dortif U ICaut ^rJiJinl Slibtaty KF1524.C69"l910™"'""-"'"'^ ^"llHiiM^iKfiV ''* '" "ankruptcy under 3 1924 019 342 249 m Cornell University Library The original of this book is in the Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924019342249 American Bankruptcy Reports Annotated. Twenty-four Volumes report the decisions with Annotations under the Act of 1898, to January 1, 1911 ; thereafter two volumes a year, with Monthly Advance Sheets. Price, $5.00 per volume. Bender and Hinman's Bankrupcy Digest. Two Volumes Digest the decisions of the Amer- ican Bankruptcy Reports, 1898-1909. Volumes 1 to 20 inclusive. Price, Law Buckram, $9.00. Hagar and Alexander's Bankruptcy Forms Annotated. Including Special and OfBcial Forms for every step in the Proceeding, Rules, General Orders, etc. A complete work in itself that will supplement and complete any Text Book on Bankruptcy. THE LAW AND PRACTICE IN BANKRUPTCY UNDER The National Bankruptcy Act of 1898, BY Wm. miller collier FOURTH EDITION WILLIAM H. HOTCHKISS EIGHTH EDITION WITH AMENDMENTS OF 1903, 1906 AND 1910 And with Decisions to date BT FEANK B. GILBERT OP THE ALBANY BAE. EDITOR OP STREET RAILWAY REPORTS, ANNOTATED; JOINT AX7TH0E OP COMMERCIAL PAPER, ETC. ALBANY, N. Y. MATTHEW BEI^DER & COMPANY. 1910 COPTBIGHT, ^898, By Wm. miller collier. COPYRMHT, 189ft, By Wm. miller COLLIER. COPYRiaHT, 1900, By MATTHEW BENDER. COPYEIQHT, 1903, By MATTHEW BENDER. Copyright, 1905, By MATTHEW BENDER. CpPYEiGHo;, 190'!!, By MATTHEW BENDER & CO. Co?yri;ght, 1909, By MATTHEW BENDER & CO. Copyright, 1910, By MATTHEW BENDER & CO. 18 PREFACE TO EIGHTH EDITION. The eighth edition of this work is made necessary by the important amendments to the Bankruptcy Act by tlie Act of June 25, 1910. Nearly two years have elapsed since the publication of the former edition and in that period, about five hundred bankruptcy cases have been reported, many of them very important. The amendments of 1910 were pre- pared by acknowledged experts in bankruptcy law, for the purpose of settling many disturbing questions, in respect to which a number of controversies had arisen, and of obviating the confusion which had arisen because of divergent views as to the compensation of receivers and trustees. These amendments are far reaching in their effect. They com- pletely nullify many decisions which were controlling in the several jurisdictions. In view of the many changes thus made in the law, the publishers, in furtherance of their policy of keeping this work abreast of the times, could not do otherwise than cause a new edition thereof to be pre- pared and published. The cases included in this edition are those contained in the American Bankruptcy Reports, down to and including page 456 of volume 24, together with other cases of even date, not included in that series because not deemed properly within the scope thereof, Fkank B. Gilbert. Albany, N. Y. October 1, 1910. PREFACE TO SEVENTH EDITION, This new edition of Collier om Bankruptcy is published in pursuance of the publishers' policy of keeping the work abreast of the deveJopment of the law on the subject. In preparing this edition it has seemed necessary to entirely rewrite a large por- tion of the text. The method of treatment used in former editions has been followed in this, but the discussion under the several sections of the bankruptcy act has been reclassified and extended. The notes have been made more prominent; many of the new and important cases cited therein being digested and applied to the principles laid down in the text. In recognition of the fact that the law of bankruptcy is based solely upon the Federal Bankruptcy Act, the several sections of that act bave been clearly set forth at the beginning of each chapter. Such sections are cemented together by exhaustive cross references at the end of each section, and in the foot notes. The general orders containing correlative matter are quoted or referred to as the occasion demands. As in former editions, the text of the statute has thus been given its proper place in the work. It is desirable to call attention to this feature of the work. To the editor's mind it is one of the things which has made this work a success. If it had been thought advisable, the so-called te!x1>book method of treating the subject might have been adopted without additional labor or expense. The experience of lawyers and judges dealing with bankruptcy has shown the importance of keeping the several parts of the statute in their proper relation with the discussion to which they pertain. Every bankruptcy case relates to some particular provision of the Bankruptcy Act. The principle laid down in the case pertains to the application or dis- cussion of such provision. It is not desirable to disassociate the case and the statute. We have therefore continued our former method of treating this important subject, and are firm in the belief that it is what the practitioner wants. The general orders have been separately treated; all of the cases pertaining thereto having been grouped and considered there- under. This is a new feature which will prove serviceable. A complete new index has been made covering the entire subject. [iii] IV PEEFACE TO SEVENTH EDITION. The cases included in this edition are those contained in the Amerioan Bankruptcy Eeports down to and including the first three numbers of volume 21 thereof, together with such English cases and cases arising under the former bankruptcy acts as are applicable. Much of the valuable matter contained in former editions of this work has been retained. The many important and trust- worthy comments upon the law made by !Mr. Hotchkiss in the Fourth Edition will still be found in their places, with such elabor- ation as seems necessary to conform with recent developments in the law. EEANK B. GILBERT. Albany, M.ay 1, 1909. PREFACE TO SIXTH EDITION. Two years have elapsed since the former edition of this work was published. During this time nearly 600 cases involving the interpretation and application of the National Bankruptcy Act have been decided, all of which have been reported in volumes 13 to 16, and in the first three numbers of volume 17 of the American Bank- ruptcy Reports. Many of these cases conclusively settle disputed questions and are authoritative declarations of important doctrines. The character of these cases has required occasional modifications of the text of the former edition. In many instances new para- graphs and subdivisions have been inserted for the purpose of con- forming the text to the trend of the judicial decisions. The law of bankruptcy is based upon the Federal statute. Ex- planatory and illustrative cases are cited and commented upon in this edition, as in the former editions, for the purpose of clearly showing what the statute means and how it should be applied. It may be safely assumed that this important subject may not be properly treated in any other way. We have endeavored in this edition to bring before the practitioner first the statute and then the decisions in their legitimate relations without magnifying the importance of the one to the detriment of the other. It is sug- gested that in so doing the valuable results of former editions have been retained. The constant and continued use of Collier on Bankruptcy by the courts and the profession, as evidenced by the frequent citations therefrom in the reported decisions, has more than justified a re- tention of the method of treatment adopted in former editions. All the recent cases are cited in their proper connection and are dis- cussed and commented upon when deemed necessary. The com- manding position which this work occupies among text-books upon this subject has brought home to the publishers the necessity of keeping it strictly up to date, and hence this new and revised edition. It is hoped that this edition, like its predecessors, will meet with the approval of the bench and the bar. FRANK B. GILBERT. Albany, .N. Y., April 15, 1907. [V] b PREFACE TO FIFTH EDITION. The fourth edition of this work was written and published soon after the enactment of the important amendments of 1903 to the bankruptcy act. Many important cases have been decided and reported during the two years which have elapsed since the publication of the fourth edition, many of them bearing directly upon the effect of the amend- ments of 1903. These cases have been referred to in their appro- priate connection in this new edition. The text of the former edi- tion has been rewritten wherever necessary to conform it to subse- quent authorities, and much new matter has been added supplement- ing and amplifying its many valuable features. The progress and ever increasing volume of the law of bankruptcy is evidenced by the number of cases reported during the two years intervening between this and the prior edition of this work. These cases run through volumes 9, 10, 11, and 12, and the first number of volume 13 of the American Bankruptcy Reports. _ All of these cases have been referred to or discussed and considered in this edi- tion of this work. The many valuable notes in these reports are frequently used or referred to. The number and importance of these cases and their instructive value as interpretations of the amended bankruptcy act of 1903 and the policy adopted by the publishers to keep this work in advance of every other work upon the subject render imperative this new, and revised edition. FRANK B. GILBERT. Albany, N. Y., February i, 1905. [vii] PREFACE TO FOURTH EDITION. The death of Mr. Eaton, the author of the third edition, made necessary the choice of a successor. Originally, the writer's purpose was merely to bring Mr. Eaton's edition down to date. The increasing importance of the federal bankruptcy system and the probability of important amendments, early caused the abandonment of that purpose, and the writing of the book anew. The result is a new work. The present author has, however, frequently drawn from his predecessors' conclu- isions, and gladly records his debt to them. This rewriting has made possible some changes: The cases referred to are cited in foot-notes, not in the body of the text, with, it is hoped, such completeness as to make the work a table of cases on the law of bankruptcy, as well as a text-book. The citations are largely to precedents under the present law, but those thought valuable under previous laws are also included. Reference is made, where possible, to both the American Bankruptcy Reports and the Federal Re- porter, and, in the court of last resort, to the United States Reports. Quotations from reported cases have been eliminated from the text. Disputed points are not elaborately discussed, the work being intended for the practitioner who is perhaps unfamiliar with this branch of jurisprudence, rather than the student of or expert in it. Through the " cross-references " at the head of each Section, all analogous provisions in the present law, as well as those in the former laws and the English Bankruptcy Acts of 1883 and 1 1890, are compacted into a few paragraphs, and the text and the statute thus webbed together. To a General Index, far more complete than in the earlier editions, has been added a system of short indices, called " Synopses of Sections," at the head of each Section, by running which the investigator may [ix] X PREFACE. quickly reach the paragraph pertinent to his quest. The General Orders, Official Forms, and Supplementary Forms have also been carefully indexed. Much more space has been given to practice than in the pre- vious editions, and, for convenience of reference, all paragraphs bearing on it have been indexed by sections under " Practice " in the General Index. The General Orders have also been annotated and, criticised and the Official Forms cross-referenced. A long list of " Supplementary Forms," based on the ex- perience of a referee in bankruptcy and the daily inquiries of the prbfession, has been added. These, while in no sense official, will, it is hoped, supply precedents for many of the papers needed in a. bankruptcy proceeding. Where the Official Forms do not fit the law or the Gfeneral Orders, new forms are oflfeired as substitutes. The abstracts of the exemption laws of the States, and the lists of the federal judges and clerks, and of the terms of court in the various districts, have been omitted. The arnendments Of 1903 are indicated by italics, matter omitted from the original statute being placed in the foot- notes. The discussion of the amendments, themselves, is made as complete as possible — there beirtg as yet no decisions con- struing them — and is based largely on the vvriter's knowledge of the purposes of the framei"s of the amendatory act and the genesis of the successive bills that resulted in that dct. The preparation of the work has stretched over itiore than a year, and it has been frequently revised to meet later decisions and changes in the then piending amendatory bill. Foi- its errors in conclusion or statement, the writer asks the indulgence of all who recognize that to err is human. Such as it is, the work voices, doubtless imperfectly, the purpose of one who, recog- nizing that the bankruptcy system has now come to stay, earnestly desires to make its principles and procedbi-e both clearer to the general practitioner and available even to the layman whose daily rbund is to give credit and collect his due. The grateful acknowledgment of the writer is due to Wash-* ington A. Russell, Esq., of the Buffalo bar, for his preparati6n of the Table oiE Cases and his work in connection with the foot-notes; also to many of his brethren of the referees' courts for suggestions and encouragement. Nor can the writer forbear to mention in Ihiis place the PREFACE. XI work in behalf of the amendatory bill of The National Asso- ciation of Credit Men, and especially its tireless and, resource- ful Secretary, William A. Prendergast, of New York. Without the earnest and early advocacy of the Ray bill by that Associa- tion, its passage would have been doubtful, if not impossible. Without immediate remedial legislation, the law itself would have been repealed. This record of appreciation by one who believes that a permanent bankruptcy system is necessary to a "^.redit-giving nation is, therefore, gladly made. William H. Hotchkiss. Buffalo, N. Y., March i6, 1903. PREFACE TO THIRD EDITION In his modest preface to the first edition of this book the author stated that his work was in the nature of a pioneer undertaking intended to " blaze the way " and aid in answering the questions which might arise before adjudications became plentiful. It is pleasant to know that Mr. Collier's scholarly and exhaustive book has not only assisted the practitioner to understand a complicated statute, the subject matter of which is new to most of the present generation, but has also helped greatly in the judicial construc- tion and interpretation of that statute. It is gratifying, too, that the author's answers to many of the numerous questions which he foresaw would arise under this Act have proved to be correct. In the two and a half years during which the Act has been in force and since the publication of the first edition of this book, most of the sections of the Act have been judicially construed. This fact alone makes a new edition at this time imperative. The bankruptcy decisions, under the law of 1898, have been collated in the present edition and their results set forth in rules of con- struction. The editor has quoted largely from the more important opinions because he believes that the bar will find it desirable to have the exact language of the court deciding the questions aris- ing under the Act. It is not claimed that the book dispenses with the use of the reported cases but merely that this method guides the practitioner most surely and quickly to an intelligent knowl- edge of the effect of such decisions and where they may be found. All of Mr. Collier's work which has a permanent and historical value has been retained, while, at the same time, no effort ha« [xiii] xiv PREFACE TO THIRD EDITION. been spared to make the revision complete and to make the book a thoroughly up-to-date treatise on the principles of the bank- ruptcy law and guide to bankruptcy practice. With the hope that this purpose has been fairly realized, the editor submits his work to the kindly indulgence of his profes- sional co-laborers. JAMES W. EATON. Albany, N. Y., November 17, 1900. freface; TO ri}E ENLARGED EDITION, In presenting to the profession and to the public, an enlarged edition of my work on bankruptcy, it is but proper that the character and extent of the additions be explained. In this edition the forms which appeared in the original edition have been superseded by the official forms just promulgated by the Supreme Court; and the rules and orders in bankruptcy pre- scribed by the same court have been inserted. Not only is the full text of these rules and forms given, but an exhaustive index of them has been made, and they have been annotated and cross-referenced as far as their nature permits. The fact that by rule XXXVII it is provided that in proceedings in equity instituted for the purpose of carrying into effect the provisions of the bankruptcy act, or for enforcing the rights and remedies given by it, the rules of equity practice prescribed by the U. S. Supreme Court shall be followed, has led me to insert these rules ; and a detailed index accompanies them. A list of the judges of the U. S. District Courts and of the clerks thereof, and the addresses of the clerks, has been inserted for the convenience of attorneys. The almost universal tendency on the part of practitioners, — hi some cases enforced by local rulings of district courts— [xv] ^ PREFACE. to withhold proceedings in bankruptcy until the promulga- tion of the official rules, has resulted in an almost complete absence of adjudications under the new law. Consequently the enlarged edition contains, besides the additions above mentioned, no changes in the text of the original edition except the correction of a few typographical errors, and the changing of the abstract of the exemption laws of Louisiana to correspond with a new statute of that state recently passed and to go into effect upon January first, 1899. I* i^ believed, how- ever, that everything affecting the law and practice of bank- ruptcy is embodied in the book. The marked favor shown to the work, — the original edition of which was exhausted on the day of issue and of which there have been already four reprints, — is a matter for which the author tenders his sincerest thanks. That the book, — now more full and complete than ever before and embracing, in one volume, the statute itself, the official rules, forms and orders, the exemption laws of all the states, the equity rules, exhaustive comment, and full citation of all authorities now applicable, — • may be of further aid to the members of the profession and may assist them in the construction and application of the law and in practice under its provisions, is the wish of THE AUTHOR. Auburn, N. Y., November 29th, 1898. PREFACE. The Law of Bankruptcy is purely statutory both In its origin and in its development. Underneath it lies the one great funda- mental principle that when a person's property is insufficient to pay in full all of his creditors, it shall be equitably divided pro rata among them; but there is probably no other principle which can be said to be fixed and permanent and fundamental. Even in England, where there has been a continuous system of bankruptcy for over three hundred years, that system has been developed rather by parliamentary legislation than by judicial decision; while in the United States so infrequent and spasmodic has been the exercise by Congress of its constitutional powers upon the subject that we can hardly claim that bankruptcy is a part of ""ur system of jurisprudence. It has been, in the past, rather in the nature of fragmentary statutory legislation, the various enact- ments on the subject being separated by intervals of decades, and each presenting important features not appearing in those pre- ceding it, and often the later acts containing provisions which evidenced a different purpose and policy than those of the earlier acts. So entirely unstable and unfixed is bankruptcy as a system of law that under the last two statutes, as will be seen by refer- ence to the notes under section 1 2 of the present work, the courts have very frequently been called upon to determine what is a bankruptcy law, and what the "subject of bankruptcy" includes. The successive statutes have affected different classes of persons, have materially changed the manner of procedure, have differed radically as to the acts to be regarded as acts of bankruptcy and have at times enlarged and at other times restricted the rights of creditors, or the benefits conferred and the duties imposed upon bankrupts. Not only have there been changes, but ^he changes '[xvii] Xviii PREFACE. have not always tended toward any one end or indicated any fixed purpose. Like all laws of statutory creation the development of the American bankruptcy system has not been harmonious and symmetrical. The study of bankruptcy, the^i, is a iriatter of statutory con- struction. The law must be considered and applied and enforced as it appears enacted, not as general notions of equity may seem to indicate as proper. The aim of the author of this book has been to study the bankruptcy act of 1898, to analyze its provi- sions and terms; in fine to ascertain the expressed will and inten- tion of Congress. Following the general principle of the law of construction that each part of a statute or document is to be con- strued with reference to the whole, each section has been con- sidered in connection with all others on the same or kindred topics, and copious cross-references have been given under the various sections. But it is not to be denied that the present bankruptcy act, though presenting many points of dissimilarity, is substantially like that passed in 1867, and also bears many resemblances to those passed in 1800 and 1841. The fact has not been overlooked that the adjudicated cases decided under those acts not only shed light on the meaning of terms and provisions of the present act, but that in very many cases they are indisputably clear authori- ties. In so far as these cases are applicable we have cited them, and for every legal proposition unqualifiedly stated, judicial authority is given. Many of the cases cited are now analogous rather than decisive ; but it is believed they sustain the points made. The reader will, of course, bear in mind that when a case is cited upon a given point, it is by us claimed to be applicable or analogous only as to that particular point. Upon other matters, by reason of differences between the present and former acts, it may be entirely inapplicable and incorrect as an exposition of the present law. While an attempt has been made to give all appli- cable decisions, we have also endeavored to omit all that would mislead and confuse. To show to what extent the cases may still be considered authorities, special pains have been taken to point out the differences between the statutes, and with this aim in view under each section we give the analogous provisions in all PRBFAO. xiz the former acts, and as an appendix have inserted, for purposes of comparison, the full text of the act of 1867 with all amend- ments up to the time of its repeal. While the authority of decided cases is cited for every legal proposition which is stated without qualification, we have felt that we would fail in properly performing the work undertaken If, because of the lack of adjudicated cases, no study should be given to and no comment made upon the great number of ques- tions which spring up from the new and changed provisions of the act. In considering these we have not, however, always felt called upon to answer them dogmatically; but they have all been discussed and treated, and everything bearing upon them laid fully and fairly before the reader. We take this opportunity of publicly extending our thanks to H. Noyes Greene, Esq., of the Troy, N. Y., bar, for assistance in preparing the index to this book and the table of cases ; also to William H. Hotchkiss, Esq., of Buffalo, N. Y., referee in bankruptcy for Erie county, for his assistance in the preparation of the forms. In presenting the work to the profession we do so with hesi- tancy. Of its shortcomings and failings few will be more keenly conscious than ourselves, but we ask that those who use it will bear in mind that the book is in the nature of a pioneer undertak- ing. It could without question be made more accurate, full and complete if its publication could be delayed until the courts should have construed the provisions of the statute and judicially answered all the questions that might arise, and if then it were made a mere digest of their decisions. But the demand of the bar is for a work that will to some extent, at least, aid them in the solution of the questions that will arise in the early months of practice under the act, before adjudications are plentiful. Thi« task of "blazing the way" is here undertaken, and in proportion to the difficulty of the task we ask the leniency of the critic. WM. MILLER COLLIER. Auburn, N. Y., Sept. 10, 1898. TABLE OF CONTENTS. rAQB Pbbface to Seventh Editioh" iii Pbefacb to Sixth Edition r Pbbface to Fifth Edition vii Peeface to Foueth Edition ix Peeface to Thied Edition ■ xiii Peeface to Enlaeged Edition xv Peeface to Obiginal Edition xvii Table of Cases xv THE LAW AND PRACTICE IN BANKRUPTCY. SECTION 1. Meaning of Words and Phrases 1 2. Creation of Courts of Bankruptcy and their Jurifr- diction 13 3. Acts of Bankruptcy 54 4. Who may become Bankrupts 93 5. Partners 112 6. Exemptions of Bankrupts 139 7. Duties of Bankrupts 170 8. Death or Insanity of Bankrupts 193 9. Protection and Detention of Bankrupts 197 10. Extradition of Bankrupts 204 11. Suits by and against Bankrupts 206 12. Compositions, when Confirmed 226 13. Compositions, when Set Aside 245 14. Discharges, when Granted 250 15. Discharges, when Revoked 295 16. Codebtors of Bankrupts 303 17. Debts not Affected by a Discharge ^ 308 18. Process, Pleadings, and Adjudications 332 19. Jury Trials 36i3 20. Oaths, Affirmations 370 f 21. Evidence 373 22. Reference of Cases after Adjudication 389 23. Jurisdiction of United States and State Courts 392 [xxi] c ' xxii Table of Contents. FAOB SECTION 24. Jurisdiction of Appellate Courts 421 25. Apperfb'airi Writs of .©rror 429 26. ArbitrKtitJn oi "ControveTsies 4'55 27. Compromises 457 28. Designation of ISTewspapers 459 29. Offenses 461 SO. Rules, Forms and Orders 473 31 Computation of Time 476 32. Transfer of Cases 478 33. Creation of Two Offices 480 34. Appointment, Bemoval, and Districts of Referees 481 35. Qualifications of Referees 483 36. Oaths of Office of Referees 485 37. JSTumber of Referees 486 38. Jurisdiction of Referees 4*87 39. Duties of Referees 497 40. Co-mpensation of Ref.efees 507 41. Contempts before Referees 514 42. Records of Referees 521 43. Referee's -Absence or Disability 5.23 44. Appointment of Trustees 524 45. Qualifications of Trustees 533 46. Death or Removal of Trustees 536 47. Duties of Trustees 537 48. Coanpensation of Trustees 547 49. Accounts ^nd Papers of Trustees 554 50. Bonds of Referees .and Trustees 555 51. Duties of Clerks 559 52. Compensation of Clerks and Marshals 563 53. Duties of Attorney-General 566 54. Statistics of Bankruptcy Proceedings 567 55. Meetings of Creditors. 568 56. Voters at Meetings of Creditors 574 57. Proof and Allowance of Claims 582 58. ISTotice -to Creditors.. 617 59. Wbo may File and Dismiss Petitions 626 60. Preferred Creditors 644 61. Depositories for Money 682 62. Expenses of -Administering -Estates 684 63. Debts which may be Proved 695 64. Debts which have -Priority 724 61). Dpcl.aration and payment of Dividfends 748 Table of Contents. xxiii BECnOn FAOB 66. Und'aimed Dividends 754 67. Liens 756 68. Set-offs and Counterclaims 791 69. Possession of Property 799 70. Title to Property 803 71. Indexes and Searches of Clerks 846 72. Limitation on Fees of Certain Officers 847 Supplementary Section to Original Act, the Time when this Act shall go into Effect 850 Supplementary Section to Amendatory Act, the Time when the Amendatory Act took Effect 850 General Orders in Baniruptcy, with Annotations 855 Official Forms, with Annotations 897 Supplementary Forms, with Annotations 975 Index to General Orders, Official Forms, and Supplementary Forms 1085 Equity Eules in the United States Oooirts 1099 Index to Equity Eules 1127 The Bankruptcy Act of 1898, with Amendments of 1903 1139 Index to the Bankruptcy Act of 1898 1177 The Bankruptcy Act of 1867, with amendments 1189 The Bankruptcy Act of 1841 1228 The Baiikrupt(yjr Act of 1800 1237 General Index .- tt. .-..-. . 1259 TABLE OF OASES OITED (Heferencea are to pages.) Abbey Press, Matter of The, 344, 379. 385, 856, 857, 867, 884. Abbott V. Rowan, 717. Abendroth v. Van Dolsen, 305. Ablowich, In re, 277. Ablowich V. Stursburg, 277. Abraham, In re, 434, 436, 437, 443, 895. Abraham Steers Lumber Co., In re, 604, 653,. 661. Abrahamson, In re, 620, 621. Abrahamson v. Bretstein, 33. Abram, In re, 688. Abrams v. Robins, Matter of, 246. Acheson Co., In re, 825. Acme Food Co. v. Meier, 62, 63, 66. Acretelli, Md.tter of, 819, 839. Adam, Ex parte, 97. Adamont Plaster Co., In re, 771. Adams, In re, 60, 187, 210, 264, 279, 468, 675, 701, 711, 721, 761, 775, 780, 789, 820. Adams v. Collier, 781. Adams v. Lane, 450. Adams v. Merchants Bank, 658. Adams- v. Meyers, 826. Adams t. Nat. Bank, 781. Adams v. Storey, 854. Adams v. Terror, 120. Adams & Hoyt Co., In re, 102. Adams Sartorial Art Co., In re, 34, 565. Addington v. Allen, 286. Adler, In re, 38, 39, 51, 211, 217, 244, 316, 326, 328, 379, 3S5, 422, 423, 446, 532, 868, 888. Adler t. Hammond, 444, 446. Adler v. Jones, 239, 244, 446, 867, 889. Aetna Cotton Mills, In re, 710. Agnew, In re, 829. Ahl V. Thomer, 666. Aiken v. Haskins, 715. Alaska American Fish Co^, la re, 28, 105. Alaska Fishing ft Development Co., In re, 734. Albrecht, In re, 262, 306, 889. Alden, In re, 114. 115, 670, 773, 810, 838. Alden Elec. Co., In re, 446, 447. Alderson, In re, 313, 720, 733. Alderson v. Temple, 647. Aldrich v. Campbell, 793. Alex, Matter of,. 158, 890. Alexander, In re, 633, 650, 702. Alexander v. Union Surety & Guar- anty Co., 558. Alfred, In re, 153. Alkon V. United States, 471. Alleman, In re, 274. Alleman Hardware Co., In re. 111. Allen, In re, 147, 156, 158, 160, 715. 716, 735, 746. Allen V. Grant, 831. Allen V. Hickling, 320. Allen V. Hollander, 817. Allen V. McMannes, 671, 674, 676. Allen & Co., In re, 162, 873. Allen & Co. v. Ferguson, 331. Allen ft Co. v. Thompson, 261. AUendorf, In re, 282. AUert, In re, 513, 689, 839. 870. AUgair v. Fisher, 622, 840. Ailgair v. Fisher ft Co., 884. Ailing V. Egan, 313. Allison Lumber Co., In re, 35, 744. Alper, Matter of, 384. Alpin ft Lake Cotton Co.,, In re, 45, 173, 378, 384, 779. Alsager v. Currie, 793. Alsberg, In re, 202, 320. Alston V. Robinett, 300. Altman, In re, 123, 337, 348, 862. Altohwood Park Co., Matter of, 107, 358. Alverson Bros., In re, 769, 779. XXVll XXVlll Table of Cases Cited. (References are to pages.) AlTord, In re, 280, 282. Ambler, In re, 734. American Brewing Co., In re, 349, 360. American Const. Co. v. Jacksonville, Tampa & Key West Co., 453. American Graphone Co. t. Leeds & Catlin Co., 20. American Lumber, etc., Co. v; Tay- lor, 670. American Machine Works, In re, 825. American Trust Co. v. Wallis, 38, 808. American Wood Working Machin- ery Co. V. Norment, 773. Ames V. Oilman, 223, 224. Ames V. Moir, 320. Amey v. Watertown, 225. Amos, Matter of, 164, 447, 874. Amoskeag Mfg. Co. v. Barnes, 329. Amslnck v. Bean, 126, 659. Anders Push Button Telephone Co., Matter of, 512. Anderson, In re, 38, 39, 77, 142, 258, 379, 516, 520, 596, 692. Andrae Co., In re, 762. Andre, Matter of, 47, 400, 401, 408, 801. Andrews, In re, 5, 7, 376, 604, 665, 667, 669, 671, 741. Ankeny, In re, 176, 184, 590, 609, 611. Anniston Iron & Supply Co. v. Anniston Rolling Mill Co., 68, 79. Anonymous, 63, 464, 858. Ansley Bros., In re, 159, 164, 658. Anson, In re, 739. Antigo Screen Door Co., In re, 47, 414, 437, 438, 762. Antrim v. Kelly, 781. Appeal, In re, 21, 203, 339, 343, 808. Appearson v. Stewart, 331. Archenbrown, In re, 107, 180, 621. Argall V. Jacobs, 330. Arkell, In re, 319. Arkonia Fabric Mfg. Co., In re, 780. Armstrong, In re, 667. Armstrong v. Fernandez, 339, 340, 452, 895. Arndt, In re, 162, 656, 677. Arnett, In re, 40, 688, 694, 885. Arnold, In re, 161, 163, 602, 705. Arnold v. Maynard, 72. Arnold & Co., In re, 610, 703, 710. Arnstein, In re, 721. Arrington v. Arrington, 298, 322. Arrington Co., In re, 240. Aschenbach Co., Matter of, 66. Ash, In re, 377. Ashland Steel Co., In re, 729. Ashley v. Robinson, 300. Aspinwall, In re, 382. Atchison, Topeka & Santa Fe Ry. Co. V. Hurley, 811, 832. Atkins y. Spear, 665. Atkins V. Wilcox, 539, 721. Atkinson v. Kellogg, 752. Atlantic Co. v. Dittmar Powder Mfg. Co., 174, 516. Atlantic Mut. Life Ins. Co., In re, 96. Audubon v. Shufeldt, 275, 292, 311, 316, 322, 431, 720. Augensteln, In re, 300. Augusta V. Earl, 146. Austin, In re, 641, 744. Averick, In re, 174. Averill, In re, 692. Ayres v. Cone, 610, 641, 642. Babbett v. Burgess, 809. Babbitt V. Butcher, 22, 47, 403, 413. Babbitt V. Kelly, 654, 672. Babbitt v. Read, 796, 831. Baber, In re, 539, 540, 688. Bachman v. Packard, 395. Back Bay Automobile Co., Matter of, 177, 178, 186, 377, 390, 526, 570, 572, 586, 587, 608, 868. Backus V. Fort Street Co., 428. Bacon v. Heathcote, 811. Bacon v. Roberts, 503, 895. Badger v. Gilmore, 331. Bagley, In re, 771. Baer v. Grell, 307, 330. Baerncopf, In re, 266, 267, 276, 352. Baginsky, In re, 543. Bailes, In re, 158. Bailey, Ex parte, 796. Table of Cases Cited. (References are to pages.) XXIX Bailey, In re, 597, 604, 660, 673, 700, 710, 825, 833. Bailey & Son, In re, 660, 663, 670. Bailey v. Glover, 210, 224. Bailey v. Loeb, 771. Baird, In re, 401, 539, 540. Baird & Co., In re, 615. Baker, in re. 162, 198, 200, 313, 316, 317, 323, 439, 440, 442. 448, 605, 656, 731, 888. Baker-Ricketson Co., In re, 65, 80, 85. Baldwin, In re, 266. Baldwin v. Rosseau, 68. Ball, In re, 352, 596, 772. Bank v. Buckner, 296. Bank v. Cook, 667. Bank v. Johnson, 885. Bank v. Jones, 414. Bank v. Meyer, 118, 125. Bank t. Onion, 330. Bank y. Sherman, 343. Bank of Commerce v. Elliott, 224, 761. Bank of Dearborn v. Matney, 100, 101. Bank of Madison, In re, 794. Bank of N. Y. v. Southern Nat. Bank, 651. Bank of North Carolina, In re, 752. Bank of Ravenswood y. Johnson, 189, 492, 519, 881. Barber, In re, 12, 512, 549, 550, 750, 838. Barber y. Coit, 844. Barclay v. Barclay, 322. Bard, In re, 188, 270. Barden, In re, 116, 117, 122, 560, 561, 862. Bardes y. First Nat. Bank, 670. Bardes v. Hawarden Bank, 17, 18, 19, 20, 32, 43, 46, 148, 214, 215, 350. 368, 394, 397, 398, 411, 432, 453. Bargassa y. St. Louis Cycle, 274. Barker, Matter of, 508, 815. Barker v. Bankers' Ass'n, 539. Barker y. Barker's Assignee, 767. Barker v. Franklin, 540, 542. Barnard v. Norwich & Worcester Railroad Co., 771. Barnes, In re, 591, 602. Barnes Mfg. Co. v. Norden, 312, 319, 767. Barr Pumping Engine Co., In re, 733. Barret, In re, 155. Barrett, In re, 535, 580, 664, 779, 890, 896. Barrett y. Prince, 326, 713, 888. Barrett Co., In re, 637, 639. Barrow, Ex parte, 97. Barrow, In re, 182, 807. Barry y. Ogden., 451. Barstow v. Hansen, 330. Bartheleme, Matter of, 666. Bartholomew v. West, 146. Bartholow v. Bean, 605, 66. Bartlett, In re, 670. Bartlett v. U. S., 465. Barton, In re, 48. Barton v. Barbour, 364, 611. Barton Bros. v. Texas Produce Co., 273, 278, 451. Barton Hotel Co., In re, 107. Barton's Estate, In re, 358. Barwis, Ex parte, 97. Basch, In re, 209, 210, 220, 315, 328. Bashinski v. Talbott, 159, 160. Bashline, In re, 602. Bashore v. Rhoades, 798. Bassett y. Thackara, 293. Batchelder, In re, 657. Batchelder y. Low, 300. Batchelder & Co. v. Wedge, 788. Batchelder & Lincoln Co. v. Whit- more, 17, 539. Bates, In re, 130, 279, 851. Bates Machine Co., In re, 85. Battle, In re, 288. Baudouine, In re, 273, 368, 407, 409, 541, 819. Baughman, In re, 213. Baum, In re, 42, 440, 540. Bauman v. Feist, 271, 279, 283. Baumann, In re, 5, 7. Bausman y. Dixon, 427. Baxter, In re, 474, 598. Bay City Irrigation Co., Matter of, 107, 416. Bayley y. Greenleaf, 764. Bayly, In re, 231. XXX Table of Gases Cited. (References are ta pages.) Beach v. Macon Grocery Coi. 32, 35, 102, 340, 405, 414. Beachy & Co., In re, 831. Beal, In re, 182. Beals, In re, 161, 786. Beals V. Quinn, 650. Bean, In re, 152, 156> 164> 182. 184, 562. Bean v. Amsinck, 241, 242. Bean v. Bertenshaw, 666. Bean v. Brookmire, 241. Bean Chamber lin Mfg. Co. v. Stand- ard Spoke & Nipple Co., 64. Bear v. Chase, 214, 222. Beardsley y. Hall, 296. Beasley v. Coggins, 843. Beatty, In re, 82, 119. Beauchamp, In re, 157. Beaver Coal Co., In re, 746, 785. Beck, In re, 128, 298, 692, 578. Beck V. Connell, 666. Beck V. Parker, 852. Beck Prow. Co., In re, 769. Becker, In re, 31, 275, 278, 796, 820, 822. Beckerford, In re, 141. Becket, In re, 230, 232. Beckham v. Drake, 830. Beckwith, In re, 114. Beddingfleld, In re, 640. 641. Beebe, In re, 273, 278. Beech v. Macon Grocery Co., 109. Beecher v. Clark-, 767. Beede, In re, 762, 764, 767, 772. Beerman, In re, 210, 325, 343, 650, 657. 659. Beers v. Hamlin, 67, 630, 633. Beiber, In re, 605. Beihl, In re, 824. Belcher r. Bernard, 817. Belden, In re, 186, 262, 837. Belding, In re, 649, 658. Beldlng-Hall Mfg. Co. v. Mercer Lumber Co., 672. Belfast Mesh Underwear Co., In re, 82. Belknap, In re, 62^, 63, G4, 75, 662. Bell V. Carey, 794. Bell V. Dawson, 150. Bell Piano Co., Matter of, 612, 753. Bellahk In re. 8. 3^8, 340, 341, U2. 865. Bellamy, In re, 346. 361, 624. Bellevue Pipe & Foundry Co.. In re, 765. Bellingham Bay t. New Whatcom, 428. Bellis, In re, 265, 382. Belton V. Hodges, 97. Bement, In re, 761, 765. 767, 824. Bemis, In re, 275, 276. Bender, In re, 51, 414, 801, 833. Benedict, In re, 21, 30, 31, 304. 305, 315, 783. 786. Benedict v. Deshel, 669, 671. Benjamin, In re. 44. 219, 495. 542, 776, 841, 867. Benjamin v. Chandler, 6, 650, 651, 666, 673, 823. Bennet, In re, 742, 743. Bennett v. Alexander, 307. Bennett v. American Credit Indem- nity Co.. 593, 594. Bennett Shoe Co., In re, 81. Benoit; Matter of, 319. Bergeron, In re, 347, 634. Bergman, In re, 158. Berkebile, In re, 447, Berkowitz, In re, 49, 52, 203, 219, 280, 409, 493, 495, 690, 867, 868. Bernard v. Abel, 357, 364. Bernard v. Tromme, 631. BemeTi In re, 24, 25, 28, 268, 269, 274, 275. Berry v. Jackson, 312, 319. Berry & Co., Matter of, 288, 616, 816, 822. Berry Bros. v. Sheehan. 126. Bertenshaw, In re, 61, 116, 120, 122, 125, 138. Berthelon v. Betts, 852. Beswick, In re, 602, 649, 653. Betts V. Betts. 550. Beutel's Sons, In re, 622. Bevins, In re, 631. Bidwell V. Bidwell, 231. Big Meadows Gas Co., In re, 633. Bigelow, In re, 136. Bllafsky v. Abraham, 225. Blllteg, In re, 19, 71, 339, 34T. 355. Table of Cases Cited. (References are to pages.) XXXI 358, 360, 620, 637, 642. Bills T. Schliep, 826. Bimberg, In re, 297, 298, 613. Bindseil t. Smith, 212, 416. Bingham, In re, 606, 701, 711, 796. Bininger, In re, 340, 34S. Birch V. Steele, 428, 481, 482. Birck & Co., In re, 780. Birkett v. Columbia Bank, 326. Birmingham Coal & Iron Co. T. Southern SteefCo., 356. Birnhisel v. Firman, 658. Bishop, In re, 743. Bishop V. Church, 796. Black, In re, 149, 150, 271, 705. Black V. Blazo, 296, 324. Black V. McClelland, 706. Blair, In re, 25, 61, 119, 122, 125, 128, 424, 432, 436, 442, 664, 785, 788. Blaisdell, In re, 546. Blake, In re, 403, 672, 811. Blake v. Corbett, 414. Blake v. Francis Valentine Co., 60. Blake v. Valentine Co., 801, 851. Blalock, In re, 264, 265, 271, 273, 276, 279, 282. Blanchard, In re, 133. Blanchard & Howard, In re, 144, 150, 151. Blanchard Shingle Co., In re, 433, 436, 446. Blandin, In re, 702. Blankfein, In re, 580, 858, 880. Blight, In re, 755. Blight V. Ashley, 458. Blight V. Fisher, 517. Bliss, In re, 535. Bloch, In re, 6, 70, 71, 601, 776. Block V. Rice, 657. Blodgett, In re, 532. Bloodworth-Steinhulze Co., 234, 239. Bloomingdale v. Empire Rubber Mfg. Co., 829. Bloomsburg Brewing Co., 104, 105. Bloss, m re, 598, 635. Blount, In re, 631, 632. Blue Mountain iTon & Supply Co. T. Portner, 82. Blue Ridge Packing Co., In re, 535, 580, -581, 588, 589, 870, 877, 878. Bluestone Bros., In re, 214. Blumberg, In re, 72, 292, 311, 319, 320, 327, 785. Blumberg v. Bryan, 402. Blumblatt, In re, 740. Blumenthal v. Jones, 292. Blumer, In re, 131. Board of County Com'rs. v. Hurley, 339, 448, 701, 703. Boardman, In re, 822, Boasberg, In re, 283. Boese V. King, 781. Boese v. Locke, 237, 853. Bogart V. Supply Co., 520. Bogen, In re, 68, 88. Bogen £ Trummell v. Porter, 74, 76, 90. Bogen V. Trummel Co. v. White, 74. Bogert, In re, 535. Bolinger, In re, 146, 149, 150. Boiling, In re, 816. Bond V. Milliken, 321. Boner, In re, 288. Bonesteel, In re, 189. Book, In re, 96, 262, 313. Boonville Nat'l Bank v. Blakey, 29, 30, 31, 404, 405, 447, 450. Boorstin, In re, 145, 147, 159. Booss, In re, 156, 823. Booth, In re, 31, 160, 761, 762. Booth V. Prete, 794. Borelli, In re, 118. Bosteck V. Jordan, 819. Boston, In re, 160, 767. Boston Dry Goods Co., In re, 440, 503. Boston H. & E. R. R. Co., In re, 355, 479, 534, 641. Botts V. Hammond, 788. Bourlier Cornice & Roofing Co., 35, 685, 744. Boutelle, In Te, 262. Bouton, In re, 631. Boutell V. Magone, 367. Bower v. Holzworth, 443. Bowers, Ex parte, 106. Bowie, In re, -840. Bowman V. Alpha Farms. 407. Bowne, In re, 771. Boyce v. Snaranty-Co., 633. Boyd, In re, 119, 142, 143. XXXll Table of Cases Cited. (References are to pages.) Boyd V. Boyd Fry Stove & China Co., In re, 119. Boyd V. Glucklich, 38, 39, 40, 41, 48, 174, 515, 517. Boyd V. Lemon Gale Co., 9, 68, 70, 664. Boyd V. Mangles, 796. Boyden, In re, 278. Boylan, In re, 127, 479. Boynton v. Ball, 218, 318, 330. Bozeman, In re, 824. Bracken v. Johnson, 761. Bracken v. Milner, 315, 326. Brackett v. Watklns, 149, 160. Bradbury, In re, 190. Bradley v. McAfee, 465. Bradley Clark Co. v. Benson, 654. Bradley Timber Co. v. White, 73, 74, 337, 338, 350, 367. Brady, In re, 179, 451. Brady v. Bernard-Kittinger, 435, 436, 438, 447, 451. Bragassa v. St. Louis Cycle Co., 53, 265, 270, 293, 509, 849. Bragg, In re, 143, 188. Brake v. Callison, 67, 630. Braley v. Boomer, 306. Bramlett, In re, 259. Brand, In re, 598, 734. Brandt, In re, 186. Braselton, In re, 504, 765. Bray v. Cobb, 79, 90, 350, 360, 361, 366, 484, 501, 560, 612, 615, 620, 706. Bray v. Johnson, 512, 849, 892. Bray v. U. S. Fidelity & Casualty Co., 396. , Breckons v. Snyder, 384, 416, 557, 843, 844. Breiner, In re, 274. Breitling, In re, 273, 276. Brener, Matter of, 285, 286. Breslauer, In re, 389, 787. Brewer v. Dew, 830. Brewster, In re, 704, 794. Brewster y. Goft, 667. Brewster v. Goft Lumber Co., 657. Brett, In re, 102, 340, 588, 631. Brett V. Carter, 771. Brice, In re, 26, 97, 269. Bridges v. Sheldon, 174. Bridgman, In re, 752, 755. Briener, In re, 278. Brlggs V. McCullough, 142, 148. Briggs V. Walker, 427. Brinckmann, In re, 67, 630, 633. Brinker, In re, 687, 733. Brinkley v. South wick, 86. Briskman, In re, 400, 401. Bristol V. Sanford, 752. Briswalter v. Long, 120. Brietain Dry Goods Co. v. Berten- shaw, 662. Broadnax v. Bradford, 320. Broadway Sav. Trust Co., In re, 17. Broadway Trust Co. v. Manheim, 232, 325. Brochman, In re, 282. Brock V. Hoppock, 367. Brock V. Terrell, 676. Brockman, In re, 267, 269. Brod, In re, 265, 283. Brodbine, In re, 541, 820. Broich, In re, 633, 635. Bromley, In re, 173, 266. Bromley v. Smith, 830. Bromley & Co., In re, 186. Brooke, In re, 528. Brooks V. Davis, 658. Broom, In re, 727, 733. Browder & Co. v. Hill, 773. Brown, In re, 101, 145, 146, 149, 243, 260, 264, 267, 274, 299, 328, 551, 535, 580, 596, 613, 630, 633, 706, 740, 816, 844. Brown v. Barker, 818. Brown v. Carr, 304. Brown v. Case, 783. Brown v. Farmers Bank, 797. Brown & Fleming, Matter of, 772. Brown v. Guichard, 650, 674. Brown v. Jefferson County Bank, 672. Brown v. Walker, 191, 384. Brown v. Streicher, 663. Brown v. White, 394. Brown & Adams v. United Button Co., 314, 718. Bruce v. Burr, 286. Brumbaugh, In re, 143, 148, 150, 288, 316. Brumelkamp, In re, 181, 184, 352. Table of Cases Cited. (References are to pages.) xxxiu Brumelkemp, In re, 371. Brumley v. Jones, 18, 46, 406. Brundage, In re, 189, 381. Brundln, In re, 293. 692. Brunslng, Telle & Pastel, In re, 747. Bruss-Rltter Co., In re, 851. Bryan v. Bernheimer, 19, 29, 32, 43, 45, 209, 215, 216, 220, 403, 410, 411, 413, 431, 434, 814. Bryan v. Madden, 416. Bryant, In re, 273, 277. Bryant v. Kingston, 330. Bryant v. Kinyon, 315. Bryant v. Swafford Bros. Dry Goods Co., 762, 766. Buchanan, In re, 640. Buchanan's Soap Corporation, In re, 616, 718. Buchana v. Smith, 667, 784. Buchner v. Cheshire R. R. Co., 142. Buchstein. In re, 297, 298. Buckhart v. German American Bank, 103. Buckhause, In re, 702. Buckingham, In re, 159. Buckingham v. Bank, 133. Buckingham v. First Nat. Bank., 115, 137. Buckingham v. Estes, 593, 615. Buckingham v. McLean, 47. Buckner v. Street, 710. Bucyrus, In re, 133. Buelow, In re, 141, 142, 143, 154, 156, 822. Buffalo Milling Co. v. Lewisburg Dairy Co., 115, 365. Buffalo Mirror & Beveling Co., Mat- ter of, 712. Builders Lumber Co., In re, 824. Bullis, In re, 311, 317, 319, 326, 328. BulUs V. O'Beirne, 317, 319. Bullock, In re, 603, 604, 666. Bullymore v. Cooper, 144. Bullwinkle, In re, 277. Burbank v. Bigelow, 407, 415. Burbank Co., In re, 86. Burdick v. Dillon, 109. Burgin, In re, 101, 102. Burk, In re, 262. Burka, In re, 98, 194, 312, 345, 701, 808, 809, 815. Burke, In re, 142, 210, 630, 685, 693, 729, 735, 742, 765, 824, 829. Burke v. Guarantee Title & Trust Co., 142, 179, 182, 474, 865, 896. Burkhart v. German-American Bank, 110, 115. Burkholder v. Stump, 686. Burkle, In re, 823. Burlage Bros., In re, 666, 708, 762. Burleigh V. Foreman, 423, 451, 821. Burlington Malting Co., In re, 348, 631, 635, 664, 788. Burnham, In re, 764, 771. Burnham v. Pidcock, 221, 311, 315. Burnhisel v. Firman, 71. Burns, In re, 707, 770. Burns v. O'Gorman, 844. Burnstine, In re, 831. Burow V. Grand Lodge, 445. Burr V. Kimback, 174. Burrell v. State, 191. , Burrell & Corr Co., Matter of, 65. Burrow v. Grand Lodge, 156. Burrus, In re, 688, 693. Burstein, In re. 280, 282. Burtls V. Dodge, 551. Burt, In re, 823. Burton Mfg. Co., In re, 738. Buse, In re, 597. Bush, In re, 262, 358, 820. Bush V. Crawford, 133. Bush V. Elliott, 394, 395, 396, 398, 405, 407. Bush V. Export Storage Co., 767, 810, 843. Bush V. Lester, 144. Bushby, In re, 596. Buskirk, Ex parte, 515. Butler, In re, 154, 780. Butler V. Bandoine, 818. Butler V. Miller, 9. Butler Paper Co. v. Goembel, 7, 650, 651, 670. Butt V. Carter, 658. Butt V. Construction Co., 104. Butt V. MacNlchol Const. Co. 105. Butterwick, In re, 814, 826. t Butts, In re, 209, 327, 328, 329. Byerly, In re, 694. Byers v. Franklin Coal Co., 104. Byrne, In re, 132, 727, 741, 744, 769. XXXIV Table of Cases Cited, (BeferenceB are i:o pagesO CabuB, In re, 277. Cagliostro t. Indelle, 325. Cain, In re, 635, 637. Caldicott, Ex parte, 796. Caldwell, In re, 740. Calendar, In re, 640. Calhoun County Bank v. Cain, 650. California P. R. Co., In re. 351, 635. Callahan v. Israel, 541. Callan v. Wilson, 204. Callison, In re, 109, 630. Calnan Co. v. Doherty, 104. Cambridge, In re, 551. Cambridge Institution v. Littlefield, 331. Cambridge Lumber Co., In re, 34. Cameron v. Canieo, 127. Cameron Currie Co., Matter of, 417, . 419. Cameron Town Mut. Fire Ins. Co., In re, 107. Camp, In re, 142, 143, 149, 157, 158, 304, 732, 873. Campbell, In re, 148, 154, 158, 163, 164, 189, 379, 621, 707, 739, 874. Canby v. McLear, 611. Candee v. Lord, 708. Canleld, In re, 361, 629. Canner, Matter of, 636. Canner v. Webster-Tapper Co., 79, 451, 504, 505, 636. Cannon, In re, 588, 608, 764. Cannon v. Dexter Broom & M. Co., 164, 168. Capell V. Trinity Church, 699. Capital Publishing Co., In re, 104. Carbon, Matter of, ^. Carbone, In re, 96. Carleton, In re, 96, 123, 641, 862. CarJey, In re, 189, 265, 266, 380, 436, 439. Carlin v. Carlin, 329. Carllng v. Seymour Lumber Co., 32, 80, 280, 402, 419, 852. Carmlchael, In re, 135, 136, 153, 259, 281. Carolina Cooperage Co., In re, 495, 513, 692, 740, 892. Carpenter, In re, 152, 172, 826. Carpenter v. Southworth. 539. Carpenter Bros. v. O'Connor, 20, 215. Carr, In re, 47, 571, 683, 689, 737, 887. Garr v. Fife, 501. Carroll & Bros., Co. v. Young, 771, 839. Carson, Pirie v. Chicago Title & Trust Co., 4, 6, 9, 11, 431, 599, 600, 601, 649, 653, 656, 665. Carter, In re, 588, 592, 606. Carter v. Bank, 218. Carter v. Goodykoontz, 664, 777. Garter v. Hobbs, 213, 357, 414. Carton & Co., In re, 233, 240, 284, 287. Carver, In re, 216, 504. Carvill, In re, 364. Casey, In re, 439. Casey v. Cavaroc, 781. Cashman, In re, 42, 269, 520. Cass, In re, 816. Castillo V. McConnico, 427. Castleberry, In re, 53, 143, 147, 164, 551, 692, 833. Castle Braid Co., In re, 588. Caswell, In re, 152. Caten v. Eagle B. & L. Assn., 541. Catlin, In re, 793. Gatlin v. Hoffman, 71. Cavagnard, Matter of, 825. Cavan, In re, 230. Geballos & Co., In re, 116, 119, 124, 125, 630, 775, 862, 863. Chadwick, In re, 289, 653, 655, 709, 780. Chadwick v. Starrett, 313. Challoner, In re, 321. Chamberlain, In re, 231, 237, 257, 269, 633. Chambers, In re, 23, 208, 416, 503, 609. Chambers, Calder & Co., In re, 879, 880, 884, 885. Chandler, In re, 106, 200, 262, 264, 298, 601, 699, 710. Chandler v. Siddle, 853. Chantler Cloak & Suit Co., In re, 811. GbapUn, In re, 648. Chapman, In re, 75, 76, 77, 108. Table of Cases Cited. (References are to pages.) XXXV Chapman t. Bowen, 452. Chapman v. Bowers, 895. Chapman v. Brewer, 359, 406, 809. Chapman v. Forsyth, 315, 328. Chappell, In re, 96, 357, 650. Chase, In re, 17, 78, 705, 745. Cratfleld v. O'Dwyer, 448, 610. Chattanooga, City of, v. Hill, 730, 731. Chattanooga Nat. Bank v. Rome Iron Works, 395, 664, 761, 781, 810, 812. Chauncey v. Dyke Bros., 403, 409, 414, 839. Chavez, In re, 743. Chemical Nat. Bank v. Meyer, 79, 123. Chemung Bank v. Judson, 224. Chequasset Lumber Co., In re, 353. Chesapeake Oyster & Fish Co., In re, 107. Chesapeake Shoe Co., In re, 339. Chesapeake Shoe Co. v. Seldner, 436, 445, 816, 824. Chicago & Northwestern Railway v. Osborne, 454. Chicago-Joplin Lead & Zinc Co., In re, 103, 109. Chicago Motor Vehicle Co. v. Ameri- can Oak Leather Co., 340, 343. Chicago Title & Trust Co., Ex parte, 454. Chicago Title & Trust Co. v. Roe- bllng's Sons, 6, 60, 650, 651. Chiles, In re, 516. Chisdell, In re, 490. Chism V. Friars Point Bank, 540, 541, 674. Christ V. Zehner, 653. Christensen, In re, 18, 364, 368, 580, 607, 611, 677, 793, 794. Christiansen, In re, 692. Christy, Ex parte, 210, 432, 760. Church V. Winkley, 331. Church Construction Co., In re, 106. Citizens Bk. v. Canon, 890. Citizens Bank v. De Pauw Co., 63, 88. Citizens' Bank v. Hargraves, 149. Citizen's Loan Ass'n v. Boston & Maine R. R., 774. Citizens' Nat. Bank v. Cass, 640. City Bank, In re, 793, 798. City Nat. Bank V. Bruce, 779. City Nat. Bank v. .Doolittle, 239. City of Waco v. Bryan, 730, 733. Claff, In re, 257, 292, 293, 312. Claflin V. Coogan, 307. Claflin V. Eason, 753. Claflin V. Houseman, 394. Claiborne, In re, 199, 887. Clairmont, In re, 535. Clapp, In re, 230. Clarion Bank v. Jones, 650, 657, 676. Clark, In re, 133, 176, 189, 492, 609> 656, 705, 710. Clark V. Am. Mfg. Co., 79, 354. Clar V. Binninger, 176. Clark V. Equitable Life Assur. Co., 822. Clark V. Henne & Meyer, 338, 636. Clark V. Iselin, 69, 71, 658, 769, 774, 781, 797. Clark V. Pidcock, 439, 531, 871. Clark & Co., In re, 810. Clark Coal & Coke Co., In re, 36, 731, 732, 743, 839, 883. Clarke v. Larremore, 418, 787. Classen v. Schoenemann, 319. Clastei- v. Soble, 707. Claussen & Co., In re, 689, 764. Clay V. Smith, 616. Clay V. Waters, 810. Clayton v. Exchange Bank of Macon, 762. Cleage v. Laidley, 100. Cleanfast Hosiery Co., In re, 612, 728, 734. Cleland v. Anderson, 816, 831. Clelland, In re, 108. Clemenshaw v. Inter. Shirt & Collar Co., 20, 47, 409. Clemmons v. Brinn, 712. Clendening v. Red River Valley Nat. Bank, 483, 489, 572, 576, 885. Clews, In re, 616. Cliffe, In re, 189, 338, 351, 378. Clifeord, in re, 663, 773. Clingman v. Miller, 776. Clinton v. Konert, 443. Clinton v. Mayo, 634. Clisdell, In re, 24, 25, 98, 257, 313. XXXVl Table of CaSes CiTEt). (References are to iJagres.) Clopton V. ^ip'ratt, 304. Clothier, In re. 261, 262. Cobb, In re, 3t6, 379, 380, 385, 495, 544, 658, 664, 665, 6183, 781, 817, 818, 856. 887. 1 Cobb V. Overman, 706. 712. Coburn, In re. 637. 701. Cocks, In re. 107. • Coddington. In re. 6, 7, 90, 159. - Coder v. Arts, 10, 61, 64, 424, 437, 1 451, 656, 659, 669, 776. 777, 779. 839. 894. Coder v. McPherson. 659. 668. Coe, In re. 8, 120, 121, 135. 534. 578, 597. 606. Coe. Powers & Co., In re, 738, 769. Coffey, In re, 413, 603, 616, 659, 662. 666, 667, 670. Coffin, In re, 512, 727, 750, 818. Coffman, In re, 155. Cogley, In re, 832. Coggeshall v. Potter, 658. Cogswell, In re, 531. Cohn. In re, 19, 149, 154, 379, 408, 493, 541, 686, 815, 868, 885. Cohen, In re, 49, 203, 278, 660, 870. Cohen v. American Surety Co., 44, 419, 781. Cohen v. Budd, 821. Cohen v. United States, 191, 471. Cohen v. Wager, 844. Colaluca, In re, 321. 356. Cole, In re, 41, 174, 209, 217, 318, 386, 451, 516, 518, 707. Cole V. Roach, 315. Coleman, In re, 822. Coleman v. Davis,' 329. Coleman v. Sherman, 830. Coller, In re, 152, 153. Collier, In re, 132, 134, 164, 331, 562, 893. CoUignon, In re, 721. Collins, In re, 98, 286, 656, 767. Collins V. Gray, 676. Collins V. Hood, 132. Collins V. Jones, 793. Collins V. McWatters, 31&, 325, 329. Colton Export & Import Co., In re, 665. Columbia Bank v. Blrkett, 325, 326, 865. Columbus Buggy CO., Iti re, i9, 825. Columbia Fireproof Door & "frim. Co., 780. Columbia Iron Works, In rfe, 577, 579, 581, 688, 834, 880. Columbia Iron Works v. National Lead CO., 444, 449, 453. Columbia Real Estate Co., In re, 19, 102, 109, 348, 355, 422, 423, 708. Columbia Water Power Co. v. Street Railway Co., 427. Columbia Elec. Co. v. Worden, 599, 649. Columbus Watch Co. v. Robbins, 453. Colwell, In rd, 687. Colwell V. Tinker, 524. Comingor, Ex parte, 174. Coiningor v. Louisville Trust Co., 681. 745. Commerce v. Elliott, 329. Commercial Bank v. Buckner, 297. Commonwealth v. Eurlgn, 191, 192. Commonwealth v. Hutchinson, 313. Conimonwealin v. Walker, 464. Comstock, In re, 240, 241, 247, 379. Comstock V. Bechtel, 160. Comstock V. Grout, 313. Comstock & Co.. In re. 604. Conant. In re. 224. Conboy v. First Nat. Bank. 447. 452, 894. Concord Motor Car Co., Matter of, 104, 106. Condict, In re, 265. Congdon, Matter of, 745. Coiihaim, In re, 599, 60;i, 603, 649, 731, "734. Conley, Matter of. 148, 153, 281, 283. Conn. In re. 273. Connell, Ex parte, 132. Connell. In re, 184. jConnell & Sons, In re, 689. 737. Connolly. In re, 404. Connor, in re, 158. Connor v. Long, 809. Conqueror, The, 453. Conrader, In re, 131. Conroy, In re, 262, 4'(B9. Conrader v. Cohen, 131. Consolidated Rubber Tire Co. v. Table op Cases Cited. (References are to pages.) XXX Vll Vehicle Equipiiient Co., 294, 361. Consumers' Cottee Co., In re 742, 743, 771. Conti V. Sunserl, 489, 494. Continental Corporatioa, Matter of, 358. Continental Nat'l Bank v. Katz, 218, 760. Conway v. German, 65, 86, 340, 341. Copper King, In re, 740, 787. Cook, In re, 132, 694, 717, 769. Cook V. Coyie, 616. Cook V. Parrington, 598. Cooi V . Tullis, 657, 812. Cook V. Whipple, 397, 767. Cook Inlet Coal Fields Co. v. Cald- well, 443, 444, 450, 522. Cooke, In re, 189, 270, 384. Cooke V. U. S., 728. Cookingham v. Morgan, 666. Cooley V. Cook, 477. Cooney v. Collins, 411. Cooper, In re, 580, 870. Cooper V. Schlesinger, 286. Cooper Bros., In re, 246, 349, 351, 895. Cooper Grocery Co. v. Bryan, 733. Corbett, In re, 409, 681, 808. Corbltt Buggy Co. v. Ricand, 825. Corcoran, In re, 116, 131. Col-ey V. Ripley, 296, 297. Corn, In re, 283. Cornell, In re, 277. Corne^ll t. Dakln, 330. Cornwall, In re, 351, 633, 722. Corse, In re, 367. Corwin, In re, 300. Cosmopolitan Powief Co., In re, 444, 446, 732. Cothier, In re, 889. Cotton, In re, 323. Cotton Ex-port and Import Co., In re, 657, 662. Cofton r. Preston, matter 6f, 147, 874. Cottrell, Ex parte, 699. Coulter, In re, 7*69. Counselman v. Hitchcock, 191, 384. Countryman, In re, 277. Courier-Journal Printing Co. t. Schaefer-Meyer Brewing Co., 434. 446, 606. Courtney v. Beale, 328. Couts V. Townsend, 101. Coventry-Evaos Furniture Co., In re, 587, 588, 589, 592, 614, 689, 848. Covington, In re, 271, 277, 292, 489, 492, 687, 690. Covington Stock Yards v. Keith, 450. Cowell V. Tinker, 201. Cowles, In re, 64, 104, 776. Cox V. Schermerhorn, 550. Crabb, Ex parte, 106. Craddock-Tierry Co. v. Kaufman, 502, 883. Cragin v. Thompson, 686. Craig, In re, 379. Craig V. Seitz, 331. Cram, In re, 579, 596. Cramond, In re, 512, 550, 551, 595, 727, 738, 744, 770, 808, 810. Crane Co. v. Smythe, 770. Crawford, In re, 305, 701. Crawford v. Burke, 310, 312, 314, 316, 327, 701, 710, 713. Crawford Carriage Co. v. Hall, 327. Creasinger, In re, 588, 589, 594. Creditors v. Cozzens, 519. Creditors v. WlUiains, 261. Crenshaw, In re, 100, 102, 185, 279, 340, 377, 64X). Crescent Lumbet- Co., In re, 718. Cresson & Clearfield Coal & Coke Co. v. StaufEer, 85, 419. Crim V. Woodford, 441, 503, 505, 773, 883, 884, 885. Crisfleld v. State, 329. Crist, In re, 257, 266, 268, 271. Criterion Watch, etc;, Co., In re, 240. Crittenden y. Barton, 667. Crocker, In re, 608. Crockett, In re, 830. Ci'btiey, In re, 720. Cronin, in i-e, 356, 357. Croik-Horner Co. v. Gilpin, 306, 787. Crooks V. Stuart, 539. Crooks V. The People's Bank, 67, 662, 666, 672, 674. XXXVlll Table of Cases Cited. (References are to pages.) Crosby v. Miller, 416, 765, 810. Crosby v. Spear, 409, 414, 416. Cross V. Evans, 453. Crow, In re, 742. Crucible Steel Co. of Amer. v. Holt, 765, 825, 894. Crump V. Chapman, 666. Crystal Springs Bottling Co., In re, 796, 797. Crystal Springs Water Co., In re, 541. Cullman Assn., In re, 826. Culver V. Torrey, 319. Culwel, In re, 142, 145. Cunningham et al. v. German Ins. Bank, 445, 450, 506, 883. Curran v. Hunger, 776, 777. Currier, In re, 51, 212, 413, 599, 606. Curtis, In re, 255, 446, 636, 688, 690, 694, 721, 737, 851. Gushing, In re, 700. Cushman v. Arkell, 315. Custard v. Wlggerson, 181, 296, 297, 325. Cutter V. Folsom, 330. Cutting, In re, 69. Cyclopean, In re, 596. Dacovich v. Schley, 135, 699. Dalton, In re, 237. Damon, Matter of, 565, 615. Damon & Co., Matter of, 614. Dana, In re, 204, 214. Danbenny, Ex parte, 106. Daniels, Ex parte, 699. Daniels, In re, 131, 513, 742, 747, 883, 893. Dann, In re, 813. Danville Rolling Mill Co., In re, 732. Dareski, In re, 285. Darling v. Berry, 141. Darwin, In re, 785. Daubner, In re, 155. Dauchy, In re, 268, 272, 274, 288. Davenport, Ex parte, 592. Davenport, In re, 687, 688, 694. Davidson, In re, 377, 629, 779. Davidson & Co. v. Friedman, 434, 436, 438, 446. Davis, In re, 401. 402, 408, 579, 595, , 715, 746, 760, 772, 827, 829. Davis V. Bohle, 216, 418, 419, 437, 781, 852. Davis V. Crompton, 505, 811. Davis V. R. R. Co., 781. Davis V. Stevens, 64, 80, 86, 110, 117, 118, 119. Davis V. Turner, 134, 136, 771, 772. Davis Tailoring Co., In re, 381, 410, 412. Davison, In re, 174, 517. Dawley, In re, 154. Day, In re, 133. Day V. Bardwell, 851. Day V. Beck & Gregg Hardware Co., 365. Day V. Beck, etc., Co., 78, 348, 364. Day & Co., In re, 529, 578. Dayville Woolen Co., In re, 529, 576, 870. Dean, In re, 552. Dean v. Bloomer, 322. Dean v. Justices, 311, 312. Deane v. Caldwell, 721. Debs, In re, 38. Deckert, In re, 141. Deere Plow Co. v. McDavid, 729, 747, 825. De Forest, In re, 358. De Gottardi, In re, 39, 50, 188, 492, 506, 884. De Graff v. Lang, 650. De Lancey Stables Co., In re, 110, 771. Deland v. Miller & Cheney Bank, 669, 671. 764. De Lany & Co., In re, 210, 217. Dell, In re, 133. Delling, In re, 600. Delmour, In re, 276. De Long, In re, 210, 304, 305. De Lue, In re, 783, 788. Delta National Bank v. Easterbrook, 425. Demarest, In re, 157. Dempster, In re, 22, 339, 359. Denman v. Boylston, 794. Denning, In re, 129, 130, 134, 136, 137. Table of Cases Cited. (References are to pages.) xxxix Denver First Nat'l Bank v. Klug, 433. Derby, In re, 96, 351, 358. Desmare v. U. S., 145. Des Moines Savings Bank y. Mor- gan Jewelry Co., 222, 357, 416, 417, 669. Deuell, In re, 39, 40, 190, 516, 517, 778. Devries v. Orem, 552, 848. Devries v. Shanahan, 440, 450. Dewdney, Ex parte, 702. Dewey, In re, 532. Dews, In re, 277, 283. Dey, In re, 769. Diamond, In re, 159, 176, 822. Dibblee, In re, 4, 70, 71, 456, 458. Dickas v. Barnes, 118, 129, 437, 424. Dickens, In re, 517. Dickinson v. Bank of Riclimond, 660. Dickson, In re, 53, 444, 599, 649. Dickson v. Wyman, 445, 600. Dielil, In re, 289. Dietz, In re, 246, 293, 297. Diggles, In re, 248. Dight v. Cliapman, 316, 578. Dillard, In re, 142, 832. Dillon, In re, 130, 135, 607, 797. Dimm & Co., In re, 36, 37, 549, 552, 694. Dimock v. Revere Copper Co., 212, 233, 329, 330, 427. Dingee v. Becker, 311. Dinglehoef Bros.. In re, 24, 26, 145. Disler v. McCauley, 316, 323. Dismal Swamp Contracting Co., In re, 652, 779. Dixon, In re, 508, 513, 892. Doan V. Compton, 353. Dobbins, In re, 230. Dobbs, In re, 147, 164, 165. Dobert & Son, In re, 131. Dobson, In re, 783. Docker-Foster Co., In re, 90, 651. Dodge V. Kaufman, 125, 126, 317. Dodge T. Knowles, 449. Dodge V. Nodin, 766. Dodge V. Norlin, 423, 425, 434, 445, 451, 780. Doe, In re, 535. Doe V. Bevan, 820. Doe V. Childress, 760. Doe V. Smith, 820. ' Doherty, In re, 275. Doken v. Page, 671. Dokken v. Page, 778. Dole, In re, 199, 817. Dolle V. Cassell, 423. Domenig, In re, 591, 704. Dommett v. Bedford, 820. Donahey, In re, 146, 163, 167, 183. Doran, In re, 424, 446, 743, 765, 767, Donaldson v. Farwell, 811. Dorn V. O'Neale, 304. Doroshow V. Ott, 446. Doscher, In re, 5. 7. Doty, In re, 610, 880. Dougherty Co., In re, 771. Douglass, In re, 601. Douglass & Sons Co., In re, 504, 609. Douglass Coal & Coke Co., In re, 70, 71, 80, 82, 635, 662. Dow, In re, 279, 792, 793, 811. Downer v. Brackett, 760. Downing, In re, 131, 134, 156, 161, 305, 788. Downing v. Traders' Bank, 703. Downing Paper Co., In re, 826. Downs, Ex parte, 598. Doyle V. Heath, 707, 785, 789. Dozier v. Deckert, 141. Drake, In re, 100, 688, 693. Drake v. Rollo, 793. Drayton, In re, 47, 414, 867. Dreeben, In re, 689. Dressel v. North State Lumber Co., 26, 188, 492, 513, 658, 892. Dresser, In re, 135, 200, 292, 592. Dresser & Co., In re, 287. Drew V. Myers, 405, 416. Drewry, In re, 839. Driggs, In re, 47, 214, 739, 809. Driggs V. Moore, 70, 71. Drummond, In re, 70. Duble, In re, 744. Ducker, In re, 764. Dudley v. Easton, 539. Duerson, In re, 141, 142, 154. Duff, In re, 107, 108. Duff V. Carrier, 453. Duff V. Hopkins, 458. id Tablje of Cases Citb!D. (References a^^re to pages.) Duffy, In re, 158, 162, 183, 865. Duguid, In re, 96, 97, 118, 1^1, 125, 157, 158. Dulany v. Wagga,man, 667. Dulcher v. iBank, 540. Dumahaut, In re, 173. Dunavant, In re, 672, 760, 761. Dunbar v. Dunba,r, 316, 322, 707, 717. Duncan, In re, 410, 737, 767. Duncan v. Ferguson-McKinn^y Dry GoQds Co., 143, 152, 155, 439. Di^ncan V. Landis, 6, 74, 367, 423, 443, 651. Dunkerson, In re, 596, 769, 772. Dunkle, In re, 656. Dunlap Carpet Co., In re, 589. Dunlap Hardware Co. v. Huddle- ston, 34, 164. Dunlop, In re, 811, 815, 825. Dunn, In re, 248. Dunn V. Gans, 604. Dunn Hardware & Furniture Co., In re, 564, 587, 766, 893. Dunn Salmon Co. v. Pillinore, 616, 789, 843. Dunnigan In re, 709. Dunnlgan Bros., In re, 97, 121. Dunseath, Matter of, 21, 22, 31, 32. Dupee, In re, 246, 297, 299. Duplan Silk Co. v. Spenc^, 762. Duplex Radiator Co., In re, 27, 85, 86. Dupree, In re, 477, 637. Durant v. Hospital, etc., Co., 819. Durham, In re, 144, 161, 398, 403, 564, 769, 779. Durham v. Wick, 844. Durham Paper Co. v. Seaboard Knitting Mills, 636. Duryea v. Guthrie, 852. Dusenberry v. Hpyt, 296, 331. Dutcher v. Wright, 5, 87, 651. 667. Dutton V. Freeman, 586, 641. Dvorak, In re, 181, 619. Dwyer, In re, 361, 629. Sades, In re, 269, 281- Eagles & Crisp, In re, 128, 172, 489. 570, 571, 576. Eames, Ex pa,rte, 85i. Earle, In re, 385. Eash, In re, 145, 147. Easley, In re, 783, 816. Ea^ern Cpm. &. Imp. Co., In re, 214. Eastlack, In re, 527, 529, 534, 869. Ea&ton, In re, 174, 184, 265, 270, 273, 279. Eau Claire Nat'l Bank v. Jackman, 418, 426. Ebert, In re, 672. Economical Pr. Co., In re. 768. Eddleman, In re, 515. Edelman, In re, 68, 72. Edelstein, In re, 87. Edelstein v. United States, 19, 191, 192, 469. Edens & Co., In re, 709. Edes, In re, 840, 876. Edinburg Coal Co. v. Humphreys. 34, 451. Edmondson v. Hyde. 151. Edwards, In re, 144, 150. Eeles, In re, 106. Egan V. Hart, 427. Egan State Bank v. Rice, 780. Eggert, In re, 437, 667. 668, 671. Ehle, In re, 817. Eidemiller, In re, 261. Eidom, In re, 261. Ei^enberg, Matter of, 97, 247. Elby, In re, 259, 290, 489. Eldred, In re, 268, 586, 593, 614, 753, 781. Eldridge, In re, 722. Electric Supply Co., In re, 7, 81, 83. Elfelt V. Snow, 246. Eliowich, In re, 830. Elk Park Mining & M- Co., In re. 108, 109. Elkins & Schwartz, Matter of, 290'. Ellerbe, In re, 518. EUetson, In re, 776. Elletsen & Co., In re, 494. Elliott, In re, 12?. Elliott V. Teoppner, 89, 365, 367, 433, 443, 452. Ellis, In re, 164, 63?, 710, 872. Ellis V. Hays, 851. Ellis V. Krulewitch, 489. Table of Cases Ci3?ed. (Refereuc^B ^re to p^fes.) xli Ellis BroB. Bi»inting Co., In re, 401. BUithorpe, Ip re, -157. Ells, In re, 719. ,721. 878. Elisworth & Co., Ifl re. 82, 212. Elmira Steel Co., In re, 18, 19, 76, 109, 353, 479, 808, 86p. 861. Elasser, In re, 661. Elsbree v. Burt. 293. Emery v. Canal Ban^, 129, 136, 703. Emlson, In re, 592. Empire Metallic Bedstead Co.. In re, 59, 65, 75, 79, 80. Emrich, In re, 404, 821. Emslie, In re, 75, 420, 744, 769. Engle, In re, 761, 785, 808. English, In re, 416, 417. English V. Riss, 652, 655, 814. Ennis v. Stoppani, In re, 315, 328. Enrich's Fort Hamilton Brewery, Matter of, 772. Epstein, In re, 36, 286, 549, 827, 828, 893. Equitable Loan & Security Co. v. Moss & Co., 832. Erie Lumber Co., In re, 36, 511, 550, 737, 738, 741. Erie Railroad Co. v. Dial, 744. Erie Rolling Mill Co.. In re. 740. Ervin, In re, 591, 704, 705. 710. Eschwege, In re, 691, 737. Etheridge Furniture rCp,, In re^ 32, 50, 838, 851. Ethier, In re, 836. Euclid Nat'l B^'nl^ v. Union Trust Co., 132, 438. Eureka Furniture Co., In re. 407, 831. Evans. In re, 120. 160, 689. 693. Evans v. Lincoln Co.. 719. Evans y. RounsavHle. 769. Evans V. U. S.. 465. Evans & Co.. In re. 152, 153. Evening Standard Pub. Co.. In re, 529. Bveritt, In re, 141, 142. Bverletb, In re, 152. Everybody's Market. Matter of, 61. 6?. 116, -120, 124. Ewart v. Sqimftvtz, 212. Ewing, In re, 350. Eyeter y. GafC, 208, 394, 407, 417, 639. Fagan. In re. 615. Fahy. In re. 257. 258, 259. Fairbank v. Smedley Const. Co.. 769, 785. Faiiil)anks v. Amoskeag Banl^, 246. Falconer, In re, 147, 159, 160, 1^2. Fall City Shirt Co., In re, 742, 770. Falter v. Reinhard, 52S, 534. 576, 869. Fanning, Matter of, 292. Farish, In re, 142. Farley, In re, 116, 117, 122, 560. Farmer, In re, 707. Farmer Supply Co., In re, 769. Farmers' Bank v. Carr ^ Co., 779. Farnham, In re, 97. Farns worth, In re, 794. Farrell, In re, 423, 437. Parrell Co., Matter of, 68, 778. Fatune, In re, 716. Faulkner Stable Co., In re, 779. Faulk & Co. V. Steiner, 29, 30, 33, 474, 882. Faulkner, In re, 594. Featherstonhaugh v. Fenwlck, 132. Petcher v. Postel, 314, 316. Fehley v. Barr, 144. Fehling v. Goings, 770. Feigenbaum, In re, 118, 126, 257, 259, 292. Feldsier, In re, 45. Peldstein, In re, 191, 192, 280, 281, 282, 288, 382, 383. Fellerath, In re, 419, 783. Peller-man. Matter of, 41, 179, 186. 190, 377, 384. Fellows V. Freudenth^,!, 268, 270, 509, 849. Fellows V. Hall, 330. Felson, In re, 174, 493, 690, 691, 693, 893. Penley -y. Poor, 9. Ferguson, In re, 7^, 75, 77, 274, 589. Ferrer, Matter of, 610. Per? is. In re. 2(6,9, 278. xlii Table of Cases Cited. (References are to pages.) Feschmacher & Mrazay, In re, 405. Feuerlicht, In re, 661. Fider v. Mannheim, 325. Fidler, In re, 45. Fidler & Son, In re, 553, 693, 834. Field V. U. S., 463, 468, 728. Fielding, In re, 512, 750, 755. Fields V. Karter, 277. Fife, In re, 200, 316, 707, 888. Filer, In re, 25, 63, 146, 700, 717. Fillingin v. Thornton, 629. Findlay, In re, 728, 741. Fiijk, In re, 738, 741. Finkelstein, In re, 269, 273. Finklea, In re, 151. Finlay, In re, 576, 578, 580, 877, 878. Finlay Bros., In re, 836. Finnegan v. Hull, 312, 316, 707. Fireman's Ins. Co., In re, 458. Firestone v. Harney, 285. Firestone Co. v. Agnew, 111. First Nat. Bank v. Aultman, 732. First Nat'l Bank v. Connett, 654, 655, 762. First National Bank v. Bason, 595. First Nat. Bank v. Johnson, 665. First Nat. Bank v. Lasater, 832. First Nat. Bank v. Penn. Trust Co., 657. First Nat. Bank v. Staake, 768, 787, 790, 816. First Nat'l Bank v. State Nat'l Bank, 135, 435, 609. First National Bank of Belle Fourche, In re, 19, 104, 105, 338, 349, 359. First National Bank of Canton, In re, 423. 445, 762, 765, 772, 780. First Nat'l Bank of Chicago v. Chi- ^ cago Title & Trust Co., 404, 408, 411, 433, 437, 438. First Nat. Bank of Corinth v. Has- ■well, 343, 440, 651. First Nat. Bank of Denver v. Klug, 444,. 453, 895. First Nat. Bank of Louisville, In re, 446, 602, 669. First Nat. Bank of Phil. v. Abbott, 268, 335, 492, 505, 668, 669, 670. First Nat. Bank of Sayre v. Bart- lett, 135, 145, 150, 786. First Nat. Bank of Wilkesbarre v. Barnum, 11, 100. First Nat. Bank of Wilkesbarre v. Wyoming Valley Ice Co., 108, 636. Fischer, Matter of, 690. Fish & Co. V. Wolf & Bro. Dry Goods Co., 244. Fish Bros. Wagon Co., In re, 79, 765, 767. Fishblate Clothing Co., In re, 634. Fisher, In re, 143, 146. 162, 176, 527, 530, 820, 833, 865. Fisher v. Gushing, 436, 437, 439, 446, 813, 820. Fisher v. Zollinger, 655. Fisher & Co. In re. 237. 730. 731, 734. 821. 836, 837. 885. Fisk. Ex parte. 367. 386. FIsk V. Montgomery. 853. Fitch V. Richard. 880. Fitch V. Richardson, 596. Fltchard, In re, 269, 277, 278. Fite V. Fite, 321, 322. Fitz immons In re. 154. Fixen & Co.. In re, 29. 31. 189. 376, 377, 378, 380, 381, 405. 518. 599. 649, 656. Flagg V. Ely. 329. Flagg V. Tyler. 307. Flanagan. In re, 178, 361. Flanagan v. Pearson. 212, 319. Flanders, In re. 221, 825. Flanders v. MuUin, 321. Plannagan, In re, 155. Flatau, Matter of, 131, 732. Fleischer, In re, 49, 376, 377, 385, 895. Fleischman, In re, 271, 274. Fleitas v. Richardson, 330. Fletcher, Matter of, 146, 689, 809. Flick, In re, 740, 741. Flickinger v. First National Bank of Vandalia, 101, 449, 450. Flint Hill Stone & Construction Co., In re, 61, 62, 65, 69. Flodd-Pratt Dairy Co., In re. 111. Florchen, In re, 29, 33, 866. Flower V. Greenbaum, 230. Table of Cases Cited. (References are to pages.) xliii Flody, Matter of. 209, 326. Floyd & Co., In re, 151, 157, 660. Fly, In re, 151. Flynn, In re, 237, 407, 734. Flynn & Co., In re, 402. Foerest, In re, 189, 380. Foley, In re, 6. Foot, In re, 130. Forbes, In re, 116, 119, 123, 196, 729, 819, 863. Forbes v. Howe, 668. Force, In re, 734. Ford, In re, 591. Foreman v. Burleigh, 448. Forsyth, In re, 599. Forsyth v. Hammond, 453. Forsyth v. Vehmeyer, 320, 426. Forsyth v. Woods, 710. Ft. Wayne, Elec. Corp., In re, 9, 512, 649, 750. Forth, In re, 271, 504. Fortunato, In re, 210, 217. Fortune, In re, 592, 716, 746. 747. Foss, In re, 441, 503, 885. Foster, Ex parte, 715, 807. Fouche V. Shearer, 505, 777. Fowler, In re, 96, 123, 158, 379. Fowler v. Jenks, 530, 817. Fowler v. Kendall, 329, 701, 712. Fox, In re, 237, 238, 242, 613. Fox V. Eckstein, 63, 64. Foye, In re, 698. Fraizer, In re, 339. Francis, In re, 33. Francis v. McNeil, 444. Francis-Valentine Co., In re, 408, 437, 747, 816. Frank, In re, 271, 576, 578. Frank v. Dickey, 737. Frank v. Mercantile Nat. Bank, 796. Frank v. Michigan Paper Co., 320. Frank v. Musliner, 657. Frank v. VoUkomer, 401, 418, 452. Franklin, In re, 22, 222, 770. Franklin Fund, etc.. In re, 458. Franklin Lumber Co., In re, 409. 824. Franklin v. Stoughton Wagon Co.. 425, 445, 825, 829. Franklin Syndicate, In re, 185, 191, 383, 490, 621. Franks. In re, 214, 223. 407. Frazler, In re, 824. Frazler v. McDonald, 194. Frazier v. Oppenheimer, Matter of. 820, 832. Frear, In re, 49, 129, 232, 236. 238. Freche, In re, 323. Fredenberg, In re, 379. Freelander v. Holloman. 224. Freeman, In re, 289. French v. Morse, 719. French v. Shoemaker, 450. French v. Smith, 416. French v. White, 808, 822. Freund, In re, 124, 126. 273, 340, 862. Freudenfels, In re, 342. Frey v. Torrey, 320, 327. Frice, In re,. 262. Frick, In re, 596, 685, 727, 737. Friday v. Hall & Kaul Co., 104, 105. Friederick, In re, 157. Friedman, In re, 401, 516, 594, 701, 783. Friedman v. Myers, 831. Friedrich, In re, 142, 144, 147, 157, 158, 163. Friend, In re, 424, 425, 435, 444. Frisbie, In re, 187. Frischberg, Matter of, 339, 347, 348. Fritz, In re, 201, 258, 260, 293, 300, 622. Froelich Rubber Refining Co. In re, 828. Frost, In re, 347, 634. Fry V. Penn. Trust Co., 664. Fuller V. New York Fire Ins. Co., 808. Fuller & Bennett, In re, 739. Fulton Club, In re, 107. Funk, In re, 97, 98. Furbish, In re, 458. Furth V. Stahl, 658, 678, 679, 840. Fuzelle, In re, 187. Gabbie & Co., In re, 811. Gage & Co. v. Bell, 337, 349, 638. Galley, In re, 179, 182, 273, 278. Gainey, In re, 142. xliv X^BLE QF Cases Cited. (RefereAces ^re t9 pages.) Gallagher, In re, 74. Gallagher v. De Lancy Stables Co., 108. Galinger, In re, 3^0. Gait, In re, 825, 826, 830. Gang v. Ellison, 600, 677. Gany, In re, 286, 811, 827. Garcewlch, In re, 766, 781, 823. Garden In re, 150. Gardner, In re, 501, 817. Gardner v. Cook, 715, 716, 727, 769. Garland, Ex parte, 99. Garlington, In re, 701, 708. Garneau, In re, 24, 26, 28. Garner, In re, 147, 149, 817, 819. Garner & Co., In re, 31. Garrison, In re, 269, 281, 283, 284. Gartner Hancock Lumber Co., In re, 157. Gasser, In re, 261, 349, 580, 858, 890. Gauss V. Schrader, 133. Gay, In re, 122, 560. Gayle v. Randall, 146. Gaylord, In re, 53, 269, 270, 276, 278, 279, 293, 821. Gebhard, In re, 708. Gebhardt, In re, 366. Gee V. Gee, 315, 320, 329. Geirveiter v. Sevier, 489. Gelster, In re, 211, 218. General Metals Co., Matter of, 479. Georgia Handle Co., In re, 773. Georgia Mfg. & Public Service Co., In re, 105. Gerdes, In re, 214, 215, 221, 417, 541, 838. Gerry, Appeal of, 854. Gerry, In re, 769, 839, 840. Gerson, In re, 12, 496, 512, 591, 633, 704, 709, 711, 739, 750. Gerstel, In re, 39, 42. Gerstman & Bondman, Matter of, 767, 842. Gesas, Matter of, 657, 772. Getts V. Janesville Grocery Co., 667, 671. Ghiglione, In re, 63, 91, 690, 891. Ghiradelli, In re, 208. Gibbs, In re, 154, 155. Gibson V. Dobie, 68, 656. Giddings y. Ppdd, 71^ 657. Gift, In re, 260, 265, 266, 267, 288. Gilbert, In re, 6, 69, 71, 80, 187, 377, 621. Gilbert v. Lynch, 755. Gllbertson v. United States, 359, 361, 468. Gilday, In re, 230. Giles, Matter of, 151. Gillette, In re, 63, 86, 134, 630, 634, 659. Gilligan, In re, 824. Gilman v. Gate, 700. Gilmore v. Bangs, 223. Gilpin, In re, 269, 285, 286, 464, 469. Gilpin v. Merchants Nat. Bank, 285. Gilroy, Matter of, 45, 468. Ginsburg, In re, 261, 265, 282, 889. Girard Glazed Kid Co., Matter of, 406, 447, 634. Girdes, In re, 416. Gir-vin, In re, 588. Githens v. Shiffler Bros., 61, 62, 775. Gitkin, In re, 190, 519. Gladding, In re, 739. Gladding Co., Matter of, 745. Glass, In re, 260, 265, 267, 888, 890, 895. Glassner, In re, 191. Gleason v. Smith, Perkins & Co., 340, 343, 347, 860, 865. Glenny v. Langdon, 394, 539, 672, 832. Glickman, In re, 258. Globe Cycle Works, In re, 23, 210, 211. Globe Ins. Co. v. Cleveland Ins. Co., 78, 781. Globe Security Co., In re, 479. Glover Grocery Co. v. Dome, 232. Godier v. Barnes, 420. Coding V. Roscenthal, 307. Godley v. Morning News, 345. Godschalk Co. v. Sterling, 266, 267, 282, 283. Godwin, In re, 240, 241. Godwin v. Muchison Nat. Bank, 815. Goedde, In re, 181. Gold, etc., Co., In re, 786. Goldberg, In re, 219, 220, 447, 747. Table of Cases Cited. (References are to pe^ges.) xlv Golden Malt Cre^ Co., In r«, 7, ^3. Golden Rule ^flrc. Co., Matter of, 157. Goldfarb Bros., In re, 38, 39. Goldick, In re, 282. Goldman, In re, 812, 816, 825. Goldman v. Smith, 67, 68, 70, 351, 761. Goldschmldt In re, 65. Goldsmith, In re, 278, 595, 8^8, 839. Goldstein, Matter of, 501, 721, 747. Goldville Manufacturing Co., In re, 509, 549, 689, 691, 737. Gomila v. Wilcombe, 658. Good, In re, 435, 440, 441, 444. Goodale, In re, 261, 274, 277. Goodall V. Tuttle, 23. Goodfellow, In re, 28, 96, 98. Goodhile, In re, 270, 286, 670. Goodier v. Barnes, 395. Goodman, In re, 98, 149, 162, 279, 544, 698, 704, 865. Goodman v. Brenner, 443, 446. Goodman Shoe Co., In re, 703, 79,6. Goodnough Mercantile & Stock Co., V. Galloway, 47, 407, 769, 772, 787. Goodrich v. Lincoln, 237. Goodwin, In re, 681, 692. Goodwin v. Murchison Nat. Bank, 810. Goodyear v. MuUee, 174, 516. Gordon, In re, 41, 148, 517. Gordon v. Mechanics' & Traders' Ins. Co., 808, 823. Gordon v. Ogden, 451. Gordon v. Scott, 368. Gordon Supply & Manufacturing Co., In re, 535, 585, 870. Gorman, Matter of, 337. Gojrmap V. Wright, 8, 9, 709. Gormley v. Bunion, 224. Gosch, In re, 76?, 77Q. Gould V. New York Life Ins. Co., 822. Gove V. Morton Trust Co., 764. Goyer Co. v. Jones, 307. Grady, In re, 153. Graft, In re, 705. Graham y. Boston, .etc., 3j59. Graham v. Pierson, 715. Graham t. Richerson, 312. Graham y. Stark, 666. Grahs, In re, 775, 781, 844. Grainger, In re, 886. Gramman, In re, 279. Grandy, In re, 781. Granger, In re, 598. Granite City Bank, In re, 176, 178, 339, 410, 413. Gra^t, In re, 70, 122, 261, 503, 532, 885, 889. Grant v. Bank, 667. Grant Bros., In re, 118, 505. Grant Shoe Co., In re, 633, 711. Grant Shoe Co. y. Laird Co., 452, 711, 894. Grassier, In re, 45, 437. Graves, Ex parte, 597. Graves, In re, 456, 519, 531, 597. Graves v. Winter, 99. Gray, In re, 78, 419, 539, 675, 762, 781, 814, 843, 844. Gray v. Grand Forks Mercantile Co., 445. Gray v. Mercantile Co.., 449. Gray v. Rollo, 796. Great Wtestern Mfg. Co., In re, 652, 811, 824. Great Western Mining & Mfg. Co., y. Harris, 30. Greater American Exposition, In re, 216. Greek Utg. Co., In re, 885. Green, In re, 131, 402, 414, 710, 732. Green v. Blunt, 149. Green v. Rogers, In re, 7fl. Greenbaum, In re, 230, 239. Greenberg, In re, 174, 268, 269, 275, 277, 517. Greene, In re, 699, 762. Greenewald, in re, 10, 741. Greenfield, In re, 479. Green Pond R. Co., In re, 347. Green River Deposit Bank v. Craig Bros., 79, 102, 116, 119, 351, 352. Greenwood v. Marvin, 132. Grefe, In re, 262. G^gg, In re, 686. Gregg v. Mitchell, 101. Gregory, Matter of, 821. Gregory v. Atkinson, 399, 404, 406, 412, 845. xlvi Table of Cases Cited. (References are to pages.) Greth, In re, 605. GriflBn v. Dunton, 79. Griffin v. Mutual Life Insurance Co., 223. Griffin V. Sutlierland, 142, 148. Griffin Bros., In re, 263, 264, 271, 273, 280, 282, 298, 300, 468, 601. Griffith In re, 151, 539. Grignard Litli. Co., Matter of, 729. Grimes, In re, 25, 143, 145, 146, 157, 160, 161, 835. Grinnell In re, 781. Grissl^r, Matter of, 216, 770. Grist, In re, 201, 217. Griswold v. Hazard, 202. Griswold v. Pratt, 854. Grive, In re, 596. Groetzinger, In re, 132, 136, 436, 441, 444, 816. Groetzinger & Sons, 439. Gromme, In re, 96. Gross, In re, 260, 263, 265, 268, 269, 277. Grossman, In re, 270, 279, 509, 849. Groves, In re, 145, 146, 173, 183, 690, 735, 836. Grow V. Ballard, 676. Grubbs-Wiley Co., In re, 740. Grunsfield v. Brownell, 5. Guaranty Title & Trust Co. v. Pearl- man, 31. Guilbert, In re, 263, 268, 274, 278. Guild V. Butler, 305. Guinn v. Iowa Cent. Ry. Guise V. State, 142, 148. Gunike, In re, 195. Gunn V. Barry, 142. Guras v. Porter, 762. Gurewitz, In re, 740. Gutman, In re, 50, 209, 339, 410, 868. Gutterson, In re, 450, 836. Gutwillig, In re, 20, 50, 60, 65, 78, 79, 210, 216, 255, 289, 419, 636, 781. Haach v. Theise, 858. Haack v. Theise, 325. Haake, In re, 159. Haas, In re, 290, 535. Haas V. O'Brien, 289. Habegger, In re, 679. Hackney v. Hargreaves, 651, 662, 666. Hackney v. Raymond Bros., Clarke Co., 7, 651, 657, 658, 667, 669. Hadden Rodee Co., In re, 403, 404. Hadley, In re, 203. Haensell, In re, 223. Haeseler-KohlhofE Carbon Co., 92. HafiE, Matter of, 91, 341, 342, 638, 641, 861, 865. Hagan, In re, 752. Hagerty v. Barkin, 329. Haggerty v. Morrison, 330. Hahlo V. Cohn, 222, 223, 225, Halbert, In re, 693. Halbert v. Pranke, 844. Hale, Ex parte, 692. Hale, In re, 116, 125, 203, 259. Hale V. Allinson, 31. Haley, In re, 590. Hall, Ex parte, 194. Hall, In re, 153, 217, 346, 460, 599, 603, 624, 647, 649, 653. Hall V. Allen, 442. Hall V. Cooley, 108. Hall V. Gushing, 536. Hall V. Fowler, 307. Hall V. Kincell, 20. Hall Co., In re, 255, 852. Hallack v. Tritch, 394. Halliburton v. Carter, 329. Halsel, In re, 283. Halsey Electric Generator Co., In re, 730, 732, 890. Hambright, In re, 727. Hamilton, In re, 269, 278, 283, 823. Hamilton v. Bryant, 306. Hamilton Furniture Co., In re, 610, 828. Hamlin, In re, 230, 243, 248, 249, 621. Hammond, Ex parte, 305. Hammond, In re, 341, 394. Hampton v. Rouse, 808. Hamrick, In re, 342, 860. Handford, In re, 98. Hanna, In re, 267, 282, 579. Hanna v. Rayburn, 286. Hanna & Kirk, 817. Table of Cases Cited. (References are to pages.) xlvii Hannahs, In re, 289. Hanover Nat'l Bank v. Moyses, 96, 141, 231, 256. 325, 622. Hansen, In re, 300. Hansen Mercantile Co. v. Wyman, Partridge & Co., 831. Hanson, In re, 489, 529, 534. Hanson v. Blake & Co., 658, 762. Hanson v. Stephens, 816. Hanyan, Matter of, 630. Hapgood, In re,*72. Harber, In re, 183. Harder v. Clark, 662, 671. Hardie v. SwafEord Bros. Dry Goods Co., 255, 269, 287. Hardie & Co., In re, 135, 287. Hardin, In re, 722. Hardt v. Schuylkill, etc., Co., 789. Hardy v. Binninger, 72. Hardy v. Gray, 669. Hare, In re, 529, 869. Hargadine-McKittrick Dry Goods Co. V. Hudson, 319, 587, 616, 699, 722. Hargraves, Matter of, 149, 155. Hark v. Allen Co., 340, 341, 342. Hark Bros., Matter of, 66, 192, 341, 379, 383. Harmon, Matter of, 739. Harper, In re, 4, 46, 73, 75, 77, 80, 289, 328, 796, 831. Harper v. Rankin, 328. Harper & Bros., In re, 65. Harpke, In re, 664. Harr, In re, 262, 284, 504. Harrell v. Beale, 845. Harrington, In re, 155, 183. Harrington & Goodman v. Herman, 329. Harris, Ex parte, 356. Harris, In re, 21, 24, 31, 123, 125, 137, 174, 182, 237, 257, 258, 365, 384, 641, 808, 809, 861. Harris v. First Nat. Bank, 403, 404. Harrison, In re, 763, 768. Harrison Mercantile Co., In re, 690. Harson, Matter of, 745. Hart & Co., Matter of, 36, 510, 552, 690, 801, 849. Hartman, In re, 706. Hartman v. Peters, 86, 118. Hartsell, In re, 143, 148. Hartwell Oil Mills, In re, 79. Harvey, In re, 237, 729, 731. Harvey v. Smith, 769, 779. Harvey v. Tyler, 530. Har-wood, In re, 598. Haskell, In re, 230, 268, 283. Haskin, In re, 149, 163, 183. Hassel v. Wilcox, 708. Hassenbusch, In re, 187, 204. Hatch, In re, 143, 154, 160. Hatch v. Curtin, 395, 396. Hatch V. Seeley, 598. Hatcher, In re, 622, 736, 864. Hatem, In re, 504, 608, 609. Hathorn, In re, 190, 382. Hatje, In re, 189, 347, 634, 641, 716, 746. Hausberger, In re, 716. Hausman, In re, 516. Havens, In re, 533, 801. Havens & Geddes Co. v. Pierek, 18, 414. Hawdon, In re, 278. Hawes v. Cooksey, 313. Hawk, In re, 184, 297, 298, 299, 612, 615. Hawk V. Hawk, 196, 704, 819. Hawkes v. Cooksey, 323. Hawkins, In re, 622, 819, 876. Hawkins v. Blake, 812. Hawkins v. Larned, 853. Hawley, In re, 502, 503, 837, 884, 885. Hayden, In re, 189, 380. Hayer v. Comstock, 325, 607, 709, 880. Hayes v. Dickinson, 812. Hayman v. Pond, 315. Haynes, In re, 575, 752, 755, 786. Haynes & Sons, In re, 258, 259. Hays V. Ford, 19, 313. Hays V. Wagner, 636. Hays, Foster & Ward Co., In re. 721. Hayward, In re, 599. Hazelton, In re, 199. Hazens, In re, 634, 63^ Head, In re, 779. Headley, In re, 266, 274, 596, 611. Heard v. Arnold, 621. xlviii Table of Cases Cited. (Referemifes are to pages.) Heard v. Jones, 598. Heath v. Shaffer, 215, 222, 420. Hebbart, In re, 356. Heebner, In re, 752. Heckathorn, In re, 830. Heckman, In re, 417. Hecox, In re, 359, 433, 435. Hedley, In re, 288. Hee, In re, 129. Heebnet, In re, 885. Heffner v. Jayne, 329. Hegerty, In re, 753. Heinsfurter, In re, 349. Heller, In re, 184. Hemstreet, In re, 21, 22, 385, 386, 518, 856. Henderson, Ex parte, 97. Henderson, In re, 132. Hendrick, In re, 263, 265, 268, 269. Henkel, In re, 160. Henkel v. Selder, 63, 777. Hfenly V. Lanier, 331. Hennequin v. Clews, 315, 319, 328, 426. Hennis, Matter of, 152. Hennocksburg, In re, 700. Henrle v. Henderson, 396, 406. Henry, Matter of, 152. Henschel, In re, 20, 191, 382, 442, 528. 529, 575, 576, 577, 578, 580. 869, 890, 896. Herbold, Matter of, 151. Hercox, In re, 81. Hercules Atkin Co., Limited, In re, 81, 103. Herman, In re, 278. Herndon v. Ridgway, 344. Hernich, In re, 156, 822. Herrick, In re. 135, 300. Herrman, In re, 257, 312, 576. Herron Co. v. Superior Court, 853. Hersey, In re, 79, 592, 609, 735, 743, 744, 769, 771, 780. Hershkowitz, In re, 174, 520. Herskovitz, In re, 385. Herzikopf, In re, 17, 352, 353, 365, 635, 858., Hess, In re, 191, 192, 381, 383, 813, 824. Hesseltine v. Prince, 819. Hester, In re, 144, 819. Hettling, In re, 822. 823. Hisusted, In re, 641. Hewit V. Berlin Machine Works, 423, 435, 815. 825. Heyden, In re, 402, 404. Heydette, In re, 366. Heyman, In re, 277. 458. 607. Hibbard v. Bailey. 709. Hibbard v. McGill, 135. Hickerson, In re, 659, 779, 780. Hickey, In re, 604. Hicks, In re, 49. 51, 194, 195, 210, 258. Hicks V. Knost, 398, 432. Hicks V. Langhorst, 674. Iliggins, In re, 783, 784, 787. High, In re, 579. Highfield, In re, 143. Hilberg, In re. 731. Hilborn, In re, 234, 236. Hildebrant, In re, 828. Hill, Ex parte, 193. Hill, In re, 143, 144. 145. 265, 340, 355, 776, 779. Hill V. Harding, 306, 330, 426. Hill V. Hareling, 218. Hill V. Levy, 350, 699. Hill V. Sheibley, 329. Hill Co., In re, 30, 35, 449, 605, 660, 661, 690, 794, 828. Hiller v. Leroy, 786. Hilton, In re, 210, 312, 633, 888. Hinckel Brewing Co.. In re, 512, 610, 721. Hinds, Ex parte, 132. Hinds V. Moore. 401. 407. Hindman. In re, 151. Hines, In re, 5, 6, 7, 91. 152, 164, 595, 601, 651, 659, 663, 667. 891. Hinsdale, In re, 243, 824. Hintze, In re, 357, 359. Hirsch, In re, 115, 117, 118, 263, 264, 265, 274, 277. Hirschmann, In re, 700, 714. 717. Hiscock V. Mertens, 822, 834. Hlscock V. Jaycox, 132. Hiscock V. Varick Bank, 51. 133, 597, 762, 809. Hitchcock, Matter of, 692. Hitchcock V. Rollo, 798. Hixon. In re. 263, 265. Table of Cases Cited. (References are to pages.) xlix Hoadley, In re, 817. Hoag, In re, 155. Hobbs V. Prazler, 832. Hobbs & Co., In re, 43, 410. Hoffman, In re, 277, 505, 693. Hoffschlaeger Co. v. Youngnap, 65, 101, 203, 338, 690. Holbrook, In re, 133. Holbrook Shoe & Leather Co., In re, 402, 494, 705, 814. Holden t. Stratton, 156, 433, 438, 452, 822, 834. Holgate, In re, 53, 302. Hollenfeltz, In re, 731. Holloway, In re, 214, 215. Holman, In re, 263, 265, 889. Holmes, In re, 230, 258, 434, 435, 441, 456, 477, 715, 716, 747, 851. Holmes v. Baker & Hamilton, 76, 115, 117, 119. Holsteln, In re, 277. Holt, In re, 189. Holyoke v. Adams, 306, 330. Home Discount Co., In re, 41, 51, 293, 502, 812, 884. Home Nat. Bank y. Carpenter, 230. Hood V. Karper, 606. Hole, In re, 458, 621. Hoole, In re, 458, 621. Hooks V. Aldridge, 82, 418. Hooks Smelting Co., In re, 189, 383, 505, 809. Hoover, In re. 300. Hoover v. Wise, 672. Hopkins, In re, 150, 160, 163. Horgan, In re, 400, 404. Horgan & Slattery, Matter of, 189, 378, 380. Home & Co., In re, 594. Homer v. Spellman, 329. Horner-Gaylord v. Miller, 31, 405, 406. Hornsteln, In re, 417, 587, 635. Horsklns v. Sanderson, 844. Horton, In re, 603, 851. Hosaok v. Rogers, 550. Hostin, In re, 151. Houck v. Christy, 451. Houghton, Ex parte, 720. Houghton, In re, 267. House, In re, 274. Houseberger, In re, 746. Houston, In re, 23, 200, 217, 321, 322, 520, 720. Houston V. City Bank, 8iO. Hovey v. Insurance Co., 798. Howard, In re, 379, 380, 385, 402, 518, 540, 609, 610, 885. Howard v. Compton, 809. Howard v. Crowther, 830. Howard v. Cunliff, 293, 769. Howard, Cole & Co., In re, 597, 703. Howard Nat. Bank, Ex parte, 794. Howden, In re, 269, 271, 275. Howe V. Noyes, 293, 318. Rowland, In re, 98, 767, 780, 823, 824. Howley-Dresser Co., In re, 813. Hoy, In re, 101. Hoyt, In re, 544, 755, 887. Hoyt and Mitchell, In re, 544, 887. Hubbard, In re, 323, 598, 707. Hubbard v. Todd, 453. Huber, In re, 279. Huddell, In re, 728. Huddleston, In re, 19, 30, 489, 535, 691, 868, 895. Hudson V. Bingham, 296. Hudson V. Mercantile Nat. Bank, 27'2, 275. Hudson Clothing Co., In re, 115, 447. Hudson River, etc.. Power Co., Mat- ter of, 31, 82, 86, 106, 108, 110, 348, 359. Huenergardt v. Brittain Dry Goods Co., 154, 160. Hufnagel, In re, 720. Hughes, In re, 552, 734. Hugill Mercantile Co., In re, 777, 779. Hull, Ex parte, 4. Hull, In re> 762, 766, 845. Hull V. Burr, 18, 399, 413, 780, 843. Humbert, In re, 348, 355, 490. Humphrey v. Tatman, 653, 762, 764, 765. Hun V. Gary, 314. Hunt, In re, 352, 579, 634, 655, 666, 744. Hunt V. Holmes, fSf, 798. Hunt V. Oliver, 451. Table of Cases Cited. (References are to pages.) Hunt V. Pooke, 194. Huntenberg, In re, 740. Hurlbutt, In re, 602. Hurlbutt, Hatch & Co., Matter of, 45, 822. Hurley v. Dedlin, 18, 399, 845. Hurst, In re, 230, 233, 236. Hussey v. Judson, 293. Hussey v. Richardson-Roberts Dry Goods Co., 4, 451, 660, 667. Hussman, In re, 63, 182. Huston, In re, 769. Hutchinson v. LeRoy, 434, 437, 446, 816. Hutchinson v. Otis, 422, 423, 438, 445, 446, 451, 593, 594, 612, 614, 615, 773. Hutchinson & Wilmoth, In re, 18, 399. 407. Hutchinson Co., Matter of, 779. Huttig Mfg. Co. V. Edwards, 359, 542, 668, 682, 769, 886. Hutto, In re, 769. Hyde v. Tufts, 830. Hyde v. Woods, 410. Hyde v. Gload v. Lesser, 328. Hyman, In re, 273, 281. Hymes, In re, 639. Hymes Buggy & Implement Co., In re, 786. Idaho, etc., Co. v. Bradbury, 354. Ideal Clo. Co. v. Hazle, 851. Idzall, In re, 263, 269, 283. Imperial Brewing Co., In re, 711, 719. Independent Ins., In re, 102, 602. Independent Thread Co., In re, 632. Industrial Coal Storage & Ice Co., In re, 733. Ingalls Bros., Matter of, 595, 612, 613, 856, 874, 878. Ingram v. Wilson, 143, 144, 150, 155, 438. I Plan & Co., In re, 701, 710, 711, .12. Insley v. Garside, 606. Interborough Coal Mining Co., In re, 102, 854. International Harvester Co., v. Lyman, 331. Interstate Paving Co., In re, 106, 110. Iowa Falls Mfg. Co., In re, 512. Irish V. Citizens Trust Co., Ill, 795. Ironsides, The, 773. Iroquois, In re, 742. Irvin, In re, 154. Irving, In re, 212. Irving V. Hughes, 52. Irwin, In re, 147, 160, 163. Isaacson, In re, 23, 25, 34, 36, 268, 474, 479, 859, 860, 881. Isidor, In re, 187. Israel, In re, 634. Ives, In re, 20, 96, 121, 261, 358, 359, 434, 439, 444. Jack, In re, 347, 641. Jack V. Kipping, 794. Jackson, In re, 142, 143, 151, 164, 188, 576. Jackson v. Miller, 755. Jacobs, Ex parte, 304. Jacobs, In re, 71, 241, 269, 276, 277, 433, 434, 436, 667. Jacobs V. George, 449. Jacobs V. United States, 175, 465. Jacobs and Roth, Matter of, 189, 529. Jacobs & Verstandig, In re, 276, 277, 467, 468. Jacoby v. Distilling Co., 160. James, In re, 276, 468, 752, 755. James v. Gray, 591, 703. James Dunlap Carpet Co., In re, 711. Jamieson, In re, 151, 267, 835. Janes, In re, 132. Jaquith v. Alden, 9, 600, 656, 663, 895. Jaquith v. Rawley, 222, 400. Jarecki Mfg. Co. v. McElwaine, 126. Jaycox, In re, 596, 710. Jayrox & Greene, In re, 698. Jeffers, Matter of, 154. Jefferson, In re, 379, 721. Table of Oases Cited. (References are to pages.) li Jeffries v. Bartlett, 143. Jehu, In re, 186, 360, 376, 571. Jelsh, In re, 367. Jemison v. Blowers, 719. Jemison Mercantile Co., In re, 356, 357, 439, 623, 646. Jenkins v. Armour, 796. Jenkins v. Bank, 224. Jenkins v. Pierce, 811. Jenks, In re, 715, 716, 746, 747. Jenks V. Opp, 304. Jennings, In re, 715, 746. Jennings & Co., In re, 158. Jerome v. McCarter, 761, 774. Jersey Ice Co., v. Archer, 331. Jersey Island Packing Co., In re, 51, 247, 294, 297, 832. Jetter Brewing Co., v. ScoUan, 820. Jewett, Ex parte, 230, 239, 352. Jewett V. Huffman, 143, 148, 161, 787. Jobbins v. Montague, 18, 20, 21, 344. Johann, In re, 781. John Deere Plow Co. v. Anderson, 825. John L. Nelson & Bro. Co., In re, 21. John Osborne Sons & Co., In re, 880. Johnson, In re, 101, 154, 259, 473, 475, 494, 788. Johnson v. Auditor, 328. Johnson v. Bishop, 218. Johnson v. Bruckheimer, 321. Johnson v. Collins, 306. Johnson v. Knox Lumber Co., In re, 518. Johnson v. United States, 179, 191, 467, 468. Johnson v. Wald, 9, 68, 69, 70, 657, 777. Johnson v. Worden, 315, 456. Johnson Co. v. Wharton, 19. Johnston v. Forsyth Mercantile Co., 778, 782. Johnston v. Huff, 651. Jonas, Ex parte, 96, 699. Jonas, In re, 641. Jones, In re, 134, 135, 152, 156, 289, 526, 599, 600, 616, 653, 658, 677, 727, 729, 742, 743, 880. Jones V. Burnham, Williams & Co., 115, 122. Jones V. Kinney, 686. Jones V. Knox, 307. Jones V. Russell, 307. Jones V. Sleeper, 59, 78. I Jones V. Stevens, 87, 477, 785, 790. Jordan, In re, 141, 290, 699. Joseph V. Makley, 541. Josephson, In re, 53, 382, 762, 780. Jourdan, In re, 444, 450. Judd V. Ives, 851. Junk & Balthazard, In re, 116, 137, 138, 863. Kahn, Matter of, 235. Kahn v. Export, etc., Co., 677. Kaiser, In re, 263, 268, 491, 549. Kajita, Matter of, 558. Kaldenberg, In re, 611. Kalak, Matter of, 734. Kalter, In re, 557, 794. Kamsler, In re, 189. Kane, In re, 17, 39, 42, 45, 47, 142, 163, 402, 417. Kane Co. v. Kinney, 770. Kanter, In re, 191. Kanter & Cohen, In re, 33, 213, 382, 383. Kaplam, Matter of, 286. Kaplan, In re, 418. Kasson, In re, 78. Katzenstein v. Reid, Murdock & Co., 310, 320. Kaufman, In re, 126, 147, 154, 292, 704. Kaufman v. Schreier, 325, 326. Kaufman v. Treadway, 650, 669, 677. Kaupisch Creamery Co., In re, 790. Kavanaugh, In re, 785. Kavanaugh v. Mclntyre, 315, 321. Kayser, In re, 776, 777. Kean, In re, 141, 146. Kearney, In re, 494, 657. Keck V. U. S., 465. Keefer, In re, 269, 282. Eeegan v. King, 23, 213, 409, 416, 808. lii Table or Cases Cited. (References are to pages.) Keeler, In re, 372. Keet, In re, 838. Keeton, In re, 708. Kehler, In re, 98, 102, 194. Kehr v. Smith, 781. Keisler, In re, 219, 895. Keith V. Gettysburg Nat. Bank, 671. Keller, In re, 134, 230, 384, 605, 662, 664, 677, 733, 734, 611, 821, 838. Kellogg, In re, 46, 409, 414, 477, 816, 824. Kellogg V. Russell, 52. Kelly, In re, 407, 801. Kelly V. Scott, 811. Kelly V. Smith, 46, 397. Kelly V. Sparks, 160. Kelly V. Strange, 819. Kelly Dry Goods Co., In re, 31, 33, 34, 85, 503, 540, 576, 688, 691, 836, 884. Kemp In re, 783, 787. Kemper, In re, 615. Kennedy Tailoring Co., In re, 83. Kenney, In re, 114, 210, 214, 437, 596, 664, 718, 767, 785, 816. Kenney & Co., In re, 528, 578, 591, 896. Kenova Loan & Trust Co. v. Gra- ham, 437, 442, 449. Kentucky National Bank of Louis- ville V. Carley, 265, 868. Kenyon, In re, 283, 504, 616. Keppel V. Tiffin Savings Bank, 601, 605. Kerby-Dennis, In re, 744, 769. Kern v. United States, 468. Kerch v. United States, 449, 466, 468. Kerski, In re, 44. Kersten, In re, 74, 75, 86, 118, 419. Kessler v. Herklotz, 222. Kessler & Co., In re, 402, 597. Ketchum, In re, 49, 203, 204, 410. Ketchum v. McNamara, 852. Ketterer Manufacturing Co., In re, 687, 691, 841. Keyes, In re, 614. Keyes v. McKirrow, 694. Keyser, In re, 371, 590, 663. Keyser v. "Wessel, 771. Keystone Coal Co., In re, 109. Kilton V. Codington, 772. Kimball, In re, 108, 199, 200, 202, 210, 214, 371, 591, 816. Kimball v. Rosenham Co., 600, 649, 677. Kindt, In re, 349, 353, 371, 539, 654. King, In re, 367. King V. Block Amusement Co., 787. King V. Central Bank, 305. King Co., In re, 367. Kingsbury, In re, 599. Kingsland v. Spalding, 329. Kingsley, In re, 181, 186, 722, 797. Kingston, Matter of, 105. Kingston Realty Co., Matter of, 105, 107. Kinkead, In re, 98. Kinmouth v. Braeutigam, 761, 786, 787. Kirkland, In re, 773. Kirkpatriek, In re, 34. Kirtland, In re, 174. Kitzineer, In re, 133. Kizsie V. Winston, 815. Klapholz, In re, 769. Klein, In re, 222. Klein v. Powell, 276, 468. Klein & Co., In re, 694, 746. Kleinhans, In re, 30, 50, 209, 410. Kletchka, In re, 210. Klingaman, In re, 654, 664, 780. Klipstein v. Allen Miles Co., 306. Knapp V. Anderson, 307. Knapp V. Harold, 325. Knapp V. Milwaukee Trust Co., 445, 894. Knapp & Spencer Co., v. Drew, 350, 493, 494, 868, 885. Knaszak, In re, 265, 271. Knauer, In re, 258. Kneopfel, In re, 580. Knickerbocker, In re, 408. Knight, In re, 19, 81, 131, 418, 419, 693, 694. Knittel v. McGowan, 7, 90. Knoelle, In re, 283. Knopf, In re, 30, 45, 377, 395, 492. 671, 778, 868. Knost, In re, 599, 649. Knost V. Wilhemy, 9. Knott V. Putnam, 221, 311, 888. > Table of Cases Cited. (References are to jiages.) liii Knox V. Bank, 222. Kobusch V. Hand, 663. Koenlg & Van Hoogenhuyze, In re, 883, 885. Kohler, In re, 814. Kohlsaat, In re, 231. Kohout V. Chaloupka, 595, 779. Kolb V. Berger Mfg. Co.', Matter of, 33. Kolln, In re, 339, 810. Kolster, In re, 275, 276. Koronsky, Matter of, 217. Kosches V. Libowitz, 851. Koslowlski, In re, 785. Kranich, In re, 458. Kretsch, In re, 277, 279. Krinsky Bros., In re, 50, 339. Kross, In re, 678, 681, 688, 692. Kuffler, In re, 259, 290, 292, 311, 312, 376, 435, 444, 528, 571. Kuntz V. Young, 290. Kurtz, In re, 505, 818, 883, 884. Kyle Lumber Co. v. Bush, 479. Kyler, In re, 174. Kyte, In re, 274, 287, 704. Lacey, In re, 640. Lachemeyer, In re, 322. Lackrow, In re, 72. Ladue Tate Mfg. Co., In re, 712. Lady Byron Mining Co., In re, 220. Lafayette Ins. Co. v. French, 146. Lafferty, In re, 722. Lafleche, In re, 283. Lake, Ex parte, 717. Lake, In re, 809, 845. Laker v. Stapely Co., 108. Lake Superior Ship Canal, etc., Co., In re, 526, 576, 577, 581, 592. Lamb v. Brown, 311, 324. Lambert, In re, 144. Lamkin v. Starkey, 199. Lammer, In re, 160. Lamoille County Nat'I Bank v. Stevens, 133, 136, 703. Lamon, In re, 115, 134. Lamprey v. Nudd, 530. Landis, In re, 613, 826. Landry v. Andrews, 9, 68, 660, 661. Landry v. First Nat. Bank, 669. Lane, In re, 132, 232, 242, 243, 613, 796. Lane Co. v. Oregon, 730. Lang, In re, 477, 687, 693, 737. Langdon, In re, 230. Lange, In re, 60, 69, 156, 189, 340, 353, 664, 822, 834. Lange Co., In re, 606, 615, 732. Langslow, In re, 122, 560, 561. Langslow, Fowler & Co., In re, 892. Lanier, In re, 589, 705. Lansaw, In re, 589, 705. Lansing Boiler Works v. Ryerson, 5, 7, 61, 62, 64. Lantzenheimer, In re, 579, 597. La Plume Condensed Milk Co., In re, 30, 31, 808. Laramore v. McKinzie, 329. Laskaris, In re, 338, 896. Larkin, In re, 64, 66, 194. Lathrop v. Drake, 19, 21, 22, 23, 346, 394, 405. Lathrop v. Stewart, 601. Latimer, Matter of, 116, 125. Lattimer v. McNeal, 33. Laughlin, In re, 126, 127, 259, 863. Lau Ow Bew v. U. S., 454. Lavender, Ex parte, 106. Lavender v. Gosnell, 851. Lavoc, Matter of, 35, 38, 354. Law, Matter of, 581. Lawlor, In re, 10, 744. Lawrence, In re, 211, 451. Lawrence v. Allen, 104. Lawrence v. Harrington, 315. Lawrence v. Lowrie, 23, 405, 408. Lawson, In re, 368, 535. Lazarovic, In re, 593, 700, 705. Lazoris, In re, 535, 580. Lea V. West Co., 19, 90, 210, 216. Leachman, In re, 188. Lebrecht, In re, 45. LeClaire, In re, 154, 275. Lederer, In re, 259, 356. Ledigh Carriage Co. v. Stengel, 23. Lee, Ex parte, 377. Lee, In re, 606, 612. Leech, In re, 153, 436, 671, 672, 674. Leeds Woolen Mills, In re, 47, 414. Leeuw, In re, 468. liv Table of Cases Cited. (References are to pages.) Leffingwell v. Warren, 142. Legg, In re, 761. Legge, Ex parte, 190. Lehigh Lumber Co., In re, 134, 136. Lehman v. Strassberg, 699. Leibowitz, In re,. 612, 615. Leicester v. Hoadley, 321. Leidlgh Carriage Co. v. Stengel, 350, 351, 353, 477, 85L Leigh, In re, 761, 780. Leigh Bros., In re, 824. Leighton, In re, 108. LeIghton v. Kennedy, 631, 632. Leighton & Co., In re, 107, 108. Leinweber, In re, 38. Leitch V. No. Pac. Ry. Co., 293. Leland, In re, 479. Lemon v. Gale, In re, 409. Lengert Wagon Co., Matter of, 19, 32, 747. Lenox v. Allen Co., 79, 443. Lentz, In re, 157. Leonard, In re, 691, 342. Leopold, In re, 283. Leroux v. Hudson, 395. Lesaius, In re, 40. Lesaius v. Goodman, 436. Leslie, In re, 190, 269, 270, 276. Leslie v. Shaw, 326. Lesser, In re, 210, 211, 213, 214, 219, 277, 436, 439, 686, 735, 736, 783, 785, 788, 789. Lesser v. Bradford Realty. Co., 674, 844. Lesser Bros., In re, 279. Letson, In re, 154, 155, 809. Le Vay, In re, 143, 163, 183. Leverton, In re, 158, 553. Levey, In re, 261, 262, 263, 264, 265, 284, 890. Levi, Matter of, 356, 624, 643, 795, 828. Levi V. Picard, 827, 828, Levi & Klauber, Matter of, 619, 863. Levin Matter of, 40, 191, 262, 516, 826, 889. Levingston, Matter of, 102, 125, 338, 352. Levor v. Seiter, 666, 785, 786, 816. Levy, In re, 117, 188, 189, 235, 240, 242, 304, 217, 550, 609, 879. Levyensohn, In re, 200, 318, 526, 528, 530, 534, 609, 610, 707, 744, 879, 882, 888. Lewin, In re, 258, 279, 281, 499, 679, 681, 737. Lewis, In re, 123, 264, 286, 320, 339, 356, 357, 715, 742, 744, 746. Lewis V. Bishop, 843. Lewis V. Shaw, 315, 316, 328. Lewis V. Sloan, 359. Lewis V. U. S., 304, 728. Lewis County, Matter of, 739. Lewis Eck & Co., In re, 611. Libby, In re, 153. Libby v. Hopkins, 792, 793. Liddon v. Smith, 423, 737. Lieber, In re, 281, 319. Lieke v. Thomas, 230. Liesum v. Krauss, 180, 325, 858. Lillington Lumber Co., In re, 773. Linderman, In re, 239, 240, 458. Lines, In re, 216. Linkman v. Wilcox, 71. Linn v. Hamilton, 304. Linn v. Smith, 633. iiinstroth Wagon Co. v. Ballew, 401, 405, 416, 417. Linton, In re, 610, 650. Linton v. Stanton, 427. Lipke, In re, 18, 49, 203. Lipman, In re, 181, 722. Lipman v. Stein, 142, 163, 182, 183. Lipset, In re, 188, 492. Lipset, Levittan & Co., In re, 895. Lisk Mfg. Co., In re, 81, 85. List, Ex parte, 199. Litchfield, In re, 131, 194. Little, In re, 143, 150, 155, 230, 258, 290, 595, 661, 664, 750, 795, 807. Little V. Alexander, 656. Little V. Holly Brooks Hardware Co., 87, 775. Littlefiekl, In re, 838. Littlefield v. D. H. & C. Co., 441. Littlefield v. Gray, 851. Little River Lumber Co., In re, 53, 611, 686, 688, 690, 735, 779. Livermore v. Bagley, 63. Livingston v. Bruce, 71, 686. Livingston v. Heineman, 446, 604, 607. Table of Cases Cited. (References are to pages.) Iv Livingston Co., In re, 609. Lloyd, In re, 134, 581. Lockerby, In re, 158. Lockman v. Lang, 17, 436, 443, 448, 449. Locks, In re, 277. Lock-Stub Check Co., In re, 745. Lockwood, In re, 233, 613. Lockwood V. Exchange Nat. Bank, 143, 144, 147, 148, 150. Loder, In re, 533, 534. Loeser v. Alexander, 709. Loeser v. Bank & Trust Co., 655. Loeser v. Savings Dep. Bank & Trust Co., 43, 424, 442, 445, 762. Logan, In re, 266, 268, 371, 279, 868. London v. King, 716. Long, In re, 132, 134, 158, 160. Long V. Parmer's State Bank, 449, 652, 666, 823. Long V. Murphy, 160. Longbottom, In re, 776. Longfield v. Minnesota Sav. Bank, 325. Longis V. Creditors, 851. Loomis V. Wallbolm, 126. Lord, Ex parte, 190. Lord, In re, 188. Lorde, In re, 321. Lorillard, In re, 331. Lott V. Young, 114, 115. Louck's Appeal, 149. Loudon V. Blanford, 223. Louis, In re, 230. Louisville Trust Co. v. Commingor, 216, 401, 404, 411, 431, 516, 694. Love V. Export Storage Co., 448, 504, 541, 773. Lovell V. Beauchamp, 97. Lowe, In re, 699. Lovye v. Waller, 699. Lowell V. International Trust Co., 653, 661. Lowensohn, In re, 769. Lowenstein, In re, 275, 279. Lowenstein v. McShane Mfg. Co., 80, 631, 636. Luby, In re, 163. Luckenbill, In re, 817. Luckhardt, In re, 101. Lucius, In re, 143, 147, 148. Lucius V. Cawthorn-Coleman Co., 451. Ludvigh V. American Woolen Co., 777. Ludvigh V. Umstadter, 663. Luftig Matter of, 278, 300, 470. Lukens, In re, 766. Lutfy, Matter of, 40. Lynan, In re, 359. Lynch, In re, 143, 155, 590. Lynch v. Bronson, 44, 406. Lynch v. Mercantile Trust Co., 386. Lynde, In re, 151. Lynn Camp Coal Co., In re, 659. Lyon, In re, 607, 609, 660, 664, 879. Lyon V. Bertram, 225. Lyon V. Clark, 416, 658. Lyons, In re, 98. Lytic, In re, 230. M Maaget, In re, 306. Maas V. Kuhn, 358. McArdle, In re, 821. McBachron, In re, 283. McBride & Co., Matter of, 47, 813, 830. McBrien, In re, 189. McBryde, In re, 40, 153, 515, 516, 714. ■ McCabe v. Patton, 826. McCall, In re, 447, 449. McCallum, In re, 46, 394, 396, 405, 409, 540, 594, 616. McCann Bros. Ice Co., In re, 505. McCarthy, In re, 264. McCartney, In re, 786. McCarty, In re, 272, 311. McCarty v. Coffin, 143, 152, 423, 445. McCauley In re, 201, 316, 323, 593, 707, 745. McChristal v. Clisbee, 321. McClntock, Matter of, 142, 179, 182, 183, 873. MeClure v. Gibbs, 364. MoClusky V. McNeely, 146. McCombs V. Allen, 306. McConnel, In re, 184, 594, 737. McCord, Matter of, 663, 810. McCormick, In re, 190, 516, 517, 520. Ivi Table of Cases Cited. (References are to pages.) McCoy, In re, 136. McCracken & McLeod, 690. McCrary Bros., In re, 143, 143, 157, 504, 505. McCrea, In re, 274, 279, 283. McCulloch V. Maryland, 231. McCutchen, In re, 143, 145. McDaniel v. Strand, 133, 448. McDonald, In re, 304, 763, 765, 829. McDonald v. Brown, 321. McDonald v. Clearwater Ey Co., 7, 657. , . _ McDonald v. Daskam, 664. r McDonald v. Davis, 208, 212. MacDonald v. Moore, 78, 686. McDonald v. Tefft-Weller Co., 98. McDonald, In re, 813, 822, 823. McDonoug-h, In re, 463, 667. McDongall, In re, 47. McDowell, In re, 230. McDowell V. McMurria, 158. McDufe, In re, 259, 268, 849, 867. McElvain v. Hardesty, 654, 667, 671, 675, 824. McEwan, In re, 131. McEwen, In re, 132. McEwen v. Totten, 825, 829. McFadgen, In re, 729. McFarland Carriage Co. v. Solamas, 402, 409, 809. McFaun, In re, 116, 124, 126, 259. McGahan v. Anderson, 143, 148, 154, 164, 183, 874. McGee, In re, 68, 70. McKehee, In re, 762, 766. McGill, In re, 528, 534, 672, 576, 868, 870. McGilton, In re, 840. McGowan, In re, 151. McGowan v. Knittel, 90, 365. McGuire, In re, 606. JTcGurn, In re, 263. McHarry, In re, 817. Machin, In re, 527, 535, 870. Maclntire, In re, 187. Mclntyre & Co., Matter of, 588, 589. Mclntyre Bros., Matter of, 741. McNamara, In re, 265, 274, 275, 673, 770. Mcintosh, In re, 655. McKane, Matter of, 288, 655, 672, 776, 786. McKay v. Funk, 210. McKay & Aldus, In re, 811, 824. McKee, In re, 48, 184, 298. Mackel v. Eochester, 191, 209, 211, 314, 319, 383. Mackellar, In re, 529, 575. Mackey, In re, 26, 100, 101, 180, 341, 499, 631, 640, 865. McKejiy, Lee, 677. McKe^lii, ,In re, 588, 688, 693, 809. Mc^ij^^a' V. Simpson, 428. Mcp;lntiey V. Cheney, 143, 150, 161, &4, 783, 787, 833. bkenzie. In re, 282. r to these jurisdictional requirements so as to protect itself against fraud or imposition.** The fact that the ailleged bankrupt is a roving character, and never residing at any place for the required period of time, does not affect the necessity of proving that such bankrupt had resided for a greater portion of the previous six months within the territorial limits of the court.*® 42. Bankruptcy act of 1867, § 11. bankruptcy court of that district to 43. In re Plotke (C. C. A., 7th proceed with the case." See, also, In Cir.), 5 Am B. R. 171, 175, 104 Fed. re Clisdell (Ref., N. Y.), 2 Am. B R. 964; In re Clisdell (Ref., N. Y.), 2 424; In re Berner (Ref., Ohio), 3 Am. B. R. 424. Iowa), 2 Am. B. R. 197, 93 Fed. 943. 44. In re Garneau (C. C. A., 7th Distinction between residence Cir.), 11 Am. B. R. 679, 127 Fed. 677. and domicile. — In the case of 45. In re Williams (D. C, Ark.), 9 In re Garneau (C. C. A., 7th Am. B. R. 736, 120 Fed. 34, in which Cir.), 11 Am. B. R. 679, 127 case it was held' that a court of bank- Fed. 677, the court says : " There is ruptcy did not have jurisdiction to ad- of course, a legal distinction between judge bankrupt a travelling gambler 'domicile' and 'residence;' although who had resided within the district the terms are generally used as syn- and carried on his business there for onymous, the distinction depends upon only two months prior to the filing of the connection in which and the pur- the petition in bankruptcy against pose for which the terms are used, him- ' Domicile ' is the place where one has 46. Matter of Harris (Ref., N. J.), his true, iixed, permanent home, and 11 Am. B. R. 649, in which the referee principal establishment, and to which, says : " If a person has had any one whenever he is absent he has the in- of the three (place of business, resi- tention of returning, and where he ex- dence or domicile) in the district for ercises his political rights. There the greater part of six months immed- must exist in combination the fact of lately preceding the date of bank- residence and the animus manendi." ruptcy there is jurisdiction in the See, also. In re Dinglehoef Bros. (D. Jurisdiction of Couets of Bankruptcy. 25 §2(1).] Domicile and Residence of Debtor. Subdivision 1 further provides that the power to adjudicate will exist in the court where the debtor has not had his principal place of business, does not reside, nor have his domicile within the United States but has property within the jurisdiction of the court, and also where a debtor, who has been adjudged a bankrupt by a court of competent jurisdiction without the United States, has property within the court's jurisdiction. In both of such cases, the location of the property of the debtor will determine the juris- diction of the court. b. Domicile of debtor. — It will be noticed from the language of subdivision 1 that either domicile or residence within the terri- torial limits of the court will be suflBcient to confer jurisdiction. It is not essential that both should exist.** Domicile means more than residence. To constitute domicile there must exist in com- bination the fact of residence and also the intent to remain, — the animus manendi.*'' The district in which an alleged bankrupt has resided during the greater portion of the six months next preced- ing the filing of a petition against him is the " district of his domicile " within the meaning of General Order VI.*''* A debtor who absconds does not lose his domicile within the meaning of the act.*'"' Where it is sought to be proved that there has been an abandonment of the old domicile and an establishment of a new one the burden of proof lies upon the person who asserts the change.** The domicile of any one of two or more partners would be sufficient to support the jurisdiction of the court.** c. Residence of debtor. — The word " resided " as used in sub- division 1 is of slight importance. Cases may arise where it may be useful, as wlien a debtor attempts to escape bankruptcy by denying domicile. Residence may mean no more than sojourning. It is a personal presence in a fixed and permanent abode as dis- tinguished from a temporary occupation, but it does not include as much as domicile, which requires an intention combined with C, N. Car.), 6 Am. B. R. 242, 109 47b. In re Filer (D. C, N. Y.), 5 Fed. 866; In re Owings (D. C, N. Am. B. E. 332, 108 Fed. 209. Car.), 15 Am. B. R. 472, 140 Fed. 30; 48. In re Berner (Eef., Ohio), 3 In re Scott (Eel, Mass.), 7 Am. B. Am. B. R. 325; In re Scott (D. C, E. 35; In re Williams (D. C, Wash.), Mass.), 7 Am. B. E. 39, 111 Fed. 144; 3 Am. B. E. 677, 99 Fed. 544; In re In re Waxelbaum (D. C, N. Y.), 3 Berner (Eef., Ohio), 3 Am. B. E. Am. B. R. 267, 97 Fed. 562; In re Clis- 325; In re Grimes (D. C, N. Car.), dell (Ref., N. Y.), 2 Am. B. R. 424. 2 Am. B R. 160, 96 Fed. 529. 49. In re Blair (D. C, N. Y.), 3 47a. In re Isaacson (D. C. N. Y.), Am. B. R. 588, 99 Fed. 76. 20 Am. B. R. 430, 161 Fed. 777, 779. 26 The Law and Pbactice in Bankeuptct. Principal Place of Business. [§2(1). residence.^" If change of residence is asserted the burden of proof is upon him who asserts it.^^ d. Principal place of business ^A court of bankruptcy may, under subdivision 1 of this section, adjudge a person banl?rupt who has had his principal place of business within the territorial juris- diction of the court for the preceding six months, or the greater portion thereof, although he may not have resided or had his, domicile therein during such period. The former bankruptcy act used the words " carried on business " instead of " had their prin- cipal place of business " as in the present section.^^ Principal place of business means the place where the principal affairs and business of the debtor are transacted.^^ The residence of the debtor will not control as to his principal place of business; he may reside in one district and be adjudged a bankrupt in another district in which he has his principal place of business.^* The question as to what constitutes a principal place of business arises more frequently in respect to a corporation. The principal ofiSce of a corporation as specified in its articles of incorporation will not control. The district in which its assets, manufacturing plant and business office are located will govern the jurisdiction of the court as against the location of the office so specified.^ ^ Corpora- 50. In re Dinglehoef Bros. (D. C, that matter his sole place of business N. Car.), 6 Am. B. R. 242, 109 Fed. in another State. 866; In re Garneau (C. C. A., 7th A farmer who lived in one dis- Cir.), 11 Am. B. R. 679, 127 Fed. triet and whose business consisted of 677. (CSting Tracey v. Traoey, 62 raising, buying and selling farm prod- N. J. Equity 807, 48 Atl. 533; Shaef- ucts, buying and slaughtering live fer V. Gilbert, 73 Md. 66, 20 Atl. stocks and selling the meat from a 434.) stall in a market place in a city in 51. In re Waxelbaum (D. C, N. another district where he exhibited Y.), 3 Am. B. R. 267, 97 Fed. 562. and' sold all but a comparatively 52. Act of 1867, § 11. The Ian- small portion of the produce handled guage of the present section is more by him, was held to have a principal exact than that used in the former place of business in the city. In re act. Mackey (D. C, Del.), 6 Am. B. R. 53. Milwaukee Steamship Co. v. 577, 110 Fed. 355. City of Milwaukee, 83 Wis. 590, 53 55. Dressel v. North State Lumber N. W. 839, 18 L. R. A. 353. Co. (D. C, N. Car.), 5 Am. B. R. 744, 54. In re Brice (D. C, Iowa), 2 107 Fed. 255; compare Tiffany v. La Am. B. R. 197, 93 Fed. 942; In re Plume Condensed Milk Co. (D. C, Magie, Fed. Cas. 8,951. See, also, Pa.), 15 Am. B. R. 413, 141 Fed. 444; Guinn v. Iowa Cent. Ry. Co., 14 Fed. Milwaukee Steamship Co. v. City of 323, 324, which is to the effect that Milwaukee, 83 Wis. 590. 53 N. W. the principal place of business of a 839, 18 L. R. A. 353; Matter of Perry corporation is no test of residence. Aldrich Co. (D. C, Maas.), 21 Am- B- A natural person might reside in one R. 244, 165 Fed. 249. State and have his principal, or for JUBISDIOTION OF CoUETS OF BaNKEUPTCY. 27 §2(1).] Preceding Six Months. tions are frequently organized under the statutes of one State for the purpose of transacting business in another State. The require- ment that a corporation so organized shall have an office within the State where incorporated will not preclude the exercise of jurisdiction by a court of bankruptcy in a district other than that in which such office is located.®* If the office be the place where the business affairs of the corporation are managed it may deter- mine the jurisdiction of the court, although factories, mills or mines in another district are operated therefrom.®'' Business tran- sacted by a receiver of a corporation in a district, appointed to collect assets and turn them into money, is not " business " as meant by the phrase " principal place of business.""^* The failure of a foreign corporation to secure a certificate permitting it to do business in a State doesi not affect the jurisdiction of a court of bankruptcy, nor alter the fact that the principal place of business of the corporation is where its principal business is done.®* Where there are two alleged bankrupt corporations, whose business trans- actions are so intermingled as to be impossible of separation, requiring administration under one jurisdiction, the proceedings may be conducted in the court first acquiring jurisdiction regard- less of the location of the principal place of business of one of such corporation®.®* e. Preceding six months. — The alleged bankrupt must have resided, had his domicile, or transacted business within the district 56. In re Magid-Hope Silk Manu- 57. In re Matthews Consolidated facturing Co. (D. C, Mass.), 6 Am. Slate Co. (C. C. A., 1st Cir.), 16 Am. B. R. 610, 110 Fed. 352. B. R. 407, 144 Fed. 737; aflFg. 16 Am. 'Wbere a West Virginia coal B R. 350, 144 Fed 724, in which case company, though its charter stated it was held that where a, corporation that its principal place of business owning a quarry in one state but was in that state, as were its mines whose business was transacted and and real estate, had from the time of controlled from an office in another its incorporation and for six months state, the principal place of business prior to the commencement of bank- was in the latter State. See, also, In ruptcy proceedings maintained its re Marine Machine and Conveyor Co. executive office and principal place of (D. C, N. Y.), 1 Am. B. R. 421 91 business in Philadelphia, the bank- Fed. 630. ruptcy court of the Eastern District 57a. Matter of Perry Aldrioh Co. of Pennsylvania having first acquired Co. (D. C, Mass.) 21 Am. B. R. 244, jurisdiction should retain the same as 165 Fed. 249. against the bankruptcy court in West 58. In re Duplex Radiator Co. (D. Virginia, it not appearing that the C, N. Y.), 15 Am. B. R. 324, 142 Fed. greater convenience of parties would 906; Matter of Perry Aldrieh Co. (D. be promoted by a transfer. In re C, Mass.), 21 Am. B. R. 244, 165 Fed. Pennsylvania Cons. Coal Co. (D. C, 249. Pa.), 20 Am. B. R. 872, 163 Fed. 579. 59. In re Southwestern Bridge & 28 The Law and Practice in Bankeuptcy. Effect of Adjudication, in Rem. [§2(1). for six months or the greater portion thereof preceding the appli- cation. This does not mean the full period of six months prior to the filing of the petition f a residence, domicile or transaction of business for more than three months, whether at the beginning or end of the period of six months, will be sufficient.^^ f. Alien bankrupts. — An alien may be adjudged bankrupt, pro- vided he has property within the United States, or, if he has been adjudged bankrupt in the bankruptcy courts of another country and does not reside but has property within the United States.®^ g. Removal from one district to another. — The removal of a person from one district to another for the purpose of pretending to acquire a residence so that a petition in bankruptcy might be filed by him in a district in which he did not reside, with the in- tention of leaving the place as soon as his discharge was granted, does not make him a resident of the district, and such facts being disclosed upon his examination, his creditors may have the pro- ceedings dismissed for want of jurisdiction, the adjudication in bankruptcy not being conclusive upon them.®* h. Effect of adjudication, in rem. — An adjudication acts both in personam and in rem. The property of the bankrupt at once vests in the trustee subsequently to be appointed, remaining mean- while in custodia legis. In this the law is defective, and the resultant difficulties and dangers are not fully met by § 2(3) authorizing the appointment of receivers. In the absence of an official with powers and functions similar to those of the offici-al receiver in England,®'* the custody of the court in the interregnum between the filing of the petition and the appointment and qualifi- Iron Co. (D. C, Kan.), 13 Am. B. R. words "for the six months next pre- 304, 133 Fed. 568; In re Alaska ceding or for the longest period dur- American Fish Co. (D. C, Wash.), ing such six months," which were 20 Am. B. R. 712, 162 Fed. 498. (Cit- construed as giving the court juris- ing Collier on Bankruptcy [6th Ed.], diction to adjudge one bankrupt if he P- 17.) had resided only one day in the dis- 60. In re Ray (Ref. Wash.), 2 trict, provided he had not resided a Am. B. R. 158. Contra, In re Stokes longer period in any other district. (Ref., Wash.), 1 Am. B. R. 35. See In re Foster, 3 N. BanK. Rep. 236 ; 61. In re Plotke (C. C. A., 7th In re Goodfellow, 3 N Bank Rep Cir.), 5 Am. B. R. 171, 104 Fed. 964, 452. 44 C. C. A. 282; In re R. H. Wil- 62. See discussion under § 4, post. liamg (D. C, Ark.), 9 Am. B. R. 736, 63. In re Garneau (C C. A., 7th 128 Fed. 38; Matter of Harris (Ref., Cir.), 11 Am. B. R. 679, 127 Fed.' 677. N. J.), 11 Am. B. R. 649; In re Ber- 64. Eng. Bankruptcy Act of 1883* ner (Ref., Ohio), 3 Am. B. R. 325. §§ 66-71. " ' The act of 1867 contained the Jurisdiction of Courts of Bankruptcy. 29 §3 (2). (3).] Claims; Receivers. cation of the trustee is often more theoretical than actual. The practice has grown up in some districts of appointing receivers in all cases ; this rests on doubtful authority^ because not always " ab- solutely necessary for the preservation of estates," is expensive and sometimes proves an interference with the right given the creditors to choose their trustee. In other districts, the attorney in charge is held responsible for the property. In still others, the property is in effect put under the seal of the court by being locked up and the keys delivered to the referee. While the rules of the western district of Michigan establish the strange practice of making the referee to whom the case has been referred and who is, therefore, " the court " as well, eo nomine the receiver in every voluntary case."' III. CrAIMS. Subdivision 2 of this section authorizes a court of bankruptcy to allow, disallow, and reconsider the allowance or disallowance of claims. This jurisdiction will be fully discussed hereafter.'" IV. RECEIVERS. a. In general. — A court of bankruptcy may, under subdivision 3 of this section, appoint receivers of the property of the alleged bank- rupt when absolutely necessary for the preservation of the bankrupt estate,""* " after the filing of the petition and until it is dismissed or the trustee is qualified." The court may also, under subdivision 15, make such orders and interlocutory judgments and issue such process as may be necessary for the enforcement of the provisions of the act. This is in recognition of the equity powers of the court and authorizes intervention by the court, through a receivership or otherwise, to preserve the property of the alleged bankrupt. If appointed under the former provision he is the custodian of the estate, but may be clothed with such powers as to the court may seem necessary, subject, however, to the title to be acquired by the trustee upon his appoint- ment and qualification."' The power to appoint may be exercised in either voluntary or involuntary proceedings, but should be invoked with caution, and only when absolutely necessary to pre- serve assets."^ The necessity of providing for the appointment of a receiver is obvious. A considerable time must necessarily elapse be- 65. As to appointment of receiver 67. Compare In re Fixen (D. C, ■when necessary for preservation of Cal.), 2 Am. B. R. 822, 96 Fed. 748, estate, see next paragraph but one, and In re Florcken (D. C, Cal.), 5 et seq. Am. B. R. 802, 107 Fed. 241, with 66. Bankr. Act, § 57, post. Boonville Nat'l Bank v. Blakey (C. 66a. Preservation of estate. — C. A., 7th Cir.), 6 Am. B. R. 13, In no ease should a receiver in bank- 107 Fed. 891. ruptcy be appointed except where, 68. Bryan v. Bernheimer, 181 U. upon clear and convincing proof, the S. 188, 5 Am. B. R. 623; In re Flor- court finds it absolutely necessary cken (D. C, Cal.), 5 Am. B. R. 802, for the preservation of the estate. 107 Fed. 241; In re Rosenthal (D. C., Matter of Oakland Lumber Co. (C. N. J.), 16 Am. B. R. 448, 144 Fed. C. A., 2d Cir.), 23 Am. B. R. 181, 548, holding that an order appoint- 174 Fed. 634. An alleged bankrupt ing a receiver in a voluntary bank- cannot, by his consent, waive the ruptcy will be set aside where the limitation as to the necessity of the petition merely states that the bank- appointment of a receiver for the rupt verily believes that such an ap- preservation of the estate. Faulk & pointment will be to the benefit of all Co. v. Steiner (C. C. A., 5th Cir.), persons in interest See, also, Faulk 21 Am. B. R. 623, 165 Fed. 861. & Co. v. Steiner (C. C. A., 5th Cir.), 30 The Law and Peactice in Bankeuptcy. Powers of Receivers. [§ 2 (3). tween the filing of a petition and the adjudication of bankruptcy and selection and qualification of a trustee. During this period opportun- ity may be afforded for the dissipation or depreciation of the assets either by the alleged bankrupt, or by third persons, with or without his connivance.^" A creditors' petition for a receivership will usually be granted where it appears that otherwise the bankrupt's estate will be left wholly unprotected, especially where there is no fraud or collusion and the other interested parties do not object.*"* Coincident with the filing of a petition the court acquires control of the property of the alleged bankrupt, and to properly exercise this control, it is thereupon vested, under the subdivisions above referred to, with full power to designate officers of the court, either a receiver or marshal, to preserve such property, to the end that the interests of the creditors may be protected.'" The power to appoint a receiver, where the court has acquired jurisdiction of the parties, is not affected by the fact that the respondent, a corporation, was not subject to adjudication as a bank- rupt.'"* It seems that if a receiver is appointed in an involuntary case, before adjudication, he must give a bond.'^ The official status or regularity of appointment of a receiver is not subject to collateral attack."* b. Powers of receiver. — The powers of the receiver will depend on the purpose for which he is appointed. If appointed for the preservation of the bankrupt estate under authority of § 2(3), he becomes a mere custodian. In any event the powers of the receiver are limited by the jurisdiction, directly or otherwise, of the court which appoints him.''' When appointed as above provided the court may confer additional powers on him, and, for cause, order a sale of 21 Am. B. R. 623, 165 Fed. 861; In Bank v. Blakey (C. C. A., 7th Cir.), re Knopf (D. C, S. Car.), 16 Am. 6 Am. B. R. 13, 107 Fed. 891. B. R. 432, 144 Fed. 245; In re Moody 69a. In re Huddleston (D. C, (D. C, Iowa), 12 Am. B. R. 718, Ga.), 21 Am. B. R. 669, 167 Fed. 428. 131 Fed. 525. 70. In re Kleinhaus (D. C, N. Y.), Vacating receivership. — While 7 Am. B. R. 604, 113 Fed. 107. the questions presented by the credi- The title to the property of the tors' petition and the alleged bank- alleged bankrupt remains in him rupt corporation's answer remain un- until adjudication, subject to the determined, and there is nothing to control of the court to be exercised indicate that its assignee for credi- either by a receiver or the marshal, tors was not an honest, capable and if otherwise the interests of the credi- responsible man, in whose hands the tors are not sufficiently iprotected. property of the estate was entirely In re La Plume Milk Co. (D. C., safe, an ex parte order appointing a Pa.), 16 Am. B. R. 729, 145 Fed. receiver granted upon the filing of 1,013. the petition in bankruptcy will be 70a. In re Hill Co. (C. C. A., 7th reversed with costs and the receiver- Cir.), 20 Am. B. R. 73. ship vacated. Matter of Oakland 71. Bankr. Act. § 3-e, post. Lumber Co. (C. C. A., 2d Cir.), 23 71a. Ross v. Stroh (C. C. A., 3d Am. B. R. 181, 174 Fed. 634. Cir.), 21 Am. B. R. 644, 165 Fed. 69. In re Benedict" (D. C, Wis.), 628. 15 Am. B. R. 232, 140 Fed. 55. 72. In re Benedict (D. C, Wis.), Object of receivership.— The 15 Am. B. R. 232, 140 Fed. 55. It duty required and the power con- seemed well established that a re- ferred clearly are that the receiver ceiver appointed in any proceeding, or the marshal should take posses- who relies upon his authority as an sion of property that would other- officer of the court, has no authority wise go to waste, and hold it and to do any official act outside of the preserve it, so that it mic;ht come jurisdiction of the court appointing to the trustee, when selectpH, without him. Great Western Mining & Mfg. needless injury. Boonville Nat'l Co. v. Harris, 198 U. S. 561 ; Hale v. JUEISDIOTION OF CoUETS OF BaNKEUPTCY. 31 § 2(3) .] Powers of Receivers. the property in his possession/' if it appear that the property be of a perishable nature and sale thereof is necessary in order to preserve it.'* But it must be remembered that pending and prior to an ad- judication the property of the bankrupt still belongs to him, and title thereto only vests in the trustee after an adjudication has been ob- tained. '^ The importance of the question as to whether a sale by a receiver so appointed may be ordered is lessened, when it is consid- ered that the court may direct a trustee when appointed to ratify a sale so made by the receiver. The question has also arisen as to whether a receiver before adjudication may be permitted to bring suit for the recovery of the property of the bankrupt not in his pos- session. The weight of authority is against the right of a receiver to sue to recover such property.'* But it has been held in a well con- sidered case that where property has been fraudulently and illegally transferred by a bankrupt within the four months period, the court may, acting under authority of § 3(3), appoint a receiver of such property, since by the terms of the act " such transfer was declared null and void and the property involved to be the property of the bankrupt." In this and similar cases it was assumed that the court in the exercise of its equity jurisdiction could protect the rights of creditors by the appointment of a receiver, by injunction or any other appropriate remedy." In any event a receiver may not be authorized to sue in a district other than the one in which he is appointed,** but an ancillary receiver may be appointed to aid in pro- tecting the assets in any district pending the selection of a trustee.'^ Allison, 188 U. S. 56; Booth v. (D. C, Pa.), 16 Am. B. R. 729, 731, Clark, 17 How. (U. S.) 327. A re- 145 Fed. 1,013. ceiver of a corporation appointed in 76. Boonville Nat'l Bank v. Blakey a court other than a court of bank- (C. C. A., 7th Cir.), 6 Am. B. R. 13, ruptcy, may contest the adjudication 107 Fed. 891, in which the court said of the corporation as a bankrupt. " the receiver or marshal takes pos- Matter of Hudson River Electric session of the visible property of the Power Co. (D. C, N. Y.), 23 Am. bankrupt for delivery to the trustee, B. R. 191, 173 Fed. 934. not to pursue the debtors of the es- 73. In re Becker (D. C, Pa.), 3 tate, nor to enforce rights of action Am. B. R. 412, 98 Fed. 407. vested in the trustee alone, nor to 74. In re Kelly Dry Goods Co. (D. involve the estate in possibly unnee- C, Wis.), 4 Am. B. R. 528, 102 Fed. essary litigation." Guaranty Title & 747, in which case it was held that Trust Co. v. Pearlman ( D. C, Pa. ) , as a general rule no order of sale 16 Am. B. R. 461, 144 Fed. 550. should be made until after adjudi- Contra: In re Fixen (D. C, Cal. ), cation, unless the property is of such 2 Am. B. R. 822, 96 Fed. 748. a nature that a sale is necessary to 77. Bankr. Act, § 67-e. preserve its value. In re Garner & 78. Horner-Gaylord v. Miller & Co. (D. C, Ala.), 18 Am. B. R. 733, Benedict (D. C, W. Va.), 17 Am. B 135 Fed. 914; In re Harris (D. C, R. 257, 147 Fed. 295. Ala.), 19 Am. B. R. 635, 155 Fed. TTpon a fictitious sale of prop- 216. In the two cases last cited the erty shortly prior to the adjudica- court limited the right to order a tion, no title passes to the fraudulent sale of perishable property to such vendee, and the receiver is entitled cases in which it was clear to the to the possession of the property. In court that the property was, in fact, re Siegel (D. C, N. Y.), 21 Am. B perishable in part or in its entirety, R. 154, 164 Fed. 559. or would greatly deteriorate if held 79. In re Schrom (D. C, Iowa), 3 without a sale, and only that portion Am. B. R. 352, 97 Fed. 760 which was of such nature could be 80. In re Nat'l Mercantile Agency ordered sold. (D. C, Pa.), 12 Am. B. R. 189T 128 75. Bankr. Act, § 70-a, post. Fed. 639; Matter of Dunseath (D. C, In re La Plume Condensed Milk Co. Pt.), 22 Am. B. R. 75, 168 Fed. 973. 81. In re Benedict (D. C, Wis.), 32 The Law and Practice in Bankeuptct. Possession of Property claimed adversely. [§3(3). c. Possession of property claimed adversely. — In the interim between the supreme court decisions in Bardes v. Banh^^ and Bryan v. Bernheimer/^ it was generally conceded that receivers had not power to take possession of property claimed adversely, even if to act only as custodians. Since the latter case, however, the lower courts have been confirmed in their earlier opinions that the district court had power to direct receivers or the marshals to seize and hold the prop- erty of the bankrupt wherever found ; this is something very different from a summary settlement of a controversy as to the title of property so seized, which must usually be by plenary suit.'* But, though such jurisdiction exists, it will rarely be exercised.*" An injunction, either in the proceeding*^ or in an ancillary action in equity to prevent the adverse claimant from disposing of the property,*' will usually be enough. Nor should courts of bankruptcy, through their receivers, seize property claimed adversely and already in the custody of a State court ; comity requires that the first court obtaining jurisdiction shall retain it until ousted by its consent.** Thus, though there is ample jurisdiction to take possession of such property, the trustee should always apply to the State court in the first instance.*' If a receiver of a bankrupt estate is in possession of goods the title to which is in dispute, and which are not included in the bankrupt's schedules, an action of replevin will not lie to recover the goods upon the theory that the receiver was holding the goods, not as an officer of the court, but as an individual. *'^ Where a receiver, acting under an erroneous order, takes property from one claiming to be the owner, without his consent, the property should be returned to him, without charge of any kind.'" 15 Am. B. R. 232, 140 Fed. 55; Mat- of this work, and "Injunctions other ter of Dunseath (D. C, Pa.), 21 Am. than against Suits," post, in this sec- B. E. 742, 168 Fed. 973. tion. 82. 4 Am. B. R. 163, 178 U. S. 89. In re Lengert Wagon Co. (D. 525. C, N. Y.), 6 Am. B. R. 535, 110 Fed. 83. 5 Am. B. R. 623, 181 U. S. l<27 ; Mauran v. Crown Carpet Clean- 188. ing Co. (Sup. Ct., R. I.), 6 Am. B. 84. In re Etheridge Furniture Co. R. 734; Carling v. Seymour Lumber (D. C, Ky.), 1 Am. B. R. 112, 92 Co. (C. C. A., 5th Cir.), 8 Am. B. R. Fed. 329; In re Young (C. C. A., 8th 29, 113 Fed. 483; In re Watts, 10 Cir.), 7 Am. B. R. 14, 111 Fed. 158; Am. B. E. 113, 124, 190 U. S. 1, 23 In re Tune (D. C, Ala.), 8 Am. B. R. Sup. Ct. 718. It has been held that 285, 115 Fed. 906. the state court which yields posses- 85. Compare " Effect on Auxiliary sion may retain the costs and ex- Remedies," in Section Twenty-three penses of its ofBcer. Wilson v. Parr, of this work. 8 Am. B. E. 230. This rule was con- 86. See " Injunctions other than vincingly challenged in In re Rogers against Suits," in this section, post. (D. C, Ga.), 8 Am. B. R. 723, 116 87. As in Beach v. Macon Grocery Fed. 435. Co. (C. C. A., 5th Cir.), 8 Am. B. R. 89a. Murphy v. John Hofman Co. 751, 116 Fed. 143. (U. S. Sup. Ct.), 211 U. S. 562, 21 88. For instance, see In re Russell Am. B. R. 487, affg. 187 N Y 548 (C. C. A., 2d Cir.), 3 Am. B. R. 658, 90. Beach v. Macon Grocery Co! 101 Fed. 248. But it may be ques- (C. C. A., 5th Cir.), 11 Am. B. R. tioned whether this doctrine of comity 104, 125 Fed. 513, 60 C. C. A. 557. has not been carried too far in such But a receiver should not be eom- cases, as In re Shoemaker (D. C, pelled to turn over property to a Va.), 7 Am. B. R. 437, 112 Fed. 648, claimant where there is a question as and In re Wells (D. C, Mo), 8 Am. to the interests of the parties in such B. R. 75, 114 Fed. 222. As to this, property. Matter of Mundle (D. C, see discussion under Section Eleven N. Y. ), 13 Am. B. R. 490. Jurisdiction of Courts of Bankruptcy. 33 § 3(3).] Suits and Practice. d. Suits against receivers. — The Federal Statutes provide in substance that a receiver appointed in a Federal court may be sued without leave of the court "in respect to any act or transaction of his in carrying on the business connected with " the property in his charge.""* It has been held that this provision applies to receivers appointed in bankruptcy proceedings as well as other Federal re- ceivers.""^ But such receivers cannot be sued without leave unless they are carrying on the business of the bankrupt estate.""'^ An action in a state court against a receiver upon an agreement which pertains to the preservation of the estate, or business connected therewith, may not be stayed by an order of the bankruptcy court.""'' e. Practice. — The practice on receiverships is simple. Before reference application should be made to the judge; after that time to the referee.""^ Notice of the application for the appointment of a receiver is proper; the statute does not expressly require it, but it should be given except in rare cases, where it is apparent that irrepar- able loss or injury is threatened or that notice might defeat the very purpose of the receivership."^ An appointment without notice is not in a constitutional sense a deprivation of property without due process of law."^ The application is by petition or on affidavits of parties in interest, showing the requisite facts. A petir'on which fails to allege or is not accompanied by affidavits showing 1 aat the appointment is absolutely necessary for the preservation of th estate is insufficient."^* The law does not authorize an application oy the attorney of the creditors."^^ The analogies of the statutes si ^gest that it be accom- panied with a consent, signed by a goodly nu nber of creditors, and a request that a named person be appointed; or, if not so accom- panied, the appointment may be withheld until the wishes of creditors can be ascertained. The order of appointment should fix the amount of the receiver's bond, and distinctly specify his powers and duties. Should he find the order insufficient, he may, of course, apply for 90a. Acts, March 3, 1887; August re Abrahamson v. Bretstein (Ref N 13, 1888 Y.), 1 Am. B. R. 44; Faulk & Co. v! 90b. In re Kanter & Kohen (C. C. Steiner (C. C. A., 5th Cir.), 21 Am A., 2d Cir.), 9 Am. B. E. 372, 121 B. R. 623, 165 Fed. 861. Fed. 984; In re Smith (D. C, N. Y.), 93. Idem. 9 Am. B. E. 603, 121 Fed. 1014; In Ancillary apppintment. — A re Kelly Dry Goods Co. (D. C, bankruptcy court in the district Wis.;, 4 Am. B. E. 528, 102 Fed. other than that in which the bank- on nT li r IT ,u .. T. ruptcy proceedings are pending has 90c. Matter of Kalb_ & Berger no jurisdiction to appoint a receiver ^ % S,°o,'^«p-n.^7 IL^"-''' ^^ ^"- "^ ^^^ property of the alleged bank- o5"j Tj' ^ ?^^- ^^^\ "■"?*' ^^''^Pt ipon motion in open 90d. Idem; In re Eoberta (C. C. court upon such notice to the persons ^-'a .£'J-''' ^^ ^™- ^- ^- ®°^' ^^^ '" *^® «<'*"^' possession of property oi n n J VTT A . X. ^ ^° located and to those otherwise in- f ®/k !"• .? \^^^- ^ ^^ ^° ^^.^ ^^' t««sted, as will in the circumstances feet that after the order referring a constitute due process of law as re- case to a referee, the proceedings, ex- quired by the constitution of the cept such as are required by the act United States. Eoss-Meehan Foun- or by the general orders to be had dry Co. v. Southern Car & Foundry before the judge, shall be had before Co. (D. C, Tenn.), 10 Am. B. R. 624, the referee, see In re Florcken (D. 124 Fed 403 C., Cal.), 5 Am. B. E. 802, 107 Fed. 93a. Faulk & Co. v. Steiner (0. 92. Latimer v. McNeal (C. C. A., ?65Vd*'86?"'' '' ^'"- ^^ ^^ '''' 3d Cir ), 16 Am B. E. 43, 142 Fed. 93b. Matter of Oakland Lumber 451, affg. In re Francis D. C, Pa. , Co. (C. C A 2d Cir 1 pq Att, -r -r 14 Am. B. R. 676, 136 Fed. 912; In 181, 174 ptd'. 634 '' 34 The Law and Peactice in Bankkuptcy. Compensation of Receiver. [§ 3(3)(5). modifications, fixing or increasing his powers. He should be ready at the first meeting of creditors with a report and account, which should then be audited and his allowance fixed; whereupon he should turn over the property to the trustee. This procedure rests on custom and the analogy of the administrative features of the statute, rather than on thelaw or the rules of the courts.'* Whether a receiver should be appointed is a judicial question to be determined by the court; its determination may not be revised by mandamus."" f. Compensation of receiver. The compensation of receivers was not limited by the original statutes, but rested in the sound discretion of the court.** Clause 5 of section 2, and section 48 of the bank- ruptcy act have been amended by the amendatory act of 1910 so that the discretion of the court in allowing additional compensation is limited by fixing the maximum commissions to be allowed receivers (1) for services rendered by them when appointed under § 2(3) to take charge of and preserve the property of the alleged bankrupt, and (8) for services rendered by them in conducting the business of the bankrupt.""^ Some of the cases variously construing the act of 1903 amending § 2 (5) are cited in the foot-note."^ These cases are not controlling under the law as amended by the amendatory act of 1910. The words added to suL'l. 5 by the act of 1903, " but not at a greater rate than in this act alL vved trustees for similar services," were omitted by the amendment of L910; they were held to be a limitation on the discretion of the ( mrt so far as they related to compensation 94. Where a marsl al is re- business of an alleged bankrupt was quired to seize and take possession continued by the receiver and, pend- of the property of the alleged bank- ing the adjudication, the debtor was rupt the special warrant to him adjudicated a bankrupt in the East- should be in the form prescribed in em District of New York and re- official forms in bankruptcy number ceivers appointed, and the adjudi- 8; the bond of the marshal is pre- cation previously made in the South- scribed by form number 10. These em District was vacated, by an forms do not apply to receivers. In order directing that all property supplementary forms numbers 101- held by the Southern District re- 104 are found petition and orders ceivers be turned over to the Eastern for the appointment of receivers be- District receivers, the court in the fore and after adjudication. These Southern District has jurisdiction to will be found useful in practice in determine what is a proper compen- reeeiverships. sation for its receivers, who actually 95. Edinburg Coal v. Humphrey continued the business for five davs (C. 0. A., 7th Cir.), 13 Am. B. E. Matter of Isaacson, (C. C. A 2d 593, 134 Fed. 839. Cir.), 23 Am. B. R. 98, 174 Fed. 406. 96. In re Adams Sartorial (D. C, 97. In re Kirkpatriek (CCA Col.), 4 Am. B. E. 107, 101 Fed. 6th Cir.), 17 Am. B. E. 594, 148 Fed' 215; In re Kelly Dry Goods Co. (D. 811, in which case the court held C, Wis.), 4 Am. B E. 528, 102 Fed. that the amendment to § 2(5) had H7; In re Scott (D. C, N. Car.), 3 reference to services rendered by a Am. B. E. 625, 96 Fed. 607; In re receiver, marshal or trustee in con- Cambridge Lumber Co. (D. C, ducting the business of the bankrupt Mass.), 14 Am. B. E. 168, 136 Fed. and not to services required of re- 983; Dunlap Hardware Co. v. Hud- ceivers and marshals by § 2(3) In dleston (C. C. A., 5th Cir.), 21 Am. re Martin Borgeson Co. (D C N ^•o« "«'' \1 f''- f ^o , . , Y.), 18 Am. B. E. 178, 151 Fed Vso! 96a. bee §§ 1 and 9 of Amend- In the case of In re Cambridge Lum- atory Act of 1910, amending §§2(5) her Co., 14 Am. B. E. 581, 127 Fed and 48 of the Bankr. Act of 1898. 772, it seems to have been inferred Change o* reoelTrers by adju- that the amendment limited the exer- dication in another district.— cise of the court's discretion in fixing Where, by order of the court in tlip tVio onmr.or>c,o+;„« i„ iv.i. -n j i° Southern District of New York, JUEISDICTION OF CoUETS OF BANKRUPTCY. 35 § 2. (5).] Continuance of Going Business. allowed for continuing a going business. In such cases receivers are not entitled to greater allowances than the percentages fixed by g 48-a on moneys disbursed by trustees/* but where receivers have carried on the business of the bankrupt with skill and success they may be allowed a maximum compensation allowed to trustees under that section.** Petitioning creditors in case of a receiver in involuntary proceeding may be charged with the compensation of the receiver, and the costs and expenses of the receivership.'"" A receiver may be allowed compensation and the expenses of the receivership out of the assets, though the court, on dismissal of the proceedings, may ultimately charge such expenses in whole or in part against the petitioning creditors.^""* V. CONTINTTANCE OF A GOING BUSINESS. a. In general. — Section 2(5) permits the court to authorize the business of a bankrupt to be conducted for a limited period by a receiver or marshal, or by the trustee when ap- pointed. This is a power inherently belonging to the court independent of the statute.'"* The chief function of a bank- ruptcy law is to distribute an insolvent's assets pro rata; this implies the power to marshal those assets. In ordinary cases, a court of bankruptcy will go no further. Yet occasion will often arise where a going business may be preserved and advantageously sold by keeping it alive under the management of the trustee. By (D. C, N. Y.), 13 Am. B. R. 22, 133 Cir.), 15 Am. B. E. 290, 142 Fed. Fed. 997, which arose subsequent to 960; Beaeh v. Macon Grocery Co. the amendment of 1903,' a compensa- (C. C. A., 5th Cir.), 8 Am. B. E. 751, tion much larger than that allowed to 116 Fed. 143. trustees was awarded to receivers who 100a. In re Hill Co. (D. C, N. had rendered valuable services by col- Y. ), 20 Am. B. E. 73. leeting a large sum for the estate, 101. In re Bourlier Cornice & which the judge thought was due to Eoofing Co. (D. C, Ky.), 13 Am. B. the experience and skill of the re- E. 585, 590, 133 Fed. 958, in which ceivers. the court said: "I am much inclined 98. For the compensation of court to think that a referee should never receivers who have surrendered to re- permit a procedure for the carrying ceivers in bankruptcy, see Mauran v. into effect of the unexecuted contracts Crown Carpet Lining Co. (Sup. Ct., of a bankrupt, to be commenced upon E. I.), 6 Am. B. E. 734; In re Allin- the initiative of the trustee. Much son Lumber Co. (D. C, Ga.), 14 Am. abuse of the power might be avoided B. E. 78. and temptation for the trustee re- 99. In re Eichards (D. C, Mass.), moved by putting that burden on the 11 Am. B. R. 581, 127 Fed-. 772; In re creditors. Such authorization should Sully (D. C, N. Y.), 13 Am. B. E. generally be made upon the applica- 22, 133 Fed. 997. tion of some or all of the general 100. In re Lavoc (C. C. A., 2d creditors." 36 The Law and Peactice in Bankruptcy. Additional Compensation of Trustee. [§ 3(5). this subdivision, courts of bankruptcy are -vested with ample power to that end. A referee should not exercise the power on the initia- tive of the trustee to carry into effect the unexecuted contracts of the bankrupt; nor should it be exercised for the benefit of general creditors at the expense of secured creditors who do not consent thereto.'"^ A secured creditor's security may not be diminished by any expense of administration or operation of the business, unless such creditor has sought or acquiesced in the order continuing such operation. ^"^^ When an order is made authorizing the continuance of the business it may not be attacked collaterally."^'' The conduct- ing of daily auction sales by the trustee of the bankrupt's goods in his stores may be considered in effect as the continuance of business by the trustee for the purpose of allowing additional compensation."^ Where receivers authorized to continue tho business of the bankrupt go beyond the extent of their authority to contract indebtedness, the indebtedness so contracted is not a prior lien upon the assets of the bankrupt. It is the duty of those dealing with receivers in such cases to inquire as to the extent of their authority, and the orders of the court in respect to their powers will be regarded as notice to all per- sons."^ A receiver may be authorized to borrow money to continue the business of the bankrupt and for the purpose of preserving the assets ofthe estate."^^ He should not be surcharged for losses or sales during the continuance of the business.^"^'' Where a receiver is in possession of leased premises for the purpose of continuing the bus- iness, he should pay the pro rata rent at a reasonable value.^"^'= b. Additional compensation of trustee. -The compensation of a trustee for continuing a going business was, prior to the amendment of 1903, based upon moneys received and paid out rather than work done.^"* Even since the amendment of 1903 it has been doubted whether the court could allow to a trustee compensation for continuing the business of the bankrupt in addition to that given him by § 48-a of the bankruptcy act."° It seems, however, that the omission from § 48-a by the amendatory act of 1903 of the words " as full com- pensation" was for the purpose of authorizing an additional allow- ance to a trustee where he had performed services of value in respect to the bankrupt's business and had thus materially increased the bank- rupt's estate. "° The amendatory act of 1910 amending § 2 (5) and 101a. In re Clark Coal & Coke Foundry Co. (D. C, N Y), 21 Am Co. (D. C, Pa.), 22 Am. B. E. 843, B. R. 509, 166 Fed. 381. 173 Fed. 658. 104. In re Epstein (D. C, Ark.), 101b. Matter of Isaacson (C. C. 6 Am. B. R. 191, 109 Fed 879- In re A., 2d Cir.), 23 Am. B. R. 98, 174 Plummer (D. C, N. Y.) 3 Am B Fed. 406. R. 320. 102. In re Dimm & Co. (D. C, 105. It was held in the case of Pa.), 17 Am. B. R. 119, 146 Fed. 402. Matter of Hart & Co. (D. C, 103. In re Erie Lumber Co. (D. Hawaii), 17 Am. B. R. 480, that C, Ga.), 17 Am. B. R. 689, 707, 150 § 2(5) as amended did not permit of Fed. 817. the allowance of compensation to the 103a. In re Restein (D. C, Pa.), trustee for continuing a going busi- 20 Am. B. R. 832, 162 Fed. 986. ness in addition to the fees and com- 103b. Matter of Isaacson (C. C. missions on disbursements allowed to A., 2d Cir.), 23 Am. B. R. 98, 174 a trustee under § 48-a. Fed. 406. 106. Matter of Pequod Brewing 103o. In re Yodleman-Walsh Co. (Ref., N. Y.), 18 Am. B. R. 3521 Jurisdiction of Couets op Bankkuptcy. 37 § 2 (4) (13) (15). ] Enforcement of Orders ; Contempt. § 48 has limited the allowances to be made to trustees for continuing the business of the bankrupt. Receivers and similar officers can never be allowed compensation other than at the percentages of the trustees on moneys disbursed. VI. PUNISHMENT FOR CBIME; ENrORCEMENT OE OBEDI- ENCE TO LAWFUI. ORDERS; PUNISHMENT FOB CONTEMPT. a. In general. — By subdivisions 4, 13 and 16 of § 3 a court of bankruptcy is clothed with ample power to punish violations of the bankruptcy act, to enforce obedience to the lawful orders issued thereunder and to punish persons for contempts committed in a bank- ruptcy proceeding. They are among the most important powers pos- sessed by courts of bankruptcy and are essential for the proper carrying into effect of the provisions of the act. Other sections of the act relate to these powers and provide more in detail for the exercise thereof. b. Punishment for violations of the act. — Subdivision 4 author- izes a court of bankruptcy to punish bankrupts, officers and other persons, including the agents, officers and directors of corporations, for violations of any provisions of the bankruptcy act. Section 29, post, specifies certain offenses and prescribes the punishment therefor. These specific offenses and the procedure required for the punishment thereof will be considered under that section. If an offense consists of a violation of the act not included in those specified in § 29, subd. 4 of § 2 confers the power of punishment. As to the right to a jury trial reference should also be made to § 19-a, post. c. Enforcement of obedience to lawful orders. — The power to enforce obedience to its lawful orders is inherent in every court. The act recognizes the power of the court to punish as for contempt any person who disregards its lawful orders. The esercise of the power is discretionary but cannot be invoked in any case unless the order is a lawful one.^°' , d. Punishment for contempt. — (1) In general. — As already indicated the court has power under § 2 (13) to punish by fine or imprisonment any violation of a lawful order issued by it. This confers upon the court ample power in contempt proceedings. The power to punish for contempt in bankruptcy proceedings has always been recognized.^"' In many cases, as where the bankrupt or another contumaciously keeps property belonging to the estate In re Dimm & Co. (D. C, Pa.), 17 sell Card Co. (D. C, N. J.), 23 Am. Am. B. E. 119, 146 Fed. 402; Matter B. R. 300, 174 Fed. 202. of Shlebler & Co. (C. C. A., 2d Clr.), 107. Compare a similar phrasing 23 Am. B. E. 162, 174 Fed. 336. in Bankr. Act § 7-a(2), post, and in But the compensation of trustees for § 14-b(6), post. continuing the business of the bank- 108. See ex parte Eobinson, 86 U. rupt should not be fixed in advance S. 505. of the services rendered. In re Rus- 38 The Law and Peactice in Bankeuptcy. Punishment for Contempt. [ 2 (13). in his possession, it is essential to the proper administration of the act. The proceeding is quasi-criminal, yet not one entitling the person proceeded against to a trial by jury.'"* It is not an infringe- ment of the constitutional prohibition on imprisonment for debt ; but a bankrupt cannot be imprisoned indefinitely for a contempt.^'" The constitutional provision here referred to is that contained in the con- stitutions of many of the States to the effect that no person shall be imprisoned for debt in any civil action unless in ease of fraud. Where the order of the court directs the surrender to the proper officer of property in respect to which the court has jurisdiction, the obligation and duty of the person to whom it is directed to surrender cannot be converted into a debt by his mere refusal to comply with the order.'" The power to punish for contempt is a judicial one and cannot be referred or delegated.''^ (2) When proceedings will lie. — The power of commitment should be cautiously exercised and only when its propriety is be- yond a reasonable doubt; it should appear from the facts in the case that there has been a wilful disobedience of the order.''^ It should not be sought by proceedings for contempt to compel a per- 109. In re Debs, 158 U. S. 564; Kosser (C. C. A., 8th Cir.), 4 Am. B. Eipon Knitting Works v. Schreiber R. 153, 101 Fed. 562. (D. C, Wash.), 4 Am. B. R. 299, 101 111. Schweer v. Brown (C. C. A., Fed. 810. 8th Cir.), 12 Am. B. R. 178, 130 Fed. 110. Matter of Lavoc (C. C. A., 328; In re Schlesinger (C. C. A., 2d Cir.), 15 Am. B. R. 290, 142 Fed. 2d Cir.), 4 Am. B. R. 361, 102 Fed. 960, in which case it was held that 117. the enforcement of an order direct- 112. Bank of Ravenswood v. John- ing the payment of the expenses of a son (C. C. A., 4th Cir.), 16 Am. B. receiver, by imprisonment was >iot R. 206, 143 Fed. 463 ; Boyd v. Gluck- unlawful because an Imprisonment lich (C. C. A., 8th Cir.), 8 Am. B. R. for debt, since under the laws of New 393,» 116 Fed. 131; Smith v. Belford York (Civ. Pro. § 1241) disobedience (C. C. A., 6th Cir.), 5 Am. B. R. 291, of an order is punishable as for a 106 Fed. 658. contempt of court, where it required 113. Moody v. Cole (D. C, Me.), the paymen. of money to the court or 17 Am. B. R. 818, 148 Fed. 295, to an officer ot the court. In re Lein- holding that in bankruptcy a con- weber (D. C, Ct.), 12 Am. B. R. tempt proceeding is criminal in its 175, 128 Fed. 641; In re Taylor (D. character, and the conclusion that a C, Col.), 7 Am. B. R. 410, 114 Fed. party is in contempt should be reached 607; Mueller v. Nugent, 184 U. S. 1, only upon evidence which induces be- 7 Am. B. R. 224; Ripon Knitting lief beyond a reasonable doubt. In re Works V. Schreiber (D. C, Wash.), Switzer (D. C, S. Car.), 15 Am B R 4 Am. B. R. 299, 101 Fed. 810; In 468, 140 Fed. 976; In re Adler (D. G.', re Anderson (D. C, S. Car.), 4 Am. Tenn.), 12 Am. B. R. 19, 129 iPed B. R. 640, 103 Fed. 854; In re 502; In re Goldfarb Bros. (D. C, Schlesinger (C. C. A., 2d Cir.), 4 Ga.), 12 Am. B. R. 386, 131 Fed. 643- Am. B. R. 361, 102 Fed. 117; In re American Trust Co. v. Wallis (C. C. Jurisdiction of Courts of Bankruptcy. 39 § 2 (13).] Punishment for Contempt. son to do that which he has no power to do. If it is sought to compel the bankrupt to surrender to the trustee property belonging to the estate it must appear that such property is in the actual control or possession of the bankrupt and that it is possible for him to surrender it.^^* It must at least appear that the property directed to be sur- rendered is part of the bankrupt's estate, and that the person to whom the order is directed has control of it at the time.^^^ It should appear that the person complained of was acting in bad faith and for the purpose of evading the provisions of the law; thus, an attorney who in good faith, but wrongly, advises a State court as to the right of such A., 3rd Cir.), 11 Am. B. R. SCO, 126 Fed. 466; Boyd v. Glucklich (C. C. A., 8th Cir.), 8 Am. B. R. 393, 116 Fed. 140; In re DeGottardi (D. C, Cal.), 7 Am. B. R. 723, 114 Fed. 328; In re ScJilesinger (C. C. A., 2d Cir.), 4 Am. B. R. 361, 102 Fed. Ill; In re Anderson (D. C., S. Car.), 4 Am. B. R. 640, 103 Fed. 854; In re Deuell (D. C, Mo.), 4 Am. B. R. 60, 100 Fed. 634; In re Mayer (D. C, Wis.), 3 Am. B. R. 533, 98 Fed. 839; In re McCormick (D. C, N. Y.), 3 Am. B. R. 340, 99 Fed. 56. 114. Boyd V. Glucklicli (C. C. A., 8th Cir.), 8 Am. B. R. 393, 116 Fed. 140; In re Mize (D. C, Ala.), 22 Am. B. R. 577, 172 Fed. 945. Impossible to perform. — In the Case of Goldfarb Brps. (D. C, Ga.), 12 Am. B. R. 386, 131 Fed. 643, the court held that a bankrupt cannot be required, under a proceeding for con- tempt to do that which is out of his power to do ; the evidence in such a proceeding should satisfy the court beyond a reasonable doubt that the bankrupt has the money or goods in his possession or control and is able to turn them over when so ordered. Schweer v. Brown (C. C. A., 8th Cir.), 12 Am. B. R. 178, 130 Fed. 328; In re Adler, D. C, Tenn.), 12 Am B. R. 19, 129 Fed. 902; In re Gerstel (D. C, 111.), 10 Am. B. R. 411, 123 Fed. 166; Sinsheimer v. Simonson (C. C. A., 6th Cir.), 5 Am. B R. 537, 107 Fed. 898; Matter of Adler (D. C, Okl.), 21 Am. B. R. 371; In re Mize (D. C, Ala.), 22 Am. B. R. 577, 172 Fed. 945. An order will not be granted directing the bankrupt to turn over property alleged to have been in his possession six years prior thereto, the time of beginning the proceedings in bank- ruptcy, in the absence of proof of the bankrupt's ability to comply with the order. In re Ruos (D. C, Pa.), 21 Am B. R. 257, 164 Fed. 749. 115. In re Rosser (C. C. A., 8th Cir.), 4 Am. B. R. 153, 101 Fed. 462; In re Wilson (D. C, Ark.), 8 Am. B. R. 612, 116 Fed. 419; In re Adler (D. C, Tenn.), 12 Am. B. R. 19, 129 Fed. 902. Control of property. — Where it appears that money in the bank was taken by the bankrupt after a peti- tion in involuntary bankruptcy was filed, but before adjudication, and it does not seem probable that the money was expended for the support of his family, it will be held to be under his control and he may be adjudged in contempt for failure to turn it over to his trustee. In re Kane (D. C, Pa.), 10 Am. B. R. 478, 125 Fed. 984; In re Gerstel (D. C, 111.), 10 Am. B. R. 411, 123 Fed. 166. Where the property is beyond the present control of the bankrupt and in the hands of third parties claiming title derived prior to the proceedings in bankruptcy, the court may not punish either of them for contempt, although the transaction is manifestly fraudulent. In re Mayer (D. C, Wis.), 3 Am. B. R. 533, 98 Fed. 839. It would be different if the property claimed was in the bank- rupt's possession. In re DeGottardi (D. C, Cal.), 7 Am. B. R. 723, 144 Fed. 328. Loss of money in gambling is not a sufficient defense. Ripon Knitting Works v. Schreiber (D. C, Wash.), 4 Am. B. R. 299, 101 Fed. 810. Where it appeared that an alleged robbery of stock belonging to a bankrupt merchant never occurred and that such stock is still under his 40 The Law and Peaotice in Bankkuptcy. Punishment for Contempt. [§2(13). court to compel a receiver in bankruptcy to surrender property in con- troversy cannot be adjudged guilty of contempt.^^* A bankrupt who refuses to account for property vrhich should have been in his possession without any effort to explain the loss of the property may be adjudged guilty of contempt.^^' But where the property is not described and "the person proceeding against the bankrupt is unable positively to as- sert that particular property, or a particular sum, has been removed or concealed, contempt procedings are not justified.'"^^^ A surrender of property by a bankrupt, after a petition in bankruptcy had been filed, to a secured creditor may be punished as a contempt both on the part of the bankrupt and the creditor."^ It is probable that any unlawful interference on the part of the bankrupt after adjudication, may be a contempt, although a mere threat to interfere would not be suflBcient.^'* Any wilful disregard of an order requiring the bankrupt to pay to the control, the disobedience of an order directing the bankrupt to deliver over the stock to his trustee is a con- tempt of court. In re Levin (D. C, N. Y.), 6 Am. B. R. 743. 116. In re Watts, 10 Am. B. R. 113. 190 U. S. 1, 23 Sup. Ct. 718; In re Zier & Co. (C. C. A., 7th Cir.), 15 Am. B. R. 646, 142 Fed. 102. The attorneys for parties who were responsible for the seizure of property from the sheriff and its re- moval from the district when the banltruptcy proceedings were insti- tuted, are equally guilty with their clients of contempt, which may only be purged by a return of the property or payment of its full value. In re Walsh Bros. (D. C, Iowa), 20 Am. B. R. 472, 159 Fed. 560. 117. In re Deuell (D. C, Mo.), 4 Am. B. R. 60, 100 Fed. 633. Com- pare In re Schlesinger (D. C, N. Y.), 3 Am. B. R. 342, 97 Fed. 930, in which case the court committed a bankrupt who failed to account for a certain sum of money in his posses- sion which had been directed to be paid to the trustee. Concealment of property. — The mere fact that the possession and control by the bankrupt is not open and notorious would not prevent his punishment for contempt. A conceal- ment of the property in controversy by the bankrupt and his refusal to disclose may be a contempt, and where the facts are such as to indi- cate concealment the court may en- force its order to surrender the prop- erty by commitment. In re Shachter (D. C, Ga.), 9 Am. B. R. 499, 119 Fed. 1010; Boyd v. Glucklich (C. C. A., 8th Cir.), 8 Am. B. R. 393, 116 Fed. 131, in which Judge Sanborn said: "The rule by which this issue is to be determined is that the prop- erty of the bankrupt estate traced to the recent possession or control of the bankrupt is presumed to remain there until he satisfactorily accounts to the court for its disposition or disappearance. He cannot escape an order for its surrender by simply adding perjury to fraudulent con- cealment or misappropriation." See also In re Purvine (C. C. A., 5th Cir.), 2 Am. B. R. 787, 96 Fed. 192; In re Wilson (D. C, Ark.), 8 Am. B. R. 612, 116 Fed. 419; In re Lesains (D. C, Pa.), 21 Am. B. R. 23, 163 Fed. 614; In re Rogowski (D. C, Ga.), 21 Am. B. R. 553, 166 Fed. 165. 117a. Samel v. Dodd (C. C. A., 5th Cir.), 16 Am. B. R. 163, 142 Fed. 68; In re Rogowski (D. C, Ga.), 21 Am. B. R. 553, 166 Fed. 165. 118. In re Arnett (D. C, Tenn.), 7 Am. B. R. 522, 112 Fed. 770; see Matter of Lutfy (D. C, N. Y.), 19 Am. B. R. 614, 156 Fed. 873, to the effect that after notice of bankruptcy proceedings an attaching creditor and his attorney are guilty of eon- tempt, if they take possession of the property. 119. In re McBryde (D. C, N. Car.), 3 Am. B. R. 729, 99 Fed. 686. JUEISDICTION OF COUETS OF BaNKEUPTOY. 41' §2(13).] Punishment for Contempt ; Practice. trustee money which belongs to the estate may be punished.""^ A bankrupt may be committed for contempt because of his refusal to surrender his books of account to the receiver in bankruptcy.^^" So also may a stakeholder be adjudged guilty of contempt where he refuses to surrender to the marshal money placed in his hands by the bankrupt.^'^^ False swearing, although punishable as perjury, is also punishable summarily as a contempt of eourt.^^^ So, too, any- intentional evasion and refusal to make proper explanation of material facts or a deliberate determination to conceal such facts may be punished.^^^* The fact that the person complained of acted under advice of counsel may not in every case be a defense. ^^' A city marshal who proceeds in executing a writ of replevin, although notified that an injunction has been issued in bankruptcy proceedings, is guilty of a contempt.^^* (3) Practice. — The practice outlined in the case of Mueller v. Nugent,^^^ will be found useful in conducting proceedings in con- tempt. The mode of proceeding in a court of bankruptcy to deter- mine whether the party complained of is guilty of contempt should conform as nearly as may be to the established practice in like cases in all other United States courts; whatever is legally suf- ficient to purge a contempt in any of such courts is sufficient for like purpose in a court of bankruptcy. ^^' In the case of Mueller V. Nugent, on the verified petition of the trustee, the referee issued a show cause to the party alleged to be in possession of the property, coupled with an injunction. On the return day, a response on behalf of the claimant was filed. The matter was then heard sum- marily by the referee, who found the response insufficient. There- 119a. In re Cole (C. C. A., 1st Advice of counsel in the case of Cir.), 20 Am. B. R. 761, 163 Fed. 180. Orr v. Tribble (D. C, Ga.), 19 Am. 120. In re Wilson (D. C, Ark.), B. E. 849, 158 Fed. 897, it was held 8 Am. B. E. 612, 116 Fed. 419. that a sheriff who is in possession of 121. Matter of Macon Sash, Door property by virtue of a levy, will not. & Lumber Co. (D. C, Ga.), 7 Am. be adjudged in contempt, where, in B. E. 66, 112 Fed. 322. good faith and acting under advice- 122. Matter of Fellerman (D. C, of counsel, he refuses to surrender the- N. Y., 17 Am. B. E. 785, 149 Fed. property uoon the demand of the re- £44. But if he changes his mind, ceiver in bankruptcy. See In re- and swears truthfully he ought not Strobel (D C, N. Y.), 20 Am. B. E. to be punished for contempt. In re 754, 163 Fed. 380. Gordon (D. C, N. Y.), 21 Am. B. E. 124. In re Wilk (D. C, N. Y.), 1» 290. Am. B. E. 178, 155 Fed. 943. 122a. Matter of Schulman (D. 125. 184 U. S. 1, 7 Am. B. E. 224. C, N. Y.), 21 Am. B. E. 288. 126. Boyd v. Glucklich (C. C. A.. 123. In re Home Discount Co. (D. 8th Cir.), 8 Am. B. E. 393, 116 Fed. C, Ala.), 17 Am. B. R. 168, 147 Fed. 131. 538. 42 The Law and Peactice in Bankkuptcy. Contempts Before Referees. [§ 3 (16) . upon, the referee granted an order directing a surrender to the trustee within a limited period. On default being made, the referee certified the facts to the judge, recommending that the respondent be punished and committed for contempt. In this case, a review of this order was asked. The same result would have been accom- plished had the respondent appeared voluntarily before the judge and brought up the whole matter on the merits, the judge not being in such case bound by the findings of fact of the referee.^^' The judge, with all the facts thus before him, affirmed the order of the referee, found the respondent guilty of contempt, and called him to the bar for com- mitment. This practice is not fixed by rules. It may be varied to fit the circumstances of each case. Valuable precedents will be found in the supreme court decisions controlling on the procedure to punish for contempts in other than courts of bankruptcy. The person alleged to be in contempt should have notice and be given an opportunity to show cause why he should not comply with the order.^^^ The bankrupt's denial of possession of the property directed to be surrendered will -not be conclusive,^^° nor will the court be deceived by evasions, or deterred by consequences.^*" Those alleging con- tempt must prove the commission thereof beyond a reasonable doubt.^""^ It has been held, however, that the respondent's answer may not be traversed but that it should be taken as true, and if in fact false, prosecution should be had against him for perjury. ^'^ An order which directs a marshal to confine the bankrupt in jail until he complies with the order is erroneous; the order should permit the bankrupt to show that he has complied therewith.^'^* (4) Contempts committed in the presence of referees; as- sault UPON trustee. — Subdivision (16) seems merely to confer on the judge power to punish for contempts other than those committed in his presence or consisting of viola- tions of his own orders. He has the usual power, irrespective of statute, to punish for contempt committed in his presence. If the contempt is committed in the presence of the referee, § 41 applies. The district court may summarily try and determine 127. In re Mayer (D. C, Wis.), 3 328; In re Gerstel (D. C, 111.), 10 Am. B. R. 533, 98 Fed. 839. Am. B. R. 411, li,3 Fed. 166. 128. In re Rosser (C. C. A., 8th 130. In re Kane (D. C, JPa ) 10 Cir.), 4 Am. B. R. 153, 101 Fed. 462. Am. B. R. 478, 125 Fed. 984. ' ' A rule requiring the bankrupt 130a. In re Cashman (D. C, N. to appear and show cause why he Y.), 21 Am. B. R. 284; In re Mize should not be punished for contempt (D. C, Ala.), 22 Am. B. R. 577, 172 in declining to answer sundry ques- Fed. 945; and see eases cited in' note tions is sufficient where it refers to 114, cmte. the transcript of proceedings filed by 131. In re Purvine (C. C. A., 5th the referee. U. S. v. Goldstein (D. Cir.), 2 Am. B. R. 787, 96 Fed 192 C, Va.), 12 Am. B. R. 755, 132 Fed. 131a. In re Baum (C, C. A., 8th 789. Cir.), 22 Am. B. R. 295, 169 Fed. 129. Schweer v. Brown (C. C. A., 410. 8th Cir.), 12 Am. B. R. 178, 130 Fed. JUEISDICTION OF CoUBTS OF BaNKEUPTCY. 43 § 2 (7).] Collection and Distribution of Estates. The question as to whether an assault upon a trustee, as an officer of the court, had been committed, and if so whether it was a contempt of court.^''' VII. BBINGING IN ADDITIONAL PARTIES. Subdivision 6 of this section authorizes the court in bankruptcy to bring in and substitute additional persons or parties when necessary for the complete determination of a matter in controversy. The case of Bryan v. Bernheimer is an instance where this power was recognized.^'* This power is an important one in bringing about a complete determination of the rights of all parties interested in the property subject to the proceeding. The power has been exercised to bring in a non-joining partner,'^'* and may be exercised where a creditor has been inadrertently omitted from the schedule. ^'^ The rule under the former law, that strangers to the proceeding cannot be compelled to come in, is probably still the law; for subsection (6) refers only to " proceedings in bankruptcy." ^*° Under the case of Bardes v. Bank,^^" consent of the proposed defendant was necessary, where the stranger to the proceeding claimed title adversely. Since the amendment of 1903, however, this distinction is not important. The court can order the trustee to sue in a district court, and thus in effect bring in strangers to proceedings in bankruptcy.^'"^ viii. collection and distribution of estates and d£T7:rmination of controversies. a. In general. — By subdivision 7 of this section courts of bank- ruptcy have power to cause the assets of bankrupts to be collected, reduced to money and distributed, and to determine controversies in relation thereto except as herein otherwise provided. It will not be attempted to discuss in this place the power hereinafter conferred upon trustees to sue to recover property preferentially and fraudu- lently transferred or of a court of bankruptcy generally to entertain a suit for the collection of the bankrupt's assets. These powers are 132. Ex parte O'Neal (D. C, Flor- Fed. 898. See, also, In re Hobbs & ida), 11 Am. B. R. 196, 125 Fed. 967. Co. (D. C, W. Va.), 16 Am. B. R. 133. 181 U. S. 188, 5 Am. B. R. 544, 145 Fed. 211. 623. 136. 178 U. S. 524, 4 Am. B. R. 134. In re O'Brien, 2 N. B. N. 163. Rept. 312. 136a. See Loeser v. Savings Dep. 135. Sinsheimer v. Simonson (C. Bank & Trust Co. (C. C. A., 6th C. A., 6th Cir.), 5 Am. B. R. 537, 107 Cir.), 20 Am. B. R. 845, 163 Fed. 212. / 44 The Law aitd Feactice in Bankeuptcy. Collection and Distribution of Estates. [§ 3 (7). more appropriately considered under other sections of the aet.^^^ It will only here be attempted to show how the power may be exercised generally and without special regard for other provisions of the act. b. Collection and Distribution. — The act of 1867 contained sim- ilar language conferring upon courts of bankruptcy the power to collect and distribute the estate of bankrupts. Precedents under that law will be found valuable. The power to turn a bankrupt's estate into money and distribute it pro rata would probably flow from subd. 15, were it not specifically conferred by subd. 7. It is a broad power and should be liberally construed to accomplish the purposes of the act. It has an important bearing upon the jurisdiction of the court to entertain and determine suits necessary for the collection and reducing to money all the assets of the bankrupt. The power conferred in this respect seems to be plenary except where otherwise provided for in the act.^'* The exact extent of this jurisdiction will be hereafter considered."^ The power to cause the bankrupt's estate to be reduced to money implies the power to direct the sale of the estate, either subject to or clear from mortgages or other liens.^*" It is this power to collect the estate of the bankrupt that authorizes the court to issue all necessary orders directing the bankrupt and others having property belonging to the estate to surrender the same to the trustee. ^^^ The power to recover property by suit is subject to the limitation " except as otherwise provided in this act," which evidently has reference to the limitation on the jurisdiction of the district courts imposed by § 23b, under which this entire question will be dis- cussed.^*^^ This subdivision is frequently considered in connection 137. As to jurisdiction of district (D. C, Wis.), 2 Am. B. R. 79; In re courts to entertain suits by trustees Benjamin (C. C. A., 2d Cir.), 14 Am. or receivers in bankruptcy, see Bankr. B. R. 481, 136 Fed. 175, in which Act, § 23-b, post. As to power of case it was held that a bankruptcy trustee to institute suits for the re- court had power to designate some covery of property preferentially or auctioneer to act for the trustee in fraudulently transferred, see Bankr. selling the bankrupt's estate. Act, §§ 60-b, 67-e and 70-e, post. 141. In re Rosser (C. C. A., 8th As to the distribution of the bank- Cir.), 4 Am. B. R. 153, 101 Fed. 462; Tupt's estate among creditors, see Ripon Knitting Works v. Schreiber Bankr. Act, § 65, post. (D. C, Wash.), 4 Am. B. R. 299, 101 138. In re Sievers (D. C, Mo.), 1 Fed. 810. Am. B. R. 117, 124, 91 Fed. 366. 141a. See discussion in Cohen v. 139. Bankr. Act. § 23, post. American Surety Co., 20 Am. B. R. 140. In re Pittlekow (D. C, 65, 71, 192 N. Y. 227; Lynch v. Wis.), 1 Am. B. R. 472, 92 Fed. 901; Bronson (D. C, Conn.), 20 Am. B. In re Worland (D. C, Iowa), 1 Am. R. 139, 160 Fed. 139. B. R. 450, 92 Fed. 893; In re Kerski Jurisdiction of Courts of Bankruptcy. 45 § 3(7).] Collection and Distribution of Estates. with that provision of the same section which authorizes an order directing the receiver or marshal to take charge of the property of the bankrupt."^ It has been deemed sufficient to justify an order directing the bankrupt to sign and deliver to a stock exchange a re- quest for the sale of his seat, and for the payment of the proceeds to the trustee in bankruptcy.^*^ So, too, where property of bankrupt has been taken under a void attachment an order may be issued directing the surrender of the proceeds of the attachment sale to the trustee."* It includes the power to preserve the estate, as well as the power to sell. Hence, it comprises the power to enjoin those who would inter- fere with the due administration of assets.'*" The court may compel the surrender of money or other assets of the bankrupt, or that of some one for him, on petition and rule to show cause.'*''* Where a fraudulent transfer has been made, and the court is satisfied that there is danger of the property transferred being dissipated, the court may order a seizure of the property.'** It permits the court to order property of the bankrupt in the hands of an agent to be delivered to the receiver pending the appointment of a trustee.'*^ If the court is convinced '*' that a third person has money belonging to the bankrupt's estate, it is its duty to require the payment thereof to the trustee; if the money is traced into the hands of such third person the burden is on him to explain how it came there, what became of it, or that he did not have it when the order was made.'*' But it is only in clear cases, in which the proof is decisive, that the court is justified in making a peremptory order against a third party directing the disclosure of concealed assets.'^" If 142. McNulty v. Feingold (D. C. Fed. 633; In re Fidler (D. C, Pa.), Pa.), 12 Am. B. R. 338, 129 Fed. 21 Am. B. R. 101, 163 Fed. 973. 1001; Mason v. Wolkowich (C. C. A., 146. In re Knopf (D. C, S. Car.), 1st Cir.), 17 Am. B. R. 709, 150 Fed. 16 Am. B. R. 432, 144 Fed. 245. 699. 147. Matter of Muncie Pulp Co. 143. Matter of Hurlbutt, Hatch & (C. C. A., 2d Cir.), 14 Am. B. R. 70, Co. (C. C. A., 2d Cir.), 13 Am. B. R. 139 Fed. 546; but not where the pay- 50, 135 Fed. 504. ment was of salary actually due the 144. In re Grassier (C. C. A., 9th agent when the proceedings were in- Cir.), 18 Am. B. R. 694, 154 Fed. 478. stituted. In re Lebrecht (D. C, 145. See under Section Eleven. Tex.), 14 Am. B. R. 445, 135 Fed. See also "Effect of Bryan v. Bern- 878. heimer," 5 Am. B. R. 623, 181 U. S. 148, In re Feldser (D. C, Pa.), 188, and "Injunctions other than 14 Am. B. R. 216, 134 Fed. 307. against Suits," post; both in this 149. In re Alphin & Lake Cotton section. Co. (D. C, Ark.), 14 Am. B. R. 194, 145a. Mueller v. Nugent, 184 U. 134 Fed. 477. S. 1, 7 Am. B. R. 224; In re Kane 150. Matter of Gilroy (D. C, N. (D. C, N. Y.), 20 Am. B. E. 616, 161 46 The Law and Peactice in Bankeuptcy. Settlement of Controversies. [§ 2 (7). property mortgaged is not in the possession of a trustee, and the general creditors have no interest therein the court has no juris- diction to set aside and cancel the mortgage.^'^ The provisions apply to the powers of receivers or the marshal to take charge of property of bankrupts in the hands of third persons after the filing of the petition, and until it is dismissed or the trustee has qualified.''^ This power extends even to a refusal to administer burdensome prop- gj^y 153 Under the present law, it has been asserted to the extent of ordering an assessment for unpaid subscriptions upon the stockholders of a bankrupt corporation.^'* So also in respect to the liquidation of a claim for damages of the bankrupt against a creditor who has come into court with a claim against the estate.^'*^ This function of courts of bankruptcy is also considered under other sections of this work.^'^ c. Settlement of controversies. — Subdivision 7 empowers courts of bankruptcy to determine controversies in relation to the estates of bankrupts, "except as herein otherwise provided." The exception has reference particularly to the limitation imposed upon the jurisdiction of such courts by § 23b.^''^ The jurisdiction in respect to the determination of controversies, prior to the amendatory act of 1903, depended on who were the parties to the suit.^'" Since then, as to suits to recover property, it depends, as to the same jurisdiction under law of 1867, on the subject- matter."' When the property has become subject to the juris- Y.), 14 Am. B. R. 627, 140 Fed. 733; 156. Bardea v. Bank, 178 U. S. In re Weinreb (C. C A., 2d Cir.), 16 524, 4 Am. B. E. 163. Am. B. R. 702, 146 Fed. 243. Subsection (7) applies only 151. Brumley v. Jones (C. C. A., where the trustee is the adverse 5th C=r.), 15 Am. B. R. 578, 141 Fed. claimant, and leave to sue him in 318 ^^c state court will be denied. In re 152. McNulty v. Feingold (D. C, ^gf^'lTFi?• S',%'' ^ f™" ?• '^• Pa.), 12 Am. B. R. 338, 129 Fed. |tVwin n ,^t^'' r.^^'°A ^V '? loni biegel-Hillman Co., (D. C, Mo.), 7 ,=o 1^- ., ., o *• c -^™- ^- ^- 351, 111 Fed. 983, and In 153. Discussed under Section Sev- ^e Kelloo-g (D. C. N. Y ) 7 Am ''"ty- B. R. 623, 113 Fed. 120; aflfd., lo" 154. In re Miller Electrical Main- Am. B. R. 7, 121 Fed. 333, 57 C. C. tenance Co. (D. C, Pa.), 6 Am. B. A. 547, holding on appeal that the R. 701, 111 Fed. 515. controversies in relation to the bank- 154a. In re Harper (D. C, N. rupt estate which do not come within Y.), 23 Am. B. R. 918, 934, 175 Fed. the jurisdiction of the bankruptcy 412. court are those where the trustee 155. For instance, see: for stays, must bring suit to assert title to §§ 2(15) and 11; for suits to collect, property not in his possession or § 23; for suits to recover property under his control. Where, even be- preferentially or fraudulently trans- fore the amendment, the claimant is ferred, §§ 60-b, 67-e, and 70-e; for also a bankrupt, jurisdiction to de- general duties of the trustee, § 47; cide between the two estates exists; for payment of dividends, § 65. In re Rosenberg (D. C, Pa.) 8 Am 155a. In re Walsh Bros. (D. C, B. R. 624, 116 Fed. 402. la.), 21 Am. B. R. 14, 17. 157. Kelly v. Smith, Fed. Cas. Jurisdiction of Courts of Bankruptcy. 47 § 2 (8).] Closing and Be-opeiing Estates. diction of the bankruptcy court as that of the bankrupt, whether held by him or , for him, jurisdiction exists to determine contro- versies in relation to the disposition of the same and the extent and character of liens thereon or rights therein.^"' If the property or fund is in the possession of the court, represented by one of its officers, as receiver or trustee, controversies in respect thereto are clearly within its jurisdiction.^"" If the property is in the possession of an adverse claimant the court cannot summarily direct him to turn the property over to an officer of the court.^^" If an adverse claimant bases his right upon that of the bankrupt the controversy is within the summary jurisdiction of the bankruptcy court.**^ The rule may be summarized as follows: Where there is a claim of adverse title to property of the bankrupt based on a transfer antedating the bank- ruptcy, a plenary suit must be brought, either at law or in equity, by the trustee, in which the adverse claim of title may be adjudicated. But if there is no such adverse claim of title, and the property is in the physical possession of a third party, or of an agent of the bank- rupt, or of an officer of a bankrupt corporation, who refuses to deliver it to the trustee, it is not necessary to bring a plenary suit, but the court may act summarily.^'^* IX. CI.OSING AND REOPENING ESTATES. Subdivision 8 of § 2 " invests courts of bankruptcy with the power to close estates whenever it appears that they have been fully adminis- tered, by approving the final accounts and discharging the trustees, and reopen them whenever it appears they were closed before being administered." Estates can only be closed under this subdivision when it appears that they have been finally administered. The general policy of the law requires that it be done speedily.^'^ This subdivision 7,675. Under law of 1841, Bucking- 400; In re Drayton (D. C, Wis.), ham v. McLean, 13 How. 151. See, 13 Am. B. R. 602, 135 Fed. 883; Mat- also, under section 23. ter of McBride (D. C, N. Y ) 12 158. Whitney v. Wenman, 198 U. Am. B. E. 81, 132 Fed. 285. ' ' S. 539, 14 Am. B. R. 45, in which case I60. Matter of Andre (C. C. A., it was held that a district court could 2d Cir.), 13 Am. B. R. 132, 135 Fed! determine by plenary suit in equity 736, 68 C. C. A. 374. The validity the title to property claimed by trus- of an assignment of wages made tee to have been surrendered to third prior to the filing of the bankruptcy parties by the temporary receiver petition must be determined by plen- after the filing of a voluntary peti- ary suit. In re Driggs (D. C, N. tion in bankruptcy, without right and 22 Am. B. R. 621, 171 Fed. 897. authority from the court. 161. Goodnough Mercantile & 159. In re Antigo SereeH Co. (C. Stock Co. v. Galloway (D C C. A., 7th Cir.), 10 Am. B. R. 359, Oregon), 19 Am. B. R. 244, 156 Fed' 123 Fed. 249, 58 C. C. A. 248; In re 504; In re Kane (D. C, N. Y.), 20 Leeds Woolen Mills (D. C, Tenn.), Am. B. R. 616, 624, 161 Fed. 633 12 Am. B. R. 136, 129 Fed. 922, hold- 161a. Babbitt v. Butcher (Sup. ing further that the jurisdiction Ct.), 216 U. S. 102, 23 Am. B. R. once acquired cannot be defeated by 519. the surrender of the property to the 162. In re Carr (D. C, N. Car.), alleged rightful owner; Cleminshaw 8 Am. B. R. 635, 116 Fed. 556. See V. International Shirt & Collar Co. generally under § 47, post, and as to D. a, N. Y.), 21 Am. B. R. 616, 164 when an estate is "closed," see §§ 11 Fed. 797; In re McDoueall (D. C, and 55, post. ■JN. Y.), 23 Am. B. R. 762, 175 Fed. Speedy administration.— In the 48 The Law and Pkactice in Bankeuptcy. Closing and Re-opening Estates. [§ 3 (7). recognizes the power to reopen estates " whenever it appears they were closed before being administered." The power is thus limited to those cases where full administration has not been had. It becomes necessary therefore to determine, before granting an application to re- open, whether the ground consists of lack of administration. The com- mon cause is the discovery of unadministered estates, and it has been held that the allegations of the petition to reopen must be such as to satisfy the court that such estates exist.^^' The application may be granted where a probable fraudulent transfer of property is apparent ; in such case the order reopening the estate should not be construed as authorizing the trustee to commence an action in a State court to set aside the transfer.^** The bankrupt's application to reopen made sev- eral months after his discharge, so as to permit him to amend his schedules by inserting the name of a creditor omitted therefrom, so that the bankrupt may also be discharged from such creditor's claim should be denied.^"^ But a reopening after a discharge has been per- mitted for the purpose of amending schedules by inserting a claim upon which an action was pending at the time of adjudication and to which a counterclaim had been pleaded. '■^^^ Where a discharge was re- fused because the bankrupt had not accounted for a large sum of money, the estate may be reopened. ^^* It has been held that, where the time to file claims has expired, a reopened case will redound to the benefit only of creditors whose claims were allowed in the original pro- ceeding.^"' Creditors who have not proved their claims cannot apply for the relief.^*^ An application by the bankrupt to reopen the . proceedings may be granted on the ground of newly discovered assets, although the time for filing claims has expired. ^*'^ Laches of the applicant may deprive him of his right to a reopening.^"" It fre- quently becomes necessary to reopen estates that there may be a ease of Boyd v. Glueklicli (C. C. A., 168. Matter of Paine (D. C, 8th Cir.), 8 Am. B. E. 393, 116 Fed. Ky.), 11 Am. B. R. 351, 127 Fed. 131, the court said: "The bank- 246. ruptoy act contemplates that proceed- 168a. In re Pierson (D. C, N.. ings in bankruptcy shall go forward Y.), 23 Am. B. R. 58, 174 Fed. 160. with all reasonable dispatch compat- 169. Iiacbes in making appli- ible with the due and orderly admin- cation. — In the ease of In re Paine- istration of justice and a proper re- (D. C, Ky.), 11 Am. B. R. 351, 127 gard for the fundamental rights of Fed. 248, the court held the proper the citizens." See, also. In re Paine rule to be that a fairly reasonable (D. C, Ky.), 11 Am. B. R. 354, 127 time, under all the circumstances of Fed. 346. the ease, should be allowed and that 163. In re Newton (C. C. A., 8th if the parties who had full knowledge Cir.), 6 Am. B. R. 52, 107 Fed. 439; delayed an unreasonable time to seek Matter of Paine (D. C, Ky.), 11 Am. to re-open a ease, their laches should B. R. 35i, 127 Fed. 246. authorize~the court to refuse to do so. 164. In re Ryburn (D. C, Ct.), 16 In the ease of In re Reese (D. C, Am. B. R. 514, 145 Fed. 662. Ala.), 8 Am. B. R. 411, 115 Fed. 993, 165. In re Spicer (D. C, N. Y.), it was held laches on the part of a 16 Am. B. R. 802, 145 Fed. 431. creditor, who had received notice of 165a. In re McKee (D. C, N. Y.), the filing of a petition, to fail to con- 21 Am. B. R. 306, 165 Fed. 269. te'st the bankrupt's claim to exemp- 166. In re Barton (D. C, Ark.), tion. In the case of Gary v. Jackson 16 Am. B. R. 569, 144 Fed. 540. (C. C. A., 5th Cir.), 21 Am. B. R. 167. In re Shaffer (D. C, N". 334, 164 Fed. 840, a delay of seven Car.), 4 Am. B. R. 72H, 104 Fed. 982. years was held laches, especially since- Jurisdiction of Couets of Bankruptcy. 49 §2 (9) (15).] Compositions; Necessary Orders, etc. trustee on whom process may be served ; thus, where burdensome prop- erty has vested in the trustee, and, by inadvertence, he has not been formally excused from taking the same, and a mortgagee wishes to foreclose. The practice is simple — an ex parte application to the judge for an order reopening, and, if granted, a reference to the referee and a meeting of creditors on notice, with the other sub- sequent proceedings as in the original case. The petition to reopen an estate need not be of any formal or technical character, but should reasonably satisfy the court of the requisite jurisdictional fact of non- administration.^^" X. CONFIRMATION OR REJECTION OF COMPOSITIONS. Subdivision 9 of this section authorizes a court of bankruptcy to " confirm or reject compositions between debtors and their creditors, and set aside compositions and reinstate the cases." Section 13 of the act recognizes and specifies the compositions which are subject to con- firmation by the court. This whole subject is discussed under that section. The power conferred upon the court to confirm or reject such compositions is limited to those recognized in § IS.^^"^ XI. ENFORCEMENT OF ACT BT NECESSARY ORDERS, PRO- CESS OR JUDGMENT. a. In general. — Subdivision 15 invests courts of bankruptcy with the power "to 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." This is the omnibus clause of the section. Generally speaking, it may be availed of to compel anything which ought to be done for, or to prevent anything which ought not to be done against, the enforcement of the law ; provided the court of bankruptcy otherwise has jurisdiction of the person or the subject matter.^''' Under the power here con- ferred the bankrupt may be compelled to perform other duties than those enumerated in § 7; he may be restrained from leaving the jurisdiction of the court in the proper case, by writ of ne exeat."^ the petitioner failed to show when Am. B. R. 355, 126 Fed. 599; In re the alleged fraud was discovered. Lipke (D. C, N. Y.), 3 Am. B. R. 170. In re Newton (C. C. A., 8th 569, 98 Fed. 970; In re Fleischer (D. Cir.), 6 Am. B. R. 52, 107 Fed. 430. C, N. Y.), 18 Am. B. R. 194, 151 Fed. 171. In re Frear (D. C, N. Y.), 82; Matter of Berkowitz (D. C, N. 10 Am. B. R. 199, 120 Fed. 978. J.), 22 Am. B. R. 231, 173 Fed. 172. In re Hicks (D. C, N. Y.), 1012. Compare In re Ketchum (C. 13 Am. B. R. 654, 133 Fed. 739. C. A., 6th Cir.), 5 Am. B. R. 532, 108 173. In re Cohen (D. C, 111.), 14 Fed. 35. 50 The Law and Practice in Bankeuptcy. Injunctions Other than Against Suits. [§ 3(15). This subdivision is not sufficiently broad to authorize an order requir- ing a bankrupt, who has been released from arrest, to give bail."**^ b. Injunctions other than against suits. — Early in the admin- istration of the present law, the injunction was frequently used to prevent the dissipation of assets to which the bankrupt had title.''* Through this power a court may extend the powers of receivers appointed under § 2 (3) ; in the exercise of it the court may compel the surrender by a bankrupt of his property. It is frequently called upon to justify the making of orders and the issuing of process required for the due administration of the bankrupt's estate. Many instances of such orders and process might be here cited, but it seems more appropriate to refer to them in connection with other parts of the act. The power to enjoin is inherent in the court of bankruptcy as a court of equity. It includes the power to grant stays, conferred by § 11, of pending suits in other courts. That the broad phrasing of subdivision 15 amounts to an express ratification of this inherent power has not been doubted. The exercise of it, like the quasi-criminal remedy of contempt, is essential to the due enforcement of the act, as was the additional process of seizure when the act complained of amounted to an act of bankruptcy or other fraud on the act."^ Where, however, the property at which the process was aimed was claimed adversely by another and in that other's possession, the supreme court's decision in the Bardes case at once made it doubtful whether this jurisdiction could longer be exercised."* This doubt has now been removed by the amendments of 1903.'" It may be suggested, however, that Bryan v. Bernheimer, supra. having affirmed the doctrines of the earlier decisions and to that 173a. U. S. ex rel. Kelly v. Peters their respective districts, abridged . C, 111.), 22 Am. B. R. 177, 166 this very necessary power. Verbal I'e Peactice in Bankeuptct. Synopsis of Section. [§ 3. SYNOPSIS OF SECTION. ACTS OF BANKRUPTCY. I. Acts of Bankruptcy in General. a. History and analogies. b. Comparative legislation. c. Former United States statutes. d. Construction of the section. (1) In geneeal. (2) Steict consteuction. e. Insolvency; when essential. II. Acts of Bankruptcy Under Present Law. a. First act of bankruptcy j a fraudulent transfer. (1) In geneeal. (2) Disposition of peopeety. (3) Meaning of woeds of devolution. (4) Intent to hindee^ delay oe defeatjd. (5) Insolvency. (6) Ceeditoes oe any of them. (7) COMPAEISON with OTHEE SECTIONS. b. Second act of hanhruptcy; a preferential transfer. (1) In qeneeal. (2) TeANSFEB of PEOPEETY. (3) Intent to peefee. (4) Peoof of intent. (5) Intent as distingttistied feom motive, (6) Allegations as to peefeeence. c. Third act of bankruptcy; preference through legal proceedings. (1) In geneeal. (2) compaeison with act of 1867. (3) Intent not essential. (4) suffeeed oe peemitted. (5) Ceeditoes to be affected. (6) Peefeeence. (7) Legal peoceedings. (8) Vacating oe dischaeging peefeeence. (9) Consteuction op subsection. Acts of Bankruptcy. 57 § 3.] Acts of Bankruptcy in General. d. Fourth act of banhruptcy ; a general assignment or receivership. (1) In general. (2) What constitutes a general assignment. (3) Insolvency essential. (4) Meaning of words. (5) Precedents under former law. (6) Reference to other sections. e. Fifth act of ianhruptcy; a confession of bankruptcy. (1) In general. (2) Essential element; III. When and Against Whom Petition May be Filed. a. Against person who is insolvent and has committed act of bankruptcy. h. Time vdthin tuhich petition miist be filed. (1) Within four months after commission of ACT. (2) JSTecessity for record or possession to start time running. IV. Insolvency as a Defense. a. When insolvency need not be shown. b. Solvency and the first act of bankruptcy. c. Solvency and the second and third acts of bankruptcy. V. Bond on Taking Possession of Bankrupt's Property Before Adjudication. a. Requirement as to bond. b. Remedies under bond; costs. I. ACTS OF BANKRUPTCY IN GENERAL. a. History and analogies — In most of the continental bank- ruptcy systems, acts of bankruptcy, in our sense of the term, are unknown. Mere cessation of payment is enough to entitle the creditors to resort to the court. In France the debtor is legally bound to notify the court that he' has stopped payment. Indeed, in several of the Latin systems, the court may declare a debtor a bankrupt on its own motiop. Anglo-Saxon jurisprudence, while allowing the debtor to initiate bankruptcy by his own declaration or petition, not only does not 58 The Law and Pbactice in Bankruptcy. Former United States Statutes. [§ 3. otheorwise permit the court to adjudicate save at the instance of creditors, but even affords further protection against arbitrary or unjust interference with the property of the individual, by provid- ing that he shall not be amenable to bankruptcy unless he has done or suffered certain acts which either amount to actual or con- structive frauds on creditors or are tantamount to declarations of hopeless insolvency. These acts are called under our present stat- ute " acts of bankruptcy." b. Comparative legislation. — The present English act,^ as sup- plemented by § 1 of the amendatory act of 1890, specifies eight acts of bankruptcy, four of which^ are practical equivalents of the first, second, fourth, and fifth acts found in § 3a of our law. Of the others, absconding or concealing himself* is ancient, while of the remaining three an unpaid levy outstanding for twenty-one days* is but little more drastic than is our third act of bankruptcy, and the giving of a notice by the debtor that he has suspended payments,^ or the failure on his part to respond within seven days to a demand to pay a final judgment,® are but statutory recognition of the continental doctrine that cessation of payments and the status of bankruptcy are one and the same thing. The two systems, therefore, aside from the difference which grows out of our defini- tion of insolvency, are, as acts of bankruptcy, near akin. There has been a like parelleling at other periods.' c. Former United States statutes. — The acts of bankruptcy in our statute of 1800* were largely copied from those then in force in England. Of the six acts of bankruptcy in the law of 1841,' only three, the procuring or suffering of a levy or attachment, the concealing of property with intent to prevent a levy, and the fraud- ulently conveying or transferring of property, are similar to those now available; only the last is in effect an equivalent. There were nine acts of bankruptcy under the law of 1867. The third and fourth are comprised within the present § 3-a(l), and the eighth is similar to our § 3-a(2). Here the similitude ends, save that the making of a general assignment became by judicial construction in effect a tenth act of bankruptcy. Our third act is new, as is 1. English Bankruptcy Act of 1883, 6. Id., § 4(l)-g. § 4. 7. Compare the English Act of 1869 2. Id., § 4 ( 1 ) -a-b-c-f. with our law of 1867. 3. Id., § 4(l)-d. 8. Act of 1800, § 1. 4. Eng. Bankruptcy Act of 1890, § 1. 9. Act of 1841, § 1. 5. Eng. Bankruptcy Act of 1883, § 4(l)-h. Acts of Bankruptcy. 59 § 3.] Construction of Section. our fifth. We certainly have now nothing like such once well- known acts of bankruptcy as the alleged bankrupt's abscondence, or being in custody on a civil judgment, or, if a banker, merchant, trader, or manufacturer, stoppage of payment for a specified period. The decisions under the former law, while, of course, valuable, are not always controlling.^" The practitioner, when citing, should observe the changes in § 39 of the former statute made by the acts of June 22, 1874, and July 26, 1876. It is often important, too, to note the difference in phrasing between the two statutes, even where there is a seeming equivalence.^-' d. Construction of the section. — (1) In general. — Section 3 relates wholly to involuntary bankruptcy. It clearly indicates what wrongdoing or acts on the part of the bankrupt must be al- leged in the creditons' petition and established by them as a part of their proof on the trial. Such a petition, prepared after carefully observing the provisions of this section, and of § 4-b, indicating against whom such a petition may be filed, and § 59-b, deokring by whom it may be filed, and § 2 (1), specifying where it may be filed, and § 18-a, indicating how it is served, and § 63-a-b, speci- fying what are petitioning creditors' debts, will, provided the act of bankruptcy relied on is alleged with sufficient detail, render the petitioners reasonably secure against a plea in the nature of a demurrer.^^ (2) Steigt consteuctton. — The purpose of the act as a whole isi remedial ; but this portion of it, while not penal, is in derogation of common-law rights. The higher courts have, therefore, quite unifoi-mly refused to read into this and the corresponding sections of previous laws, meanings which do not appear from the very words. ^^ Strong reasons may, however, be urged for a liberal construction. The law was intended to compel prorating, by halt- ing frauds and checking preferences. As has been seen, defined acts of bankruptcy are merely limitations expressive of the caution 10. Compare Wilson v. City Bank, Congress, 2d Session, Vol. 31, p. 2038) 17 Wall, 473, with Wilson v. Nelson, will prove suggestive. 183 U. S. 191, 7 Am. B. E. 142. 12. Compare Form No. 3, and 11. As bearing on the purpose of "Creditors' Petitions in Involuntary Congress in limiting the acts of bank- Bankruptcy," by Mr. Collier 1 N. B. ruptey to those discussed in detail, N. 62. post, reference to the Torrey bill in its 13. Jones v. Sleeper Fed Cas latest form, the so-called Lindsay bill 7,496; Wilson v. City Bank 17 Wall (see § 40, S. 1032, 55th Congress, 1st 473.; In re Empire Metallic Bedstead Session; and compare also § 2 of the Co. (C. C. A., 2d Cir.), 3 Am B E Henderson substitute, Cong. Eee. 55th 575, 98 Fed. 581. 60 The Law and Pkactice in Banketjptcy. Insolvency, when Essential. [§ 3. inherent in Anglo-Saxon jurisprudence when dealing with the rights to property. Being limitations on the operation of a statute that is highly remedial, a broad construction, while not perhaps so safe, would in the long run accomplish more equity.** As' a rule, the statute as an entirety, as well as its sections other than § 3, are liberally construed.*^ e. Insolvency; when essential ^What constitutes insolvency has already been considered.-^® Insolvency has in all bankruptcy laws been a most important element of allegation and proof. Yet, where the act of bankruptcy consists of a general assignment for the benefit of creditors," insolvency is immaterial.*^ Under the present definition, it is conceivable that a debtor who " admits in writing his inability to pay his debts "** may still be solvent; yet insolvency need not be alleged or shown. But it is either a neces- sary element of, or its opposite, a conclusive defense to, the other acts of bankruptcy.^" A general averment in an answer, that no act of bankruptcy, such as is charged, has been committed, may be deemed sufficient as a denial of insolvency, although if insolvency be alleged as a material element, it would be better to specifically deny the insolvency at the time the act was committed.^* The act is not to be construed as intending to cover all cases of insolvency to the exclusion of other judicial proceedings.^^ But if the insolvency be depended vipon to show an act of bankruptcy, it must have existed at the time of the act complained of ;^^ that the act of bankruptcy itself brought about the insolvency is not enough.^* A general letter to creditors admitting insolvency will outweigh mere estimates.^* If the insolvency of a partnership is 14. Compare, as tending to support vency, see § 1(15), ante, and the cases this view. In re Gutwillig (D. C, N. cited. Y.), 1 Am. B. R. 78, 90 Fed. 475; In 21. Troy Wagon Works v. Vast- re Adams (Kef., N. Y.), 1 Am. B. R. binder (D. C, Pa.), 12 Am. B. R. 352, 94; Southern Loan & Trust Co. v. Ben- 130 Fed. 232. bow (D. C, N. Car.), 3 Am. B. R. 9, 22. In re Wilmington Hosiery Co. 96 Fed. 514; Silverman's Case, Fed. (D. C, Del.), 9 Am. B. R. 581, 120 Cas. 12,855; In re Mueller, Fed. Cas. Fed. 179; Wilson v. City Bank 17 9,912. Wall. 473, 21 L. Ed. 723. 15. For instance, see Blake v. Fran- 23. In re Rome Planing Mills (D. CIS Valentine Co. (D. C, Cal.), 1 Am. C, N. Y.), 3 Am. B. R. 123 96 Fed B. R. 372, 89 Fed. 691. 812. 16. See ante, § 1(15). 24. Chicago Title & Trust Co. v. 17. Bankr. Act, § 3-a(4). Roebling's Sons (D. C, 111.). 5 Am B 18. West Co. v. Lea, 174 U. S. 590, R. 368, 107 Fed. 71. 2 Am. B. R. 463. 25. In re Lange (D. C, N. Y.), 3 19. See under subs, a- (5), post. Am. B. R. 231, 97 Fed. 196. 20. As to what constitutes insol- Acts of Bankeuptct. 61 5 3-a(l).] Fraudulent Transfer. at issue, it must not only be shown that the partnership assets are insufficient, but also that the assets of individuals, after paying their debts, are not enough to make up the deficiency.^' II. ACTS OF BANKRUPTCY TJNDEB PRESENT LAW. a. First act of bankruptcy; a fraudulent transfer. — (1) In geneeal. — The first act of bankruptcy prescribed by this section consists of a person having " conveyed, transferred, concealed, or removed, or permitted to be concealed or re- moved, any part of his property with intent to hinder, delay, or defraud his creditors or any of them." The important elements of this act of bankruptcy are: (1) The disposition of the bankrupt's property either by himself or by his per- mission, and (2) the intent to defraud creditors. There is a very patent distinction to be drawn between the first and the second acts of bankruptcy.^'' A preferential payment to creditors will, in most cases, amount to a transfer with intent to hinder, delay or defraud ; but where such an act has been committed it falls under the second subdivision of sub-section a. To constitute the first act of bankruptcy the disposition of the property and the intent must oo-exist.^® (2) Disposition op peoperty. — The particular acts referred to in subd. 1 of this section are those conveyances or transfers made with intent to hinder, delay or defraud, which were interdicted by the statute of frauds, now a part of the law of nearly every State.^® Just what transactions will furnish a legal presumption that this act of bankruptcy has been committed will depend largely on the State decisions.'" The execution of a chattel mortgage by a 26. Vaccaro v. Security Bank (C. 27. In re Mingo Valley Creamery C. A., etU Cir.), 4 Am. B. R. 474, 103 Ass'n (D. C, Pa.), 4 Am. B. R. 67 Fed. 436; In re Blair (D. C, N. Y.), 100 Fed. 282. 3 Am. B. R. 588, 96 Fed. 76. 28. In re Flint Hill Stone & Con- Insolvency of partnership. — In struction Co. (D. C., N. Y.), 18 Am the case of In re Bertenshaw (C. C. B. R. 81, 149 Fed. 1,007; In re Tup- A., 8th Cir.), 19 Am. B. R. 577, 588, )er (D. C, N. Y.), 20 Am. B. R. 824 157 Fed. 363, it was said that " If a 827, 163 Fed. 766; Coder v. Arts partnership is a distinct entity sepa- (Sup. Ct.), 213 U. S. 223, 22 Am. rate from the individuals who com- B. E. 1, 15. pose it,— if its property and its debts 29. 1^ Eliz. Ch. 5. See Githens, are separate and distinct from the etc., Co. v. Shiffer & Bros. (D. C, property of its individual members. Pa.), 7 Am. B. E. 453, 112 Fed. 505. and from their individual debts, then 30. Lansing Boiler & Eng. Works it 18 insolvent under this act when v. Eyerson (C. C.A., 6th Cir.), 11 Am. the aggregate of its property is not B. E. 558, 128 Fed. 701, in which the sufficient to pay its debts." See, also, court said: "The language of sub- r^\ of_ Everybody's Market (D. section 1 of § 3 is the familiar lan- ioo ■^' ^^^' ^^^ ^^^' S^^S^ °* statutes against conveyances 62 The Law and Peactioe in Bankbuptcy. Fraudulent Transfer. [§3-a(l). debtor 'to secure a present loan to pay certain creditors may be an act of bankruptcy under this subdivision.^^ But a mere voluntary transfer, impeachable only upt/n the ground that it is a preference, is not sufficient.^^ If conveyances are made in good faith with the intent only of securing the grantees as siureties for the grantor, their execution is not an act of bankruptcy.^^ Cash sales of property by the debtor, to meet an indebtedneisis, but the proceeds of which were not so applied, are not inhibited;** nor are such sales when made in the ordinary course of trade for full considera- tion, and not for the purpose of putting the property out of the reach of creditors.*® A mortgage on all the debtor's property is not within the act if the equity remaining is sufficient to pay his debts.*^ The payment of current expenses necessarily liquidated fraudulent as against creditors, and we think there can be no doubt that •Congress intended the words employed •should have the same construction and effect as have for a long period of time been attributed to those words." Com- pare In re Salmon (D. C, Mo.), 16 Am. B. R. 122, 127, 143 Fed. 395; Rumsey & Sikemier v. Novelty Mfg. Co. (D. C, Mo.), 3 Am. B. R. 704, 99 Fed. 699. 31. In re Pease (D. C, Mich.), 12 Am. B. R. 66, 129 Fed. 446. See, also, Martin v. Hulen & Co. (C. C. A., 8th Cir.), 17 Am. B. R. 510, 149 Fed. 982, where it was held that the giving of a mortgage to secure the purchase price of goods purchased, covering after-acquired stock, was not an act of bankruptcy. 32. Githens, etc., Co. v. Shiffler Bros. (D. C, Pa.), 7 Am. B. R. 453, 112 Fed. 505. It must also appear that the mortgage was given with in- tent to hinder, delay and defraud creditors. In re Flint Hill Stone & ■Construction Co. (D. C, N. Y.), 18 Am. B. R. 81, 149 Fed. 1,007. Deed of trust iiritli condition, — It has been held an act of bankruptcy where an insolvent debtor conveyed all his property to a trustee with direc- tions as to the payment of creditors ■without preference, and the deed con- tained a condition of defeasance and an equity reserved in the property to the grantor after the satisfaction of the claims of the beneficiaries, in that such transfer was made to hinder, de- lay and defraud his creditors. Rxun- sey & Sikemie v. Novelty & Machine Mfg. Co. (D. C, Mo.), 3 Am. B. R. 704, 99 Fed. 699. 33. Acme Food Co. v. Meier (C. 0. A., 6th Cir.), 18 Am. B. R. 550, 557, 153 Fed. 74. Mortgage to secure advances made by the mortgagor's son, in the payment of debts, the mortgagor be- lieving that she was solvent at the time, and it appearing that her indebt- edness was reduced between the date of the mortgage and the filing of the petition in bankruptcy, and no unse- cured debts were incurred after the mortgage was executed, is not an act of bankruptcy. In re McLoon (D. C, Me.), 20 Am. B. R. 719, 162 Fed. 576. 34. In re Belknap (D. C, Pa.), 12 Am. B. R. 326, 129 Fed. 646. ,35. Githens, etc., Co. v. Shiffler & Bros. (D. C, Pa.), 7 Am. B. R. 453, 112 Fed. 505; Richardson v. Shaw 203 TT. S. 587, 19 Am. B. R. 717. A transfer to a bona fide pur- chaser for a present fair considera- tion is not ordinarily such a transfer as to make the sale an act of bank- ruptcy. TiflTany v. Lucas, 15 Wall 421, 21 L. Ed. 128; Stewart v. Piatt, 101 U. S. 731, 25 L. Ed. 816; In re Franklin, Fed. Cas. 5,053, 8 Ben. 233; In re Pusey, Fed. Cas. 11,478. 36. Lansing Boiler & Eng. Works Acts of Bankeuptcy. 63. § 3-a ( 1 ) .] Fraudulent Transfer. to continue the business would not be an act of baiikruptcy.^^ Conveyances of real estate by a husband to his wife, without a present consideration, about a month prior to the filing of a peti- tion against him is an act of bankruptcy.^''* (3) MEiiNiNG OF WORDS OF DEVOLUTION.— The word " convey " has its common meaning and is the equivalent of " grant." The word "transfer" has a broad generic meaning; it is defined for the purposes of this act in § 1(25). The payment of a partner's; individual debts out of the assets of the partnership is, as to the creditors of the partnership, a transfer.** A discussion of what constitutes a concealment of property is had under § 29-b, post^ *o determine the meaning of this term reference should be made to § 1(22). A debtor who absconds and takes part of his prop- erty with him, both " conceals " and " removes " the property.** When the quantum of the propei'ty is not kept under cover, but remains visible, even though the transaction is fraudulent, it is not such a concealment as to amount to an act of bankruptcy.*" The word " removed " as used in this clause signifies an actual or physical change in the position or locality of the property consti- tuting the subject of the removal.'*-' Where proijerty is removed by a creditor in the debtor's absence, and against his protest, the failure to take legal proceedingsi to recover such property is not an act of bankruptcy.*^ A person does not " permit " a removal V. Ryerson (C. C. A., 6th dr.), 11 which places his property beyond the Am. B. E. 558, 128 Fed. 701. reach of his creditors. In re Shoe- Tte equity of redemption smith (C. C. A., 7th Cir.), 13 Am. B. should be considered in determining R. 645,. 135 Fed. 684. See also In re- whether the mortgagor can pay his Hussman, Fed. Cas. 6951 ; In re Wil- debts. Acme Food Co. v. Meier (C. C. liams, Fed. Cas. 17, 703; Anonymous. A., 6th Cir.), 18 Am. B. K. 550, 153 Fed. Cas. 466; O'Neill v. Glover, S Fed. 74. Gray (Mass.), 159. 37. Richmond Standard Steel Spike 41. In re Wilmington Hosiery Co. & Iron Co. T. Allen (C. C. A., 4th (D. C, Del.), 9 Am. B. R. 581, 12» Cir.), 17 Am. B. R. 583, 148 Fed. 657. Fed. 180, holding that the word " re- 3Ta. Henkel v. Seider (D. C, N". moved " has no application to the tak- Y.), 20 Am. B. E. 773, 163 Fed. 558. ing of property by a receiver of a cor- 38. Mattocks v. Rogers, Fed. Cas. poration acting under competent 9,300; In re Gillette (D. C, N. Y.), authority As to what constitutes con- 5 Am. B. R. 119, 104 Fed. 769. cealing or removing property with in- 39. In re Filer (T). C. N. Y. ), 5 tent to hinder, delay or defraud credi- Am. B. E. 332, 108 Fed. 209. tors, see Anonymous, Fed. Cas. 466, 40. Citizen's Bank v. DePauw Co. 1 Pac. L. Rep. 173; Livermore v. Bag- (C. C. A., 7th Cir.), 5 Am. B. E. 345, ley, 3 Mass. 489; Fox v. Eckstein, Fed. 105 Fed. 926. Cas. 5,009. 4 N. E. E. 373; In re Concealment Implies something Shapiro, 106 Fed. 495, 3 N. B. N. 385. more than a mere failure to disclose; 42. In re Belknap (D. C, Pa.), IZ it may include an act of the debtor Am. B. R. 326, 129 Fed. 646. 64 The Law and Practice in Bankruptcy. Intent to Hinder, Delay or Defraud. [§3-a(l). or concealment of property who has neither the power or right to prevent it.*' (4) Intent to hinder, delay or defraud. — The intent on the part of the dfebtor to hinder, delay or defraud his creditors must be shown in order to constitute the transfer an act of bank- ruptcy under this subdivision.** It rarely can be established by direct proof.*' The intent may be inferred from the acts done and the surrounding circumstances, though the debtor denies such intent.*^^ It may be established by the debtor's admission and declarations,** or it may be inferred from the act itself as a necessary consequence of it; for instance if a creditor in failing circumstances places all his prop- erty beyond the reach of his creditors, that fact may be considered in determining whether he did so in good faith, without intent to defraud.*^ The intention which is here brought into question must, however, in most circumstances, be an actual intention ; the mere fact that the transaction complained of has hindered or delayed creditors will not be enough.*'^ The insolvency of the debtor at the time the transfer was made will not always of itself be sufficient to show inte.it to defraud or delay.*^^ The burden of proving fraudulent intent is, of course, on him who asserts it. Thus, in the absence of proof as too when or how assets were lost, the presumption is against fraud.*' 43. In re Wilmington Hosiery Co. (D. C, Del.), 9 Am. B. R. 581, 120 Fed. 179. 44. In re Cowles, Fed. Caa. 3,297; In re McKibbin, Fed. Cas. 8,859; Fox V. Eckstein, Fed. Cas. 5,009; In re Belknap (D. C, Pa.), 12 Am. B. R. 326, 129 Fed. 646; In re Wilming- ton Hosiery Co. (D. C, Del.), 9 Am. B. R. 581, 120 Fed. 180; Lansing Boiler Works v. Ryerson & Son (C. C. A., 6th Cir.), 11 Am. B. R. 558, 128 Fed. 701; In re Tupper (D. C, N. Y.), 20 Am. B. R. 824, 827, 163 Fed. 766; Coder v. Arts (Sup. Ct.), 22 Am. B. R. 1, 15, 213 U. S. 223. 45. Van Wyck t. Seward, 18 Wend. 375, 395. 45a. In re Larkin (D. C, N. Y.), 21 Am. B. R. 711, 168 Fed. 100. 46. Compare In re Foster (D. C, Pa.), 11 Am. B. R. 131, 133, 126 Fed. 1014. 47. Bean Chamberlain Mfg. Co. v. Standard Spoke & Nipple Co. (C. C. A., 8th Cir.), 12 Am. B. R. 610, 131 Fed. 215; In re Salmon (D. C, Mo.), 16 Am. B. R. 122, 143 Fed. 395. Intent implied. — Where it ap- pears that the purpose of an alleged bankrupt in making certain trans- fers was to put his property beyond the reach of his creditors and he pro- fesses to be unable to tell of the dis- position of the money received, the intent to defraud may be implied. In re Minard (D. C, Oregon), 19 Am. B. R. 485, 156 Fed. 377. See. also, Macon Grocery Co. v. Beach (D. C, Ga.), 19 Am. B. R. 558, 156 Fed. 1,009. 47a. Lansing Boiler Works v. Ryerson (C. C. A., 6th Cir.), 11 Am. B. R. 558, 128 Fed. 701, 63 C. C. A. 253; In re McLoon (D. C, Me.), 20 Am. B. R. 719, 162 Fed. 575. 47b. Richardson v. Shaw, 203 U. S. 587, 19 Am. B. R. 717, in which the court held that there is nothing in the Bankruptcy Act which pre- vents an insolvent from disposing of his property, provided his dealings are conducted without any purpose of defrauding his creditors or giving a preference to any of them. 48. Davis v. Stevens (D. C, S. Dak.), 4 Am. B. R. 763, 104 Fed. 242. Compare In re Shapiro & No- V3J,^.- ^- N. Y.), 5 Am. B. R. 839, 106 Fed. 495. The burden is shifted to the Acts of Bankruptcy. 65 §3-a(l).] Intent to Hinder, delay or Defraud. It is still an open question whether a voluntary receivership by an insolvent corporation under a State law may not be " with intent to hinder or delay creditors " and thus an act of bankruptcy, irre- spective of the amendment of 1903.*° In a proceeding instituted prior to the amendment of 1903 it was held that the appointment of a receiver of an insolvent partnership was not an act of bank- ruptcy under this clause. °'' Thus, also, a transfer intended to delay was under the former statute held an act of bankruptcy.^"^ Allegations that the defendant transferred his property with intent to hinder, delay or defraud his creditors should be specific if possible, but the purpose of the law does not require greater detail than it is probable that creditors can furnish.^^ An allegation, in the language of the statute, of a disposition of property to hinder, delay and defraud creditors, is not sufficient; facts and circumstances should be stated from which the inference may be drawn that the disposition of the property was done with an evil intent." A petition is insufficient which fails to describe the property alleged to have been transferred, the time of the alleged transfer, and to whom it was made.°^^ There can be no intent to hinder, delay or defraud unless at the time the transfer was made the debtor knew or had reason to know of the existence of more than one creditor."* The alleged bankrupt should debtor to explain the transaction where it appears that all his property has been removed to a vessel about to leave for a foreign country. Hoff- schlaeger Co. v. Young Nap. (D. C, Hawaii), 12 Am. B. R. 517. 49. See In re Empire Metallic Bed- stead Co. (D. C, N. Y.), 1 Am. B. R. 136, 141 (this point not having been passed on when this case was subsequently reversed) ; In re Gut- willig (C. C. A., 2d Cir.), 1 Am. B. R. 388, at p. 390, 92 Fed. 337; In re Harper & Bros. (D. C, N. Y.), 3 Am. B. R. 804, 100 Fed. 266, and Seheuer v. Smith (C. C. A., 5th Cir.), 7 Am. B. R. 384, 112 Fed. 407. Receivership of corporation. — In the case of In re Wilmington Hosiery Co. (D. C, Del.), 9 Am. B. R. 581, 120 Fed. 171, it was held that where an insolvent corporation, against which a bill was filed alleg- ing its insolvency and praying the appointment of a receiver, and a re- ceiver was thereupon appointed who took possession of its property, the corporation did not thereby permit its property to be removed, with in- tent to hinder or delay its creditors, within the meaning of § 3-a(l). To a similar effect see In re Baker- Ricketaon Co. (D. C, Mass.), 4 Am. B. R. 605, 97 Fed. 489; Vacoaro v. Security Bank (C. C. A., 6th Cir.), 4 Am. B. R. 474, 103 Fed. 436; In re Zeitner Brewing Co. (D. C, N. Y.), 9 Am. B. R. 63, 117 Fed. 799. 50. Matter of Burrell & Corr Co. (C. C. A., 2d Cir.), 9 Am. B. R. 625, 123 Fed. 414, 59 C. C. A. 508. A deed of trust conveying all the debtor's property to be distributed ratably among his creditors was held presumptively fraudulent and an act of bankruptcy. Rumsey v. Novelty & Machine Co. (D. C, Mo.), 3 Am. B. R. 104, 99 Fed. 699. 51. In re Goldschmidt, Fed. Cas. 5,520. 52. In re Mero (D. C, Ct.), 12 Am. B. R. 171, 128 Fed. 630. A petition charging that the act of bankruptcy was the giving of a chattel mortgage within the four months' period must allege facts suiBcient to show that it was given either with intent to hinder, delay and defraud creditors, or with intent to prefer mortgagee over other credi- tors. In re Flint Hill Stone & Construction Co. (D. C., N. Y.), 18 Am. B. R. 81, 149 Fed. 1,007. 53. In re White (D. C, Pa.), 14 Am. B. R. 241, 135 Fed. 199; In re Hark Bros. (D. C, Pa.), 14 Am. B. R. 400, 135 Fed. 603. 53a. Conway v. German (C. C. A. 4th Cir.), 21 Am. B. R. 577, 166 Fed. 67. 54. Merchant's Nat. Bank v. Cole (C. C. A., 6th Cir.), 18 Am. B. R. 44, 149 Fed. 708. 66 The Law and Peactice in Bankeuptcy. Fraudulent Transfer ; Creditors. [§ 3-a (1). be permitted to show that a deed which is relied upon as an act of bankruptcy, though absolute upon its face was intended as a mere security and that there was no intent to defraud.^" If the alleged bankrupt was insane at the time the transfer was made, he cannot be said to have made it with intent " to hinder, delay and defraud his creditors."^'* (5) iNSOLVEifCY. — We have already considered what constitutes insolvency,'" and have also discussed the subject in respect gen- erally to acts of bankruptcy under this section.'^ We will also hereafter under this section again refer to solvency as a defense to proceedings in bankruptcy and the proof necessary to establish the fact.'' It is only necessary here to call attention to the fact that the insolvency of the debtor is not required to be shown. A per- son is not permitted to convey, transfer, conceal or remove any part of his property with intent to hinder, delay or defraud his creditors, and on becoming insolvent within four months thereafter, escape the bankruptcy law by showing that he was solvent when he so conveyed, transferred, concealed or removed his property.'^* The act of bank- ruptcy is declared to consist of a transfer by the debtor with intent to hinder, delay or defraud his creditors. If the debtor shows that at the time of filing a petition in bankruptcy he was actually solvent it is a complete defense in a proceeding based upon the first act of bankruptcy."' (6) Creditors or ant of them. — The act under this subdi- vision must have been committed with intent to hinder, delay or defraud "his creditors or any of them." This means a creditor who owns a judgment or claim provable in bankruptcy."" An unliquidated claim for tort, unreduced to judgment at the time of an alleged transfer, does not constitute the claimant a creditor so 55. Acme Food Co. v. Meier (C. C. sanity, provided it shows lunacy at A., 6th Cir.), 18 Am. B. R. 550, 153 the time of the commission of the Fed. 174. alleged act of bankruptcy." 55a. Intent of insane person.^ 56. See Bankr. Act, § 1 (15) and In the case of In re Ward (D. C, N. discussion thereunder, ante v 4 J.), 20 Am. B. R. 482, 486, 161 57. See ante, p. 60. ' Fed. 755, the court said: "If 58. See post, p. 88. the alleged bankrupt was, at the 58a. In re Larkin (D. C NY) time of committing the alleged 21 Am. B. R. 711, 713, 168 Fed lOo' act of bankruptcy charged in the 59. In re Schenkein (D. C, N. Y)" petition filed against him, so insane 7 Am. B. R. 162, 113 Fed! 421- In re that he did not understand the nature West {C. C. A., 2d Cir.), 5 Am' B R of the act, its commission should be 734, 108 Fed.' 940; Matter of As- denied on the ground that, being in- ehenback Co. (C. c' A., 2d Cir.) 23 sane, he could not commit it. On the Am. B. R. 95, 174 Fed. 396 ' trial of such an issue, the adjudicn- 60. Bankr. Act, § 1(9) and 63-a-b tion of lunacy may, perhaps, be of- post. ' fered as prima facie evidence of in- Acts of Bankeuptct. 67 § 3-a ( 2 ) .] Preferential Transfer. asi to authorize him to insist that such transfer is an act of bank- ruptcy.*^ (7) CoMPAEisoN WITH OTHER SECTIONS. — If the fraudulent transfer is within four months of the filing of the petition, it is not only an act of bankruptcy but void under § 67-e; it ia also an objection to discharge under § 14-b(4:) ; and, if also voidable under the State laws, it may be set aside under § 70-e, and the property or its value recovered by proper proceedings begun within the limitations as to time fixed by the State statutes.®^ b. Second act of bankruptcy; a preferential transfer. — (1) In GENEEAL. — The sccond act of bankruptcy consists of a debtor trans- ferring while insolvent any portion of his property to one or more of his creditors with intent to prefer such creditor or creditors over his other creditors. As in the case of the other acts of bankruptcy it must have been committed within the four months preceding the filing of the bankruptcy petition. The interdicted transaction here must be between a debtor and his creditors. Where at the time of the transfer there were no creditors, a subsequent creditor cannot complain.®^ The act itself may not even be illegal or fraudulent. ' The debtor merely prefers to pay one creditor more than he doesi another.** The judicial definition of preference*'' is not controlling in this connection, for a preference which will be an act of bankruptcy is something other and more than one voidable under § 60-b. Thus, the intent to prefer on the part of the debtor may not be accompanied by reasonable cause to believe on the part of the creditor.** The elements of a preferential transfer under this subdivision, are: (1) a transfer of property, (2) insolvency and (3) intent to prefer.*^ (2) Teansfee of peopeety. — " Transfer " as here used has 61. Beers v. Hanlin (D. C, Ore- (D. C, Ark.), 8 Am. B. E. 345, 114 gon), 3 Am. B. R. 745, 99 Fed. 695. Fed. 1011. See also Sections One and A creditor cannot complain of an act Sixty of this work. committed before he was a creditor. 66. See Crooks v. The People's Nat. In re Brinekmann (D. C, Ind.), 4 Am. Bank, Am. B. R. 238, 46 N. Y. App. B. R. 551, 103 Fed. 65. Div. 335; In re Wright Lumber 62. These doctrines are further con- Co. (D. C, Ark.), 8 Am. B. R. 345, sidered in the appropriate Sections, 114 Fed. 1,011. post. 67. As to what evidence will estab- 63. Brake v. Collison (C. C. A., 5th lish this act of bankruptcy, see Gold- Cir.), 11 Am. B. R. 797, 129 Fed. 201. man v. Smith (D. C, Ky.), 1 Am. B. 64. Rex Buggy Co. v. Hearick (C. R. 266, 93 Fed. 182. For analysis of C. A., 8th Cir.) 12 Am. B. R. 726, 132 the subsection see In re Rome Planing Fed. 310. Mills (D. C, N. Y.), 3 Am. B. R. 123, 65. See In re Wright Lumber Co. 96 Fed. 812. 68 The Law and Practice in Banketiptct. Preferential Transfer. [ § 3-a ( 2 ) . the enlarged meaning given it by § 1(25).®* It is immaterial how the transfer is made. It may be either directly to the creditor or indirectly through a third person for his benefit.** "Whatever may be the nature of the transaction, if the result of it is to pro- cure to a creditor a preference over any other creditor it may be an act of bankruptcy.'"* A chattel mortgage is more than a mere security ; it is a sale of the thing mortgaged and operates' as a trans- fer of it to the mortgagee, and if given within the four months period with intent to prefer it is an act of bankruptcy.^^ A trans- fer of property to a creditor greater in value than the amount of the debt, the difference being paid in cash to the debtor, is an act of bankruptcy.''^ And so also is the payment of one or more cred- itors in full to the exclusion of other creditors, out of the proceeds of the cash sale of the property of the debtor.''^ There can be no question but that a payment of money by an insolvent is a transfer of property within the meaning of this subsection. ''* Payments made by a corporation, however large, to creditors resulting in their preference over others- will constitute an act of bankruptcy.''^ Where the transaction consists of merely making an exchange of 68. See nnte, p. 9. In re Rogers, Fed. Case 12,002; Bald- 69. In re McGee (D. C, N. Y.), 5 win v. Rosaeau, Fed. Case 803. Am. B. R. 262, 105 Fed. 895; Troy 72. Johnson v. Wald (C. C. A., 5th Wagon Works v. Vastbinder (D. C, Cir.), 2 Am. B. R. 84, 93 Fed. 640. Pa.), 12 Am. B. R. 352, 130 Fed. 232. 73. Matter of Farrell Co. (D. C.,. 70. Pirie v. Chicago Title & Trust N. Y.), 9 Am. B. R. 341, 36 Fed. 500; Co., 182 XJ. S. 438, 5 Am. B. R. 814, Boyd v. Lemon, Gale Co. (C. C. A., 5th 45 L. Ed. 1,171; Boyd v. Lemon, Gale dr.), 8 Am. B. R. 81, 114 Fed. 647 j. Co. (C. C. A., 5th Cir.), 8 Am. B. R. Rex Buggy Co. v. Hearick (C. C. A.', 81, 114 Fed. 647; Goldman v. Smith 8th Cir.), 12 Am. B R. 726, 132 Fed (D. C, Ky.), 1 Am. B. R. 266, 93 Fed. 310. 82- 74. Landry v. Andrews, 6 Am. Wiere an insolvent transfers B. R. 281, 22 R. I. 597; Pirie v. his property to another who executes a Chicago Title & Trust Co., 182 U. S. mortgage thereon in favor of a creditor ^^^' ^ •'^™- B- K. 814, 45 L. Ed. it is an act of bankruptcy. Gibson v. ]'iJ\\ ^f"?'' S^ Everybody's Market, Dob.e, Fed. Case 5,394 - T> i, i ^ '^^°- ^^^- An assignment of money 71^Matter of Riggs Restaurant Co. d^e to an alleged" bankrupt on i (C. C. A., 7th Cir.), 11 Am. B. R. building contract to an aocommoda- 508, 130 Fed. 691. Compare In re tion endorser of his note is a prefer- Bogen (D. C, Ohio), 13 Am. B. R. ential transfer. In re O'Donnell (D. 529, 134 Fed. 1,019. Same rule applies C., Mass.), 12 Am. B. R. 621, 130 Fed. in respect to a mortgage given on real ^^"^ , ^.° ^'^° '^ ^ transfer of ac- pronerty. In ve Edelman (C. C A, <;°"".ts m lieu of materials pledged. 2d Cir.'), 12 Am. B. R. 238 130 Fed. ^^t^on RoUin" Mm?^/?, "^r \,^r 700; In re Wright Lumber Co. (D. C, u' Am. R^R.^aO^ 125*?ed''97i''"'' Ark.), 8 Am. B. R. 345, 114 Fed. 75. Naylon & Co. v. Christiansen & 1,011; In re Waite, Fed. Case 17,044; Co. (C. C. A., 6th Cir.), 19 Am B R 789, 158 Fed. 290. Acts of Bankeuptcy. 69 § 3-a (3).] Preferential Transfer. securities it does not constitute an act of bankruptcy, for in such a case there is no satisfaction of a debt nor depletion of the debtor's estate.'"' The transfer must consist of the bankrupt's own property to constitute a preference ; as where a note of a bankrupt was paid by an indorser.'"^ If there is no depletion of the estate the creditors cannot complain.''^ The payment of unearned premiums on policies of insurance would come within this rule.'* An agreement to insure goods and assign the policies to secure a creditor is not necessarily prejudicial to the other creditors, and an assignment of such policies made in pursuance thereof after the debtor became insolvent, is not an act of bankruptcy.^" A renewal within the four months period of a chattel mortgage, given as security for a preexisting debt, is not an illegal preference.'" A transfer by an insolvent partner of his entire separate estate in satisfaction of a debt of his firm which had no assets, constitutes a preference over other firm creditors of the same class and is an act of bankruptcy on the part of the partner.'^ (3) Intent to prefer. — To authorize an adjudication of bankruptcy it must appear that the transfer alleged to constitute an act of bankruptcy was made with the intent to prefer the cred- itor to whom it was given; if no such intent exists it may be a preference but it is not an act of bankruptcy.'^ If a mortgage is given to a person not a creditor to secure advances made in the payment of debts, and the mortgagor believed at the time that she had ample property to meet all demands against her, it is not a preference.'^^ The intent will be presumed when the transaction consists in a transfer of personal property by way of payment.'^ 76. Clark v. Icelin, 21 Wall. 360, 22 80. In re Cutting (D. C, N. Y.), L. Ed. 568; In re Weaver, Fed. Case, 16 Am. B. R. 751, 145 Fed. 388. 17,307; In re Union Pacific R. R. Co., 81. Mills v. Fisher & Co. (C. C. A., Fed. Case, 14,376. 6th Cir.), 20 Am. B. R. 237, 159 Fed. 76a. Mason v. Nat. Herkimer Co. 897. Bank (C. C. A., 2d Cir.), 22 Am. B. 82. In re Gilbert (D. C. Oregon), E. 733, 172 Fed. 529. 8 Am. B. R. 101, 112 Fed. 951. 77. Martin v. Hulen (C. C. A., 8th 82a. In rd McLoon (D. C Me.), Cir.), 17 Am. B. R. 510, 148 Fed. 982; 20 Am. B. R. 719, 723, 162 Fed. 575. In re Pearson (D. C, N. Y.), 2 Am. Preferential transfer must be B. R. 482, 95 Fed. 425, in which case made to or for benefit of creditor. the payment of debts which were a Richardson v. Shaw, 203 U. S. 587, charge upon a leasehold in order to 19 Am. B. R. 717. protect the debtor's interest therein 83a. Johnson v. Wald (C. C. A,, was held not to be an act of bank- 5th Cir.), 2 Am. B. R. 84, 93 Fed. ruptcy, since the payment did not in- 640; In re Rome Planing Mills (D. juriously affect his creditors. Com- C, N. Y.), 3 Am. B. R. 123, 96 Fed. pare In re Lange (D. C, N. Y.), 3 812; In re Gilbert (D. C, Ore.), 8 Am. B. R. 231, 97 Fed. 197. Am. B. R. 101, 112 Fed. 951; In re 78. Nickerbocker v. Comstock, Fed. Flint Hill Stone & Construction Co. Cas. 7.879. (D. C, N. Y.), 18 Am. B. R. 81, 149 79. Wilder v. Watts (D. C, S. Fed. 1,007. Car.). 15 Am. B. R. 57, 138 Fed. 426. 70 The Law and Peactice in Bankruptcy. Preferential Transfer. [§ 3-a (3). The intent of the creditor to whom the preferential transfer is made is not material; it need not be shown that the creditor knew or had reasonable grounds to believe that the transfer was prefer- ential.^* The question of intent is one for the jury.^^ (4) Proof of intent. — As in the case of a transfer to hinder, delay and defraud creditors, the intent to prefer may be implied from the actual result of the transaction.*^ One is presumed to intend the probable consequences of his acts, — that is, those consequences which would naturally follow, and which a person of ordinary intelligence would expect as the natural result thereof; this presumption is of weight in determining the debtor's intent to prefer, and has been frequently applied.*' Where an insolvent debtor, before the entry of judgment on a verdict against him, gives a mortgage to secure another creditor, the intent to prefer will be presumed.*'* If a debtor, while insolvent, transfer all or nearly all his property to some of his cred- itors, leaving others- unprovided for, the intent to prefer may be almost conclusively presumed.** The effect of this presumption 84. In re Rome Planing Mills (D. C, N. Y.), 3 Am. B. R. 123, 96 Fed. 812; In re Wright Lumber Co. (D. C, Ark.), 8 Am. B. R. 345, 114 Fed. 1,011. 85. In re Bloch (C. C. A., 2d Cir.), 6 Am. B. R. 300, 109 Fed. 790. 86. In re Douglass Coal & Coke Co. (D. C, Tenn.), 12 Am. B. R. 539, 131 Fed. 769; In re Wright Lumber Co. (D. C, Ark.), 8 Am. B. R. 345, 114 Fed. 1,011; In re McGee (D. C, N. Y.), 5 Am. B. R. 262, 105 Fed. 895; In re Bloeh (C. C. A., 2d Cir.), Am. B. R. 300, 109 Fed. 790. In re Rome Planing Mills (D. C, N. Y.), 3 Am B. R. 123, 96 Fed. 812; Johnson V. Wald (C. C. A., 5th Cir.), 2 Am. B. R. 84, 93 Fed. 640. 87. Macon Grocery Co. v. Beach (D. C, Ga.), 19 Am. B. R. 558, 156 Fed 1,009. Under the former Iiair. — Toof V. Martin, 13 Wall. 40, 20 L. Ed. 481 ; Wager v. Hall, 10 Wall. 584, 21 L. Ed. 504; Traders Bank v. Campbell, 14 Wall. 87, 20 L. Ed. 832; Samison V. Borton, 5 Ben. 325; In re Dibbles, 3 Ben. 283; Terry v. Cleaver, 2 Biss. 356; Rison v. Knapp, Fed. Cas. 11,681, 1 Dill. 186; Driggs v. Moore, Fed. Cas. 4,085, I Abb. C. C. 440; In re Silverman, 1 Sawy. 410 ; In re Oregon Bulletin Print. & Pub. Co., Fed. Cas. 10,559; Miller v. Keyes, Fed. Cas. 9,578. 87a. In re Smith (D. C, N. Y.), 23 Am. B. R. 864, 176 Fed. 426. 88. Nylon & Co. v. Christiansen Co. (C. C. A., 6th Cir.), 19 Am. B. R. 789, 158 Fed. 290; Boyd v. Lemon, Gale & Co. (C. C. A., 5th Cir.), 8 Am. B. R. 81, 114 Fed. 647; Johnson v. Wald (C. C. A., 5th Cir.), 2 Am. B. R. 84, 93 Fed. 640; Goldman v. Smith (D. C, Ky.), 1 Am. B. R. 266, 93 Fed. 182; In re Grant (D. C, N. Y.), 5 Am. B. R. 837, 106 Fed. 497; In re Waite, Lowell, 407; In re Drum- mond, Fed. Cas. 4,094; In re Poster. Fed. Cas. 4,964. Intent to prefer by transfer of large part of property. — In the Case of Toof v. Martin, 13 Wall. 40, 20 L. Ed. 481, the court said: " The transfer in any ease by the debtor of a large part of all his prop- erty while he is insolvent, to one creditor without making provision for an equal distribution of its pro- ceeds to all his creditors, necessarily operates as a preference to him and must be taken as conclusive evidence that a preference was intended, unless the debtor can show that he was at the time ignorant of his insolvency, and that his affairs were such that he could reasonably expect to pay all his debts." Acts of Bankeuptcy. 71 §3-a(2).] Preferential Transfer ; Intent. will vary according to the proportionate amount of the transfer.*® Payments by one knowing himself to be insolvent raises a con- clusive presumption of intent to prefer;*** if made in the honest belief that he is solvent, the burden shifts to the creditorsi.®^ Tt is possible that, under the new definition of insolvency, one may not always know the fair valuation of his property, and, therefore, may not be able to show that he knew whether he was solvent or not. But the presumption is not so much one of actual knowledge as that a person is chargeable with knowledge of his financial con- dition.®^ Where the proof is that the property was transferred to a mortgagee who was a creditor in an amount larger than the value of the property transferred, the presumption of intent to prefer will be negatived.®* (5) Intent as distingitishbd feom motive. — There must be design to give an advantage. Where the tranisf er is in pursuance of an effort to extricate the transferrer from his embarrassments, it will not be held a preference.®* Likewise, where the physical transfer is in pursuance of a valid contract antedating the bank- ruptcy.®' But a transfer is not the less a preference because given in answer to a request or in fulfillment of a prior promise made 89. In re Gilbert (D. C, Or.), 8 B. E. 518; In re Silverman, Fed. Cas. Am. B. E. 101, 106, 112 Fed. 951. 12,855, 1 Sawy. 410. The paying of small sums to 9,3. Livingston v. Bruce, Fed. Cas. certain creditors in order to keep the 8,410; Catlin v. HoflFman, Fed. Cas. business going does not give rise to 2,521. this presumption. In re Douglass Proof of intent under former Coal & Coke Co. (D. C, Tenn.), 12 law. — Any fact which tends to es- Am. B. E. 539, 131 Fed. 769; In re tablish the existence or non-existence Stovall Grocery Co. (D. C, 6a.), 20 of intent is admissible evidence Am. B. E. 537, 161 Fed. 882. Linkman v. Wilcox, Fed. Cas. 8,374; 90. In re Billings (D. C, Ala.), 17 Giddings v. Dodds, Fed. Cas. 5,405. Am. B. E. 80, 45 Fed. 395; In re The testimony of the party himself is Wright Lumber Co. (D. C, Ark.), 8 entitled to little weight (Oxford Iron Am.B. E.345, 114 Fed. 1,011; Driggs Co. v. Slafter, Fed. Cas. 10,637). V. Moore, Fed. Cas. 4,085; Eison v. Transfers of one's property afford a Knapp, Fed. Cas. 11,861; In re Sil- violent, almost conclusive, presump- verman, Fed. Cas. 12,855, 1 Sawy. tion of intent to prefer, if there are 410; In re Dibblee, Fed. Cas. 3,884. creditors unprovided for (In re 91. Toof V. Martin, 13 Wall. 40, Waite, Fed. Cas. 17,044). Proof of 20 L. Ed. 481; In re Munn, Fed. Cas. an antecedent indebtedness is, in gen- 9,925, 3 Biss. 442; Morgan v. Mas- eral, necessary to establish that a tick, Fed. C5as. 9,803; In re Bloch (C. payment or security is a preferential C. A., 2d Cir.), 6 Am. B. E. 300, 109 transfer (Clark v. Iseliu, 21 Wall. Fed. 790; In re McLoon (D. C, Me.), 360; Burnhisel v. Firman, 22 Wall. 20 Am. B. E. 719, 162 Fed. 575. 170; Sawyer v. Turpin, 91 U. S. 114). 92. In re Gilbert (D. C, Or.), 8 94. In re Wolf (D. C, Iowa), 3 Am. B. E. 101, 104, 112 Fed. Cas. Am. B. R. 555, 98 Fed. 84. 951; In re Jacobs (Eef., La.), 1 Am. 95. Sabin v. Camp (D. C, Or.), 3 72 The Law and Pkactice in Bankeuptcy. Preference Through Legal Proceedings. [§3-a(3). at the time of contracting the debt.*® Evidence of a failure to record a mortgage until several months after its execution may justify a finding that it was given with an intent to prefer.®'^ So whatever may have been the motive in making the transfer, it is immaterial as bearing upon the question of intent. However honest or proper may have been the motive, yet if the intent to prefer exists and is coupled with the other essential elements, an act of bankruptcy is the result.'® (6) Allegations as to peefeeence. — The specific facts as to the preference relied on to constitute an act of bankruptcy must be alleged.®' The petition sihould allege the amounts paid and to whom.!"" It should also allege that the alleged act was committed with an intent to prefer.^""^ c. Third act of bankruptcy ; preference through legal proceed- ings. — (1) In geneeal. — The third act of bankruptcy consists of a person having " suffered or permitted while insolvent any cred- itor to obtain a preference through legal proceedings, and not hav- ing five dayisi before a siale or final disposition of any property affected by such preference vacated or discharged such preference." This hasi been well termed the passive act of bankruptcy. It dif- fers from the corresponding act in the law of 1867, in that intent is not material. It is in harmony with § 67-f, under which liens through legal proceedings are void, irrespective of intent on the part of the debtor, or pressure, due to knowledge, on the part of the creditor. The nearest approximation to it is found in the Canadian insolvency act of 1869 (now repealed ).^''i The corre- Am. B. E. 578, 98 Fed. 974. For lOO. In re Blumberg (D. C, Pa.), analogous cases under the law of 13 Am. B. R. 343, 133 Fed. 845. 1867, see Winter v. Railway Co., Fed. Where this is done the failure to Cas. 17,890; In re Hapgood, Fed. Cas. state names of creditors is not fatal. ^'"44. In re Lackrow (D. C, Pa.), 14 Am. 96. Arnold v. Maynard, Fed. Cas. B. R. 514, 140 Fed. 573. 56^- 100a. In re Tupper (D. C, N. Y.), 97. In re Edelman (C. C. A., 2d 20 Am. B. R. 824, 827 163 Fed 766 Cir.), 12 Am. B. E. 238, 130 Fed. 101. A debtor shall be deemed in- '''"'• solvent, and his estate shall become . 98. Hardy v. Binninger, 7 Blatch. subject to compulsory liquidation if 262; Strain v. Gourdin, 2 Woods, he permits any execution issued ^^°- against him under which any of his 99. In re Nelson (D. C, Wis.), 1 chattels, land, or property are seized Am. B. R. 63, 98 Fed. 76. An omia- levied upon, or taken in execution, to sion of the specific date does not ren- remain unsatisfied till within four der the petition demurrable. In re days of the time fixed by the sheriff Vastblnder (D. C, Pa.), U Am. B. or officer for the sale thereof, or for R. 118, 19« Fed. 417. fifteen days after such seizure Acts of Bankeuptcy. 73 §3-a(3).] Preference Through Legal Proceedings. spending clause in the English baniruptcy act is also of interest.^"^ The Torrey bill in its last form,"^ and the Henderson substitute, contained words -which seemed to include these two foreign pro- visions. The exact phrasing of the present law did not appear until the bill had been agreed to in conference committee. Charges narrowing its scope were then made. In spite of them, it is the moisit virile and available of the acts of bankruptcy. (2) CoMPABisoN WITH THE ACT OF 1867. — Sectiou 39 of that act provided that an insolvent who should " procure or suffer his property to be taken on legal proceedings, with intent to give a prefereince to one or more of his creditors " thereby committed an act of bankruptcy ; and, by § 35, it was provided that any attach- ment or seizure under execution of a person's property " procured by him " with a view to give a preference, should be void. The doubt which long divided the lower courts aisi to the meaning of these clauses was finally settled in Wilson v. City Banh,^°* wherein the supreme court held that no intent could be inferred from the mere neglect of the alleged bankrupt, properly sued on a just daim, to interpose an answer when there was no valid defems© ; and, therefore, that that intent which was an essential element of this act of bankruptcy could not be predicated on mere passive non- resistance. This case has been the storm-center of the decisions on the subsection now under consideration. (3) Intent not essential. — On the question as to whether intent is an element in this act of bankruptcy, the earlier and most of the later cases have held that intent had been dropped out, and that result, — the inequity ilowing from the transaction, rather than the animus of it — had been substituted instead.-*"^ Two decisions, lOZ. Eng. Bankruptcy Act of 1890, C, N. Y.), 2 Am. B. R. 586, 95 Fed. § 1, provides that: "A debtor com- 429; In re Rome Planing Mills (D. mits an act of bankruptcy if execution C, N. Y.), 3 Am. B. R. 123, 96 Fed. against him has been levied by seizure 812; Parmenter Mfg. Co. v. Hoever of his goods under process in an action (C. C. A., 1st Cir.), 3 Am. B. R. 220, in any court, or in any civil proceed- 97 Fed. 330; In re Thomas (D. C, ing in the high court, and the goods Pa.), 4 Am. B. R. 571, 103 Fed. 272- have been either sold or held by the In re Miller (D. C, N. Y.), 5 Am. sheriff for twenty-one days." B. E. 140, 104 Fed. 764; In re Har- 103. S. 1035, introduced by Sena- per (D. C, 111.), 5 Am. B. R. 567, tor Lindsay, March 23, 1897. 105 Fed. 900; Bradley Timber Co v' 104. 17 Wall. 473. White (C. C. A., 5th Cir.), 10 Am.' B. 105. In re Meyers (Ref., N. Y.), R. 329, 121 Fed. 779, 58 C. C. A. 55; 1 Am. B. R. 1; In re Reichman, 1 Matter of Rung Furniture Co. (C C. Am. B. R. 17, 91 Fed. 624; In re A., 2d Cir.), 14 Am. B. R. 12, 139 Moyer (D. C, Pa.), 1 Am. B. R. Fed. 526. 577, 97 Fed. 324; In re Ferguson (D. 74 The Law and Peactice in Bankkuptct. Preference Through Legal Proceedings. [§3-a(3). however, held to the older doctrine, that mere passivity was not enough.^"^ The earlier case seems to have been decided without the difference between the statutes being noted; the later is of great ability and for a time substituted doubt for what had grown to be certainty. The question reached the supreme court late in 1901, and was then settled by a five-to-foiir decision in Wilson Bros. V. Nelson,'^^'' which, reversing the court below, upholds the majoirity of the previous cases, and finally determines that intent is not an element of pleading or proof where the third act of bank- ruptcy is relied on.^"® In other words, it is now the settled law that an insolvent may be thrown into bankruptcy by the requisite number of his creditors, if a judgment has been entered against him, execution ipsued and levy made, and sale five or less days away, irrespective of whether he procured or merely could not pre- vent the judgment against him. This, from the creditor's stand- point, isi the high-water mark of Anglo-Saxon " acts of bank- ruptcy."!"* (4) Suffered oe peemitted. — " Suffered or permitted " in- cludes passive non-resistance as well as non-ability to resist.^*** A debtor who does not pay a lawful debt when due, and stands by while his creditor secures a judgment against him, and levies upon his property, " suffers and permits " such judgment to be taken, and such levy to be made, and commits an act of bankruptcy under this clause.*" The mere fact of resistance by defense conducted in good faith isi not material.**^ (5) Ceeditoes to be affected. — A creditor must have been preferred over other creditors by this act of bankruptcy.*** " Cred- itor " is defined in § 1(9). Where it is shown that the petitioning creditors induced a judgment creditor to levy execution on his 106. In re Nelson (D. C, Wis.), 1 ter of Rung Furniture Co. (Spec. M., Am. B. R. 63, 98 Fed. 76; Duncan v. N. Y.), 10 Am. B. R. 44, in which the Landis (C. C. A., 3d Cir.), 5 Am. B. cases interpreting § 3-a(3) are ool- R. 649, 106 Fed. 839. Compare In re lated. Kersten (D. C, Wis.), 6 Am. B. R. IIO. In re Gallagher (Ref., 516, 110 Fed. 929. Mass.), 6 Am. B. R. 255. 107. 183 U. S. 191, 7 Am. B. R. 111. Bogen & Trummel v. Potter 1*2. (C. C. A., 6th Cir.), 12 Am. B. R. 108. Bradley Timber Co. v. White 288, 129 Fed. 533. (C. C. A., 5th Cir.), 10 Am. B. R. 112. Bradley Timber Co v. White 329, 121 Fed. 779, 58 C. C. A. 55, af- (C. C. A., 5th Cir.), 10 Am. B. R. firming 9 Am. B. R. 441. 329, 121 Fed. 779. 109. See further discussion of this 11,3. See under first act of bank- subject by Referee Hotchkiss in Mat- ruptcy, ante, p. 61. Acts of Bankruptcy. 75 §3-a(3).] Preference Through Legal Proceedings. judgment, they are estopped from setting up such levy as an act of bankruptcy.'^ ^* (6) Pkbfeeence. — "Preference" as used in this subsection refers merely to a resultant unequality between creditors of the same class.-' ^^ The intent and purpose of this act of bank- ruptcy is', like all the others, to avoid a preference and to provide for an equal distribution of the debtor's property among his cred- itors.^ ^® The preference must be to a creditor over other creditors of the same class, so where a landlord distrains for his rent he doesi not procure a preference, Siince he is the only creditor of his class and is entitled to the priority which the law affords him.^^^ (7) Legal peoceedings. — " Legal proceedings " means pro- ceedings in a court to assert a legal remedy or obtain an equitable relief.*^* They include all proceedings in a court of justice inter- locutory or final, whereby the property of a debtor is seized and diverted from his general creditors.^^® A suit in a State court for the appointment of a receiver whereby certain creditors were preferred is such a proceeding,^ ^^ and as also are supplementary proceedings whereby a debtor of a judgment debtor is directed to pay a certain amount to the sheriff to apply on the judgment. -"^^ A disitraint of goods under a landlord's warrant is not " a legal proceeding " under this' clause.'*^ Nor is a proceeding to enforce 114. Matter of Marks (D. C, Fed. 291, reversing 3 Am. B. E. 282, Pa.), 15 Am. B. E. 457, 142 Fed. 279. 97 Fed. 929. 115. Bankr. Act, § 60-a, post. See, 119. In re Eome Planing Mills (D. also, discussion under preceding acts C, N. Y.), 3 Am. B. E. 123, 96 Fed. of bankruptcy. 812. By proceedings in attachment, 116. In re Chapman (D. C, Ga.), In re Harper (D. C, 111.), 5 Am. B. 3 Am. B. E. 607, 99 Fed. 395; Eich- E. 567, 105 Fed. 900; Parmenter Mfg. mond Standard Spike & Iron Co. v. Co. v. Stoever (C. C. A., 1st Cir.), 3 Allen (C. C. A., 4th Cir.), 17 Am. B. Am. B. E. 220, 97 Fed. 330. E. 583, 148 Fed. 657; in re Ferguson lao. In re Kersten (D. C, Wis.), (D. C., N. Y.), 2 Am. B. E. 586, 588, 6 Am. B. E. 516, 110 Fed. 929; but 95 Fed. 429. otherwise where there is no such pref- 117. In re Belknap (D. C, Pa.), erence. In re Empire Metallic Bed- 12 Am. E. E. 326, 129 Fed. 646. As stead Co. (C. C. A., 2d Cir.), 3 Am. to whether laborers having judgments B. E. 575, 98 Fed. 981; Vaccaro v. for wages are in the same class as Security Bank (C. C. A., 6th Cir.), general creditors, see Matter of To- 4 Am. B. E. 474, 103 Fed. 436. ledo Portland Cement Co. (Eef., 121. In re Miller (D. C, N. Y.), 5 Mich.), 17 Am. B. E. 375; Mather Am. B. E. 140, 104 Fed. 764. V. Coe, Powers & Co. (D. C, Ohio), 1 122. In re Belknap (D. C, Pa.), Am. B. E. 504, 92 Fed. 333. 12 Am. B. E. 326, 129 Fed. 646. See 118. Compare In re Emslie (C. C. Eichmond Standard Spike & Iron Co. A., 2d dr.), 4 Am. B. E. 126, 102 v. Allen (C. C. A., 4th dr.), 17 Am. B. E. 583, 148 Fed. 657. 76 The Law and Practice in Baktkeuptct. Preference Through Legal Proceedings. [§3'a(3). a statutory lien which would not be disturbed by an adjudication of bankruptcy.-'** (7) Vacating ob discharging peefebence. — It is not the judgment itself, or the levy thereunder, which constitutes the act of bankruptcy, but the failure on the part of the debtor to have the same vacated or discharged five days before a sale or final dispo- sition of the property.^** Failure to vacate a preference resulting from such a judgment, levy and sale is an act of bankruptcy within the meaning of this clause. ^^® The act of bankruptcy seems to be consummated five days before the sale, if at that time the levy has not been lifted ; the sale having been noticed, and nothing have been done by the judgment debtor to set aside the preference, the creditors may file a petition against him; they are not required to wait for the sale.**® " Five days before a sale " has been held to mean the siame as " five days before the day set for the sale."**^ This enlargement of meaning would seem essential to carry out the clear intent of the act ; if a petition could not be filed until after the actual sale, creditors would often be remediless.**® The debtor has all of the fifth day prior to the sale or disposition on which to vacate or dis- charge the preference.**^ If he fails so to do the act of bankruptcy is then complete and a petition may then be filed against him.**" 1Z3. In re Mero (D. C, Ct.), 12 127. In re Meyers (Ref., N. Y.), Am. B. E. 171, 128 Fed. 630; Owen v. 1 Am. B. R. 1; In re Elmira Steel Co. Brown (C. C. A., 8th Cir.), 9 Am. B. (D. C, N. Y.), 5 Am. B. R. 484, 109 E. 717, 120 Fed. 812; In re Chapman Fed. 456. And compare Re North (D. C, Ga.), 3 Am. B. R. 607, 99 (1895), 2 Q. B. 264. Fed. 395. See Bankr. Act, § 67-f, pos*. 128. Bogen v. Protter (C. ^C. A., 124. In re Vastbinder (D. C, 6th Cir.), 12 Am. B. R. 288, 129 Fed. Pa.), 11 Am. B. R. 118, 121, 126 Fed. 533. See, also. In re Miller (D. C, 417. N. Y.), 5 Am. B. E. 140, 104 Fed. 764; 125. Matter of Eung Furniture In re Rome Planing Mills (D. C, N. Co. (C. C. A., 2d Cir.), 14 Am. B. R. Y.), 3 Am. B. R. 123, 96 Fed. 812, in 12, 139 Fed. 526. which case the court said: "The act Failure to discharge by part- of bankruptcyis not consummated until nersliip. — Where an execution was the expiration of the time in which levied upon the property of an insol- the debtor may vacate or discharge vent partnership after its dissolution the lien, and the last day for doing the failure to discharge the levy con- this is five days before the day of sale stitutes an act of bankruptcy by all of the property is advertised." the members of the firm, for which it 129. Pittsburgh Laundry Supply and all the partners may be adjudged Co. v. Imperial Laundry (C. C. A., 3d bankrupt. Holmes v. Baker & Hamil- Cir.), 18 Am. B. R. 756, 154 Fed. 662, ton (C. C. A., 9th Cir.), 20 Am. B. R. See, also, as to computation time, 252, 160 Fed. 922. Bankr. Act, § 31, post. 126. In re National Hotel & Cafe 130. In re Nusbaum (DC N Co. (D. C, Pa.), 15 Am. B. E. 69, 138 Y.), 18 Am. B. E. 598, 152 Fed. '835, Fed. 947. in which case Judge Ray also says: Acts of Bankeuptct. 77 §3-a(3).] Preference Through Legal Froceedingi. Until some day is authoritatively fixed for the sale or disposition, the time for the consummation of this act of bankruptcy does not commence to run.^^* It has been held, however, that where a preference was obtained through legal proceedings, and the insolv- ent debtor has put it out of his power to procure the vacating or discharging of such preferences, an act of bankruptcy has been committed.^ ^^ (9) Construction of subsection. — The courts have inter- preted this subdivision broadly. A payment of money to a sheriff by a debtor of the judgment debtor against whom an execution has been issued is a technical levy and available as an act of bank- ruptcy.^*^ So also is garnishee process after execution unsatis- fied.^** So also is failure to pay matured judgment notes fol- lowed by entry of judgment and execution issued. ^*^ Though the judgment is more than four months old, the levy, if within that period, followed by a sale, is' an act of bankruptcy.**® But a mere entry of judgment witbout the issue of an execution is not.-'*'' The enforcement of a lien of a judgment obtained prior to the enactment of the bankruptcy act by the issue of an execution is not a preference and the provisions of § 3-a(3) do not apply.*** The suing out of an attachment and levying the same, does not suffice to constitute an act of bankruptcy.*** d. Fourth act of bankruptcy ; a general assignment or receiver- "I am of the opinion that, while such 13i3. In re Miller (D. C, N. Y.), 5 failure to discharge a levy five days Am. E. 140, 104 Fed. 764. before the sale is an act of bankruptcy, 134. In re Harper (D. C., 111.), 5 such failure four and three and two Am. B. R. 567, 105 Fed. 900. days and one day before the sale are 135. In re Thomas (D. C, Pa.), 4 also distinct acts of bankruptcy, as is Am. B. E. 571, 103 Fed. 272. the failure on the day of sale." This 136. In re Ferguson (D. C, N. Y.), is important in determining when the 2 Am. B. E. 586, 95 Fed. 429. four months' period begins to run. 137. In re Anderson, 2 N. B. N. 131. In re Vetterman (D. C, N. Rep. 1,000. Compare, also, on the H.), 14 Am. B. R. 245, 135 Fed. 448; general subject. In re Chapman (D. Seaboard Steel Casting Co. v. Trigg C, Ga.), 3 Am. B. E. 607, 99 Fed. (D. C Va.), 10 Am. B. R. 594, 124 395, and Parmenter Mfg. Co. v. Stoe- Fed. 75. Compare In re Harper (D. ver (C. C. A., 1st Cir.), 3 Am. B R. C, Ill.),5 Am. B. R. 567, 105 Fed. 900, 220, 97 Fed. 330. as to meaning of " final disposition." 138. Owen v. Brown (C. C. A., 8th 132. Scherver v. Montgomery Book Cir.), 9 Am. B. R. 717, 120 Fed 812 Co., (C. C. A., 5th Cir.), 7 Am. B. R. 57 C. C. A. 180. 384, 112 Fed. 407. Compare In re 139. In re Vetterman (D C. N. Moyer (D. C, Pa.), 1 Am. B. E. 577, H.), 14 Am. B. E. 245, 135 Fed. 93 Fed. 188; In re Eeichman (D. C, 443; In re Standard Steel Casting Co Mo.), 1 Am. B. R. 17, 91 Fed. 624. (D. C, Va.), 10 Am. B. R. 594 124 Fed. 75. Y8 The Law and Peactice in Bankbuptct. General Assignments. [§3-a(4). ship. — (1) In general. — By subsection 4 of this section an act of bankruptcy is committed by person having made " a general assignment for the benefit of his creditors, or, being insolvent, applied for a receiver or trustee for his property or because of insolvency a receiver or trustee has been put in charge of his prop- erty under the laws of a State, of a territory, or of the United States." The making of a general assignment for the benefit of creditors, with or without preferences, has been an act of bank- ruptcy for over one hundred years.^*" Though not so in words undeo" the law of 1867, late in the history of that statute it was quite generally held that, being a palpable fraud on the law, it was an act of bankruptcy.^*' While, under the decisions, there would seem little doubt that a general assignment is an act of bankruptcy, because intended to hinder or delay creditors,'*^ this new clause, § 3-a(4), removesi all question and is an affirmative declaration of great importance to the system. Such an assignment, and whether of a person or copartnership, or of one of that class of corporations mentioned in § 4-b, even though without preferences, is now, if made within four months of the filing of the petition, a constructive fraud on the act,"' and, in itself, without either insolvency or intent, an available act of bankruptcy.'** This does not mean that general assignments are no longer IsLwiul ; rather, that the assignor and his counsel thereby set the door of the court of bankruptcy ajar to such creditors as may choose to enter.'*' (2) What constitutes a general assignment. — ^A general assignment to constitute an act of bankruptcy under this subsec- tion must be for the benefit " of creditors." A direct transfer to creditors after the intervention of a trustee duly appointed, is not 140. Compare Jones v. Sleeper, 145. Assignments not nnlaw- Fed'. Gas. 7,496. ful.— In the case of In re Chase fC 141. Compare Globe Ins. Co. v. C. A., IstCir.), 10 Am B E 677 124 Cleveland Ins. Co., Fed. Gas. 5,486; Fed. 753, 59 C. C. A 629 ' it was hpld Piatt V. Preston, Fed. Cas. 11,219; In that a general common-la^ assi^ment re Kasson, Fed. Cas. 7,617; In re Men- for the benefit of creditors d^^W delsohn. Fed. Cas. 9,420; MacDonald an equal distribution a~ them " ^2\l:ir ?:* ff.m ""b°"* ^"^ attempt" t:Tf?audTr' 142. Bankr. Act, § 3-a(l). embarrass persons to whom the a, 143. In re Gutwillig (C. C. A., 2d signor is under liability i^ not cZ Cir.), 1 Am. B. R. 388, 92 Fed. 337; trary to the policy of th'. L^v T" In re Gray, 3 Am. B. K. 647, 47 N. law.^ See, alfo "^.nlfph v^tru'ggf Y. App. Div. 554. 190 U. S. 533, 10 Am B R T S' 144. West Co. V. Lea Bros., 2 Am. ing that an assi?nn,PT,f fl',!^. \'^°^f B. E. 463, 174 U. S. 594; Day v. Beck, of" creditors '^0^* aken to W B. R. 175, 114 Fed. 834. absolutely in every pv»T,f a,SJ' absolutely in every event. Summers Acts of Bankeuptcy. 79 §3-a(4).] General Assignmenta. such an assignment."" As above indicated the insolvency of the debtor is not an essential fact.**' Whatever may be the form of the conveyance in trust of the debtor's property, if it cover all his property and be for the payment of his debts, it operates in law as a general assignment for the benefit of creditors."* For instance a confession of judgment by a debtor to a trustee for the benefit of his creditors,'*" a general assignment by a corporation made by direction of a majority of the directors and stockholders,^'" and any general assignment for the benefit of creditors under a statute regulating this common law right,"*' have been held to be general assignments within the bankruptcy act. But an assignment may be invalid as to other members of a firm, being executed only by one of them.'^^ An assignment constitutes an act of bankruptcy, al- though it be not valid for all purposes, for instance, because of a want of the assent of creditors.''^^ Neither a bill of sale nor a mortgage is usually a generally assignment.'"' After in re Empire Metallic Bedstead Co. ^^* it was long thought Abbott (C. C. A., 8th Cir.), 10 Am. B. R. 254, 122 Fed. 36; In re Fish Bros. Wagon Co. (C. C. A., 8th Cir.), 21 Am. B. R. 149, 164 Fed. 553. 146. Anniston Iron & Supply Co. V. Anniston Rolling Mills Co. (D. C., Ala.), 11 Am. B. R. 200, 125 Fed. 974. 147. Solvency no defense. — In the case of West Co. v. Lea, 2 Am. B. R. 463, 174 U. S. 594, the court said : " Our conclusion, then, is that, as a deed of general assignment for the benefit of creditors is made by the bankruptcy act alone sufficient to justify an adjudication in involun- tary bankruptcy against the debtor making such deed, without reference to his solvency at the time of the filing of the petition, that the denial of insolvency by way of defense to a petition based upon the making of a general assignment is not warranted by the bankruptcy law." See, also Green River Deposit Bank v. Craig Bros. (D. C, Ky.), 6 Am. B. R. 381, 110 Fed. 137; Bray v. Cobb (D. C, N. Car.), 1 Am. B. R. 153, 91 Fed. 102; Canner v. Tapper Co. (C. C. A., Ist Cir.), 21 Am. B. R. 872, 168 Fed. 519. 148. In re Salmon (D. C. Mo.), 16 Am. B. R. 122, 143 Fed. 395. In re Heraey (D. C, Iowa), 22 Am. B. R. 856, 171 Fed. 998; In re Tomlinson Co. (C. C. A., 8th Cir.), 18 Am. B. R. 691, 154 Fed. 834, holding that " a general assignment " contemplated by the act is to be taken in its generic sense and embraces any conveyance at common law or by statute by which the parties intend to make an absolute and unconditional appro- priation of the property conveyed to raise funds to pay the debts of the vendor, share and share alike ; Lennox V. Allen Lane Co. (C. C. A., Ist Cir.), 21 Am. B. R. 648, 167 Fed. 114. All the property of the debtor must be assigned in trust for distri- bution among all his creditors. Mis- souri Elec. Co. V. Hamilton, etc., Co. (C. C. A., 8th Cir.), 21 Am. B. R. 270. 149. In re Green & Rogers (D. C, Pa.), 5 Am. B. R. 848. 150. Clark v. American Mfg. & Enameling Co. (C. C. A., 4th Cir.), 4 Am. B. R. 351, 101 Fed. 962. The action of the stockholders of a corporation at a regular meet- ing in the adoption of a resolution authorizing its board of directors to appoint a committee to advertise and sell, at public auction, the property of the corporation, valued at $25,000, for not less than $22,500, does not constitute a "general assignment for the benefit of creditors." In re Hart- well Oil Mills (D. C, Ga.), 21 Am. B. R. 586, 165 Fed. 555. 151. In re Gutwillig (D. C, N. Y.), 1 Am. B. R. 78, 90 Fed. 425; In re Sievers (D. C, Mo.), 1 Am. B. R. 117, 91 Fed. 366, both of which cases were later affrmed. 152. Chemical Nat. Bank v. Meyer (D C, N. Y.), 1 Am. B. R. 565, 98 Fed. 976, affirmed in 3 Am. B. R. 559, 98 Fed. 976. 152a, Grifhn v. Dutton (C. C. A., 1st Cir.), 21 Am. B. R. 449, 165 Fed. 626; Canner v. Tapper Co. (C. C. A., 1st Cir.), 21 Am. B. R. 872, 168 Fed. 519. 153. [t may be doubted, however, whether Rumsey v. Novelty, etc., Co. (D. C. Mo.), 3 Am. B. R. 704 and foot-note, 99 Fed. 699, is safe author- ity in holdina- that the deed of trust there £;iven was not a general assign- ment. 154. (T). C... Ore.), 3 Am. B. R. 5in. OS WprI 091 80 The Law and Practice in Bankeuptcy, General Assignments. [§3-a(4). to be settled that the voluntary application of an insolvent corpora- tion for a receivership under State laws is not a general assign- ment, and, therefore, not an act of bankruptcy under § 3-a(4),^^^ though there is now persuasive authority that it is under § 3-a(l), It followed that a suit by one partner against the other for an accounting of their insolvent partnership, resulting in the appoint- ment of a receiver, was not an act of bankruptcy under this sub- section.^^® By the act of 1903, the so-called equivalence referred to in the foot-notes to the last paragraph has become the law. Now, a copartnership or a corporation^^ '^ which is insolvent and applies for or, because of insolvency,^^* has been put in charge of a re- ceiver or trustee, under the laws of a State, or of a territory, or of the United States, thereby commits an act of bankruptcy. This amendment was intended to place all copartnerships and such corporations as may be adjudged involuntary bankrupts^^® on the same footing as individual insolvents who attempt an equivalent fraud on the act.^®" The amendment of 1903 is not retroactive, 155. Compare In re Baker-Ricket- Agency (C. C. A., 3d Cir.), 16 Am. son Co. (D. C, Mass.), 4 Am. B. R. B. R. 67, 142 Fed. 927, reversing 13 605, 97 Fed. 489; Vaecaro v. The Se- Am. B. R. 725. eurity Bank (C. C. A., 6th Clr.), 4 159. § 4-b. See Lowenstein v. Mc- Am. B. R. 474, 103 Fed. 436; Davis v. Shane Mfg. Co. (D. C, Md.), 12 Am. Stevens (D. C, S. Dak.), 4 Am. B. B. R. 601, 130 Fed. 1,007. R. 763, 104 Fed. 235; In re Gilbert 160. Some of the reasons for (D. C, Ore.), 8 Am. B. R. 101, 112 tie change have been stated thus: Fed. 951. But see, also, as suggest- (1) It is one of the general pur- ing the doctrine of equivalence. In re poses of the bankruptcy law to pro- Harper (D. C, N. Y.), 3 Am. B. R. vide a uniform national law by which 804, 100 Fed. 266; In re Macon Sash, insolvent traders can make a pro rata etc., Co. (D. C, Ga.), 7 Am. B. R. 66, distribution of their assets among 112 Fed. 323, this case, however, re- creditors, arid there is no reason ap- versed as Carling v. Seymour Lumber parent why trading corporations as Co. (C. C. A., 5th Cir.), 8 Am. B. R. well as trading copartnerships should 29, 113 Fed. 483; Scheuer v. Smith not be permitted to avail themselves (C. C. A., 5th Cir.), 7 Am. B. R. 384, of this statute. 112 Fed. 407; In re Empire Metallic (2) In the more important corn- Bedstead Co. (C. C. A., 2a Cir.), 3 mercial States, small corporations. Am. B. R. 575, 98 Fed. 581. with their limited liability, have prac- 156. But see Mather V. Coe (D. C, tically superseded' partnerships. As Ohio), 1 Am. B. R. 504, 92 Fed. 333. the law now stands, short of the corn- Compare, also. In re Storm (D. C., N. mission of an act of bankruptcy, Y.), 4 Am. B. R. 601, 103 Fed. 618, these corporations must wind up their and In re Storck Lumber Co. (D. C, aflfairs under the procedure of the Md.), 8 Am. B. R. 86, 114 Fed. 860. State which created them, a procedure 157. See §1(9). which is everywhere less ' favorable to 158. As to necessity of insolvency, creditors. see In re Douglas Coal, etc., Co, (D. (3) Owing to the lack of comity be- C, Tenn.), 12 Am. B. R. 539, 131 Fed. tween the States, a receiver of an in- 769; Zugalla v. International Merc, solvent corporation in one State is Acts of Bankeuptcy. 81 §3-a(4).] General Assignments. and a petition filed after soicli amendment took effect alleging the appointment of a receiver for an insolvent corporation within the four months period, but prior to the passage of the amendment, must be dismissed ; the fact that the receivership continues after the taking effect of the amendment, is not of itself sufficient to create an act of bankruptcy.^** An agreement to wind up the affairs of a corporation and make an assignment of all its property to its directors as trustees to dose up its business is an act of bankruptcy.*®^ The appointment of a receiver of an insolvent corporation by a State court, by consent of the parties, under a statute providing therefor, is an act of bankruptcy.**** Since the passage of the amendment a State court cannot, by appointing a receiver of an insolvent debtor, obtain priority of jurisdiction to administer the assets of such debtor.*** It is immaterial, however, that a proceeding for the dissolution of a corporation was instituted prior to the taking effect of the amendment, if the application for an order appointing a permanent receiver in such proceedings was made subsequent to such amendment.*** The application by an administrator of a deceased partner for a receiver to wind up the affairs of an insolvent firm, in which the surviving partner joined, is not an act of bankruptcy.**^ rarely recognized in another, with the 161. Seaboard Steel Casting Co. v. result that the creditors in that other Trigg Co. (D. C, Va.), 10 Am. B. R. State, by garnishee process or other- ^^f'},^\^^^- ''^- ., „, „ ,^ wise/ma; unless the corporation com- ^"i^^^-^^TL ! ?! l^O ^1 mits an act of bankruptcy, secure gsT; In re Hercular Atkin Co. preferences. Limited (D. C, Pa.), 13 Am. B. R. (4) If a corporation seeks to wind 369, 133 Fed. 813; In re Lisk Mfg. up its affairs and distribute its as- Co. (D. C, N. Y.), 21 Am. B. R. 674, sets by means of a receivership, such a 167 Fed. 411; In re Electric Supply proceeding does not constitute an act t!o. (D- C, Ga.), 23 Am. B. R. 647, of bankruptcy, and <^°-^^^^^^y' Lnk in hands of state officers. creditors are entirely deprived of the _g^^ ^j^^^ ^^ ^^ ^ ^.^^^^ ^^^^ ^^^ valuable rights and safeguards pro- jucted by a partnership placed in vided by the bankruptcy law. the hands of a special agent under a (5) As the law now stands, a cor- State law, the partnership being in- poration which wishes to be admin- solvent. In re Salmon (D. C., Mo.), istered in bankruptcy is compelled to 16 Am; B. R. 122, 143 Fed. 395. go through the motions of committing ^^®?": ^" '^ Pickens Mfg. Co. (D. an act of bankruptcy that involuntary ',a^-\'„ v- ^: ^ '^^^'^ ^ ,, , , , t^ 11 J, • i. •/ 163. In re Knight (D. C, Kv.), 11 bankruptcy may be alleged against it, ^^ g jj ^^ 125 Fed. 35- In re He- and it be brought into court apparent- ^qx (C. C. A., %U Cir.), 21 Am. B. ly against its will. This circumlocu- R. 314. tion is bad in principle and worse in 164. Matter of Milbury Co. (D. practice. (Report of Ex. Com. of Nat. C, N. Y.), 11 Am. B. R. 523. Ass'n of Referees in Bankruptcy, of 165. Moss Nat. Bank v. Arend (C. March 1900) ^- ^■' ^^'^ Cir.), 16 Am. B. R. 867, marcn, lyyjv.) ^^^ ^^^ ^^^ 82 The Law and Practice in Bankeuptcy. General Assignment or Receivership ; Insolvency. [§ 3-a (4) (3) Insolvency essential. — The application for the appoint- ment of a receiver or trustee, in order to constitute an act of bank- ruptcy under this subsection, must be based upon insolvency. If insolvency was one of the substantial reasons for the appointment of a receiver or trustee the case would come within the construc- tion of the statute.^"" Where a statute under which proceedings are taken against an insolvent corporation, authorizes the appoint- ment of a receiver thereof, only after a judicial determination of the insolvency of the corporation, the appointment of a temporary receiver upon the ex parte application of a stockholder to restrain the Corporation from exercising any of its franchises or privileges, is not an act of bankruptcy.'*^ If in such a case a receiver be appointed, the receivership is " because of insolvency " of the corporation, and constitutes an act of bankruptcy.'** The rule is that the receivership must have been procured because of the insolvency of the debtor.'*' The record may be used to prove the ground of the receivership, and if the grounds are stated therein extrinsic evidence is not admissible to vary the terms thereof.'™ If it appear that the appointment is made for some other cause than the insolvency of the debtor, it is not an act of bankruptcy under this subsection, although it may appear that the debtor was in fact insolvent.''" If the records and findings of the court show that a receiver of a corporation was appointed because of insolv- ency it is sufficient although the statutes under which the pro- ceeding for the appointment of a receiver was instituted did not provide that insolvency was the cause of the receivership."^ It 166. In re Beatty (C. C. A., 1st 170. Blue Mountain Iron & Sup- Cir.), 17 Am. B. R. 738, 150 Fed. ply Co. v. Portner (C. C. A., 4th 293. Cir.), 12 Am. B. E. 559, 131 Fed. 57. 167. Zugalla v. International 171. In re Douglas Coal & Coke Merc. Agency (C. C. A., 3d Cir.), Co. {D. C, Tenn.), 12 Am. B. E. 539, 16 Am. B. R. 67, 142 Fed. 927, re- 131 Fed. 769; In re Spalding (C. C. versing 13 Am. B. R. 725; In re A., 2d Cir.), 14 Am. B. R. 129, 139 Hudson River Elec. Power Co. (D. Fed. 245; Moss Nat. Bank v. Arend C, N. Y.), 23 Am. B. R. 191, 173 (C. C. A., 6th Cir.), 16 Am. B. R. Fed. 934, in which case it was held 867, 146 Fed. 351; In re Ellsworth that the appointment of a temporary Co. (D. C, N. Y.), 23 Am. B. R. 284, receiver by a Federal Circuit Court, 173 Fed. 699, citing this work, and on allegations of insolvency, mis- holaing that the court is precluded management, etc., which are denied from considering evidence aliunde to and not yet tried, does not consti- contradict the decree or judgment of tute an act of bankruptcy. another court appointing receivers 168. Hooks v. Aldridge (C. C. A., and setting forth the basis of such 5th Cir.), 16 Am. B. R. 658, 145 Fed. anpointment. 865. Imminent danger of insol- 169. Matter of Spalding (C. C. vency, as alleged in a bill by a A., 2d Cir.), 14 Am. B. R. 129, 139 stockholder for the appointment of a Fed. 244, holding that the appoint- receiver, and the subsequent appoint- ment of a receiver in a creditor's ac- ment based thereon, is insufficient, tion on the ground that the debtor In re Perry Aldrich Co. (D. C, had disposed, and was threatening Mass.), 21 Am. B. R. 244. to dispose, of his property with in- 172. In re Belfast Mesh Under- tent to defraud his creditors, is not wear Co., (D. C, Ct.), 18 Am. B. R. sufficient to constitute an act of 620, 153 Fed. 224. bankruptcy under this subsection. Acts of Bankeuptcy. 83 § 3-a (4).] General Assignments or Receiverships. has been held, however, that where a petition is filed against a corporation because of the appointment of a receiver in a State court, it is entitled to a hearing on the question of insolvency and is not concluded by the finding of the State court on that issue. ^'^^ (4) Meaning of words. — "Insolvent" has the same meaning here as elsewhere in the statute."^'' The amendment thus makes insolvency an essential element of proof in receivership cases.^'^'' "Applied for" manifestly means the voluntary application of the copartnership or of a corporation under resolution of its board of directors or other governing body, as regulated or prescribed by the State law of which the corporation is the creature. " Been put in charge of" clearly indicates every other means of securing the appointment of a receiver, as when the State or a creditor proceeds against the corporation for its dissolution.^'^ The appointment of a receiver by a court of equity, acting under its general equity jurisdic- tion, independent of statute, is an appointment of a receiver " under the laws of a State," within the meaning of this clause."^'' " Trustee," of course, means much the same as " receiver ; " the nomenclature being different in different States. The intention of the amendment of 1903 being clear, there would appear little doubt that any act, procedure, or process for the winding up of insolvent corporations or copartnerships, which substantially abridges or deprives cred- itors of the right to a trustee of their own choosing, or of the greater right to compel prorating between all creditors of the same class, or any other right given them by the bankruptcy law, will, pro- vided the alleged bankrupt is insolvent at the time of the commis- sion of the act complained of and that act be within the four months period, amount to an act of bankruptcy. The importance of this change cannot be overestimated.^'^'' (5) Precedents under former law. — The law of 1867 ap- plied to " all moneyed, business, or commercial corporations and joint-stock companies." This section also provided that "upon the petition of any creditor of such corporation or company, the like proceedings shall be had and taken as are provided in the case of debtors." But the corresponding acts of bankruptcy under the former law,^'° are not sufficiently analogous to furnish reliable 172a. In re Pickens Mfg. Co. (D. 175. In re Spalding (C. C. A., 2d C, Ga.), 20 Am. B. R. 202. cir.), 14 Am. B. E. 129, 132, 139 If the record shows facts which -^ , „ „ do not constitute insolvency under the bankruptcy act, the appointment ^"^Sa. In re Kennedy Tailoring of a receiver based thereon would not Co. (D. C. Tenn.), 23 Am. B. R. 656, be an act of bankruptcy. In re 175 Fed. 871. Golden Malt Cream Co. (C. C. A., 175^. The text is quoted with ap- 7th Cir.), 21 Am. B. E. 36. , ^ ^ , 173. See § 1 (15) proval by Judge Speer m In re Elec- 174. As to burden of proof, see *''i<' Supply Co. (D. C. Ga.), 23 Am. "Solvency where Act of Bankruptcy B. R. 647, 653, 175 Fed. 612. is a Receivership," post, in this sec- 176. Act of 1867, § 39, R. S., § tion of this work. 5,021. 84 The LA;9r and Peactice in Bankeuptcy. Confession of Bankruptcy. [§ 3-a(5) . precedents; in each the element of intent was essential. A volun- tary receivership of a corporation may, of course, amount to " a transfer of his (its) creditors;" so may it also be "a transfer of money or other property," or " the procuring of its property to be taken on legal process," each with intent to prefer ; or " with the intent by such disposition of his (its) property to defeat or delay the operation of the act." But now, not even the result, much less the intent, is the essential test. The mere fact of the appointment of a receiver or trustee, nay, even a mere application for such an appointment coupled with insolvency, is enough. However, it was held under the law of 1867, that the appointment by a State court of a receiver of a corporation is " a taking on legal process ; "^'^ and the fact that the corporation was extinct, it having been dis- solved by the State law, was held not a bar to the proceeding in bankruptcy, or to oust the Federal court of jurisdiction.^'" (6) Eefeeence to others sections. — Useful references to other sections wiil be found in the foot-note."^ e. Fifth act of bankruptcy ; a confession of bankruptcy. — ( 1 ) In genekal. — A person commits an act of bankruptcy by hav- ing " admitted in writing his inability to pay his debts and his will- ingness to be adjudged a bankrupt on that ground." The import- ance of this act of bankruptcy rests mainly upon its application to a corporation. It is not to be expected that in his correspondence a debtor who is a natural person will, for the purpose of getting into bankruptcy, both confess inability to pay his debts and will- ingness to be adjudged a bankrupt; the filing of a voluntary peti- tion is more direct. But many corporations are restricted under the act from becoming voluntary bankrupts except as they confess their inability to pay their debts and their willingness to be adjudged bankrupt under this statute, in which event involuntary proceedings may be instituted against him. Indeed the value of this act of bankruptcy did not appear until the determination that corporations might through it become in effect voluntary bank- rupts was generally recognized.^"" (2) Essential elements. — Three things seem to be necessary to this act: (1) a writing signed by the debtor or some officer or 177. In re Merchants' Ins. Co., 180. In re Marine Machine Co. Fed. oas. 9,441. (D. C., N. Y.), 1 Am. B. R. 421, 100 178. ThornhiU v. Bank of Louis- Fed. 439; In re Kelly Dry Goods Co. iana. Fed. Cas. 13,992, affirming s. c. (D. C, Wis.), 4 Am. B. E. 528 102 I'cd. Cas. 13,990. Fed. 747. Contra: In re Bates 179. For estoppel where the credi- Machine Co. (D. C, Mass ), 1 Am tors have assented to the assign- B. R. 129, 91 Fed. 625. in the case ment and later seek to petition the of In re Moench (C. C. A, 2d Cir ) assignor into bankruptcy, see § 59-b. 12 Am. B. R. 240, 243 1,30 Fed 685* For stays on assignment proceedings the court stated : " When all ' eom- in the State courts, see §S 2(15) and mit either of the fourth or fifth act 11-a. For jurisdiction of the court of of bankruptcy, when three creditors bankruptcy over the assigned estate, stand ready at once to take advan- «« o?o^ ",",'1,''*^" „^djudication, tage of it by filing a petition, the see §§2(3), (15), 3-e, 23, and 69-a. corporation may achieve the object For effect of adjudication on title which the act forbids it to secure by transferred by a general assignment, its own voluntary petition." S€6 8 (U"3,. Acts of Bankeuptcy. 85 §3-a(5).] .Confession of Bankruptcy. agent duly authorized; (2) a distinct admission therein of his inability to pay his debts; and (3) an unqualified expression of willingness to be adjudged a bankrupt on that ground. Thus, where the officer of a corporation was deputized to execute such a writing, provided a petition should be filed against it, it is not an act of bank- ruptcy.^*^ If the writing is sufficient, the fact that the debtor requested certain creditors to file a petition against him does not affect the character of the act."^ It is sufficient in legal effect if the board of directors of a corporation who were charged with the conduct of its business, declare the inability of the corporation to pay its debts, and its willingness to be adjudged a bankrupt, in accordance with the legal requirements specified.'*^ Directors liolding over because of a failure to elect their successors may, at a legally convened meeting, execute the necessary instrument.^** If a board is enjoined from commencing or prosecuting any proceeding " involving in any way the property or property rights " of the corporation, the adoption of a resolution confessing the inability of the corporation to pay its debts. 181. In re Baker-Ricketson Co. (D. C, Mass.), 4 Am. B. R. 605, 97 Fed. 489. 182. Matter of Duplex Radiator Co. (D. C, N. Y.), 15 Am. B. R. 324, 142 Fed. 906. 183. In re Moench & Sons Co. (D. C, N. Y.), 10 Am. B. R. 656, 123 Fed. 965, in which case it was also held that petitioning creditors are not estopped from alleging a reso- lution adopted by a board of direc- tors as an act of bankruptcy, on the ground that collusion, charged by an answering creditor, who would obtain a preference by attachment if the petition were dismissed. This case was affirmed in 12 Am. B. R. 240, 130 Fed. 685. Directors may admit insolv- ency and willingness although pro- ceedings have been instituted to sell franchises and property of corpora- tions and distribute the proceeds thereof. Cresson, etc.. Coal & Coke Co. V. Stauffer (C. C. A., 3d Cir.), 17 Am. B. R. 573, 148 Fed. 981. See, also. Mutual Mercantile Agency (D. C, N. Y.), 6 Am. B. R. 607, 111 Fed. 152; In re Peter Paul Book Co. (D. C, N. Y.), 5 Am. B. R. 105, 104 Fed. 786; In re Kelly Dry Goods Co. (D. C, Wis.), 4 Am. B. R. 528, 102 Fed. 747; In re Marine Machine & Con- veyor Co. (D. C, N. Y.), 1 Am. B. R. 421, 91 Fed. 630. Uncinalified admission of in- solvency. — A resolution of the board of directors of a corporation by which an attorney was authorized to represent it generally in any suit or suits or bankruptcy proceedings then pending or that might be brought, and to agree on behalf of the corpo- ration to the appointment of a re- ceiver, is not the unqualified written admission by the corporation of its inability to pay its debts and its will- ingness to be adjudged a bankrupt on that ground, required to consti- tute an act of bankruptcy within the meaning of the statute. In re Southern Steel Co. (D. C, Ala.), 22 Am. B. R. 476, 169 Fed. 702. The adoption of a resolution by a board of directors admitting inability to pay debts and expressing a will- ingness to be adjudged a bankrupt is sufficient to warrant adjudication, although some of the directors re- ceived no notice of the meeting, when it appeared that no action had been taken by them to set aside the pro- ceedings based upon such resolution. In re Lisk Mfg. Co., (D. C, N. Y.), 21 Am. B. R. 674, 167 Fed. 411. 184. Matter of Riley, Talbot & Hunt (D. C, Mich.), 15 Am. B. R. 169. In Oregon the board of directors of a private corporation, in the ab- sence of authority specifically con- ferred by the stockholders, cannot commit an act of bankruptcy for the corporation by the adoption of a reso- lution admitting its inability to pay its debts and its willingness to be ad- judged a bankrupt. In re Quartz Gold Mining Co. (D. C, Or.), 19 Am. B. R. 667, 157 Fed. 243; In re Bates Machine Co. (D. C, Mass.), 1 Am. B. R. 129, 91 Fed. 625. 86 The Law and Practice in Bankeuptct. When and Against Whom Petition to be Filed. [§ 3-b. and signifying its willingness to be adjudged a bankrupt is unauthor- ized and does not constitute an act of bankruptcy.^'*^ While a writing in the exact words of the statute, if authoritatively signed/*' is surely sufficient ; yet it would seem that any writing ^'^^ which substantially covers the three essentials ."just stated will be enough.^*' A written admission of one member of a firm, purporting to be made on behalf of himself and the other members to the effect that they are unable to pay their debts and are willing to be adjudicated bankrupts, is binding upon the firm unless expressly repudiated.^*^ The treasurer of a corporation cannot admit inability to pay debts and signify the willingness of the corporation to be adjudged a bankrupt.^''^^ When this act of bankruptcy is alleged, the question of insolvency is immaterial"* III. W^HEX AND AGAINST WHOM PETITION MAY BE FII.ED. a. Against person who is insolvent and has committed act of bankruptcy.— Subsection b of this section authorizes the filing of a petition against a person who is insolvent and who has committed an act of bankruptcy within four months after the commission of such act. The word "person" as here used includes a corpora- tion/*" officers, partnerships, and women,^°" but does not include wage-earners or a person engaged chiefly in farming or the tillage of the soil.^""^ An act of bankruptcy may be committed by an officer or agent of a corporation or by a member of a partnership, while acting in behalf of the corporation or partnership and within the scope of his authority. ^'^ If the act complained of is that of one partner acting individually the partnership cannot be charged with the effect thereof.^'* "Insolvent," means what it always does lS4a. In re Hudson River Elee. orized so to do. In re Southern Steel Power Co. (D. C. N. Y.), 23 Am. Co. (D. C, Ala.), 22 Am. B. R. 476, B. E. 191, 173 Fed. 934. 169 Fed. 702. 185. In re Mutual Mercantile 188. In re Duplex Radiator Co Agency (D. C, N. Y.), 6 Am. B. R. (D. C, N. Y.), 15 Am. B. R. 324, 142 607, 111 Fed. 152. Fed. 906. 185a. Conway v. German (C. C. 189. But only those indicated in A., 4th Cir.), 21 Am. B. R. 577, 166 Bankr. Act, § 4-b. Fed. 67, holding that the petition 190. See Bankr. Act, § 1 (19). must allege that the admission of 191. Bankr. Act, § 4-b. For per- insolvency_ and expression of willing- sons by whom a creditor's petition ness was in writing. may be filed, see under section 59. 186. In the case of Brinkley v. 192. Richmond Spike & Iron Co. Smithwick (D. C, N. C), 11 Am. B. v. Allen (C. C. A., 4th Cir.) 17 Am R. 500, 126 Fed. 686, it was held that B. R. 583, 590, 148 Fed. 657; In re an insolvent debtor's willingness to Perley & Hays (D. C, Mo.), 15 Am. be adjudged bankrupt on the ground B. R. 54, 138 Fed. 927. of insolvency may be inferred from 193. Hartman v. Peters (D. C., the admission of insolvency in his Pa.), 17 Am. B. R. 61, 146 Fed. 82:' answer to an involuntary petition. In re Wing Yick (D. C, Hawaii), 13 187. In re Kersten (D. C, Wis.), Am. B. R. 755; In re Schultz (D. C, 6 Am. B. R. 516, 110 Fed. 929. N. Y.), 6 Am. B. R. 91, 109 Fed. 187a. In re Burbank Co. (D. C, 264; In re Gillette (D. C, N. Y.), 5 N. H.), 21 Am. B. R. 838, 168 Fed. Am. B. R. 119, 104 Fed. 769; Davis 719. An officer of a corporation may v. Stevens (D. C, S. Dak.), 4 Am. B. not write a letter in the name of the R. 763, 104 Fed. 235. In the case of corporation committing it to an act In re Redmond, Fed. Cas. 11,632, it of bankruptcy unless expressly auth- Acts of Bankruptcy. 87 § 3-b.] When Petition to be Filed. in tliis statute. Here, also, it means something more, i. e., insolv- ency at the time of the filing of the petition, and, if the act of bankruptcy is one which can be committed only by an insolvent, at the time of the commission of such act. In most cases, insolv- ency at both times must, therefore, be distinctly alleged.^®* b. Time within which petition must be filed. — (1) Withiw FOUR MONTHS AFTER THE COMMISSION OF THE ACT. The petition must be filed within four months after the commission of the act of bankruptcy. In making the computation the day of filing is excluded and the last day included. ^^° If the last day is a Sunday or a " holiday,"'^' the time does not expire until the next day;^*^ and days will not be split into hours. ^*® The meaning of " within four months," when applied to transactions other than acts of bankruptcy, is further considered in the discussion under §§ 60, 67 and 70. (2) Necessity for record or possession to start time RUNNING. — A fair statement of its meaning is : a petition cannot be filed more than four months after the recording of the instru- ment constituting the alleged act of bankruptcy where recording is required or permitted, or, where it is not, more than the same statutory period after the beneficiary takes notorious, exclusive, and continuous possession of the property transferred; provided always that prior actual notice shall set the time running in either case.-"** The last four lines, i. e., after the word " required," of the subsection do not recur in the like sentence added to § 60-b by the amendatory act of 1903;^"° doubtless the common rule as to actual notice should be read into it. Their purpose here is was held that a conveyance by one 197. Dutcher v. Wright, 94 U. S. partner of his individual property, al- 533; In re Stevenson (D. C., Del.), 2 though an act of bankruptcy as Am. B. E. 66, 94 Fed. Ill; In re against him, will not sustain a pro- Edelstein, 1 N. B. N. 168; Parmenter ceeding in bankruptcy as against the Mfg. Co. v. Stoever (C. C. A., 5th firm, even though such conveyance Cir. ), 3 Am. B. R. 220, 97 Fed. 330. was made with intent to hinder, de- 198. In re Tonawanda St. Planing lay or defraud firm creditors, or with Mill Co. (D. C, N. Y.), 6 Am. B. E. a view of giving preference to a. firm 38; Jones v. Stevens {Sup. Ct., Me.), creditor. 5 Am. B. R. 571, 48 Atl. 170; In re 194. See under § 1, ante, p. — . Warner (D. C, Ct.), 16 Am. B. R. 195. See Bankr. Act, § 31, post. 519, 144 Fed. 987. In re Dupree, 97 Fed. 28; Whit- 199. Little v. Holley Brooks Hard- ley Grocery Co. v. Roach (Sup. Ct., ware Co. (C. C. A., 5th Cir.), 13 Am. Ga.), 8 Am. B. R. 505, 115 Ga. 918, B. R. 422, 133 Fed. 874. and foot note; In re Warner (D. C, 200. For reason for the amend- Ct.), 16 Am. B. R. 519, 144 Fed. 987. ment, see In re Mersman (D. C, N. 196. Bankr. Act, § 1(14). Y.), 7 Am. B. R. 46, and § 60-b as amended by Act of 1903 88 The Law and Practice in Bankeuptct. Solvency as a Defense. [§ 3-c-d. clear. Further they seem to make necessary the substitution of " and " for " or " in the phrase " notorious, exclusive, or continu- ous j"*"^ for, if with notice, every possession must be " notorious," and if that alone and not also a possession that is " exclusive and continuous " were enough to start the time running, the clause as to actual notice would become tautological. The word " posses- sion " means such possession as the property is susceptible of, and such as is usual and ordinary; if the property transferred consists of promissory notes, possession will be deemed notorious although the creditors are not expressly notified of the transfer.^"^ The second sentence of this subsection relates to the time when the four months period will begin to run. It has as yet had compara- tively little attention from the courts. The manifest purpose of the subsection is to prevent the escape of alleged bankrupts who have committed or concealed acts of bankruptcy more than four months old.^"* IV. SOLVENCY AS A DEFENSE. a. When insolvency need not be shown. — As has already been indicated, if a debtor makes a general assignmeait for the benefit of his creditors,^"* or if he admits in writing his in- ability to pay his debts and his willingness to be adjudged a bankrupt,^"^ the question of insolvency is immaterial. If the act of bankruptcy consists in a transfer with intent to hinder, delay or defraud creditors, the petitioner need not prove insolvency of the debtor,^"^ but the debtor himself may allege his solvency as a defense. We have already considered the necessity of proving solvency in a case where a receiver or trustee has been appointed to take charge of the debtor's property.^"^ Subsections c and (f of § 3 do not apply to this act of bankruptcy. The burden of proving the insolvency of the debtor would, therefore, seem to remain where it usually is, upon the creditor who asserts the in- solvency. The reason for this is, perhaps, because the existence of a receivership usually implies insolvency, or perhaps because the 201. For the meaning of " notori- 202. In re Bogen (D. C, Ohio), 13 ous, exclusive, or continuous posses- Am. B. R. 529, 134 Fed. 1019. sion," see In re Woodward (D. C, 203. Citizens Bank v. DePauw Co. Tex.), 2 Am. R. R. 233, 95 Fed. 260, (C. C. A., 7th Cir.), 5 Am. B. R. 345, though this case construes § 3-b as 105 Fed. 926. though it were a, part of § 60-b before 204. See ante, p. 78. the amendments of 1903. See, also, 205. Sea ante, p. 84. In re Mingo Valley Creamery Assn., 206. See ante, p. 66. iX). r.. Pa.), parte Garland, 10 Ves. 110; dians," "estates of decedtents," and Ex parte Richardson, 3 Madd. 99. " partnerships," see under this sec- 37. Graves v. Winter, Fed. Cas. tion, ante. For who may file involun- 5,710. tary petitions and the practice on the 38. In re Pierce (D. C, Wash.), 4 same, see §§ 18 and 59-a, post. Am. B. R. 489, 102 Fed. 977. 42. See discussion in this section 39. Bankr. Act, § 8. under heading " Unincorporated Com- 40. As to the effect of the infancy panics." 100 The Law and Practice in Bankktiptcy. Involuntary Bankruptcy ; Wage-Earners. [§ 4-b. tile pursuits " as used in this section do not qualify the words " natural person " but only apply to corporations.*^ (2) Wage-earners. — A. wage-earner is defined. in § 1 (27) as a person who " works for wages, salary, or hire, at a compensation not exceeding one thousand five hundred dollars per year." Under this subsection (§ 4-b) a wage-earner cannot be adjudged an in- voluntary bankrupt. It is not presumable that, were he not thus, excepted, creditors would often resort to a court of bankruptcy against such a debtor.** To bring a person within the exception it should appear that the earning of wages is his paramount occupation.**^ In considering the definition of " wage-earner " in § 1 cases were cited indicating what constitutes a wage-earner under the statute.*' If debts were incurred by an alleged bankrupt while he was engaged in the occupation of a merchant in trade he is not exempted from involuntary proceedings because he subsequently became a wage- earner.** (3) Persons engaged chiefly in farming oh the tillage op THE SOIL. — No person answering this description can be ad- judged an involuntary bankrupt. The phrase seems to be con- strued strictly. Farming or tillage of the soil must be the chief occupation. Mere physical exertions are not the determining factor; but rather that occupation which the person deems of paramount importance to his welfare.*^ Yet, it has been held that a man engaged both in the business of farming and at that of raising cattle on a large scale was, nevertheless, within this excep- tion;*' likewise, perhaps, when the chief occupation is to raise cattle and hogs for the market,*" though this is hardly "farming." Dairying is usually a mere incident of farming, and a farmer whO' 43. Cleage v. Laidley (C. C. A., 46. In re Crenshaw (D. C, Ala.,. 8th Cir.), 17 Am. B. R. 598, 149 Fed. 19 Am. B. R. 502, 156 Fed. 638. 346. 47. In re Mackey (D. C, Del.), & 44. For valuable cases under the Am. B. R. 577, 110 Fed. 355, where it somewhat similar phrase " workmen, was held that a " person engaged clerks, and servants," see under § 64; chiefly in farming," within the mean- also discussion of the definition of ing of the act, is one whose chief "wage-earner" in § 1. occupation or business is farming; 'Wage-earner. — A teamster work- and one's chief occupation or busi- ing his team for day wages haul- ness is that which is of principal ing logs and other similar services concern to him, of some permanency for different people is within the ex- in its nature, which he deems of ception. In re Yoder (D. C, Pa.), paramount importance to his Wei- ll Am. B. R. 445, 127 Fed. 894; and fare, and on which he chiefly relies, so is a bookkeeper having no other for his livelihood or as the means of business or occupation. In re Pilger acquiring wealth, great or small. In (D. C, Wis.), 9 Am. B. R. 244, 118 re Drake (D. C, S. C), 8 Am. B. R. Fed. 206; a music teacher giving 137, 114 Fed. 229, aflT'd sub nom. lessons at so much an hour is not a Wulbern v. Drake (C. C. A., 4th " wage-earner." First Nat. Bank of Cir. ) , 9 Am. B. R. 695, 120 Fed. 493. Wilkes-barre v. Barnum (D. C, Pa.), 48. In re Thompson (D. C, Iowa) 20 Am. B. R. 439. 4 Am. B. R. 340, 102 Fed. 287. See 44a. Matter of Remaley (Ref., Bank of Dearborn v. Matney (D C Pa.), 23 Am. B. R. 29. Mo.), 12 Am. B. R. 482, 132 Fed. 75^ 45. These cases may all be applied 49. In re Rugsdale, Fed Cas here. 12,123. Who May Become Bankkupts. 101 §4-b] Involuntary Bankruptcy ; Practice. keeps a dairy is subject to the exemption.*"^ A cattle buyer is not engaged in farming because he takes cattle, purchased by him for the market, to the farm for feeding.'" One engaged chiefly in farming is within the exception although he at the same time conducts a small business as a private banker,"' or is engaged in carrying on a law and collection business on a small scale,"^ or runs a small store yielding a very small income, compared with that from the farm,**^ or a partnership which conducts a commissary in connection with farming interests, and one member having an agency for fertilizers and plows."'* A resident owner who has leased his farm to another for a money rent is not within the exception,"* but otherwise where he leases part of his farm and works the rest of it."" A change in occupation from business to farming since the act of bankruptcy will not avail the debtor;"' the phrase is to be construed as referring to the conditions existing at the time the act was committed."^ A woman who owns a farm and permits her husband to run it and treat the products as his own is not a person engaged chiefly in farming, and, therefore, may be adjudicated a bankrupt."' A person engaged chiefly in farming is not subject to adjudication as an involuntary bankrupt, though he makes a general assignment for the benefit of creditors."'* (4) Practice and Pleadings. — The petition in involuntary 49a. Gregg v. Mitchell (C. C. A., 6th Cir.), 21 Am. B. R. 659, 166 Fed. 72S. 50. In re Brown (D. C, Iowa), 13 Am. B. K. 140, 132 Fed. 706. Cattle dealer. — An alleged bank- rupt, whose chief occupation was trading in cattle, using his lands as a mere feeding station, relying more upon purchased feed from the market for preparing the cattle for sale than on his own agricultural products, is not a " person chiefly engaged in farming." Bank of Dearborn v. Mat- ney (D. C, Mo.), 12 Am. B. R. 482, 132 Fed. 75. See, also, Hoffschlaeger Co. V. Young Nap (D. C, Hawaii), 12 Am. B. R. 510. 51. Couts V. Townsend (D. C, Ky.), 11 Am. B. R. 126, 126 Fed. 249. 52. In re Hoy (D. C, Iowa), 14 Am. B. R. 648, 137 Fed. 175. 53. Rise v. Bordner (D. C, Pa.), 15 Am. B. R. 297, 140 Fed. 566; In re Mackey (D. C, Del.), 6 Am. B. R. 577, 110 Fed. 355. 53a. Sutherland Medicine Co. v. Rich (Ref. Ga.), 22 Am. B. R. 85. 54. In re Matson (D. C, Pa.), 10 Am. B. R. 473, 123 Fed. 743. 55. Wulbern v. Drake (C. C. A., 4th Cir.), 9 Am. B. R. 695, 120 Fed. 493. 56. In re Luckhardt (D. C, Kas.)', 4 Am. B. R. 307, 101 Fed. 807; In re Mackey (D. C, Del.), 6 Am. B. R. 577, 110 Fed. 355; Tiflfany v. La Plume Condensed Milk Co. (D. C, Pa.), 15 Am. B. R. 413, 141 Fed. 444. 57. Flickinger v. National Bank of Vandalia (C. C. A., 6th Cir.), 16 Am. B. R. 678, 145 Fed. 162; In re Burgin (D. C, Ala.), 22 Am. B. R. 574, 173 Fed. 726, holding that a change of occupation to one of the exempt pursuits, between the com- mission of an act of bankruptcy and the filing of a petition against him, will not defeat the operation of the act, as the bankrupt's status is to be determined as of the period during which he contracted the debts and acquired or owned the assets scheduled. 58. In re Johnson (D. C, N. Y.), 18 Am. B. R. 74, 149 Fed. 864, in which case it appeared that the wife had taken title to a farm formerly owned by the husband in order to keep it from his creditors, and it was held that the fact of ownership was not material. Judge Ray in this case discusses at length and with care the question of what constitutes farming under the statute. 58a. Olive v. Armour & Co. (C. C. A., 5th Cir.), 21 Am. B. R. 901, 167 Fed. 517. 102 The Law and Peactice in Bankruptcy. Corporations as Involuntary Bankupts. [§ 4-b. cases should contain allegations to the effect that the alleged bank- rupt was not either a wage-earner or a person chiefly engaged in farming or in tillage of the soil."' But a failure to do so, unless raised by the answer, will be deemed waived.'" It may be sufiB- cient to make such averments as will exclude the idea of the alleged bankrupt being within the excepted classes;"' but the better practice is to include express allegations negativing the statutory exceptions. The allegation and proof should also show that the alleged bankrupt was not in one of these excepted classes at the time of the act of bankruptcy.®'^ A defense based on an allegation that he was, may be raised by a responding creditor, and, when raised, goes to the jurisdic- tion, and, if not met by a replication, is conclusive."^ If the petition is defective in that it does not contain allegations to the effect that the alleged bankrupt is not within either of the excepted classes, the defect may be cured by amendment."' Where a person has been adjudged insane at a certain date with lucid intervals until a certain date and without lucid intervals thereafter, a presumption of insanity arises from the date first mentioned, and the burden of proof is upon the petitioning creditors to show that the alleged act of bankruptcy was committed during a lucid interval."* b. Corporations which maybe adjudged involuntary bankrupts (1) In general. — The definition of "corporations" will be found in § 1 (6). It does not, of course, include municipal cor- porations, but it would seem to comprise membership corporations and religious, educational and eleemosynary corporations and the like. Under the law of 1867, any business, moneyed, or commercial corporation might become an involuntary bankrupt. The amendatory act of 1910 has amended clause b of this section, so as to practically conform the present bankruptcy act to that of 1867. It should be noted also that, notwithstanding its dissolution by the State court, if there are undistributed assets or unpaid debts, a corporation may be adjudicated bankrupt."' A corporation having committed an act of 59. Beach v. Macon Grocery Co. Cir.), 4 Am. B. R. 515, 102 Fed. 728; (C. C. A., 5th Cir.), 9 Am. B. E. Rise v. Bordner (D. C, Pa ) 15 Am' 762, 120 Fed. 736. B. R. 297, 140 Fed. 566. 60. Green River Deposit Bank v. 63. In re Crenshaw (D. C, Ala.), Craig Bros. (D. C, Ky.), 6 Am. B. 19 Am. B. R. 502, 156 Fed. 638. R. 381, 110 Fed. 137; In re Colum- 64. In re Kehler (C. C. A., 2d bia Real Estate Co. (D. C, Ind.), 4 Cir.), 19 Am. B. R. 513, 159 Fed Am. B. R. 411, 101 Fed. 965. 55. 61. Matter of Levingston (D. C, 65. In re Merchants' Ins. Co., Fed. Hawaii), 13 Am. B. R. 357; In re Cas. 9,441; In re Independent Ins Brett (D. C, N. J.), 12 Am. B. R. Co., Fed. Cas. 7,018. 492, 130 Fed. 981; In re White (D. 65a. In re Adams & Hovt Co fD C, Pa.), 14 Am. B. R. 241, 135 Fed. C, Ga.), 21 Am. B. R. 161; in re 199. Steelingworth Ry. Supply Co. (D 61a. The burden of proof that C, Pa.), 21 Am B. R. 341 ; In re an alleged bankrupt is not a person Internationa] Coal Mininir Co (D "engaged chiefly in farming" is C, Pa.), 16 Am. B. R. 312, 143 Fed upon the petitioning creditors. In 665, affd. 17 Am. B. R. 573, 148 Fed re Burgin (D. C, Ala.), 22 Am. B. 981; In re Munger Vehicle Tire Co R. 574, 173 Fed. 726. (C. C. A., 2d Cir.), 19 Am. B E 62. In re Taylor (C. C. A., 7th 785, 159 Fed. 901. Who May Become Bankrupts. 103 §4-b.] Corporations; Engaged in Manufacturing. bankruptcy, the jurisdiction of a bankruptcy court may not be de- feated by prior proceedings for dissolution.""^ (3) Unincorporated companies. — Under this section an "un- incorporated company" may be adjudged an involuntary bankrupt. This phrase was inserted while the bankruptcy act was in conference committee, and is not explained by any of the reports which contain the bill in its various stages. The rarity of failures of companies of this character, other than those organized for business purposes, will, however, prevent it from being either dangerous to such bodies or of much value to creditors. The phrase manifestly means all those private bodies which occupy the middle ground between partnerships and stock corporations, possessing some of the powers and privileges of both, and is generally so recognized by the courts."" Such com- panies include a fire Lloyds Association,"' or a joint-stock association organized under a State law limiting liability to the capital sub- scribed by the members."' (3) " Engaged principally in ". — The section as it existed prior to the amendatory act of 1910 provided that any corporation " engaged principally in " manufacturing, trading, printing, publishing, mining or mercantile pursuits might be adjudged an involuntary bankrupt. The phrase " engaged principally in " has already been frequently considered and interpreted in the courts. These cases are now only valuable in proceedings pending when the amendatory act of 1910 took effect, and as showing the development of our present law of bankruptcy. It has been thought best to leave the following discus- sion in the present edition of this work, at the same time calling attention to the fact that in cases hereafter arising it will not be important to determine whether a corporation is engaged principally in manufacturing etc., so long as it is within the class of a business or commercial corporation. The weight of authority declared the test to be: In what pursuit is the corporation chiefly engaged? Thus, prior to the amendment of 1903, a mining company, which also conducted a supply store, was not subject to bankruptcy;'" on the other hand ■ it was held that a mining company chiefly engaged in smelting was.'^ The purposes of the corporation, as stated in its charter, are not necessarily controlling,'^ but where a corporation was organized to manufacture and sell paper made from wood pulp, and had purchased timber and erected mills but had not actually manu- factured any paper, it was held subject to involuntary bankruptcy.'" 66. Burkhart v. German-American ing Co. (D. C, Cal.), 6 Am. B. R. Bank (D. C, Ohio), 14 Am. B. R. 250, 110 Fed. 120. 222, 137 Fed. 958. 72. In re Chicago- Joplin Lead & 67. Matter of Seaboard Fire Un- Zinc Co. (D. C, Mo.), 4 Am. B. R. derwritera (D. C, N. Y.), 13 Am. B. 712, 104 Fed. 67; Matter of Quimby R. 722, 137 Fed. 987. (D. C, Mass.), 10 Am. B. R. 424, 68. In re Hercules Atkin Co. (D. 121 Fed. 139. C, Pa.), 13 Am. B. R. 369, 133 Fed. 73. In re White Mountain Paper ^^^■^ ,, .T „, ^°- (C- C. A., 1st Cir.), 11 Am. B. 70. McNamara v. Helena Coal Co. R. 633, 127 Fed. 643, affirminff 11 (D. C, Ala.), 5 Am. B. R. 48. Am. B. R. 491. 71. In re Tecopa Mining & Smelt- 104 The Law and Peactice in Bankettptcy. Manufacturing Corporations. -b. Where a corporation is organized and makes preparation for carrying out the objects of its charter, acquiring and equipping itself with the necessary plant and appliances, it thereby engages in that which it is incorporated to do, — whether manufacturing, or mining, or whatever it may be, — within the meaning of the act.''^^ What a corporation is in fact doing is what will determine whether it is engaged in manufactur- ing, trading or mercantile pursuits;^* if it be engaged in several dif- erent occupations, some within and some without the specified classes, the debts will be the aggregate of business in the specified classes as compared with that within those classes not specified.'' (4) Manufactubing corporations. — The word "manufactur- ing " as used in the act prior to the amendment of 1910 has presum- ably its popular meaning, that is, the making of products from raw or prepared materials by hand or machinery.''* As a general rule, a natural product if only rendered more suitable for use by an artificial process is not a manufactured article." Some difficulty has arisen in de- 73a, In re Bloomsburg Brewing Co. (D. C, Pa.), 22 Am. B. R. 625, 172 Fed. 174. 74. In re Chicago-Joplin Lead & Zinc Co. (D. C, Mo.), 4 Am. B. R. 712, 104 Fed. 67; In re Tontine Surety Co. (D. C, N. J.), 8 Am. B. R. 421, 116 Fed. 460. A corporation, as apparent owner of a business, which sub- jects it to bankruptcy, or the un- known equitable owners of the busi- ness, which permits the corporation to act as the principal, may be pro- ceeded against by an involuntary pe- tition for adjudication. Calnan Co. V. Doherty (C. C. A., 1st Cir.), 23 Am. B. R. 297, 174 Fed. 222. 75. Matter of Matthews Consoli- dated Slate Co. (C. C. A., 1st Cir.), 16 Am. B. R. 407, 144 Fed. 734. 76. Lawrence v. Allen, 7 How. 785; People ex rel. U. P. T. Co. v. Roberts, 145 N. Y. 375; Matter of Concord Motor Car Co. (C. C. A., 1st Cir.), 23 Am. B. E. 73, 173 Fed. 445. What constitutes " manufac- ture." — In the case of Butt v. Con- struction Co. (C. C. A., 4th Cir.), 15 Am. B. R. 515, 140 Fed. 840, the court quoted the following language from the case of In re Capital Pub- lishing Co., 3 MacArthur, 405, 40 Am. Rep. 446 : " There can be no doubt that the word ' manufacture ' was used in the statute in the limited sense in which it is commonly under- stood. The industries to which the dictionaries and the writers on po- litical economy limit this term are where the raw materials or natural substances are wrought by hand, art or machinery into commodities for use; and the examples given are cloths, iron, shoes, cabinet work, glass, cotton and silk goods, etc. This limitation of the term manufac- ture is to be adopted as the trae meaning of the bankruptcy law." See, also. In re Niagara Contracting Co. (D. C, N. Y.), 11 Am. B. R. 643, 127 Fed. 782; Friday v. Hall & Kaul Co. (Sup. Ct.), 23 Am. B. R. 610, 216 U. S. 449, where the court said: "Manufacturing has no techni- cal meaning. It is not limited by the means used in making, nor by the kind of product produced." Com- pare In re First Nat'l Bank of Belle Pourche (C. C. A., 8th Cir.), 18 Am. B. R. 265, 269, 152 Fed. 64, in which the court said : " The word ' manu- facture' is a generic term of broad significance, advisedly used by Con- gress to include many species of cor- porations, and its comprehensive meaning ought not to be whittled away by fine distinctions. Deriv- atively meaning making with the hand, its ordinary significance is producing a new article of use or ornament by the application of skill and labor to the raw materials of which it is composed." 77. Thus, he who slaughters and refrigerates mutton (People ex rel. New England Dressed Meat Co. v. Roberts, 155 N. Y. 408), or who mines coal (Byres v. Franklin Coal Co., 106 Mass. 131), is not a manu- facturer; but he who works up standing timber on his own land is (In re Cowles, Fed. Cas. 3,297). Who May Become Bankeupts. 105 §4-b.] Manufacturing Corporations. termining whether a given corporation is principally engaged in manu- facturing. Precedents under the corporation tax law of the several States, and the internal revenue laws will prove valuable. A laundry company engaged in laundering shirts, collars, etc., for manufacturers, prior to their being sold in the market, is engaged in manufacturing.'* Although it may be otherwise in respect to a corporation where the company was engaged simply in the doing of laundry work for ordinary customers.'" A shipbuilding corporation is a manufacturing corpora- tion,*" but a corporation engaged in constructing bridges, wharves and bulkheads and in driving piles for foundations for buildings is not included within the meaning of the word.*^ It has been held, how- ever, in apparent conflict with this proposition, that a corporation principally engaged in constructing concrete arches, bridges and dress- ing stone is engaged in a manufacturing pursuit and is subject to ad- judication in involuntary bankruptcy.*^ A corporation organized for the purpose of the manufacture and sale of paper made from wood pulp and which owns large tracts of timber land on which it had made va- rious large expenditures in the prosecution of its general plan of manu- facturing paper, is subject to involuntary bankruptcy, although no manufacturing had been actually done.'^ A corporation engaged chiefly in manufacturing and selling paper, paper bags, etc., is a manu- facturing corporation, although its charter granted it the right to operate water works and electric lights.*^'' A corporation which operates a plant for carrying on the process of preserving, packing and marketing salt water fish caught by it is engaged in manufacturing.*^'' A corporation engaged in the erection of buildings has been held to be a manufacturing corporation although weighty authority is opposed to this doctrine.** A corporation engaged in the building of houses is not a manufacturing corporation within the act.**^ Where the only 78. In re Troy Steam Laundering therefore subject to adjudication Co. (D. C, N. Y.), 13 Am. B. E. 97, 83. White Mountain Paper Co. v 132 Fed. 266. Morse (C. C. A., 1st Cir.), 11 Am. 79. In re White Star Laundry Co. B. R. 633, 127 Fed. 644; In re (D. C, Wis.), 9 Am. B. E. 30, 117 Bloomsburg Brewing Co. (D. C , Pa ) Ped. 570. 22 Am. B. R. 625, 172 Fed. 174. 81. Butt V. MacNichoI Const. Co. 83a. In re Georgia Mfg & Public (C. C. A., 4th Cir.), 15 Am. B. R. Service Co. (D. C, Ga.), 21 Am B 515, 140 Fed. 840, affirming 14 Am. R. 878, 166 Fed. 964. B. R. 188, 134 Fed. 979; but see In 83b. In re Alasl timber.*" The words " engaged principally in manufacturing " have reference to the time when the petition was filed and a reasonable time prior thereto and not to some prior time in the history of the corpora- tion.*"*' From the various instances here cited it will be noticed that there is not much uniformity in the conclusions of the bankruptcy courts as to what constitutes manufacturing. There seems to be, how- ever, a gradual relinquishment of the restrictive interpretation which was originally applied to the term. (5) Trading coepo rations. — A corporation engaged principally in trading may be adjudged an involuntary bankrupt. Under the law of 1867 it was a corporation engaged in "business;'' in the law of 1841 it was a corporation "using the trade of merchandize." The meaning of " trader " in England has been well defined for centuries. The cases interpreting the meaning of this term in the English act will be found interesting and often valuable.*^ The term connotes the idea B. R. 546, 157 Fed. 296; In re Where a corporation has once Church Construction Co. (D. C, N. engaged in manufacturing it may Y. ), 19 Am. B. E. 549, 157 Fed. be proceeded against in bankruptcy 298. regardless of the period of time be- 84b. Walker Roofing, etc., Co. v. tween its cessation of operation and Merchant & Evans Co. ( ), the filing of the creditor's petition, 23 Am. B. R. 185, 173 Fed. 771. and the claims of the petitioning 85. In re Toledo Portland Cement creditors need not have arisen during Co. (D. C, Mich.), 19 Am. B. R. the period in which the corporation 117, 156 Fed. 83, revg. 17 Am. B. R. was so engaged. Robertson v. Union 375; Matter of Concord Motor Car Potteries Co. (D. C, Pa.), 22 Am Co. (C. C. A., 1st Cir.), 23 Am. B. B. R. 121, 43 Pitsb. L. J. 342, 177 R. 73, 173 Fed. 445, holding that Fed. 279. whether a corporation is subject to 87. A trader is one who buys the bankruptcy act depends upon the and sells goods or merchandise ordi- actual business transacted by it at narily the subject of traffic (Sutton or about the time a bankruptcy peti- v. Weeley, 7 East, 442, 3 Smith K. • tion was filed against it, and not B. 445). An inn-keeper was held not upon the business authorized by its to be a trader (Sanderson v. Rowles, charter. 4 Burr. 2,064), nor is a lodging- 85a. Matter of Concord Motor house keeper a trader {Ex parte- L.ar Co. (C. C. A., 1st Cir.), 23 Am. Bowers, 2 Deac. 99). A physician B. R. 73, 173 Fed. 445. who held an apothecary's license and 85b. In re Hudson River Elec. transacted business as such was held Power Co. (D. C, N. Y.), 23 Am. B. to be a trader {Ex parte Crabb, 8 R. 191, 173 Fed. 934. DeGex, M. & G. 277; Ex parte Dan- 86. In re Chandler, Fed. Cas. benny, 3 Mont. & Ayr. 16. See, also, 2,591. Ex parte Moule, 14 Bes. 602; Ex 86a. In re Interstate Paving Co. parte Lavender, 4 Deac. & Ch 484) (D. C, N. Y.), 22 Am. B. R. 572, 88. Wakeman v. Hoyt, Fed. Cas. 1/1 Fed. 604. 17,051; In re Eeles, Fed. Cas. 4,302. Who May Become Bankrupts. 107 §4-b.] Trading Corporations. of buying merchandise for the purpose of selling it for gain.** Illus- trative cases under the law of 1867 will be found in the footnote.'" Under the present law, corporations engaged in furnishing water to cities,"" in giving theatrical performances solely,"^ in conducting a hotel,"^ in conducting a saloon and restaurant business,"'' a water transportation company,"* a social club,°° an advertising company,"* a mutual fire insurance company,"' a building and loan association,"* a real estate company,"'" a company organized to buy and sell stocks, bonds and securities,"" a warehouse company,'"" a corporation char- tered as a common carrier,'"' a corporation conducting a circulating library,'"- an irrigation company,'"^ a breeder's club,'"^'' a laundry 89. The following were held trad- ers: A baker (In re Cocks, Fed. Cas. 2,933) ; a furniture dealer (In re Newman, Fed. Cas. 10,175) ; a mer- chant tailor (In re Archenbrown, Fed. Cas. 505) ; a saloon-keeper (In re Sherwood, Fed. Cas. 12,733) ; but a stockholder (In re Moss, Fed. Cas. 9,877), a lessor of oil lands (In re Wocds, Fed. Cas. 17,990), and a rail- road company (In re Union Paciiic R. R. Co., Fed. Cas. 14,376), were not. 90. In re New York & Westches- ter Water Co. (D. C, N. Y.), 3 Am. E. R. 508, 98 Fed. 711, subsequently affirmed on appeal. 91. In re Oriental Society (D. C, Pa.), 5 Am. B. R. 219, 104 Fed. 975; In re Reisler Amusement Co. (D. C, N. Y.), 22 Am. B. R. 501, 171 Fed. 283. See under former law, In re Duff, 4 Fed. 519. 92. In re United States Hotel Co. (C. C. A., 6th Cir.), 13 Am. B. R. 403, 67 C. C. A. 153. See undef former law, In re Ryan, Fed. Cas. 12,183, where an inn-keeper was held to be a trader. 93. In re Chesapeake Oyster & Fish Co. (D. C, Col.), 7 Am. B. R. 173, 112 Fed. 960. But see In re Barton Hotel Co. (Dist. Col.), 12 Am. B. R. 335. Restanrant corporation. — A company authorized by its certificate of incorporation to manage, conduct and carry on a restaurant and saloon wherein are distributed foods and liquors at retail to be consumed upon the premises, is not subject to adju- dication as a bankrupt. Matter of Wentworth Lunch Co. (C. C. A., 2d Cir.), 20 Am. B. R. 29. 94. In re Phila., etc., Co. (D. C, Pa.), 7 Am. B. R. 707, 114 Fed. 403. 95. In re Fulton Club (D. C, Ga.), 7 Am. B. R. 670, 113 Fed. 997. 96. In re Snyder & Johnson Co. (D. C, 111.), 13 Am. B. R. 325, 133 Fed. 806. 97. In re Cameron Town Mut. Fire Ins. Co. (D. C, Mo.), 2 Am. B. R. 372, 96 Fed. 756. Se?, also, In re Tontine, etc., Co. (D. C, N. J.), 8 Am. B. R. 421, 116 Fed. 400; In re Mcore & Muir Co. (D. C, N. Y.), 23 Am. B. R. 122, 173 Fed. 732. 98. Matter of N. Y. Bldg. & Loan Bank Co. (D. C, N. Y.), 11 Am. B. R. 51, 127 Fed. 471. 98a. Matter of Altonwood Park Co. (C. C. A., 2d Cir.), 20 Am. B. R. 31 ; Matter of Kingston Realty Co., 19 Am. B. R. 845. 99. In re Surety Guaranty &, Trust Co. (C. C. A., 7th Cir.), 9 Am. B. R. 129, 121 Fed. 73. Compare In re Leighton & Co. (D. C, W. Va.), 17 Am. B. R. 275, 147 Fed. 311, in which a stock, bond, grain and brokerage company was held to be within the act. A stock broker was held not to be a trader under former bankruptcy act. In re Woodward, Fed. Cas. 18,001 ; In re Marston, Fed. Cas. 9,142; In re Moss, Fed. Cas. 4,877. 100. In re Pacific Coast Ware- house Co. (D. C, Cal.), 10 Am. B. R. 474, 123 Fed. 749. 101. In re Quimby Freight For- warding Co. (D. C, Mass.), 10 Am. B. R. 424, 121 Fed. 139; Philpot v. O'Brien (C. C. A., Ist Cir.), 11 Am. B. R. 205, 126 Fed. 167; In re Phila- delphia & L. Trans. Co. (D. C, Pa.), 7 Am. B. R. 707, 114 Fed. 403. Otherwise under former law. Winter V. Iowa, M. & N. P. R. R. Co., Fed. Cas. 17,890. 102. In re Parmelee Library Co. (C. C. A., 7th Cir.), 9 Am. B. R. 5B8, 120 Fed. 235, 56 C. C. A. 583. 103. Matter of Bay City Irriga- tion Co. (D. C, Tex.), 14 Am. B. R. 370, 135 Fed. 850. 103a. In re New England Breed- 108 The Law and Practice in Bankruptcy. Printing and Publishing Corporations. [§ 4-b. corporation/"^ an electric power company,"*^ and a mercantile agency/"' have been refused adjudication because not trading corpora- tions; while a sanitarium/ "° a livery-stable company/"^ a mercantile agency/"^ a company buying and selling ice/°° a company incorporated to conduct a grain and stock brokerage business/'^" have been held either trading corporations or engaged principally in mercantile pur- suits. In analogy to cases arising under former bankruptcy acts a cor- poration, not otherwise engaged in trade or mercantile pursuits, which incidentally purchases or sells property will not be deemed to be subject to involuntary bankruptcy."' Nor is a corporation which sells the natural products of its own land a trading corporation.'^^ Public service corporations, such as water, gas or electric companies, are not subject to adjudication as bankrupts.''^^ The Amendment of 1910 has effectually reconciled these decisions with each other. As the law now stands it will not be important to determine whether a corporation is a trading or manufacturing corporation. If it is en- gaged in business or commercial enterprises it is amenable to the bankruptcy law. (6) " Printing " and " publishing." — There are few cases as yet construing these words. They were inserted doubtless to meet the de- cisions under the former law that such corporations were not manu- facturing companies. A company publishing ratings of business men for commercial use — the books remaining the property of the company, is not engaged in the printing or publishing business."* ers' Club (D. C, N. H.), 21 Am. B. Agency (D. C, N". Y.), 6 Am. B. R. E. 349. 607, 111 Fed. 152. 104. In re White Star Laundry 109- First Nat. Bank of Wilkes- Co. (D. C, Wis.), 9 Am. B. R. 30, oarre v. Wyoming Valley lee Co. (D. 117 Fed 570 C., Pa.), 14 Am. B. R. 448, 136 Fed. 104a. In re Hudson River Elee. f f' ^"l^^"" *f^ -f"?* f"""^ ^^f Power Co. (D. C, N. Y.), 23 Am. a company harvests its ice for sale to B. R. 191, 173 Fed. 934. m.hTTT' v 't TV^ t^^""- ,„^ „' , ^ ^ ,. ,,, Matter of New York & New Jersey 105. Zugalla v. International Mer- j^e Lines (C. C. A., 2d Cir.), 16 Am. eantile Agency (C. C. A., 3d Cir.), 16 b. R. 832, 147 Fed. 214, affirming 14 Am. B. R. 67, 142 Fed. 927. Am. B. R. 61. 106. In re San Gabriel Sanitarium 110. In re Leighton (D. C, W. Co. (D. C, Cal.), 2 Am. B. E. 408, Va.), 17 Am. B. R. 275, 147 Fed. 95 Fed. 271, but see In re Elk Park 311; Laker v. Stapely Co. (D. C, Min., etc., Co. (D. C, Cal.), 4 Am. Ohio), 21 Am. B. R. 303. B. E. 131, 101 Fed. 422. 111. In re Kimball, 7 Fed. 461; 107. In re Morton Boarding In re Duff, 4 Fed. 519; In re Rogers, Stables (D. C, N. Y.), 5 Am. B. R. Fed. Cas. 1,301; In re Chapman, 763, 108 Fed. 791; In re Odell, Fed. Fed. Cas. 2,601. Cas. 10,426. Contra: Under law of 112. In re Woods, Fed. Cas. 17,- 1841, Hall V. Cooley, Fed. Cas. 5,928 ; 990; In re Clelland 2 Ch. App. under present law Gallagher v. De (Kng.) 466. Lancy Stables Co. (D. C, Pa.), 19 112a. Matter of Hudson River Am. B. R. 801, 158 Fed. 381, holding Elee. Power Co. (D. C, N. Y.), 23 that a corporation formed for the Am. B. R. 191, 173 Fed. 934. purpose of conducting a gener.il 113. Former text cited with ap- livery and boarding stables business proval in In re Leighton & Co. (D. is not subject to involuntary bank- C, W. Va.), 17 Am. B. R. 275 147 ruptcy. Fed. 311. 108. In re Mutual Mercantile 114. Zugalla v. International Mer- cantile Agency (C. C. A., .3d Cir.), 16 Who May Become Bankkupts. 109 §4-b.] Mining Corporations; Practice. (7) Mercantile pursuits. — The words "mercantile pursuits " as used in this section appear to be by way of emphasis or explanation of the word " trading " which goes before. They are not much difEerent in their meaning and practically signify the same thing. The word " mercantile " like the word " trading " connotes the buying and sell- ing of commodities."^ It is possible, however, that it has a broader significance and may have been used to enlarge the meaning of the word " trading." "° (8) Mining corporations. — The word mining was inserted in subd. b of this section by the amendatory act of 1903, to meet the quite uniform holdings that such companies were neither manufactur- ing nor trading corporations.^^' The meaning of the word is un- doubtedly the common one, and a company which is engaged in tak- ing from the earth any mineral or natural product for the purpose of selling or reducing it or working it up into a salable article may here- after be petitioned against. The word " mining " is sufficiently broad in its meaning to include the quarrying of slate, granite and stone.^^* (9) Practice and pleadings. — If the petition be against the corporation it must distinctly allege that it comes within one or more of the permitted classes.^" If it does not contain such an allegation it is demurrable and an assertion of the contrary fact in an answer, if not replied to, is conclusive."" But an order of adjudication, showing a like omission, cannot be impeached collaterally. ^^^ Aside Am. B. E. 67, 142 Fed. 927, revers- Lead & Zinc Co. (D. C, Mo.) 4 Am. ing 13 Am. B. R. 725. B. R. 712, 104 Fed. 67; In re Rollins 115. Zugalla v. Mercantile Agency Gold & Silver Mining Co. (D. C, N. (C. C. A., 3d Cir.), 16 Am. B. R. 67, Y.), 4 Am. B. R. 327, 102 Fed. 982; 142 Fed. 927. In re Elk Park Mining & M. Co. 116. In re N. Y. & Westchester (D. C, Col.), 4 Am. B. R. 131, 101 Water Co. D. C, N. Y.), 3 Am. B. Fed. 422. E. 508, 98 Fed. 711; which declares 118. Matter of Matthews Consoli- that "The business of a trader in- dated Slate Co. (C. C. A., 1st Cir.), eludes both buying and selling either 16 Am. B. R. 407, 144 Fed. 737, goods or merchandize, or other goods affirming 16 Am. B. R. 350; In re ordinarily the subject of traffic; and Quincy Granite Quarries Co. (D. C, tne term 'mercantile pursuits' means Mass.), 16 Am. B. R. 823, 147 Fed. the buying or selling of goods or 279; Burdiek v. Dillon, 144 Fed. 737. merchandize or dealing in the pur- 119. In re Elmira Steel Co. (D. chase or sale of commodities." In C, N. Y.), 5 Am. B. R. 484, 109 Fed. re Surety & Guarantee Trust Co. (C. 456. C. A., 7th Cir.), 9 Am. B. R. 129, 120. See In re Taylor (C. C. A., 121 Fed. 73. 7th Cir.), 4 Am. B. R. 515, 102 Fed. 117. In re Tecopa Mining & 728; In re Callison (D. C, Fla.), 12 Smelting Co. (D. C, Cal.), 6 Am. B. Am. B. R. 344, 130 Fed. 987; Beech R. 250, 110 Fed. 120; In re Key- v. Macon Grocery Co. (C. C. A., 5th stone Coal Co. (D. C, Pa.), 6 Am. Cir.), 9 Am. B. R. 762, 120 Fed. 736, B. R. 377, 109 Fed. 872; McNamara 57 C. C. A. 150; In re Mero (D. C, V. Helena Coal Co. (D. C, Ala.), 5 Ct.), 12 Am. B. R. 171, 128 Fed. 630. Am. B. R. 48; In re Woodside Coal 121. In re Columbia Real Estate Co. CD. C., Pa.), 5 Am. B. R. 186, Co. fT>. C, Ind.), 4 Am. B. R. 411, 105 Fed. 56; In re Chieago-Joplin 101 Fed. 965. 110 The Law and Peactice in Bankruptcy. Effect of Bankruptcy of Corporation. [§ 4-b. from this allegation, the practice is the same as that when petitions are filed against individuals. The burden of proof is ordinarily upon the petitioners to show the alleged bankrupt corporation was engaged principally in a business specified in this clause."^ Where the issue is raised, evidence is not admissible to show that prior to the incorpora- tion of the company its predecessor in interest had sold merchan- dise.^^^* Pending the determination of the question as to the char- acter of the corporation, a court of bankruptcy may assume jurisdic- tion, and appoint receivers to take custody of the property, ^^^i* c. Banks and banking, — There are reasons of policy why bank- ing corporations should be excluded. They are trustees of the people, whose debts are always due and whose credit is necessary to trade and industry. They are not only creatures of the State, organized under State statutes, but are supervised and inspected by the State at fre- quent intervals, thus making it difficult for them to commit prefer- enees.^''' A national bank incorporated under the national banking act would not, for obvious reasons, be subject to involuntary bank- ruptcy, although not included within the expressed provisions of this exception.^^* It would seem that only those entities which are strictly banks and thus subject to official espionage, are excepted. '"^ A cor- poration cannot be a " private banker " within the meaning of the term as used in this clause,^^° but a partnership formed for the purpose of carrying on the business of banking, may be adjudged bankrupt as a private banker.^'" d. Effect of bankruptcy of corporations. — (1) In general. — A corporation, being defined in § 1 (19) as a person, can apply for and be given a discharge. This seems to have been doubted,'^* 122. Philpot V. O'Brien (C. C. A., Manufacturers' Nat'l Bank, Fed. Cas. 1st Cir.), 11 Am. B. R. 205, 126 Fed. 9,051. 167; Matter of Hudson River Elec. 125. Compare Davis v. Stevens Power Co. (D. C, N. Y.), 23 Am. (D. C, S. Dak.), 4 Am. B. R. 763, B. E. 191, 173 Fed. 934; Walker 104 Fed. 235. And see In re Moench Roofing etc. Co. v. Merchant & & Sons Co. (C. C. A., 2d Cir.), 12 Evans Co. (C. C. A., 4th Cir.), 23 Am. B. R. 240, 130 Fed. 685 (affirm- Am. B. R. 185, 173 Fed. 771. ing 10 Am. B. R. 656) ; In re White 122a. Walker Roofing etc. Co. v. Mountain Paper Co. (C. C. A., 1st Merchant & Evans Co. (C. C A., 4th Cir.), 11 Am. B. R. 633, 127 Fed Cir.), 23 Am. B. R. 185, 173 Fed. 643 (affirming 11 Am. B. R. 491). 7771; In re Interstate Paving Co. 126. In re Surety & Guarantee (D. C, N. Y.), 22 Am. B. R. 572, 171 Trust Co. (C. C. A., 7th Cir.), 9 Fed. 604. Am. B. R. 129, 121 Fed. 73 122b. In re De Lancey Stables 127. Burkhart v. German- Ameri- Co. (D. C, Pa.) 22 Am. B. R. 406, can Bank (D. C, Ohio), 14 Am B R 170 Fed. 860. 222, 137 Fed. 958. 123. In re Oregon Trust & Sav- 128. In re Marshall Paper Co ( ings Bank (D. C, Ore), 19 Am. B. D. C, Mass.), 2 Am B R 653 95 R. 484, 156 Fed. 319. Fed. 419, but this case was overruled 124. See under former law. In re Who May Become Bankrupts. Ill § 4-b.] OfiScers and Directors of Corporations. but that corporations may be discharged may now be considered set- tled. The reason for their existence being terminated by their insol- vency, it is not supposed that many bankrupt corporations will apply. (2) Liability of officers, directors, or stockholders. — It has been held that the discharge of a corporation does not prevent creditors taking judgment in a State court against the corporation, at least in so far as to enable them to proceed on a stockholder's or director's liability.'^* This subsection, inserted by the amendatory act of 1903, is thus probably but declaratory of the law. It is, perhaps, a little broader. The " bankruptcy " of a corporation, which must include all of the steps to and including adjudication, is enough. It is possible that the corporation may not seek a discharge. At any rate, the intention of Congress to save to the creditors of corporations all the rights given them against negligent or dishonest officers, directors, or stockholders by the State or territorial or federal laws is clear. The reason which induced the prohibition on the discharge of corporations found in the law of 1867 exists no longer."" Where the facts warrant a bankruptcy court has jurisdiction to make a call upon stockholders for unpaid stock subscriptions."* by the Circuit Court of Appeals, (C. charge in bankruptcy of a corpora- C. & A., 1st Cir.), 4 Am. B. E. 468, tion is a sufficient excuse for failure ^^?on V ^^^' nr -L *° secure judgment and return of ex- 129. In re Marshall Paper Co. ecution unsatisfied, preliminary to (D. C, Mass.), 2 Am. B. R. 653, 95 bringing action against stockholders. Fed. 419. See, also, Irish v. Citi- Firestone Co. v. Agnew (N. Y. Ct of zens Trust Co. (D. C, N. Y.), 21 App.), 21 Am. B. E. 292. Am. B E. 43; In re Flood-Pratt 130. Compare § 17, post, generally, Dairy Co. (Ref. Ohio). 23 Am. B. E. for eflfeet of a discharge, ^t?'^-'^"^''® -^"emai Hardware Co. 131. Matter of Munger Vehicle (D C, Pa.), 22 Am. B. E. 871, 172 Tire Co. (C. C. A., 2nd Cir.), 21 Am. ^4- «"• . ^- K- 395, 168 Fed. 910. Action to recover. — ^The dis- SECTION FIVE. PARTNERS. § 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. h The creditors of the partnership shall appoint the trustee j 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 individual property. d The trustee shall keep separate accounts of the partnership property and of the property belonging to the individual partners. e 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 appro- priated 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 prop- erty of any partner after paying his individual debts', such surplus shall be added to the partneirship assets and be applied to the pay- ment of the partnership debts. Should any surplus of the part- nership 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 interests in the partners'hip. g The court may permit the proof of the claim of the partner- ship estate 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. li In the event of one or more but not all of the members of a partnership being adjudged 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 busi- ness as expeditiously as its nature will permit, and account for the interest of the partner or partners adjudged bankrupt. 112 Pabtnees. 113 S 5.] Synopsis of Section. Analogoni ptotIiIoim: In V. S.t Act of 1867, § 36; R. S., f 5121; Act of 1841, i U. In Ene.i Act of 1883, §§ 110, 112, 113, US; General Rules 268-270. CrOM references: To the law: §§ 1(19), 2(1), 3, 4, 6, 7, 8, 18, 19, 32, and 59. To the General Orders: VIII, and generally to V, VI, VII, and IX. To the Forms: Nob. 1 and 2. SYNOPSIS OF SECTION. FARTNXOtS. I. Bankrupt Partnership. a. Historical and general, b. Whai constitutes a partnership. c. The entity doctrine. d. Receivership as act of bankruptcy. II. When Partnership May be Adjudged Bankrupt. a. Statutory provision. b. Acts of bankruptcy by a partnership. c. Insolvency. d. Death, insanity, or infancy of a partner. III. Practice Before Adjudication. a. In general. b. Petition by partners where all do not join. c. Form of petition. IV. Adjudication. a. In general. b. Effect of form of adjudication on discharge. V. Jurisdiction Where Partners are Domiciled in Different Dis- tricts. VI. Trustees of Bankrupt Partnerships. a. In general. b. Choice of trustees. c. Powers in respect to individual estates. d. Separate accounts. e. Expenses. VII. Provability of Debts. a. In general. b. Claims of partnership against individual partners and vice versa. 8 114 The Law and Practice in Bankeuptcy. What Constitutes Partnership. [§ 5. VIII. Marshalling Assets and Distribution. a. So as to prevent preferences. b. Distribution. (1) In genekal. (2) Paetneeship and individual cbeditoes. c. What are firm assets and what are individual assets. d. Firm debts and individual debts. e. Proof against and dividends from each estate. IX. Where One or More Partners are Solvent. I. BANKRUPT PARTNERSHIP. a. Historical and general. — General Order VIII, relating to proceedings in partnership cases, should be read in connec- tion with this section.* All bankruptcy laws have specific provisions regulating the adjudication of partnerships and the interrelation of the debts and assets of the partnership and its members. The English statute here resembles our present and past laws; the interpretation of the two statutes is not, however, always identical. Section 36 of our law of 1867 is strikingly similar to § 14 of its predecessor of 1841. The present section expresses in fewer words all that those sections did, and something more. It really should be a subsection of § 4; for it treats of the third class of business entities, " who may become bankrupts." b. What constitutes a partnership. — The term " partnership " is not specifically defined in this act. By § 1 (19) it is included in the meaning of the term " person " and it is also provided in ^ 1 (6) that " corporations " include " limited or other partner- ship associations organized under laws making the capital sub- scribed alone responsible for the debts of the association." The section under discussion thus applies only to general partnerships. It does not extend to partnershipa by estoppel but such as are part- nerships as to creditors only.^ The provisions of the section relate to a partnership between the parties where there may be both joint and individual assets.^ The mere " holding out " of a person to 1. See General Orders in bank- a partnership, see In re Beckwith (D ruptcy, VIII, post. C, Pa.), 12 Am. B. R. 453, 130 Fed 2. In re Kenney (D. C, N. Y.), 3 475; In re Alden (Ref., Ohio) 16 Am. B. R. 353, 97 Fed. 554; Lett v. Am. B. R. 362. Youns (C. C. A., nth Cir.), 6 Am. B. 3. In re Kennev (V C NY) 3 E. 436, ion Fed. 798. As to what is Am. B. R. 353, 97 Fed. 554 ' Paetnees. 115 § 5.] The Entity Doctrine. be a partner is not of itself sufficient to bring the alleged partnership within the act.* With this limitation, however, the State decisions on partnership law seem controlling. Valuable precedents will also be found in numerous decisions under the law of 1867. An unincor- porated company doing business as a private bank under a state law giving it some of the privileges of a corporation is, nevertheless, a partnership." The mere fact that one person, having the title to real estate in his own name, pays some portion of the income thereof to another person does not establish that they are partners."^ Under all the cases it is necessary in order to proceed to adjudication that an actual partnership be shown." A partnership which has ceased to exist, but has remaining assets and debts, is considered as subsisting as to its creditors until its property is subjected to the satisfaction of their debts.*'' C, The entity doctrine, — But a partnership now is something other than that under the law of 1867. There the words were, " two or more persons who are partners in trade." Now it is " a partner- ship " that " may be adjudged a bankrupt." This phrasing, coupled with other clauses, has led to the doctrine that a partnership is in bankruptcy a legal entity'' — a joint relation where the identity of the members has been lost — and that, therefore, the individuals and the partnership are entities separate and distinct from each other." A partnership being a distinct entity, it owns its property and owes its 4. Jones v. Burnham, Williams & intending to form a corporation, Co. (C. C. A., 3d Cir.), 15 Am. B. R. which was never organized, associate 85, 138 Fed. 986. themselves in a mercantile business, 5. Burkhart v. German-American one contributing goods and the other Bank (D. C, Ohio), 14 Am. B. E. cash, which was deposited in bank 222, 137 Fed. 958. .and used for the business, there is a Sa. In re Lamon (D. C, N. Y.), partnership in fact, which may be 22 Am. B. K. 635, 171 Fed. 516. adjudicated bankrupt. Manson v. 6. In re Hudson Clothing Co. (D. Williams (C. C. A., 1st Cir.), 18 C, Me.), 17 Am. B. R. 826, 148 Fed. Am. B. R. 674, 153 Fed. 525, affg. 17 305; Rush v. Lake (C. C. A., 9th Am. B. R. 826, 148 Fed. 305, aflfd. Cir.), 10 Am. B. R. 455, 122 Fed. 22 Am. B. R. 22, 213 U. S. 453. 561 ; Buckingham v. First Nat'l Bank 6a. Holmes v. Baker & Hamilton (C. C. A., 6th Cir.), 12 Am. B. R. (C. 0. A., 9th Cir.), 20 Am. B. R. 465, 131 Fed. 192; Lott v. Young 252; In re Hirsch (D. C, N. Y.), 3 (C. C. A., 9th Cir.), 6 Am. B. R. Am. B. R. 44, 97 Fed. 571. 436, 109 Fed. 798; Buffalo Milling 7. See In re Meyers (C. C. A., 2d Co. V. Lewisburg Dairy Co. (D. C, Cir.), 3 Am. B. R. 559; 98 Fed. 976; Pa.), 20 Am. B. R. 279. In re Stein (C. C. A., 6th Cir.), 11 Am association formed for the Am. B. R. 536, 127 Fed. 547; In re purpose of dealing in real estate, McLaren (D. C., N. Y.), 11 Am. B. taking title thereto in the name of a R. 141, 125 Fed. 835; In re Perley trustee under a trust deed wherein (D. C, Mo.), 15 Am. B. R. 54, 138 the members agreed to share in the Fed. 927. profits and losses, is a partnership. 8. In re Sanderlin (D. C., N. Car.), Matter of Alden (Ref., Ohio), 16 6 Am. B. R. 384, 109 Fed. 857; In re Am. B. R. 362. Where two persons 116 The Law and Peactice in Bankedptcy. The Entity Doctrine. [§5. debts apart from the individual property of its members which it does not own, and apart from the individual debts of its members which it does not owe. It may be adjudged bankrupt, although the partners who compose it are not so adjudicated.' In other words, the firm must petition or be petitioned against ; if the latter, the firm, or a member of it acting within the scope of the partnership, must have committed the act of bankruptcy; and, if adjudication follows, the firm, eo nomine, must be adjudicated.®^ This doctrine is essentially different from that of the English law, where even if the firm be proceeded against, the adjudication must be against the partners individually.^* Our law and practice, prior to the present statute, were to the same effect. This new doctrine of entity, however, has already led to some decisions of far-reaching importance, and should be kept con- tinually in mind by the student or practitioner who would under- stand one of the most confusing branches of the law of bank- ruptcy.^^ The entity doctrine permits of the adjudication in bank- ruptcy of a partnership one of the members of which is insane,'^ but will not justify an adjudication where some of the alleged McMurtrey (D. C, Tex.), 15 Am. B. K. 427, 142 Fed. 853. 9. In re Bertenahaw (C. C. A., 8th Cir.), 19 Am. B. R. 577, 157 Fed. 363. The following cases are cited as establishing this proposition: In re Corcoran (Ref., Ohio), 12 Am. B. R. 283; In re Stein & Co. (C. C. A., 7th Cir.), 11 Am. B. R. 536, 538, 127 Fed. 547, 62 C C. A. 272; In re Mer- cur (C. C. A., 3d Cir.), 10 Am. B. R. 505, 122 Fed. 384, 58 C. C. A. 472; In re Farley (D. C, Va.), 8 Am. B. R. 266, 115 Fed. 359; In re Sanderlin (D. C, N. C), 6 Am. B. R. 384, 109 Fed. 857 ; Green River Deposit Bank v. Craig (D. C, Ky.), 6 Am. B. R. 381, 110 Fed. 137; In re Hale (D. C, N. C), 6 Am. B. R. 35, 107 Fed. 432; Strause v. Hooper (D. C, N. C. ), 5 Am. B. R. 225, 105 Fed. 590; In re Barden (D. C, N. C), 4 Am. B. R. 31, 101 Fed. 553; In re Meyer (C. C. A., 2d Cir. ) , 3 Am. B. R. 559, 98 Fed. 976, 39 C. C. A. 368; In re Russell (D. C, Iowa), 3 Am. B. R. 91, 97 Fed. 32; In re McFaun (D. C, Iowa), 3 Am. B. R. 66, 96 Fed. 592; In re Meyers (D. C, N. Y.), 2 Am. B. R. 707, 98 Fed. 408; In re Cebal- los & Co. (D. C, N. J.), 20 Am. B. R. 459, 464; Matter of Everybody's Market (D. C, Okl.), 21 Am. B. R. 925, 173 Fed. 492; In re Junek & Balthazard (D. C, W. Va.), 22 Am. B. R. 298, 169 Fed. 481. A partnership is a distinct entity, a "person" under § 1(19). Mills v. Fisher & Co. (C. C. A., 6th Cir.), 20 Am. B. R. 237, 239. The adjadication of a partner- ship draws to the court for adminis- tration the individual estate of the partners, though as individuals they have not been adjudicated. Matter of Latimer (D C, Pa.), 23 Am. B. R. 388, 174 Fed. 824; In re Stokes (D. C, Pa.), 106 Fed. 312. 9a. Where there is no adjudi- cation against the firm, assets may not be administered by the bank- ruptcy court, if there be one member not adjudicated, unless he consent. In such oases the unadjudicated part- ner has the right to wind up the firm, paying over only the share of the bankrupt partner to his trustee. Mills v. Fisher & Co. (C. C. A., 6th Cir.), 20 Am. B. R. 237. 10. Act of 1883, § 115; General Rules, 264. 11. In re Pincus (D. C, N. Y.), 17 Am. B. R. 331, 337, 147 Fed. 621, in which the court said: "The right to proceed in bankruptcy against a partnership as a legal entity is new> and before the act of 1898 was un- heard of." For interesting case re- lative to the result of a literal appli- cation of the doctrine of entity to uartnerships in bankruptcy, see In re Forbes (D. C, Mass.), 11 Am. B. R. 787, 128 Fed. 138. 12. In re Stein & Co. (C. C. A., 7th Cir.), 11 Am. B. R. 536, 127" Fed. 547. Paetnees. 117 §5-a.] When Partnership May be Adjudicated. members deny the existence and composition of the partnership.^* This doctrine prevents, in considering the value of the partnership property, the including of the homestead of one of the partners in the assets.^* d. Receivership as act of bankruptcy. — Under the original law, following the analogy of the corporation cases, it was held that the consent to or the appointment of receivers of a partnership was not an act of bankruptcy.^^ This is no longer true. Section 3-a (4), as amended, means that the appointment of a receiver of an in- solvent partnership is an act of bankruptcy.^* II. WHEN PARTNERSHIP SKAT BE ADJUDGED BANKRUPT. a. Statutory provision. — The statute provides that: " A partner- ship during the continuation of the partnership business or after its dissolution and before the final settlement thereof may be adjudged a bankrupt." During the continuation of the partnership business the partnership may be adjudged bankrupt. The limitation of the filing of petitions by or against a partnership foimded in the words " after the dissolution and before the final settlement thereof," is of little importance. It has been held that there can be no final settlement until all the debts are paid ;^^ in other words, that the existeaice of assets is not material to a partnership adjudi- cation. This is doubtless the law. It may be queried, however, whether, if a partner can in an individual proceeding secure a discharge that will be effective against his partnership liability,^* of what avail either to creditors or to the bankrupt is the adjudi- cation of a partnership which has no assets ? In other words, the limitation stated above may, in actual practice, where the partner- 13. In re McLaren (D. C, N. Y.), Am. B. R. 763, 104 Fed. 235. See, 11 Am. B. R. 141, 125 Fed. 835. also. In re Mercur (D. C, Pa.), 8 14. In re McMurtrey (D. C, Tex.), Am. B. R. 275, 116 Fed. 655. 15 Am. B. R. 427, 142 Fed. 853. This 16. Compafe discussion under § doctrine has been carried even so 3-a(4), ante. far as to require the payment of the 17. In re Levy, etc. (D. C. N. Y.) statutory fees for partnerships and 2 Am. B. R. 21, 95 Fed. 812- In re each of the individuals in In re Bar- Meyers, 96 Fed. 408 ; In re ' Hirsch den (D. C, N. C), 4 Am. B. R. 31, (D. C, N. Y.), 3 Am. B. R. 344, 97 101 Fed. 553, and In re Farley (D. Fed. 571. But Royston v. Wies (C C, Va.), 8 Am. B. R. 266, 115 Fed. C. A., 5th Cir.), 7 Am. B. R. 584, 112 359, though the soundness of these Fed. 962, seems to imply that lapse rulings has been frequently chal- of time is equivalent to a settlement. l«nged. Compare Holmes v. Baker & Hamil- 15. Vaccaro v. Bank (C. C. A., 6th ton (C. C. A., 9th Cir.), 20 Am B Cir.), 4 Am. B R. 474, 103 Fed. 436; R. 252. Davis V. Stevens (D. C, S. Dak.), 4 18. See under § 14, post. See, also, 118 The Law and Peactioe in Bankbuptcy. Acts of Bankruptcy by Partnership. [§ 5-a. ship has no assets, amount to an absurdity. In other respects the limitation is declaratory of the law. The mere dissolution of a copartnership does not destroy its existence as to its creditors. It was otherwise undeir the law of 1867.^* The individual assets of members of a firm may be administered by the court so far as may be necessary to settle the partnership affairs, although such mem- bers are not individually declared to be bankrupt.*" b. Acts of bankruptcy by a partnership. — The general rule that whatever a partner does within the scope of the partnership binds the other partners applies to the commission of acts of bankruptcy. Since a partnership is now an entity, petitions which, under the previous law, would not confer jurisdiction because the act of bankruptcy was not committed by all the partners,*^ are now suffi- cient. GeneraLLy speaking, the commission of an act of bankruptcy as to the partnership property by either partner amounts to an act of bankruptcy by the firm.*^ It has thus been held that even the fifth act of bankruptcy, when committed by one partner, binds the copartnership f^ on the other hand, the embezzlement of the funds of the partnership by an absconding partner is not an act of bankruptcy.** The commission of an act of bankruptcy by the partners as to his individual property has been held insufficient to sustain proceedings againsit the firm.^^ If a partner out of his individual estate prefers one of his own or one of the firm creditors, it is not an act of bankruptcy for which the firm may be adjudged bankrupt.*"* Where the administrator of a deceased partner for instance, In re Feigenbaum (D. 274; In re Shapiro (D. C, N. Y.), 5 C, N. Y.), 7 Am. B. R. 339. Am. B. R. 839, 106 Fed. 839. 19. See cases cited in In re Hirsch 22. In re Meyer (C. C. A., 2d Cir.), (D. C, N. Y.), 3 Am. B. R. 344, 97 3 Am. B. R. 559, 98 Fed. 976, affirm- Fed. 571. ing Bank v. Meyer (D. C, N. Y.), 1 20. Dickas v. Barnes (C. C. A., 6th Am. B. R. 565, 92 Fed. 896. To same Cir.), 15 Am. B. R. 566, 72 C. C. A., eflfect, In re Grant Bros. (D. C, N. 261, 140 Fed. 849; Matter of Wing Y.), 5 Am. B. R. 837, 98 Fed. 976; Yick Co. (D. C, Hawaii), 13 Am. B. In re Borelli (D. C, Ct.), 16 Am. B. R. 757. R. 115, 142 Fed. 296. 21. Compare In re Richmond, Fed. 23. In re Kersten (D. C, Wis.), 6 Gas. 11,632. Am. B. R. 516, 110 Fed. 929. Scope of partnership. — Where 24. Davis v. Stevens (D. C, S. the act complained of was in Dak.), 4 Am. B. R. 763, 104 Fed. 235. the scope of the partnership busi- 25. Hartman v. Peters (D. C, ness it may constitute an act Pa.), 17 Am. B. R. 61, 146 Fed. 82. of the firm and be sufBcient to See under former law In re Redmond, justify the adjudication in bank- Fed. Cas. 11,632; In re Penn, Fed. ruptcy of the firm. In re Ker- Cas. 10,927. sten (D. C, Wis.), 6 Am. B. R. 516, 25a. Mills v. Fisher & Co. (C. C. 110 Fed. 929; In re Duguid (D. C, A., 6th Cir.), 20 Am.- B. R. 237, 241, N. C-* 3 Am. B. R. 794, 100 Fed. in which the court said : " The appli- Paetnees. 119 1 5-a.] Insolvency. applies for the appointment of a receiver to wind up the partner^ ship, upon the surviving partner announcing his intention of not exercising his statutory right to take the interest of his deceased partner at the appraised value, such surviving partner does not commit an act of bankruptcy by joining in the application for the receiver.^* If the insolvency of the partnership vi^as one of the substantial reasons for the appointment of a receiver the partneir- ship may be adjudicated a bankrupt.^'' A general assignment by a partnership and each of the individual members thereof is an act of bankruptcy by the partnership and the partners.^* The filing of a petition in bankruptcy by one partner against his co- partnership is not an act of bankruptcy on the part of the part- n©rsihip.^*°' "Where an execution was levied after the dissolution of a partnership, the failure to discharge it is an act of bank- ruptcy by all the members of the firm, for which it and all the partners may be adjudged bankrupt.*®'' c. Insolvency. — In determining the question of insolvency the individual property of the partners should be considered.** Where the assets of a partnership, together with the individual properties of each partner, exceeds their liabilities, the partnership is not insolvent.*** It has been well said that this principle is at variance with the universal doctrine that under the present bankruptcy act cation by one partner of his individ- lent to a general assignment and will ual property to the payment of one not support an involuntary adjudica- firm creditor would be an individual tlon in bankruptcy of the partnership, act, and not the joint act of the firm, In re Boyd v. Boyd Fry Stove & and therefore not an act for which China Co. (Eef. Ga.), 20 Am. B. R. the firm could be adjudged bank- 330. rupt." 28a. In re Ceballos & Co. (D. C, 26. Moss Nat'l Bank v. Arend (C. N. J.), 20 Am. B. R. 459. C. A., 6th Cir.), 16 Am. B. R. 867, 28b. Holmes v. Baker & Hamilton 146 Fed. 351. (C. C. A., 9th Cir.), 20 Am. B. R. 27. In re Beatty (C. C. A., 1st 262. Cir.), 17 Am. B. R. 738, 150 Fed. 293. 29. In re Perley (D. C, Mo.), 15 28. Green River Deposit Bank v. Am. B. R. 54, 138 Fed. 927. Craig Bros. (D. C, Ky.), 6 Am. B. 30. Vaccaro v. Security Bank of R. 381, 110 Fed. 137. Where such an Memphis (C. C. A., 6th Cir.), 4 Am. assignment is made the partnership B. R. 474, 103 Fed. 436, 43 C. C. A. should be adjudged bankrupt irre- 279. See, also. In re Forbes (D. C.[ spective of the question of its insol- Mass.), 11 Am. B. R. 787, 791, 128 vency. West Co. v. Lea, 2 Am. B. R. Fed. 137; Davis v. Stevens (D C S 463, 174 U. S. 590. Dak.), 4 Am. B. R. 763, 772, 104 Fed. Where an application for a re- 235; In re Blair (D. C, N. Y.), 3 ceiver is made by a partnership un- Am. B. E. 588, 99 Fed. 76 ; In re Boyd der a State law, and a temporary re- v. Boyd Fry Stone & China Co. (Ref. ceiver is appointed, it is not equiva- Ga.), 20 Am. B. R. 330. 120 The Law and Peactioe in Bankeuptct. Death, Insanity or Infancy of Partner. [§ 5-a. a paxtnersihip is a legal entity, separate from the partnera who compose it.** d. Death, insanity, or infancy of a partner. — The estate of a deceased debtor cannot in this country be adjudged a bankrupt.*^ It follows that theire can be no partnership adjudication against a firm, one member of which is dead.** The surviving partner can atill be adjudged either voluntary or involuntary bankrupt as an individual and as survivor.** The court of bankruptcy may thereby obtain jurisdiction of the partnership estate, or by consent, if in the hands of an administrator f^ and the estate of the deceased partner is in any event still liable to pay the firm debts.** A trufiitee in bankruptcy of a surviving partner may not dose the affairs of the partnership and proceed as though the surviving partner was not a bankrupt; all that the trustee can do is to take the remaining interest of the bankrupt partner after the firm obligations have been paid.*^ This doctrine of the lack of juris- diction of the court of bankruptcy to adjudicate as to the bank- ruptcy of a partnership after the death of one partner is not recognized or upheld by some of the later cases. There is an 31. In re Bertenshaw (C. C. A., Contract providiag for con- 8th Cir.), 19 Am. B. R. 577, 588, 157 tinnance in case of death. — Fed. 363; Matter of Everybody's Where a partnership contract pro- ^'"'^^L<5-.^-,ii''^-^' ^^ "*■"■ ^' ^' ""^^^ ^^^^ "P"'^ *!>« ^^^^^ °f one Insolvency of partnership.- Partner, the partnership should be The case of In re McMurtrey v. continued by the survivors for a cer- Smith (D. C, Tex.), 15 Am. B. E. tain period, the partnership and the 427, 142 Fed. 853, is analogous to surviving partners may be adjudi- the case last cited. It was there cated involuntary bankrupts. In re held that upon the question of the in- Coe (D. C, N. Y.), 19 Am. B. R. 618, solvency of a partnership, sought to 154 fed. 162. If the adjudication has be adjudged bankrupt, the firm and ^een made, it cannot be attacked col- its individual members are strangers , , „ ,„., ■„ oat. to each other, and . homestead, the ^^*'J^f "y," „^'''°° „''■ ^^"' ^ ^°'- ^- individual property of one partner, "■■ ^^^' ^l" "a. 629. may not be counted as part of the 34. In re Pierce (D. C, Wash.), partnership property. 4 Am. B. R. 489, 102 Fed. 977; Vac- 32. Note, pp. 96, 97, ante. caro v. Security Bank (C. C. A., 6th VHiere a partnership is dis- Cir.), 4 Am. B. R. 474, 103 Fed. 436; solved by death of a partner it is Briswalter v. Long, 14 Fed. 153; In not subject to bankruptcy, and the re Stevens, Fed. Cas. 13,393. voluntary petition in bankruptcy of 35. In re Pierce (D. C, Wash.), the surviving partner only affects his 4 Am. B. R. 489, 102 Fed. 977; Bris- individual estate. In re Evans (D. waiter v. Long, 14 Fed. 153. C, Ga.), 20 Am. B. R. 406. 36. Vaccaro v. Security Bank (C. 33. In re Temple, Fed. Cas. 13,825; C. A., 6th Cir.), 4 Am. B. R. 474, 103 Adams v. Terro, 4 Fed. 802; Vaccaro Fed. 436. v. Security Bank (C. C. A., 6th Cir.), 37. Moses v. Pond (Sup. Ct., St. 4 Am. B. R. 474, 103 Fed. 436, 43 C. Lawrence), 4 Am. B. R. 655. C. A. 279. Paktnees. 121 § 5-a.] Death, Insanity or Infancy of Partner. apparent conflict of authority upon this question.** The only difficulty attending upon adjudication in such a case is the con- sequent interference with the administration of the probate court of the estate of the deceased partner. In the absence of express statutory authority it would seem more consistent to leave the creditors to their remedy in the probate court. The apparent lack of jurisdiction in the bankruptcy court to adjudicate the bankruptcy of a partnership where one of the members is dead is unfortunate, but it leads to confusion rather than denial of justice. The rights' of creditors, in all ordinary cases, are fully conserved even though the administration of assets may be in two courts. The death of a partner after adjudication does not affect the proceeding.** The effect of insanity of the alleged bankrupt on the jurisdiction of the court has already been noted.*" Con- ceding that an insane person may not be adjudicated a bankrupt it has been held, neveirtheless, that a partnership of which he was or is a member may be so adjudicated, and the firm property applied to the payment of the firm debts.*^ There is the same difficulty with this question as there is with that relating to the effect of the death of one of the partners upon the jurisdiction of the court. The statute does not apparently authorize the inter- vention of committees, in involuntary proceedings against the lunatics they represent, so that where such committees have been appointed in proceedings to determine judicially the incompetency of a person, the jurisdiction of the State court would seem to supersede that of a court of bankruptcy and thus preclude the administration of the lunatic's estate in a proceeding instituted to adjudicate the bankruptcy .of a partnership of which he was a member. If one of the partners is an infant the partnership itself may be adjudicated bankrupt and so may the individual members thereof who are of age, or the petition will be dis- missed as to the partner who is an infant.*^ 38. In re Stein & Co. (C. C. A., 40. See Bankr. Act, § 4, ante. 7th Cir.), 11 Am. B. R. 536, 127 Fed. 41. In re Stein & Co. (C. C. A., 547; In re Coe (D. C, N. Y.), 19 Am. 7th Cir.), 11 Am. B. R. 536, 127 Fed. B. R. 618, 154 Fed. 162, although in 547. See, also. In re Ives (C. C. A., this case the partnership agreement 6th Cir.), 7 Am. B. R. 692, 113 Fed. expressly provided for the continu- 911. ance of the partnership business for 42. In re Duguid (D. C, N. C), a certain period after the death of 3 Am. B. R. 794, 100 Fed. 274; In re either partner. Dunningan (D. C, Mass.), 2 Am. B. 39. See Bankr. Act, § 8, post. R. 628, 95 Fed. 428. 122 The Law and Practice in Bankeuptct. Petition by Partners. [§ 5-a, III. PRACTICE BEFORE ADJUDICATION. a. In general. — If all the partners petition voluntarily, the proceeding prior to adjudication is identical with an indi- vidual petition. The owing of debts,*^ and the facts as to residence, domicile, or principal place of business",** must at least appear on the face of the petition to confer jurisdiction. Conversely, if the petition be involuntary, the facts as to the partners not being included in either of the excepted classes and owing at least $1,000,*'' as to the provable debts of the petitioners and the number of the creditors,*® as to the commission of an act of bankruptcy within four months,*^ and, in cases where insol- vency is necessary to the act, that it existed at the time of its commission and also at the time of the filing** must clearly appear or the court will not acquire jurisdiction. It must also appear afR^rmatively that both the partnership as an entity and the in- dividuals! composing it were and are insolvent at the times men- tioned.*^ A petition to have a partnership adjudicated bankrupt nunc pro tunc, the purpose of which is to overturn transactions already closed, vnll usually be refused.®" If an issue is raised as to the partnersliip in an involuntary proceeding, the burden is on the petitioners to show that there was a partnership.^^ b. Petition by partners where all do not join. — It has been held, following the entity doctrine, that separate petitions must be filed by the firm and by the individuals.®^ The better opinion is, how- ever, to the contrary, viz., that but one petition need be filed.®^ Where some but not all the partners file a voluntary petition the proceeding is voluntary as to the petitioning partners, but in- 43. Bankr. Act, § 4-a. 103 Fed. 436. Compare In re Berten- 44. Bankr. Act, § 2(1). shaw (C. C. A., 8th Cir.), 19 Am. B. 45. Bankr. Act, § 4-b. R. 577, 157 Fed. 363. 46. Bankr. Act, § 59-b. 50. In re Mercur (D. C, Pa.), 8 47. Bankr. Act, § 3-a. See In re Am. B. R. 275, 116 Fed. 655. Shapiro (D. C, N. Y.), 5 Am. B. R. 51. Jones v. Burnham (C. C. A., 839, 106 Fed. 495; In re Grant (D. 3d Cir.), 15 Am. B. R. 85, 138 Fed C, N. Y.), 5 Am. B. R. 837, 106 Fed. 986. 496; In re Meyer (C. C. A., 2d Cir.), 52. In re Farley (D. C, Va.), 8 3 Am. B. R. 559, 98 Fed. 976. Am. B. R. 266, 115 Fed. 359; In re 48. See p. — . ante. Barden (D. C, N. C), 4 Am B. R. 49. In re Blair (D. C, N. Y.), 3 31, 101 Fed. 53. Am. B. R. 588, 99 Fed. 76; In re 53. In re Gay (D. C, N. H.), 3 Meyer (C. C. A., 2d Cir.), 3 Am. B. Am. B. R. 529, 98 Fed. 870; In re R. 559, 98 Fed. 976; In re Miller, 104 Langslow (D. C, N. Y.), 1 Am. B. R. Fed. 764; Vacearo v. Security Bank 258, 98 Fed. 969. (C. C. A., 6th Cir.), 4 Am. B. R. 474, Paetnkes. 123 § 5-a.] Petition by Partners. voluntary as to the non-joining partners who, upon notification, do not join therein."* In such a case it is not necessary to allege or prove as to non-consenting partners the commission of an act of bankruptcy, or, in fact, any of the jurisdictional facts peculiar to involuntary applications;*" but such partner may set up the defense of solvency, and upon that issue he is entitled to trial by jury."® Under General Order VIII, the non-joining or absentee partner is entitled to the same notice as if petitioned against, and to answer to the petition and to allege and prove any of the facts which would be pertinent to a proceeding against the partner- ship."'' A convenient form for notice to the non-consenting part- ners is found in the case of In re Murray?^ This notice, of course, may be given by publication ;"* but such notice is so far jurisdic- tional that the consent of non-joining partners after adjudication of the bankruptcy of the firm will not render it valid.®" It seems that immediately the partnership adjudication is granted, the proceeding again becomes strictly voluntary.®^ It may be doubted whether the court has jurisdiction to adjudge the nonconsenting insolvent partner a bankrupt individually unless the prayer of the petition asks individual adjudications,®^ but, under principles discussed later in this section, that would seem immaterial, the partnership adjudication drawing to itself of necessity the admin- istration of the individual estates as well. The rule is different where the non-consenting partner proves to be solvent. Where 54. In re Murray (D. C, Iowa), out notice to the non- joining partner 3 Am. B. R. 601, 96 Fed. 600; In re is irregular and will not warrant the Carleton (D. C, Mass.), 8 Am. B. R. adjudication of the firm as bank- 270, 115 Fed. 246. rupts; such a defect is not cured by 55. In re Carleton (D. C, Mass.), subsequent unverified consent signed 8 Am. B. E. 270, 115 Fed. 246. by the attorneys for the non-joining 56. In re Forbes (D. C, Mass.), partners. In re Altman (D. C, N. 11 Am. B. R. 787, 128 Fed. 137. Y.), 2 Am. B. R. 407, 95 Fed. 263. 57. It seems that notice to an un- 58. (D. C, Iowa), 3 Am. B. R disclosed partner is not necessary. In 601, 96 Fed. 600. re Harris (D. C, Ohio), 4 Am. B. 59. See Bankr. Act, § 18, post. R. 132. As to non- joining partner 60. In re Russell (D. C, Iowa), being entitled to notice of proceeding, 3 Am. B. R. 91, 97 Fed. 32; In re etc., see In re Russell (D. C, Iowa), Murray (D. C, Iowa), 3 Am. B. R. 3 Am. B. R. 91, 97 Fed. 32; In re 601, 96 Fed. 600; In re Altman (D. Elliott, 2 N. B. N. 350; In re Moore, C, N. Y.), 2 Am. B. R. 407, 95 Fed. 9,750 Fed. Cas., 5 Biss. 79; In re 263. Prankard, Fed. Cas. 1,136, 1 N. B. R. 61. Compare In re Murray (D. C, 297; In re Lewis, Fed. Cas. 8,311, 2 Iowa), 3 Am. B. R. 601, 96 Fed. Ben. 96; In re Fowler, Fed. Cas. 600, with Medsker v. Bonebrake, 108 4,998, 1 Low. 161. U. S. 66. A petition to adjudge <* part- 62. Chemical Bank v. Meyer, af- aerahip a voluntary bankrupt which firmed In re Meyer (C. C. A., 2d is made by some of the partners with- Cir. ) , 3 Am. B. R. 559, 98 Fed. 976. l^'l The Law and Practice in Bankruptcy. Fonn of Petition. [§ 5-a. the same persons are members of distinct firms, it was held under the former law that they could not petition together.*^ The entity doctrine seems to intensify rather than weaken this ruling. Where the petitioners are members of different partnerships with others who do not join, adjudication will undoubtedly be refused, but with leave to refile in the form of separate petitions.** It has been held that a partner may file a petition praying for adjudication against his partnership, either on the sole ground of the insolvency of the part- nership and all its partners or on the sole ground that the partnership has, through one or more of the non-joining partners, committed an act of bankruptcy. "** c. Form of petition, — Form No. 2 should not be relied on too implicitly. The prayer of the petition should at least ask for an adjudication of the individuals as well as of the firm.''^ Careful prac- tice also seems to command that words indicating that both the part- ners and the individuals owe debts that they cannot pay in full, and offering to surrender both firm and individual properties, be inserted. It may be that the mere statement that debts are owed is sufficient to cover the jurisdictional requirement that partnerships cannot be adjudged bankrupt after the final settlement thereof, but it is better to allege that there has been no such settlement in very words; it has been held insufficient to state that the " co-partners are insolvent.'"' If an act of bankruptcy is alleged in a petition against a partnership, consisting of a preferential transfer and a transfer with intent to hinder and delay creditors, the petition is sufficient though it neither alleges the insolvency of the individual partners, nor that the solvent partners, if any, consent to the adjudication.'"" If one partner lives in another jurisdiction, that fact should be stated. If a partner refuses to join, that fact should be stated, and the prayer of the peti- tion should include a request for the issue of the usual subpoena to him as if to an alleged bankrupt. The schedules should be complete,"' both for the firm and for each partner. Where the petition is against a copartnership even greater care should be used. Here Form No. 3 is not reliable other than by way of suggestion ; it does not contain all the jurisdictional allegations."' 63. In re Wallace, Fed. Cas.. 66. Idem. 17,095. 66a. Matter of Everybody's Market 64. As to the amendment of peti- (jj. C, Okl.), 21 Am. B. E. 925, tions in these cases, see In re Freund 173 Fed. 492. (D. C, Iowa), 1 Am. B. R. 25; In re 67. That is A (1), (2), (3), (4), McFaun (D. C, Iowa), 3 Am. B. R. (5), and B (1), (2), (3), (4), (5), 66, 96 Fed. 592. and (6), with the summary. 64a. In re Ceballos & Co. (D. C, 68. As to these allegations, see N. J. ) , 20 Am. B. R. 459. ante, and compare " Acts of Bank- 65. Matter of Wing Yick Co. (D. ruptcy by a Partnership," and similar C, Hawaii), 13 Am. B. R. 757. paragraphs in this section, post. Paetnebs. 125 § 5-a.] Effect of Form of Adjudication on Discharge. IV. ADJUDICATION. a. In general. — A partnership may be adjudicated bankrupt irrespective of any adjudication as to the individual partners.*" The adjudication may be in the name of an ostensible partner, where it appears that such name is that under which the partnership does business.'" The entity doctrine requires that the adjudication, while substantially as prescribed by Form No. 13, should declare, after modifying its recitals slightly, that "the copartnership known as Smith & Jones, composed of John Smith and George Jones, and the said John Smith and George Jones as individuals'^ be and each is hereby declared and adjudged bankrupt." If, however, the petition asks for a partnership adjudication only, that alone should be granted.'" The form of the adjudication is, however, important only to the bankrupts. The adjudication should conform to the contents of the petition and that which is not asked for should not be granted ; so where the bankruptcy of the partnership itself is sought independent of that of the individual partners, adjudication should not be granted in respect to the partners although it may have been shown that the partners were each of them insolvent." The order of adjudication is only conclusive against those entitled to be heard in the proceedings; it is not conclusive as to the existence of a partnership or the title to its assets as against a trustee of one of the alleged partners who was not permitted to intervene."* b. Effect of form of adjudication on discharge. — If the adjudi- cation is of the firm only, the discharge following it will be a bar only to firm debts.'* If the application is for individual bank- ruptcies only, the discharge will not affect firm liabilities.'^ But, 69. In re Meyer (C. C. A., 2d Am. B E. 35, 107 Fed. 432; Dodge v. Cir.), 3 Am. B. R. 559, 98 Fed. 977. Kaufman (Sup. Ct., N. Y.), 15 Am. See, also, Matter of Levingston (D. B. R. 542, 46 N. Y. Misc. 248. C, Hawaii), 13 Am. B. R. 357. Text Where there is only a partnership cited in Matter of Latimer (D. C, adjudication, individual discharges Pa.), 23 Am. B. R. 388, 174 Fed. cannot be granted. In re Pincus 824. (D. C, N. Y.), 17 Am. B. R. 331, 70. Matter of Harris (D. C, 147 Fed. 621; In re Bertenshaw (C. Ohio), 4 Am. B. R. 132, 108 Fed. 517. C. A., 8th Cir.), 19 Am. B. R. 577, 71. This latter only if individual 157 Fed. 363. bankruptcy has been asked. Individnal estates. — The deci- 72. See Bank v. Meyer (D. C, N. sions to the effect that the bankrupts Y.), 1 Am. B. R. 565, 92 Fed. 896, of a partnership do not necessarily and In re Sanderlin (D. C, N. C), 6 draw to the court of bankruptcy the Am. B. R. 384, 109 Fed. 857 ; though administration of the individual es- the doctrine of the former case seems tates of the partners are in point to be accepted with cauti«n in In re upon tms proposition. In re Stein Stokes (D. C, Pa.), 6 Am. B. R. 262, (C. C. A., 7th Cir.), 11 Am. B. R. 1C6 Fed. 312. 536, 127 Fed. 547, 62 C. C. A. 272; 73. See In re Meyer (C. C. A., 2d Strause v. Hooper (D. C, N. C), 5 Cir.), 3 Am. B. R. 559, 98 Fed. 976; Am. B. R. 225, 105 Fed. 590; In re In re Ceballos & Co. (D. C, N. J.), Duguid (D. C, N. C), 3 Am. B. R. 20 Am. Ji. R. 467. 794, 799, 100 Fed. 274; In re Blair 73a. Manson v. Williams (Sup. (D. C, N. Y.), 3 Am. B. E. 588, 99 Ct.), 22 Am. B. R. 22, 213 U. S. 453, Fed. 76. affg. 18 Am. B. R. 674. 75. In re Myers (D. C, N. Y.), 74. In re Hale (D. C, N. C), 6 126 Tjhe Law and Peactice in Bankruptcy. Effect of Form of Adjudication on Discharge. [§ 5-a. while in the first case it would seem necessary that the individuals file new separate petitions, in the latter case an amendment of the petition and adjudication praying for the partnership bankniptcy has been allowed. Where new individual petitions are filed, they may be consolidated with the pending partnership proceeding. Where, however, the adjudication is of the individual partners only, a question has arisen which is still undetermined. Following the entity doctrine and the controlling authorities under the former law,''^ the earlier cases held that to cut partneirship debts there must be a partnership adjudication.'''' The later cases, however, seem to hold that a discharge resting on an individual adjudication will, provided there be no firm assets and the firm creditors are sched- uled and receive notice, be an available bar to subsequent suits on the bankrupt's partnership liabilities.''^ While such a view is necessarily an exception to the eintity doctrine, it seems more rea- sonable. The Meyers case''*^ is clearly distinguishable, for there there were firm assets.''* If there are no firm assets and the firm is insolvent, a judgment on a partnership debt may be released by the discharge of an individual partner.*" It has also been held that where a partner is adjudicated a bankrupt upon his indi- vidual petition, which is silent as to partnership assets and lia- bilities, although his schedules disclose both individual and firm debts, the bankrupt is not entitled to a discharge from partner- ship debts, although the firm no longer exists and is without assets.*' The cases cited indicate the unsatisfactory situation of 3 Am. B. R. 260, 97 Fed. 753; In re Mfg. Co. v. McElwaine (D. C, Ind.), Morrison (D. C, Tex.), 11 Am. B. R. 5 Am. B. R. 751; In re Feigenbaum 498, 127 Fed. 186. But compare In re (D. C, N. Y.), 7 Am. B. R. 339; In Feigenbaum (D. C, N. Y.), 7 Am. re Kaufman (D. C, N. Y.), 14 Am. B. R. 339. B. R. 393, 136 Fed. 262; Loomia v. 76. See Amsinck v. Bean, 22 Wall. Wallblom (Sup. Ct., Minn.), 13 Am. 395-405, and other cases cited in B. R. 687, 94 Minn. 392; Dodge v. Judge Brown's opinion in the Meyers Kaufman (Sup. Ct., N. Y.), 15 Am. case, immediately ■post. B. R. 542, 46 N. Y. Misc. 248; N. Y. 77. In re Freund (Ref., Iowa), 1 Institution for the Deaf & Dumb v. Am. B. R. 25; In re Meyers (D. C, Crocket (Sup. Ct., N. Y.), 17 Am. B. N. Y.), 2 Am. B. R. 707, 96 Fed. 408. R. 233, 117 N. Y. App. Div. 269. In the case of In re Mercur (C. C. A., 78a. 2 Am. B. R. 707, 96 Fed. 408. 3d Cir.), 10 Am. B. R. 505, 122 Fed. 79. Likewise of In re McFaun (D. 384, 58 C. C. A. 472, it was held that C, Iowa), 3 Am. B. R. 66, 96 Fed. a trustee in bankruptcy of the in- 592, where there was no notice to firm dividual estates of all the partners creditors. who had been adjudged bankrupts SO. Berry Bros. v. Sheehan (Sup. could not draw to himself and ad- Ct., N. Y.), 17 Am. B. R. 322, 115 minister the property of the unadjudi- N. Y. App. Div. 488. cated partnership. 81. In re Morrison (D. C, Tex.), 78. In re Laughlin (D. C, Iowa), 11 Am. B. R. 498, 127 Fed. 186; In 3 Am. B. R. 1, 96 Fed. 589; Jarecki Paetnees. 127 § 5-a.] Partners Domiciled in Different Districts. the law on this subject. The true rule seems to be, however, as above stated, that where there are no firm assets and the firm creditors are duly scheduled and receive notice, the individual discharge of a bankrupt partner should operate as a discharge from the partnership debts. Of course, if the adjudication is of the partnership but not of all the partners, individual creditors of the non-consenting insolvent partner are not affected by the dis- charge.** V. JUKISDICTION -WHEnE PABTNERS AltE DOMICILED IDT DIFFEIUBirr DISTRICTS. Subsection c provides that : " 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 part- nership and individual property." The analogous provisions in the law of 186Y was : " if such copartners reside in different districts, that court in which the petition was first filed shall re- tain exclusive jurisdiction over the case." This clause did not occur in the law of 1841. General Order XVI under the law of 1867 is substantially the same as present General Order VI, the last two sentences of which are as follows : " 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 sshall take and retain jurisdiction over all proceedings in such bankruptcy until the same shall be closed; and if such pe- titions shall be filed in the same district, action shall be first had upon the one finst 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 court should proceed with the case, order them to be transferred to that court." It will be noticed that this provision supplements subdivision c and gives it effect. The statute and the general order modified the rigid rule of the former law, that the court which has acquired jurisdiction of one of the partners had exclusive jurisdiction over both subject matter and of the partners.^^ Under the general order the court retain- re Laughlin (D. C, Iowa), 3 Am. B. Where the partners resided in R. 1, 96 Fed. 589. districts other than that which was 82. Compare, for collateral attack the place of the partnership business, and generally on the effect of dis- it was held under the former law that charges on partnership liabilities, an involuntary petition against the §§ 14 and 17, post. firm could be filed only in the district 83. In re Boylan, Fed. Cas. 1,757; where the business was conducted. Tn re Penn, Fed. Cas. 10,927. Cameron v. Canieo, Fed. Cas. 2,340. 128 The Law and Peactice in Bankeuptct. Trustees of Bankrupt Partnership. [§ 5-b. ing jurisdiction may transfer the case to another court for the greater convenience of the parties in interest, thus substituting the flexible rule of convenience of parties in the place of the rigid rule of the former lavp.** The proceeding may be brought in another district where the partner might have petitioned as an individual.^^ VI. TRUSTEES OF BANKRUPT PARTNERSHIPS. a. In general. — This section contains certain special pro- visions applicable to trustees of bankrupt partnerships. Ex- cept as otherwise expressly provided in this section the powers and duties of such trustees are the same as in the case of trustees of individuals. It will not be attempted under this section to declare rules governing in all respects partnership trustees in the perfoirmance of their duties. Subdivision b provides, that : " In other respects (except as to the appointment of trustees) so far as possible the estate shall be administered as herein provided for other estates." b. Choice of trustees. — Subdivision b provides that " The cred- itors of the partnership shall appoint the trustee." This prefenence in the choice of the trustee was also contained in the acta of 1841 and 1867.*® There is here an apparent discrimination in favor of the joint creditor, for the individual creditor has a petitioning creditor's debt in proceedings against the copartnership;*'' so also firm creditors can vote for the trustees of the individual estates ;** but an individual creditor of one of the partners may not vote at a meeting of the firm creditors for a partnership trustee.** This irestriction only applies in the case of a joint petition and not where a petition is separately brought against an individual partner.*" The reason for the apparent preference of firm over individual creditors will appear hereafter.®^ 84. In re Waxelbaum (D. C, N. C. A., 2d Oir.), 8 Am. B. R. 713, 117 Y.), 3 Am. B. R. 392, 98 Fed. 589. Fed. 294. As to the tranafer of cases where 86. Compare In re Phelps, Fed. petitions are filed against partners in Cas. 11,071. diflferent districts, see Bankr. Act, § 32, 87. In re Mercur (D. C, Pa.), 2 post. This whole question of transfer Am. B. R. 626, 95 Fed. 634. for the convenience of parties is ably 88. In re Webb, Fed. Cas. 17,317. discussed in the case of In re Sears 89. In re Eagles & Crisp (D. C. (D. C, N. Y.), 7 Am. B. R. 279, 112 N. C), 3 Am. B. R. 733, 99 Fed. 696. Fed. 58. 90. In re Beck (D. C, Mass.), 6 85. In re Blair (D. C, N. Y.), 3 Am. B. R. 554, 110 Fed. 140. Am. B. R. 588, 99 Fed. 76, holding 91. For the method of choosing the also that the petition may be amended trustee, see Bankr, Act, §§ 44 and to show jurisdiction; In re Sears (C. 56, post. Paktnebs. 129 § 6-d-e.] Trustees; Provability of Debts. c. Powers in respect to individual estates. — On the appointment of a trustee of a partnership, he may take possession and admin- ister the property of one of the partners so far as is necessary to settle the partnership estate.*^ He becomes, by virtue of his office, the trustee of the assets of the individual partners.'* d. Separate account. — Subdivision d of this section requires the trustee to keep separate accounts of the partnership property and of the property belonging to the individual partners. This follows from the very nature of his duties and the interrelation of the debts and assets over vyhich he is given charge. There were similar clauses in the laws of 1841 and 1867. The necessity of keeping separate accounts is obvious.'* e. Expenses. — It is provided in subdivision e that " the expenses shall be paid from the partnership property and the individual property in such proportion as the court shall determine." There are no reported cases under the present law.'^ VII. PROVABILITY OF DEBTS. a. In general. — The provisions of § 63 of the bankruptcy act declaring the debts which may be proved and allowed against a bankrupt estate are applicable to debts against a partnership. A member of a partnership being liable for all of the partnership debts, a debt against the partnership is provable against the indi- vidual estate of the bankrupt member.*® b. Claims of partnership against individual partners and vice versa. — ^Any claim which one member of a firm has against it may be proven against the firm, and vice versa. The general rule con- fining firm creditors to firm assets and individual creditors to indi- vidual assets is discussed later. But this subsection does not per- mit a solvent partner to prove against the separate estate of his bankrupt partner until all the partnership creditoiB have been paid in full f nor a retired partner on notes received by him for 92. Dickas v. Barnes (C. C. A., 6th in general, see Bankr. Act, §§63 and Cir.), 15 Am. B. R. 566, 140 Fed. 849. 64, post. 99. In re Stokes (D. C, Pa.), 6 96. In re Hee (D. C, Hawaii), 13 Am. B. E. 262, 106 Fed. 312; In re Am. B. R. 8; In re Webb, Fed. Cas. Smith (D. C, Ind.), 2 Am. B. R. 9, 17,317; Wilkins v. Davis, Fed. Cas. 92 Fed. 35. 17,664; In re Frear, Fed'. Cas. 5,074. 94. In re Denning (D. C, Mass.), 97. In re Stevens (D. C, Vt.), 5 8 Am. B. R. 133, 114 Fed. 219. Am. B. R. 9, 104 Fed. 323; Emery v. 95. For expenses of administration Bank, Fed. Cas. 4,446. 9. 130 The Law and Peactice in Bankruptcy. Marshalling and Distribution of Assets. [§ 5-g. his interest in the firm."' It is, however, well settled that the right of subrogation between a partnership estate and the estate of a partner exists." Hence, when a retired partner is later compelled to respond to his partnership liability, because the continuing part- ner is unable to do so, he becomes subrogated to the claim of the creditors pro tanto, and thus may prove against the partnership estate as well as the separate estate of the bankrupt partner.'"' 100 VIII. MARSHAIXING ASSETS AND DISTRIBUTION. a. So as to prevent preferences. — The court is authorized by subsection g of this section to " marshal the assets of the partner- ship estate and individual estates so as to prevent preferences." There are as yet no adjudicated eases on the meaning of the words quoted. Manifestly, they and the clause in which they are found suppleinent and emphasize the first clause of the subsection. Whether "prefer- ences " here means a bankruptcy preference as defined in § 60-a is doubtful. Yet, the estate of the individual being often a creditor of the copartnership and vice versa, it is possible that the definition of "preference" there phrased may apply. It has been said to be " aimed at the fraud brought about by partners agreeing just before hankruptcy to change joint into separate estates," thus accomplishing preferences to the separate creditors.^""^ But it is hardly supposable that the partners so agreeing will be able to show themselves solvent at the time and, unless they can, the transaction becomes actually fraudulent and may be disregarded. b. Distirbution. — (1) In general. — It is provided in subsec- tion g that the court may marshal the partnership and individual €states, "and secure the equitable distribution of the property of the several estates," and subsection / provides for the appropriation of the net proceeds of the several estates to the payment of the debts either of the partnership or of the partner as therein directed. Where the adjudication is of the partnership only and there are no separate assets belonging to the individuals, administration and distribution follow the same practice and rules as in individual cases. Where, how- •ever, there are both joint and separate estates, especially where the court has not jurisdiction of all the members, complications result ■which may be troublesome and require careful treatment.^'^ (2) Partnership and individual creditors. — Subsection / pro- vides that the net proceeds of the partnership property shall be ap- 98. In re Denning (D. C, Mass.), to interfere with a just and equi- S Am. B. R. 133, 114 Fed. 219. table distribution may result from 99. In re Dillon (D. C, Mass.), 4 the action of partners calculated to Am. B. R. 63, 100 Fed. 627; In re convert partnership property into in- Bates (D. C, Vt.), 4 Am. B. R. 56, dividual assets, thus giving undue ad- 100 Fed. 263; In re May, Fed. Cas. vantage to individual creditors. In 9,327; In re Foot, Fed. Cas. 4,908. re Terens (D. C, W. Va.), 23 Am. 100. Compare generally on this B. R. 680, 688, 175 Fed. 495. subject §40 (3) of the English Act 101. Some of these complications of 1883, General Rule No. 293, and have already been discussed; another cases cited in Baldwin on Bankruptcy, class of them will be found under 8th ed., pp. 610-520. subsection h, post. 100a. The preferences supposed Paetneks. 131 I 5-f.] Partnership and Individual Creditors, propriated to the payment of the partnership debts and the net pro- ceeds of the individual estate of each partner to the payment of his individual debts. The surplus remaining after the payment of in- dividual debts may be distributed among partnership creditors; and the surplus remaining after the payment of partnership debts may be distributed among the individual creditors in proportion to the in- terest of each partner in the partnership assets.^"'* The rule of law phrased in the statute is found in almost the identical words in the statutes of 1841 and 1867.^"^ This is simple and, in most cases, easily applied. But it has been held subject to the exception that where there are no firm assets and no solvent living partner, the firm creditors share pari passu with the individual creditors.'"^ The exception itself is qualified by cases (1) which seem to overlook the necessity of the existence of a solvent living partner,^"* and (3) which question whether it is absolutely essential that there be no assets or merely not suflBcient assets to pay expenses of administration.^"^ The tendency is, however to cast aside this ancient and inequitable exception.^"" The opinion of lOla. In re Rice (D. C, Pa.), 21 Am. B. E. 205, 164 Fed. 514; Miller V. New Orleans Acid & Fertilizer Co. (Sup. Ct.), 21 Am. B. E. 417, 211 U. S. 496. A claim for personal taxes due a city from a member of a firm can- not be enforced out of firm assets until the firm creditors have been paid in full. Matter of Flatau (D. C, N. Y.), 21 Am. B. R. 352. In the administration of part- nership property in the courts, the creditors of the partnership have the right to the application of the part- nership property to the payment of the partnership debts in preference to individual debts of the respective partners. Sargent v. Blake (C. C. A., 8th Cir.), 20 Am. B. E. 115, 160 Fed. 57; In re Terens (D. C, W. Va.), 23 Am. B. R. 680, 175 Fed. 495. Where a bankrupt, prior to his adjudication, took over partnership property, agree- ing to pay partnership debts, the partnership creditors are entitled to payment out of the partnership property in advance of his indi- vidual creditors. In re Filmar (C. C. A., 7th Cir.), 24 Am. B. R. 194. Allowances to tbe widow and children of a deceased member of a bankrupt partnership cannot be made by a trustee out of the firm assets before the firm debts are paid, and a probate court has no authority to de- cree that such allowances be made. In re Dobert & Son (D. C, Tex.), 21 Am. B. R. 634, 165 Fed. 749. 102. The corresponding section of the English Act of 1883, § 40 (3), is as follows: (3) In the case of partners the joint estate shall be applicable in the first instance in the 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 a part of the joint es- tate. If there is a surplus of the joint estate it shall be dealt with as a part of the respective separate estate in proportion to the right and interest of each partner in the joint estate. (See, also, § 59 of the same act.) 103. Story on Part., § 380; Ex parte Sadler, 15 Ves. 52; Conrader V. Cohen (C. C. A., 3d Cir.), 9 Am. B. R. 619, 121 Fed. 801, 58 C. C. A. 249, affirming In re Conrader (D. C, Pa.), 9 Am. B. E. 85, 118 Fed. 676; In re Green (D. C, Iowa), 8 Am. B. E. 553, 116 Fed. 118. 104. In re Mills, Fed. Cas. 9,611; In re Knight, Fed. Cas. 7,880; In re Downing, Fed. Cas. 4,044. 105. In re Goedde, Fed. Cas. 5,500; In re McEwan, Fed. Cas. 8,783. Any firm assets available for distribution will defeat the right of firm creditors to dividends from the separate estates of the members until after the individual debts are paid. In re Blumer, 12 Fed. 489; In re Litchfield, 5 Fed. 47; In re Smith, Fed. Cas. 12,987;- In re Warwick, Fed. Cas. 9,181; In re Morse, Fed. Cas. 9,854. 106. In re Wilcox (D. C., Mass.), 2 Am. B. R. 117, 94 Fed. 84; In re Mills (D. C, Ind.), 2 Am. B. E. 667, 95 Fed. 26s): In re Daniels (D. C R. I.), 6 Am. B. R. 699, 110 Fed. 745; In re Corcoran (Ref., Ohio), 12 132 The Law and Peactice in Bankeuptcv. Firm and Individual Assets. [§ 5-i. Judge Lowell in the Wilcox case is an historical monograph of great value. It is to be hoped that it has sounded the knell of all excep- tions to the broad rule that joint creditors share in joint assets and in- dividual creditors in individual assets.^"' There are recent cases up- holding the opinion of Judge Lowell and it seems evident that the decided weight of authority favors the universal application of the rule that although there are no firm assets and no solvent partner^ the firm creditors may only participate in the surplus of individual assets after the payment of individual debts. ^°' This subsection treats- of administration in the bankruptcy court, and hence of the partner- ship and individual property, the title to which is in the bankrupt at the time the petition against him is presented to the court.^"*^ c. What are firm assets and what are individual assets. — Questions of this character frequently arise, sometimes from the nature of the property, but more often from transactions between the partners, or between the firm and one partner. Again, the test is substantially bona fides. If the firm be solvent and the transaction be in good faith, one member can purchase the assets or buy out the interest of the other partners.^"' But if the firm be insolvent, or if for any reason the transaction would be inequitable, it will be treated as void."" It is well settled also that real property purchased for partnership pur- poses with partnership funds, even though held in the name of an individual, is, as to the firm's creditors, personal property.^^"^ Premises used by the partnership for partnership purposes are presumptively partnership property.^'^ Generally speaking, the partnership property consists of its money, its stock in trade, its outstanding accounts, and all other property purchased by the firm's money ;^^^ while the individ- ual property consists of those chattels or rights possessed by the in- Am. B. K. 283; In re Henderson (D. Fed. Cas. 8,044; In re Eahley, Fed. C, W. Va.), 16 Am. B. R. 91, 128 Cas. 7,593. Fed. 527. 110. Compare § 5-g; and see In 107. In re Mosier (D. C, Va.), 7 re Rudwiek (D. C, Wash.), 4 Am. Am. B. R. 268, 112 Fed. 138. The B. R. 531, 102 Fed. 750; In re Byrne, view expressed in the text was ap- Fed. Cas. 2,270 ; In re Cook, Fed. Cas^ proved by Mack, referee, in In re 3,150; Collins v. Hood, Fed. Cas. Corcoran (Ref., Ohio), 12 Am. B. R. 3,015; In re Zug, Fed. Cas. 18.222. 283. 111. Thus, for instance, Qreen- 108. In re Janes (C. C. A., 2d wood v. Marvin, 111 N. Y. 423; see Cir.), 13 Am. B. R. 341, 133 Fed. In re Groetzinger (C. C. A., 3d Cir.)^ 912; In re Henderson (D. C, W. 11 Am. B. R. 723, 127 Fed. 814, af- Va.), 16 Am. B. R. 91, 142 Fed. 568, Arming 6 Am. B. R. 399; Taylor v. aff'd sub. nom Euclid Nat'l Bank v. Rasch, Fed. Cas. 13,801. And under Union Trust Co. (C. C. A., 4th Cir.), the English Bankr. Act, see Smith v. 17 Am. B. R. 834, 149 Fed. 975. Smith, 5 Ves. 193; Ex parte Hinds, 108a. Sargent v. Blake (C. C. A., 3 DeGex & S. 013; Ex parte Connell, 8th Cir), 20 Am. B. R. 115, 123, 160 3 Deac. 201. Fed. 57. 112. Osborn v. McBride, Fed. Cas. 109. In re Collier, Fed. Cas. 10,593; Featherstonhaugh v. Penwick, 3,002; In re Long, Fed. Cas. 8,476; 17 Ves. (Eng.) 308. In re Wiley, Fed. Cas. 17,656; In re 113. See Hiscock v. Jaycox, Fed. Montgomery, Fed. Cas. 9,727; In re Cas. 6,531; Osborn v. McBride, Fed.^ McEwen, Fed. Cas. 8,783; In re Lane, Cas. 10,593. Partners, 133 ? 5-f-g.] Firm and Individual Debts. dividual partner solely."* The fact that a life insurance policy was pledged to secure the payment of a partnership debt, does not make the policy partnership property.^" Property originally owned by one or more partners and used for partnership purposes may be joint or separate estate as agreed between the parties."" d. Firm debts and individual debts. — As a rule it will not be difficult to distinguish between firm obligations and individual obliga- tions.^^' Whenever a partnership name appears on commercial paper the firm is presumably bound, and the burden is on the firm to show that it is not liable.^^* So where a partnership endorses a promissory note for the accommodation of the maker the obligation is presumably that of the partnership and it becomes allowable against the partner- ship estate, in favor of a bona fide holder of the note.^" Any note or other obligation signed or endorsed in the firm name, the benefits of which accrued to the firm, is a partnership debt.^^° The note or other obligation of one of the individual partners, although given for a con- sideration moving to the partnership may nevertheless be treated as 114. In re Lowe, Fed. Cas. 8,564; In re Clark, Fed. Cas. 2,798. 115. Matter of Martens (C. C. A., 2d Cir.), 15 Am. B. K. 362, 142 Fed. 445, aflf'd. sub now, Hiseock v. Var- ick Bank, 18 Am. B. R. 1. Insurance policy on life of one partner in favor of other. — Where, in Tennessee, a bankrupt and his wife are partners in a mercantile business, the proceeds of a policy of insurance on his life in her favor, do not, under the State law, constitute a trust fund held by her for the bene- fit of herself and children, free from the claims of the partnership credi- tors. In re Day (D. C, Tenn.), 23 Am. . R. 785, 176 Fed. 377. 116. In re Swift (D. C, Mass.), 9 Am. B. R. 237, 114 Fed. 947 (in which case the evidence was con- sidered and held sufficient to justify a finding that seats in a stock ex- change, owned by the members and never transferred to the firm, but used for firm business, were a part of a joint estate ) . See Buckingham v. Bank (C. C. A., 6th Cir.), 12 Am. B. E. 465, 131 Fed. 192. 117. Compare, also, for firm debts, In re Holbrook, Fed. Cas. 6,588; In re Tesson, Fed. Cas. 13,844; In re Kitzineer, Fed. Cas. 7,861; Taylor v. Rasch, Fed. Cas. 13,800; and, for in- dividual debts. In re Mills, Fed. Cas. 9,611; In re Bucyrus Machine Co., Fed. Cas. 2,100; In re Dell, Fed. Cas. 3,774. A mortgage of partnership property, given by one partner to secure his individual indebtedness, with the consent of the other partner, is not enforceable in bankruptcy against firm creditors. In re Blanch- ard (D. C, N. C), 20 Am. B. R. 417. 118. Winship v. Bank, 5 Peters, 529, 8 L. Ed. 216. 119. Union Nat'l Bank v. Neill (C. C. A., 5th Cir.), 17 Am. B. R. 841, 149 Fed. 720; Merchants' Bank V. Thomas (C. C. A., 5th Cir.), 10 Am. B. R. 299, 121 Fed. 306. See, also, McDaniel v Strand (C. C. A., 4th Cir.), 5 Am. B. E. 685, 106 Fed. 486. 120. Gauss V. Schrader, 48 Fed. 816; Bush V. Crawford, Fed. Cas. 2,224. Firm endorsements. — In the case of In re Norris, Fed. Cas. 10,302 ; In re Morse, Fed. Cas. 9,853, firm endorsements were made at the time the firm was in an embarrassed finan- cial condition, and it was held that they were not new considerations moving from the individual creditor to the firm, v?ithin the four months period, and the claim should be disal- lowed against the partnership estate. Bankrupt firm as mahers. — The claim arising from a note signed by the bankrupt firm as makers and en- dorsed by the individual bankrupt, one of the members of the firm, re- mains a firm obligation, whether the individual bankrupt's liability as en- dorsed has been fixed or not. La- moille County Nat'l Bank v. Stevens 134 The Law and Peactice in Bankkuptcy. Firm and Individual Debts. [§ 5-f-i an individual debt. ^^^ But where the note or obligation, although signed or endorsed by an individual partner, is for the sole benefit of the firm, it is a partnership debt ; "^ and it may be shown by parol evidence that notes signed by the individual members of a firm were partnership obligations.^"^" The question as to whether a debt is a firm or an individual debt arises where one partner has bought out the other and assumed the partnership debts. The debts thereby become the individual debts of the continuing partner, provided the firm was solvent and the trans- action was not tainted with fraud.^"' It does not necessarily follow that the creditors of the firm must look to the continuing partner for the payment of their debts. If the bankruptcy of the continuing partner ensues, the creditors of the partnership may not have lost their lien but may follow the firm assets and assert the priority of their liens in respect thereto.^"* If the partnership creditors either im- pliedly or expressly consent to the assumption of the debts by the con- tinuing partner they become individual creditors and the debts are provable in the same manner as the other individual debts.'"' If the retiring partner is, notwithstanding the transfer of his interest in the firm assets, compelled to pay any of the debts of the firm, he is subrogated to the rights of the firm creditors whose debts were paid by (D. C, Vt.), 6 Am. B. R. 164, 107 Fed. 245. 121. In re Lehigh Lumber Co. (D. O., Pa.), 4 Am. B. R. 221, 101 Fed. 216. In the case of In re Jones (D. C, N. C), 8 Am. B. R. 626, 116 Fed. 341, it was held that a note made by an individual partner, which on its face did not indicate that it consti- tuted a partnership liability, was not a partnershio debt. See, also, In re Lamon (D. C, N. Y.), 22 Am. B. R. 635, 171 Fed. 516. In re Stevens (D. C, Vt.), 5 Am. B. R. 9, 104 Fed. 323; In re Webb, Fed. Cas. 17,313; In re Roddin, Fed. Cas. 11,989. 122. In re Warren, Fed. Cas. 17,191; Davis v. Turner (C. C. A., 4th Cir.), 9 Am. B. R. 704, 120 Fed. 605; In re Culver (D. C, Minn.), 23 Am. B. R. 779, 176 Fed. 450. 122a. In re Stoddard Bros. Lum- ber Co. (D. C, Idaho), 22 Am. B. R. 435, 169 Fed. 190, affd. sub. nom. Mock V. Stoddard (C. C. A., 9th Cir.), 24 Am. B. R. 403. 123. In re Downing, Fed. Cas. 4,044; In re Collier, Fed. Cas. 3,002; In re Rice, Fed. Cas. 11,750; In re Long, Fed. Cas. 8,476; In re Pease, Fed. Cas. 10,881. Compare, also. In re Denning (D. C, Mass.), 8 Am. B. R. 133, 114 Fed. 219. 124. In re Gillette (D. C, N. Y.), 6 Am. B. R. 123, 104 Fed. 769; N. Y. Institution for Deaf & Dumb v. Crocked, 17 Am. B. R. 233, 241, 117 N. Y. App. Div. 269; In re Pease, Fed. Cas. 10,881 ; In re Lloyd, 22 Fed. 88; In re Downing, Fed. Cas. 4,044; In re Rice, Fed. Cas. 11,750. 125. In re Denning (D. C, Mass.), 8 Am. B. R. 133, 114 Fed. 219; In re Keller (D. C, Iowa), 6 Am. B. R 334, 336, 109 Fed. 118. If the creditor does not as- sent to a dissolution of the partner- ship and the assumption of its lia- bilities by one of the partners, his debt remains a partnership debt and lien upon a partnership assets; in re- spect to him the several estates are to be treated as though the transac- tion had not taken place. In re Worth (D. C, Iowa), 12 Am. B. R. 566, 130 Fed. 927. No tmst or lien in favor of partnership creditors. — The as- sumption of payment of partnership debts by one partner in consideration of an absolute conveyance of the part- nership property to him by the other creates no trust in and fastens no lien upon the property thus conveyed in _ favor of the partnership creditors prior to any request for the interpo- sition of a court to administer the partnership property. Sargent v. Blake (C. C. A., 8th Cir.), 20 Am. B. R. 115. Paetnees. 135 § 5-f-g.] Firm and Individual Debts. him, and the amount thereof becomes a debt against the continuing partner.^^" Where debts of an individual member of the firm are assumed by the firm, and suflBcient consideration is shown to support the assump- tion, such debts may become partnership debts."' WTiere the creditor had no notice of the assumption of the individual debt by the partner- ship and did not acquiesce therein, the character of the debt remains unchanged. ^^' The question as to the character of the debt will also arise where each member of the firm has in its behalf incurred an individual liability by signing his name instead of the firm name. The debt thereby becomes individual only."' An individual debt is none the less such because it is entered on the firm books with the knowledge of the creditor and payments have been made thereon by checks on partnership funds."* Under certain circumstances there may be a joint and several liability on the part of the partners, in which ease a creditor may file double proof, both against the partnership assets and against the individual assets of each partner.""* Some of the numerous authorities relative to the provability of individual partner- ship debts are cited and considered in the footnote."' 126. In re Dillon (D. C, Mass.), 4 Am. B. R. 63, 100 Fed. 627; In re (Jarmichael (D. 0., Iowa), 2 Am. B. R 815, 96 Fed. 594. 127. In re Dresser (C. C. A., 2d Cir.), 13 Am. B. R. 747, 135 Fed. 495; Merchants' Nat'l Bank v. Thomas (C. C. A., 5th Clr.), 10 Am. B. R. 29y, 121 Fed. 306; Dacovich v. Schley (C. C. A., 5th Cir.), 13 Am. B. R. 752, 134 Fed. 72; In re Speer Bros. (D. C, Oreg.), 16 Am. B. R. 524, 144 Fed. 910; First Nat'l Bank of Miles City v. State Nat'l Bank (C. C. A., 9th Cir.), 12 Am. B. R. 429, 131 Fed. 422, in which it was held that where there was no sufficient evidence to sustain a finding that a partnership assumed the indebtedness of one partner at the formation of the partnership, the notes of the firm given to a bank in renewal of the in- dividual partner's indebtedness, are not partnership debts, where the bank had notice. 128. Hibberd v. McGill (C. C. A., 3d Cir.), 12 Am. B. R. 101, 129 Fed. 590. 129. In re Webb, Fed. Cas. 17,313; In re Herrick, Fed. Cas. 6,420; Strouse v. Hooper (D. C, N. C), 5 Am. B. R. 225, 105 Fed. 590. 130. Hibberd v. McGill (C. C. A., 3d Cir.), 12 Am. B. R. 101, 129 Fed. 590, affirming 10 Am. B. R. 55Q. See First Nat. Bank v. Bank (C. C. A., 9th Cir.), 12 Am. B. R. 429, 131 Fed. 422. 130a. In re Coe (D. C, N. Y.), 22 Am. B. R. 384, 169 Fed. 1002. 131. See §§ 555-564 of the title "Bankruptcy" in the American Di- gest, Century edition (Vol. 6, pp. 595- 606). The treatises on the English Bankruptcy Law, of which Baldwin's and Williams' and Robson's are typi- cal, should be consulted for analogous cases arising under the system from which our doctrine of distribution has been inherited. Cases on provaliility of part- nership debts. — Our courts, under the present law, have held, among other things, as follows: (1) As to individual debts not provable against firm assets, that, vfhere a firm indorsement on an in- dividual note was made while the firm was embarrassed, and without any new consideration, the claim should not be allowed against the partnership estate (In re Jones [D. C, Mo.], 4 Am. B. R. 1441, 100 Fed. 781; In re Hardie & Co. (D. C, Tex.), 16 Am. B. R. 381, 143 Fed. 553) ; and that the surrender of the firm note more than four months be- fore the bankruptcy and the taking of an individual note instead, makes the holder a creditor of the individual estate only, even thoua;h the firm con- tinued to pay the interest (In re 136 The Law and Peactice in Bankettptcy. Provability of Partnership Debts. [§5-f-{r. e. Proof against and dividends from each estate.— Since the act of 1861, in England, joint and several creditors have been per- mitted to prove against and receive dividends from both joint and separate estates.^'^ The weight of American authority has always been in favor of this rule.^'' A common instance is a note made by a firm and indorsed by the members of the firm. Though at first glance this rule seems inequitable, the firm and the individuals are separate entities and have made separate contracts and may, therefore, be held to the performance of them. Where a creditor holds notes or other obligations binding both upon the partnership and also upon an in- dividual member thereof, he may prove against both estates, and receive dividends from both.*^* Lehigh Lumber Co. [D. C, Pa.], 4 Am. B. R. 221, 101 Fed. 216) ; that a solvent partner is as to the partner- ship and individual estates an indi- vidual creditor- (In re Stevens [D. C, Vt.], 5 Am. B. R. 9, 104 Fed. 323) ; and that under the laws of South Carolina a sealed note given by one member of a firm without authority from his copartners and not con- firmed or ratified by them is not provable against the firm. (Pollock V. Jones [C. C. A., 4th Cir.], 10 Am. B. R. 616, 124 Fed. 163, affirming 9 Am. B. R. 262 ) ; as to proof of notes signed by individual members of a firm under seal, see Davis v. Turner (C. C. A., 4th Cir.), 9 Am. B. R. 704, 120 Fed. 605, 56 C. C. A. 669. See, also, Merchants' Bank v. Thomas (C. C. A., 5th Cir.), 10 Am. B. R. 299, 121 Fed. 306, 57 C. C. A. 374. (2) As to firm debts not provable against individual assets, that, where partnership creditors have received 55 per cent, from a, proceeding in the State court, they cannot prove claims in the individual bankruptcy of one of the partners unless they surrender such 55 per cent. (In re Mills [D. C, Ind.L 2 Am. B. R. 667, 95 Fed. 269) : and that a suit by the solvent partner on a partnership debt is an election of remedies, and a claim can- not thereafter be proven against the individual estate of the bankrupt •mrtnpT (In re PoHflori, 2 N". B. N. 022. Spc. also, on the question of iurisdietion. where a firm creditor presents a claim against the indi- vidual estate. In re Sanderlin fD. C, N. CI. 6 Am. B. R. 384, 109 Fed. ?'^7) : and where retil estate was in the name of the bankrupt, but as be- tween the partners it appeared to have been firm property, individual creditors have no claim on the pro- ceeds (In re Groetzinger [D. C, Pa.], 6 Am. B. R. 399, 110 Fed. 366). (3) In general, a firm creditor may prove against the individual es- tate on individual notes talcen by him and credited on the partnership debt (In re Stevens, supra) ; a part- ner who purchases judgments against his firm may prove them against the individual estates to the amount of his partners' respective shares (In re Carmichael [D. C, Iowa], 2 Am. B. R. 815, 96 Fed. 594) ; a note made by the firm and indorsed by a member of it continues to be the obligation of the firm, whether the individual bank- rupt's liability as indorser is fixed or not (Lamoille Bank v. Stevens' Estate [D. C, Vt.], 6 Am. B. R. 164, 107 Fed. 245 ) ; notes taken by a partner in payment of his interest in the firm within four months of the bankruptcy of the continuing partner are not provable against the latter until all the firm creditors are paid (In re Denning [D. C, Mass.], 8 Am. B. R. 133, 114 Fed. 219). 132. Compare Baldwin on Bank- ruptcy, 8th ed., p. 518. 133. In re Bigelow, Fed. Cas. 1,397; Mead v. Bank, Fed. Cas. 9,366; Emery v. Canal Bank, Fed. Cas. 4,446. 134. In re McCoy (C. C. A., 7th Cir.), 17 Am. B. R. 760, 150 Fed. 106, holding that where partners for the benefit of the firm, borrow money upon their individual credit, the lender may, after the receipt of a dividend from the partnership es- tate, prove for the balance of his Paetnees. 137 § 5-h.[ Where One or More Partners Are Solvent. IX. AVHEBE ONE OK MORE PARTNERS ARE SOI.VENT. Subsection h of this section provides that " In the event of one or more but not all of the members of a partnership being adjudged bankrupt, the partnership property shall not be administered in bank- ruptcy, unless by consent of the partner or partners not adjudged bankrupt ; " in such case it is made the duty of the solvent partner to settle the partnership business and account for the interest of the partner adjudged bankrupt. This provision is new, but is declaratory of the practice under the former law. The subdivision contemplates a case where one or more, but not all, of the members of a partnership are adjudged bankrupt, while the partnership as such is not before the court. "*^ The right to administer is absolute, unless waived by the solvent partner. This doctrine seems to spring from the fact that bankruptcy works a dissolution of the firm, and the solvent partner may, therefore, close up the business of the firm as if the bankrupt member were actually dead. The provision commanding expedition and an accounting to the trustee should also be noted. It would seem that, by allowing an adjudication of partnership bankruptcy, as by making no response when served with notice as provided in General Order VIII, or by failing to disclose the relation and knowingly permitting an adjudication, this right to administer will be deemed waived. ^'^ It can also be waived by a writing or declaration to that effect. But this subsection does not apply where the solvent partner retired shortly before the bankruptcy and holds the continuing part- ner's notes for his interest in the firm.'^" This subsection merely preserves to an existing solvent partner the right to administer the affairs of the partnership if he so desires; it has no application to a case where distinct proceedings are instituted against the individual members of a partnership but not against the partnership itself.^'^ The connection between subsections h and c should be noted. When construed together they provide in effect that when a partnership and one or more of the partners, but not all of them are adjudged bank- rupt, those who are not so adjudged may administer the partnership claim against the bankrupt estate of 4 Am. B. R. 132, 108 Fed. 517; In the individual partners. Bucking- re Meyer (C. C. A., 2d Cir.), 3 Am. ham V. First Nat. Bank (C. C. A., B. R. 559, 98 Fed. 976. 6th Cir.), 12 Am. B. R. 465, 131 Fed. 136. In re Denning (D. C, Mass.), 192- 8 Am. B. R. 133, 114 Fed. 219. 134a. In re Junek & Balthazard 137. In re Mercur (C. C. A, 3d (D. C, W. Va.), 22 Am. B. R. 298, Cir.), 10 Am. B. R. 505, 122 Fed. 169 Fed. 481. 384; Mahoney v. Ward (D. C. N. 135. In re Harris (D. C, Ohio), C), 3 Am. B. R. 770, 100 Fed. 278. 138 The Law and Peactice in Bankeuptcy. Where One or More Partners Are Solvent. i 5-11. property, and a fortiori their individual property, and the court may not do so without their consent, but, if the unadjudicated members consent, the court may administer the partnership property and their individual estates.^''* 138. Eights of solvent partaer. — In the case of In re Bertenshaw (C. C. A., 8th Cir.), 19 Am. B. R. 577, 583, 157 Fed. 363, the court said : " These provisions thus inter- preted are fair, just and reasonable. The solvent partner cannot in any event escape payment of the debts of the partnership. His individual prop- erty is subject to attachment, execu- tion, and to the processes of the law to satisfy them. He is more com- petent to manage the individual prop- erty and the property of his firm which he had the shrewdness and ability to accumulate, more compe- tent to convert them into money and to apply them upon his obligations. than any trustee chosen by his credi- tors can be. He knows the property, its value, its availability for various uses. Its market. He has a vital in- terest in securing the best price for it, and the fart that it is his prop- erty, that it is to be applied to his debts, gives him a preferential equity to apply it speedily and efficiently to the payment of his obligations. The opposite process would be unreason- able, unfair to those who have ac- cumulated and preserved the prop- erty, and liable to much injustice." See, also, Matter of Solomon (D. C, N. Y.), 20 Am. B. R. 488: In re Junek & Balthazard (D. C, W. Va.), 22 Am. B. R. 298, 169 Fed. 481. SECTION SIX. EXEMPTIONS OF BANKRUPTS. § 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. Analogous provlaloiiB: In U. S.: Act of 1867, § 14 (as amended by Act of June 8, 1872; and by Act of March 23, 1873), R. S., § 5045; Act of 1841, § 3; Act. of 1800, §§ 34, 35, 53. In Eng.: Act of 1883, § 64(2). Cross references: To the law: §§ 2(11), 7-a(8), 47-a(ll), and 70-a. To the General Orders: XI, XVII, and, by analogy, XV. To the Forms: No. 47, and, by analogy, No. 27. SYNOPSIS OF SECTION". EXEMPTIONS OF BANKRUPT. I. History and Constitutionality. a. History in general. b. In the United States. c. Constitutionality. II. Jurisdiction and General Rules Governing Exemptions. a. In general. b. Trustees; rights and duties. III. Right of Bankrupt to Exemptions. a. Domicile; time and place. b. Assertion or waiver of claim; effect of. (1) asseetion of claim. (2) Waiver. c. Parties entitled to exemptions. d. Kinds of property exempt. (1) In general. (2) Watches, wearing appabel, implements of trade and the like. (3) Homesteads. 139 140 The Law and Practice in Bankeuptcy. Exemptions in United States. [§ 6. (4) Insurance policies. (5) Pension money. (6) Paetnbeship assets. (7) Unpaid purchase money. (8) Property PRAUDuiiENTLY conveyed oe con- cealed. (9) Incumbered property. IV. Practice. a. In general, b. Costs and expenses. V. Table of Cases on Exemptions Under Present Law. I. HISTORY AND CONSTITTTTIONAMTY. a. History in general. — Ever since bankruptcy laws ceased to be essentially pemal, allowances or exemptions to the bankrupt have been eanotioned by statute. The law takes his property from him and gives it to his creditors. Anglo-Saxon jurisprudence, however, has for nearly two centuries decreed either that the creditors shall make the bankrupt an allowance such as will keep him and hisi family from want until he can begin again, or else shall permit him to retain a specific sum to the same^ end. The former is at present the English method ; the latter the American. By § 64 (2) of the English act of 1883, the trustee, with the per- mission of the committee of inspection, may from time to time make an allowance to the bankrupt for his support and that of his family. Formerly, the English bankrupt was given a certain pro- portion of his assets for the same purpose.^ b. In the United States. — Our first law, besides exempting wearing apparel and beds and bedding (§18) and giving an allow- ance for the necessary support of the debtor and his family during the pendency of his proceeding (§ 53), allowed him a small percentage of the assets, with an upward limit as to the total, but on a sliding scale dependent on dividends paid to creditors. This, though generous, was at least uniform throughout the country. The law of 1841 was also uniform; under it (§ 3) wearing apparel, household furniture, and other necessary articles to the value of not over $300, were set aside by the assignee for the 1. CoKpare Massachusetts Insol- vency Law, Chap. 163, Revised Laws of 1901. Exemptions of Bankeupt. 141 § 6.] Constitutionality; Jurisdiction. bankrupt. The law of 1867, as amended (K. S., § 5045), re- enacted the provisions of the previous law, though increasing the upward limit to $500, and, in addition, after exempting the arms and equipment of one who had served as a soldier, gave effect to the exemption laws of the States to such extent as such laws were more liberal than the bankruptcy law. From this latter idea, our present far-reaching clause on exemptions sprang. In a country where trade is necessarily liquid, and, owing to our division into States, the dangers from diverse exemption laws great, by the ex- press provision of the Federal statute, the State and not the Federal law determines what portion of his estate a bankrupt may retain. The law as to exemptions remains as originally passed. That the result is inequitable is as true as it is that a remedy in the nature of a uniform national exemption law is for the time impos- sible. Thus, to-day, in some States the law's allowance of bread money is the same as that under the law of 1841 ; in others, it is so large as often to exhaust the estate. c. Constitutionality. — One ground of attack on the constitution- ality of the bankruptcy law of 1867 was that it was not uniform as to exemptions. There was no authoritative determination of this question by the supreme court. The lower courts, however, almost without exception, held that the uniformity required by the constitution was geographical only, and that the law was uniform, though, in this particular, giving effect to the local statutes of the debtor's domicile.^ The supreme court has already settled the question under the present law, by declaring that law constitutional in spite of itsi want of uniformity as to exemptions.* II. JURISDICTION ANB GENERAL RULES GOVERNING EX- EMPTIONS. a. In general. — It is the purpose of this subdivision to set forth the general principles as found in the numerous cases on the subject. For decisions under the laws of 1867 and 1841, resort should be had to the text books and digests of the periods.* The 2. In re Everitt, 4,579 Fed. Cas. 186 U. S. 181, 8 Am. B. R. 1. See, 9 N. B. R. 90; In re Beckerford, Fed. also, In re Kean, 7,630 Fed. Cas. 8 Cas. 1,209; In re Jordan, Fed. Cas. N. B. R. 401; In re Richard (D. C, 7,514; In re Smith, Fed. Cas. 12,996; N. C), 2 Am. B. R. 506, 94 Fed! Darling v. Berry, 13 Fed. 659; Dozier 633; In re Buelow, 2 N. B. N. Rep. V. Wilson, 84 Ga. 301. Contra: In 26, 98 Fed. 286. re Deckert, Fed. Caa. 3,728; In re 4. See, for instance, American Di- Duerson, 4,117 Fed. Cas., 13 N. B. R. gest, Century Edition, "Bankruptcy" 183. §§ 656-078. 3. Hanover Nat. Bank v. Moyses, 142 The Law and Peactice in Bankeuptct. General Rules Governing Exemptions. [§ 6. State law controls and its meaning is fixed by the interpretation of the highest courts of the State ;' unless there be no authoritative determination, then it seems that the Federal courts have juris- diction.* But a court of bankruptcy will not enforce an unconsti- tutional State law;'' for example, where it impairs the obligation of contracts.* Nor will a State court review a determination by the bankruptcy court as to what property is exempt.* The time and manner of claiming exemptions are regulated by the bank- ruptcy act, and the general orders and forms applicable thereto.^** It was not the intent of the section to enlarge the exemptions avail- able to the bankrupt under the State law;^^ if exempt property is not subject to levy and sale under a State statute, it cannot be made to respond under the Federal act.-'^ The law of the State 5. In re Duerson, Fed. Cas. 4,117; struetion of the highest judicial tri- In re Camp (D. C, Ga. ), 1 Am. B. R. bunal of a State, of its constitution 165, 91 Fed. 145; In re Stevenson & and of its statutes which establish a King ( D. C, N. C. ) , 2 Am. B. rule of property, is controlling author- R. 230, 93 Fed. 789; In re ity in the courts of the United States, Buelow, 98 Fed. 86; In re To- where no question of right under the bias (D. C, Va.), 4 Am. B. R. 555, constitution and laws of the nation 103 Fed. 68; Richardson v. Wood- is involved. In re Wood (D. C, ward (0. C. A., 4th Cir.), 5 Am. B. Wis.), 17 Am. B. R. 93, 147 Fed. 877. R. 94, 104 Fed. 873; In re Anderson 6. Leffingwell v. Warren, 2 Black. (D. C, Mass.), 6 Am. B. R. 555, 110 603, 17 L. Ed. 261; Provident Institu- Fed. 141; In re Manning (D. C, Pa.), tion v. Massachusetts, 6 Wall. 630, 7 Am. B. R. 571, 112 Fed. 948; In re 18 L. Ed. 907; Randall v. Brigham, Stone (D. C, Ark.), 8 Am. B. R. 416, 7 Wall. 541, 19 L. Ed. 285; Buchner 116 Fed. 35; Page v. Edmimds, 9 Am. v. Cheshire R. R. Co., 125 U. S. 582, B. R. 277, 187 U. S. 596; In re Wood 31 L. Ed. 795; Morley v. Lake Shore (D. C, Wis.), 17 Am. B. R. 93, 147 R. R. Co., 146 U. S. 162, 36 L. Ed. Fed. 877; In re Stein (D. C, Pa.), 925. 12 Am. B. R. 384, 130 Fed. 377; In re 7. In re Everitt, 4,579 Fed. Cas., 9 Owings (D. C, N. C), 15 Am. B. R. N. B. R. 90; In re Dillard, 3,912 Fed. 472, 140 Fed. 739; In re Paramore v. Cas., 2 Hughes, 190. Bicks (D. C, N. C), 19 Am. B. R. 8. Gunn v. Barry, 15 Wall. 610, 21 130, 156 Fed. 208; In re Pfeiffer (D. L. Ed. 212. C. Pa.), 19 Am. B. R. 230, 155 Fed. 9. Woolfolk v. Murray, 44 Ga. 133; 892; In re Burke (D. C, Ga.), 22 Maxwell v. McCune, 37 Tex. 515. Am. B. R. 69, 168 Fed. 994; In re 10. In re Friedrich (C C. A., 2d McCrary Bros. (D. C, Ala.), 22 Am. Cir.), 3 Am. B. R. 801, 100 Fed. 284; B. R. 161, 169 Fed. 485; In re Hast- In re Kane (C. C. A., 7th Cir.), 11 ings (C. C. A., 6th Cir.), 24 Am. B. Am. B. R. 533, 127 Fed. 552; Matter R. 360; In re Baker (C. C. A., 6th of McClintock (D. C, Ohio), 13 Am. Cir.), 24 Am. B. R. 411. But not by B. R. 606; Lipman v. Stein (C. C. outer dicta. In re Sullivan (C. C. A., 3d Cir.), 14 Am. B. R. 30, 134 A., 8th Cir.), 17 Am B. R. 578, 148 Fed. 235; Burke v. Guarantee T. & Fed. 115. T. Co. (C. C. A., 3d Cir.), 134 Fed. 6. It is well settled that the debtor 562, 14 Am. B. R. 31 ; In re Culwell must comply with the State law in (D. C, Mon.), 21 Am. B. R. 614, order to claim exemptions. In re 165 Fed. 828. Farish, Fed. Cas, 4,657, 2 N. B. R. 11. In re Boyd (D. C, Iowa), 10 168; In re Gainey, Fed. Cas. 5,181, 2 Am. B. R. 337, 120 Fed. 999. N. B. R. 525; In re Jackson, Fed. 12. Smalley v. Laugenour, 13 Am. Cas. 7,127, 2 N. B. R. 508; Guise v. State, 41 Ark, 249; Brigga v. McCul- lough, 36 Cal. 542; Griffin v. Suther- land, 14 Barb. (N. Y.) 456. The general mle is that the con- Exemptions of Bankrupt. 143 16.] (General Rules GoTeming Exemptions. of a bankrupt's domicile during the greater portion of the preceding six months is the law under which his exemptions will be allowed.^' It makes no difference where the property is situated, if it is exempt under the law of the bankrupt's domicile." A court of bankruptcy has jurisdiction to determine the merits of the bankrupt's claim to exemptions, but, as a rule, has no jurisdiction over the property claimed," and cannot order its sale,^" or enforce a mortgage against it.^' This jurisdiction, so far as it goes, is exclusive.^' A court of bankruptcy cannot enforce even an admitted lien on exempt prop- erty,*" or defend such property from adverse claims that may or may not be extinguished by the bankruptcy proceedings.^" Property set apart to a bankrupt under his claim to exemption forms no part of his estate in bankruptcy."* The bankruptcy court has no jurisdiction over a bankrupt's exempt property, except to set it aside for his use."** The trustee has no title to the exempt property, but only a quali- B. R. 692, 196 U. S. 93; In re Fisher (D. C, Va.), 15 Am. B. R. 652, 142 Fed. 205. 13. In re Grimes (D. C, N. C), 2 Am. B. R. 160, 94 Fed. 800; In re Woodard (D. C, N. C), 2 Am. B. R. 339, 95 Fed. 260; In re Buelow (D. U., Wash.), 3 Am. B. R. 389, 98 Fed. 86; In re McCutchen (D. C, 8. C), 4 Am. B. R. 81, 100 Fed. 779; In re Lynch (D. C, Ga.), 4 Am. B. R. 262, 101 Fed. 579; McCarty v. Coffin (C. C. A., 5th Cir.), 18 Am. B. R. 148, 150 Fed. 307; Duncan v. Ferguson- McKinney Co. (C. C. A., 5th Cir.), 18 Am. B. R. 155, 150 Fed. 269. 14. In re Stevens, 2 Biss, 373, Fed. Cas. 13,392. 15. In re Camp (D. C, Ga.), 1 Am. B. R. 165, 91 Fed. 749; In re Hatch (D. C, Iowa), 4 Am. B. R. 349, 102 Fed. 280; In re Hill (D. C, Ga.), 2 Am. B. R. 798, 96 Fed. 185; Woodruff V. Cheeves (C. C. A., 5th Cir.), 5 Am. B. R. 296, 105 Fed. 601, reversing In re Woodruff (D. C, Ga.), 2 Am. B. R. 678, 96 Fed. 317; In re Little (D. C, Iowa), 6 Am. B. R. 681, 110 Fed. 621; Powers Dry Goods Co. V. Nelson (D. C, N. D.), 7 Am. B. R. 506, 10 N. Dak. 580, and foot-note; McGahan v. Anderson (C. C. A., 4th Cir.), 7 Am. B. R. 641; In re Jackson (D. C, Pa.), 8 Am. B. R. 594, 116 Fed. 46; Lock wood v. Ex- change Bank, 10 Am. B. R. 107, 100 U. S. 294; In re Brumbaugh (D. C, Pa.), 12 Am. B. R. 204, 128 Fed. 971; In re Boyd (D. C, Iowa), 10 Am. B. R. 337, 120 Fed. 999; Mc- Kenney v. Cheney, 11 Am. B. R. 54, 118 Ga. 387, 45 S. E. 433; In re Hartsell (D. C, Ala.), 15 Am. B. R. 177, 140 Fed. 30; In re Castleberry (D. C, Ga.), 16 Am. B. R. 159, 143 Fed. 1,018; In re Highfield (D. C, Pa.), 21 Am. B. R. 92, Fed. In re McCrary Bros. (D. C, Ala.), 22 Am. B. R. 161, 169 Fed. 485. 16. Ingram v. Wilson (C. C. A., 8th Cir.), 11 Am. B. R. 192, 125 Fed. 913. 17. In re Hatch (D. C, Iowa), 4 Am. B. R. 349, 102 Fed. 280, and note. 18. In re Overstreet (D. C, Ark.), 2 Am. B. R. 486; In re Bragg, 2 N. B. N. Rep. 82; In re Nunn (Ref., Ga.), 2 Am. B. R. 664; McGahan v. Anderson (C. C. A., 4th Cir.), 7 Am. B. R. 641, 113 Fed. 115; In re Lucius (D. C, Ala.), 10 Am. B. R. 653, 124 Fed. 455, and cases cited. 19. In re Hartsell (D. C, Ala.), 15 Am. B. R. 177, 140 Fed. 30; In re Castlebery (D. C, Ga.), 16 Am. B. R. 159, 143 Fed. 1,018. 20. Jeffries v. Bartlett, 20 Fed. 496; Lockwood v. Exchange Bank, 10 Am. B. R. 107, 190 U. S. 294. 21. Lockwood v. Exchange Bank, 10 Am. B. R. 107, 190 U. S. 294; In re Brumbauirh (D. C. Pa.), 12 Am. B. R. 204, 128 Fed. 971; In re Le Vav (D. C, Pa.), 11 Am. B. R. 114, 125 Fed. 990; Jewett v. Huffman, 13 Am. 144 The Law and Peaotice in Bankeuptoy. Trustee's Duties as to Exemptions. [§ 6. fied right to possession.^* The title to such property is in the bankrupt,*' and descends to his heirs or legal representatives upon his death.** b. Trustees ; rights and duties. — The rights and duties of trus- tee? in respect to exemptions of bankrupts are indicated in § 47-a(ll) as supplemented by General Order XVII.*® In brief, if the bankrupt has duly asserted his claim to exemptions,** the trustee must estimate and determine the value of the exemptions claimed,*'' and make an itemized report setting them off, within twenty days,** whereupon any creditor** may except, and the ex- ceptions will be argued before the referee. It has been held that the trustee may set apart the bankrupt's exemption as a ministerial act and then except to the allowance of the claim under General Order XVII.**^ The trustee has no title to the exempt property of the bankrupt, but it re- mains in the bankrupt. The bankruptcy court may not ad- minister such property even if the bankrupt has waived the ex- emption in favor of certain creditors.*" It follows that the ap- B. E. 738; In re Edwards (D. C, tion, post; and, also, under § 47 of Ala.), 19 Am. B. R. 632, 156 Fed. this work. See, also, " Supplemen- 794. tary Forms," post. J^}\}\ '■^T, ??^S?,'^^'S, P.- .?,;' 26. § 7-a(8), Form 1, Schedule Pa.), 22 Am. B. R. 817, 171 Fed. 259. x, ,c,x 22. See § 70-a. In re Hill (D. C, IJ'r x^ ■ j • i. ,^ r, a ,xr. Ga.), 2 Am. B. R. 798, 96 Fed. 185; ^.^J" ^n/^ Fnednch (C. C. A., 7th In re Durham (D. C, Ark.), 4 Am. Cir.), 3 Am. B. R. 801, 100 Fed. 284. B. R. 760, 104 Fed. 231; In re Wells 28. General Order XVII, Form 47. (D. C, Ark.), 5 Am. B. R. 308, 105 See In re Manning (D. C, Pa.), 7 Fed. 762; In re Mayer (C. C. A., 7th Am. B. R. 571, 112 Fed. 948; In re Cir.), 6 Am. B. R. 117, 108 Fed. 599; Reese (D. C, Ala.), 8 Am. B. R. In re Seabolt (D. C, N. C), 8 Am. 411 iic jf.j qqo B. R. 57, 113 Fed. 766; In re Nye (C. ^a i„ Tj mt-t- ir, n ^r<^ ^ a C. A., 8th Cir.), 13 Am. B. R. 142, , ^\ ^^ «„^,^n,^ *?■,?•' ^*-'' * 133 Fed. 33; Lockwood T. Exchange ^"^- ^- ^- ol3. 103 Fed. 774. Bank, 10 Am. B. R. 107, 190 U. S. ^^'^- I" ""e Rice (D. C, Pa.), 21 294; In re Edwards (D. C, Ala.), 19 Am. B. R. 202. Am. B. R. 632, 156 Fed. 794. 30. Lockwood v. Exchange Bank, 23. Schlitz V. Schatz, Fed. Cas. 10 Am. B. R. 107, 190 U. S. 294; In- 12,459, 2 Biss. 248; In re Hester, Fed. gram v. Wilson (C. C. A., 8th Cir.), Cas. 6,437, 5 N. B. R. 285; In- re 11 Am. B. R. 192, 125 Fed. 913; In re Hunt, Fed. Cas. 6,883, 5 N. B. R. 493; Paramore & Ricks (D. C, No. Car.), Bush V. Lester, 55 Ga. 579, 15 N. B. 19 Am. B. R. 130, 156 Fed. 208; In re' R. 36; Simpson v. Houston, 97 N. C. Blanchard & Howard (D. C, No. 344; Wilkinson v. Waite, 44 Vt. 508. Car.), 20 Am. B. R. 422, I61' Fed! 24. In re Hester, Fed. Cas. 6,427, 797. 5 N. B. R. 285; In re Lambert, Fed. Bankruptcy court may not ad- Cas. 8,026, 2 N. B. R. 426; Rix v. minister. — Exempt property never Bank, Fed. Cas. 11,869, 2 Dill. 367; becomes assets in the bankruptcy court Bullymore v. Cooper, 46 N. Y. 236; for administration. Beyond setting it Fehley v. Barr, 66 Penn. 196. aside the trustee has no concern with 25. See "Practice" under this sec- it. In re Edwards (D. C. Ala.), i«> Exemptions of Bankkupt. 145 §6.] Bight to Exemption; Domicile. piraisers cannot fix the value of the exemptions claimed;*^ their services will, however, often be availed of by the trustee. Indeed, this practice is sometimes sanctioned by district rules. Until the exemptions are fixed, the trustee has the right to possession of the property claimed, and the bankrupt will not be allowed compensa- tion for caring for it.^* As soon as the claim is determined in favor of the banki-upt, the trustee should at once surrender pos- session, for an exemption is a matter of right and does not rest in the discretion of the trustee.*^ This general subject is also dis- cussed more in detail later.^* The requirements of the State law in respect to claiming the exemption must be complied with, or the property will pass to the trustee freed from the exemption.*^ But where the bankrupt made claim to a share of the proceeds of the sale of a homestead prior to the approval by the State court, it was held that he had not waived his right to the exemption.^^ III. RIGHT OF BANKRUPT TO EXEMPTIONS. a. Domicile ; time and place. — Domicile as used in this section means what it would mean were the question one affecting 3ur"<- diction to adjudge.*^ Thus, the law of the domicile may be dif- ferent from the law of the forum ; as', where the place of business is in one State and the residence in another. Domicile usually con- notes personal presence in a fixed and permanent abode.^* A per- son must have a legal domicile,^* and the old one always remains Am. B. B. 632, 156 Fed. 794; In re 89, 114 Fed. 696; In re West (D. C, Seaboldt (D. C., N. Car.), 8 Am. B. Ga.), 8 Am. B. B. 564, 116 Fed. 767; B. 57, 113 Fed. 766; In re Wells, (D. In re Wunder (D. C, Pa.), 13 Am. C, Mo.), 8 Am. B. E. 75, 105 Fed. B. B. 701, 133 Fed. 821. 76!i; In re Seydel (D. C, Iowa), 9 Failure to comply. — Where a. Am. B. B. 255, 118 Fed. 208; In re bankrupt makes a claim for exemp- Hill (D. C, Ga.), 2 Am. B. B. 798, tions in his schedules, but in doing so 96 Fed. 185 ; Sharp v. Woolslare does not comply with the requirements (Supt. Ct., Pa.), 21 Am. B. B. 88; In of the State law in regard to the man- re Culwell (D. C, Mon.), 21 Am. B. ner of making such claim and fails to E. 614, 165 Fed. 828; In re Mac- designate the specific articles claimed ^'f « (D; P-',.^^-'' ^^ '*■'"• ^- ^- as exempt, his claim will not be al- '3i.'ln re Grimes (D. C, N. Car.), '"-/^ ^'^ ^%^f''^-^ ^^'- O^^"'' 2 Am. B. E. 735, 96 Fed. 529. Con- '^^ ^^- ^- ^- ^o^- tra: In re McCutehen (D. C, S. 36. In re Eash (D. C, la.), 19 Am. Car.), 4 Am. B. E. 81, 100 Fed. 779. B. B. 738, 157 Fed. 996. 32, In re Groves (Bef., Ohio), 6 37. § 2(1). Am. B. B. 728. 38. Mitchell v. U. S., 21 Wall. 352- 33 In re Brown (D. C, Pa.), 4 ggg, 22 L. Ed. 584; Morris v. Gilmer, '^"k^o^-<*p' ^?? ^,f- */^\,,. 129 U. S. 328, 32 L. Ed. 690; In re 24. See "Practice" under this sec- „. , , , -r, ,T^ ^ \t ^, , tion, post. rUnglehoef Bros. (D. C, N. Car.), 6 35. In re Stephens (D. C, Ga.), ^™- B. B. 242, 109 Fed. 866. 8 Am. B. E. 53, 114 Fed. 192; In re 39. Desmare v. U. S., 93 U. S. 610, Boorstin (D. C, Ga.), 8 Am. B. E. 23 L. Ed. 959. 10. 146 The Law and Peactice in Bankeuptcy. Assertion of Claim. [§ 6. until a new one is acquired.*" Where a man leaves his family to avoid arrest his domicile does not change.*^ The domicile of a corpora- tion is in the State of its organization, and cannot be changed.*^ The burden of proving a change of domicile by the bankrupt lies un- questionably upon the party who asserts the change.*'- The time of residence, both as to existing State statutes and the property claimed, is the time when, under the statute, he is required to assert his claim of exemption.** b. Assertion or waiver of claim: effect of. — (1) Assertion of CLAIM. — While an exemption is a matter of right,*° it, being personal to the bankrupt,*" must be asserted or he will be claimed to have waived it. He must assert his claim to exemptions in a court of bank- ruptcy before his discharge,*' and he will not be entitled to such a claim in a State court after his discharge.*^ It has been held that he may claim his exemptions at any time before the sale of the property.*" An extension of the time for filing a bankrupt's schedules extends his time to claim his exemption.^" What he does not claim for himself and his family, he leaves in the general fund for distribution."' If he absconds without claiming an exemption, his wife cannot assert her right to an amount in lieu of her homestead after the bankrupt's prop- erty has been turned into cash by the trustee. °^ Failure to make a full 40. Mitchell v. U. S., 21 Wall. 353, a bankrupt's claim of an exemption 22 L. Ed. 584; Morris v. Gilmer, 120 is to be determined as of the date V. S. 328, 32 L. Ed. 690; In re when it is asserted, and his absence Sehulz (D. C, Ore.), 14 Am. B. R. thereafter from the state as a fugi- 317, 135 Fed. 228. tive from justice is immaterial. 41. In re Filer (D. C, N. Y.), 5 45. In re Brown (D. C, Pa.), 4 Am. B. R. 332, 108 Fed. 209. Am. B. R. 46, 100 Fed. 441. 42. Bank of Augusta v. Earl, 13 46. In re Bolinger (D. C, Pa.), 6 Pet. 585, 10 L. Ed. 274; Lafayette Am. B. R. 171, 108 Fed. 374. Ins. Co. V. French, 18 How. 484, 15 47. In re Kean, Fed. Cas. 7,630. L. Ed. 451 ; Shaw v. Quincey Mining 2 Hughes, .322. Co., 145 U. S. 450, 36 L. Ed. 758. 48^ Steel v. Moody, 53 Ala. 418; 43. In re Grimes (D. C, N. C), 2 Gavle v. Randall, 71 Ala. 469; Wool- Am. B. R. 160, 94 Fed. 800. folk v. Murray, 44 Ga. 133; Maxwell 44. See Bankr. Act, § 7(8). In re v. McCune, 37 Tex. 515. Groves (Ref., Ohio), 6 Am. B. R. 49. Bartholomew v. West, Fed. 728; In re Miller (Ref., Mo.), 1 Am. Cas. 1,071, 2 Dill. 290; Toenes v. B. R. 647. But see Matter of Fletcher Moog, 78 Ala. 558 ; McClusky v. Mc- (Ref., Ohio), 16 Am. B. R. 491; Neely, 8 111. 578; Slaughter v. In re Fisher (D. C, Va.), 15 Am. Detiney, 15 Ind. 49; Shepherd v. Mur- B. R. 652, 142 Fed. 205 ; In re O'Hara rill, 90 N. C. 208 ; Weaver's Appeal (D. C, Pa.), 20 Am. B. R. 714, 162 18 Pa. St. 307; Yost v. Heflfner, 69 Fed. 325, holding that a bankrupt's Pa. St., 68. right to exemption must be deter- 50. In re O'Hara (D. C, Pa.), 20 mined as of the date when claimed; Am. B. R. 714, 162 Fed. 325. if he is not then a resident of the 51. In re Sloan (D. C., Pa.), 14 State his claim for exemption will Am. B. R. 435, 135 Fed. 873. be denied, even though he was a resi- 52. In re Sharr (Ref., Ohio), 15 dent of the State, before and since; Am. B. R. 491; In re Groves (Ref, In re Donahey ( D. C, Pa.). 23 Am. Ohio), 6 Am. B. R. 728. B. R. 796, 176 Fed. 4.58, hold^nn- tint Exemptions of Bankeupt. 147 §6.] Assertion of Claim. and fair disclosure of property has been held to deprive the bankrupt of this right."' If a voluntary bankrupt, he should assert it in the first instance in Schedule B (5) attached to his petition; if an involuntary bankrupt, in the same schedule when filed after his adjudication."* Failure to schedule property thought to be exempt may amount to a concealment preventing a discharge."" In some States a bankrupt's claim of exemption is not assignable, and an attempted assignment operates as an abandonment of the right."" In Pennsylvania a debtor may waive but not assign his right to exemptions and will not be per- mitted to withdraw a waiver thereof in favor of a creditor to whom he had assigned his claim."^ If the claim was omitted through inad- vertence, an amendment asserting it will usually be allowed, even to reach property surrendered by one creditor to the trustee;"* but not where its purpose is to benefit creditors who hold waivers of exemp- tions or to avoid a charge of concealment of property."* The manner in which the claim for exemption shall be made is a mere matter of procedure, and, as in other cases, amendments may be allowed to efEeet justice between the parties."'* Exempt property, or the pro- ceeds thereof, do not belong to the creditors, nor may the trustee recover the same for their benefit."" But it has been held that the court may refuse a discharge until opportunity can be given to creditors to enforce their debts or liens against the exempt prop- erty in a court of competent jurisdiction."^ The general grant 53. In re Waxelbaum (D. C, Ga.), 4 Am. B. R. 120, 101 Fed. 228; In re Stephens (D. C, Ga.), 8 Am. B. R. 53, 114 Fed. 192; In re Boorstin (D. C, Ga.), 8 Am. B. R. 89, 114 Fed. 696; In re Williamson (D. C, Ga.), 8 Am. B. R. 42, 114 Fed. 190; In re Dobbs (D. C, Ga.), 22 Am. B. R. 801, 172 Fed. 682; Matter of Cotton & Preston (Ref., Ga.), 23 Am. B. R. 586. But these cases are all under a peculiar State statute, making the right to exemptions depend on good faith. 54. See Bankr. Act, § 47(11). In re Friedrich (C. C. A., 7th Cir.), 3 A.m. B. R. 801, 100 Fed. 284; In re Groves (Ref., Ohio), 6 Am. B. R. 728; In re Lucius (D. C, Ala.), lO Am. B. R. 653, 124 Fed. 455. Under the Virginia statute this is not enough. In re Garner (D. C, Va.), 8 Am. B. R. 263, 116 Fed. 200. 55. In re Royal (D. C, N. C), 7 Am. B. P. 106, 112 Fed. 135. 56. In re Sloan (D. C, Pa.), 14 Am. B. R. 435, 135 Fed. 873. 57. In re Pfeiffer (D. C, Pa.), 19 Am. . R. 230, 155 Fed. 892. 58. In re Tollett (C. C. A., 6th Cir.), 5 Am. B. R. 404, 106 Fed. 866; ■^n re F 140. In TB Booss (D. C, Pa.), 18 B. R. 142, 133 Fed 33; (Texas), Bu- ^^ ^ ^ ggg^ ^g^ ^^^ 4^4 row V. Grand Lodge (C. C. A., 5th 141. Holden v. Stratton, 14 Am. B. Cir.), 13 Am. B. R. 542, 133 Fed. R. 94, 198 u. S. 202, reversing 7 Am. 542; (Kentucky), Matter of Downing B. R. 615, 114 Fed. 650. See, as to (D. C, Ky.), 15 Am. B. R. 423, 139 New Yorlc, Domestic Relations Law, Fed. 590. § 22; Matter of Phelps (D. C, N. 136. In re Lange (D. C, Iowa), 1 Y.), 15 Am. B. R. 170; Matter of Am. B. R. 189, 91 Fed. 361; In re ^^^^"F^ <^- '^■^u^'^\^' ^/t^^o" fr T. 1 ,T^ ,-1 \i7 T. % o A -D T> K- 255; In re Whelpley (D. C. N. ^^fZ i°; ^o2 ™-^' 3 ^"l- f^^ H.), 22 Am. B. R.^433, 169 Fed. 389, 98 Fed. 86; In re Hermch (Ref., ioi9; In re Johnson (D. C, Minn.), Md.), 1 Am. B. R. 713. Compare 24 Am. B. R. 277; In re Orear (C. In re Shingluff (D. C, Md.), 5 Am. C. A., 8th Cir.), 24 Am. B. R. 343. B. R. 76, 106 Fed. 154. 142. U. S. R. S., § 4747. 137. Steele v. Buel (C. C. A., 8th 1*3. Thus, § 1393, N. Y. Code of Cir.), 5 Am. B. R. 165, 104 Fed. 968. Civil Procedure. See, also, Pulsifer v. Hussey, 9 Am. , ***• I" J? ^^r^'P'oPo' V^h * n T> fi.n7 Q7 Ti/r„ A^A rA Ail inTo ^^- B. R. 53, 100 Fed. 262; Contra, a. K. bo/, 97 Me. 434, 54 Atl. 1076; t„ ™ t„„„„ ;t> /-i ■»«• \ m a t> Am'^B'r27? '^- ^•' '''^■^' '' « "^e'Tee- ;?d.^33f •'' '' ^"- ^- 145. Yates County Nat. Bank t. Exemptions of Bankrupt. 157 § 6.] Partnership Assets. pertains, however, where the pensioner has embarked it in business, or where it has been invested in land from which at the time of his bankruptcy he has, through a mortgage thereon, already withdrawn more than the land cost."* (6) Partnership assets. — ^Whether the members of a bankrupt firm can claim exemptions from its partnership assets depends on the decisions of the State courts.'*^ Thus, in certain States where part- ners are allowed exemptions out of the firm property, the bankruptcy courts have granted similar exemptions.^*' On principle, they can- not claim exemptions therefrom, the partnership being an entity, and the partners having no interest in the assets until all its creditors are paid.'" Such claims have, under the present law, been denied in Alabama, Arkansas, New Jersey, Maryland, Pennsylvania, Okla- homa and South Dakota.'"* On the other hand, it has been held that such claims may be asserted, if each partner shall consent thereto,'" especially where there are no individual estates from which exemptions may be taken.'" It has also been held that, fraud being absent, partners may before bankruptcy so sever the joint estate as to permit each of them to claim their exemptions, though on appeal this severance was not approved or even thought necessary.'" But where Carpenter, 119 N. Y. 550. But see R. 268, 112 Fed. 138. In re Stout (D. C, Mo.), 6 Am. B. 150. In re McCrary Bros. (D. C, E. 505, 109 Fed. 794. Ala.), 22 Am. B. E. 161, 169 Fed. 146, In re EUithorpe (D. C, N. 485; In re Meriwether (D. C, ■y.), 5 Am. B. E. 681; affirmed, s. c, Ark.), 5 Am. B. E. 435, 107 Fed. 7 Am. B. E. 18, 111 Fed. 163. 102; In re Demareat (D. C, N. J.), 147, In re Camp (D. C, Ga.), 1 6 Am. B. E. 232, 110 Fed. 638; In re Am. B. E. 165, 91 Fed. 745; In re Beauehamp (D. C., Md.), 4 Am. B. Stevenson & King (D. C, N. Car.), 2 E. 151, 101 Fed. 106; In re Prince & Am. B. E. 230, 93 Fed. 789. Walker (D. C, Pa.), 12 Am. B. R. 148, Georgia.— In re Camp (D. 675, 131 Fed. 546; Matter of Golden C, Ga.), 1 Am. B. E. 165, 91 Fed. Eule Mere. Co. (Eef., Okl.), 21 Am 745. B. E. 397; In re Lentz (S. Dak.), 2 North Carolina. — In re Steven- N. B. N. Eep. 190, 97 Fed. 486- In aon (D. C, N. Car.), 2 Am. B. E. re Novak (D. C, S. Dak.), 18 Am 230, 93 Fed. 789; In re Grimes (D. B. R. 236, 150 Fed. 602 C, N. Car.), 2 Am. B. E. 160, 94 151, In re Grimes (D. C, N. C ), Fed. 800; In re Duguid (D. C, N. 2 Am. B. E. 160, 94 Fed. 800; In re Car.), 3 Am. B. E. 794, 100 Fed. Floyd & Co. (D. C, N. Car.) 18 Am 274; In re Wilson (D. C, N. Car.), B. E. 827, 154 Fed. 757; In re Mon- 4 Am. B. E. 260, 101 Fed. 571; In re roe & Co. (D. C, N. Car.), 19 Am. Seabolt (D. C, N. Car.), 8 Am. B. B. E. 255, 156 Fed. 216; In re Nelson R. 57, 113 Fed. 766; In re Gartner (D. C, Wis.), 2 Am. B. E 556 98 Hancock Lumber Co. (D. C, N. Fed. 76; In re Friederick (D ' C Car.), 22 Am. B. E. 898, 173 Fed. Wis.), 95 Fed. 282, in which case it '■^l' . ^ „ . , . , "^^^ ^^^^ t'lat the partner must af- n^"^.T%^^rl"J^ I"^^''^^^ 'F- fi'-'natively show that he is entitled C A., 7th Cir,), 3 Am. B. E. 801, 100 to the exemption, and, when it is Fed 284 aflfg. 95 Fed 282. asked out of firm assets, that he had M.f f .i a" ''4 ?*^,'i'',^^'S?x,' ?•,£■• "° personal property exemption inde- fn'r'e Mo^srer%^-a?Vt.'!; ^1™^: P^"'^"* "' '""^ '™ ^^^P"'^' ^""^ ^'^^ 158 TiiK Law and Peactice in Bankkuptcy. Unpaid Purchase Money. [§6. there is no transfer, but a mere abandonment by one partner of his interest, an exemption will not be allowed out of partnership assets to the other member of the firm.^^* Where a partner has parted with his interest in the assets of the firm prior to bankruptcy, he cannot claim an exemption therein, although he continued in the employ of the firm as a clerk.'^^ Where the right to a homestead exemption out of partnership assets is doubtful, the claim must be asserted reasonably and in conformity with the practice in bankruptcy, or it will not be considered.^^^a Several of the cases in the foot-notes contain sum- maries of decisions both in the Federal and in the highest State courts, in particular In re Camp.^^^ (7) Unpaid purchase money. — It is sometimes provided by State law that an exemption from execution shall not extend to a process issued upon a demand for the purchase price of the estate claimed as exempt.^'^ Any creditor of a bankrupt may avail himself of this exception. '^^^ (8) Property fraudulently conveyed or cancelled. — In some States, the bankrupt is denied his exemptions, if he has been guilty of a fraud on creditors generally or has intentionally trans- ferred or concealed any portion of his property, whether exempt or not;^^^ this is probably due to local statutes. In Georgia it is other members of the firm consent that he shall have it out of the firm assets. 152. In re Stevenson (D. C, N. Car.), 2 Am. B. R. 230, 93 Fed. 789; In re Duguid (D. C, N. Car.), 3 Am. B. R. 794, 100 Fed. 274; In re Wil- son (D. C, N. Car.), 4 Am. B. R. 260, 101 Fed. 572; In re Steed (D. C, N. Car.), 6 Am. B. R. 73, 107 Fed. 682; In re Seabolt (D. C, N. Car.), 8 Am. B. R. 57, 113 Fed. 766; In rs Monroe & Co. (D. C, N. Car.), 13 Am. B. R. 255, 156 Fed. 216. 153. In re Friedrieh (D. C, Wis.), 3 Am. B. R. 800, 100 Fed. 284, modifying .s. c, 95 Fed. 282; In re Lockerby (Minn.), 3 N. B. N. Rep. 7. 154. In re Bergman (111.), 2 N. B. N. Rep. 806. See, also, In re Mosier (D. C, Vt.), 7 Am. B. R. 268, 112 Fed. 238. 155. In re Fowler (D. C, N. Car.), 16 Am. B. R. 580, 145 Fed. 270. See In re Wolcott (D. C, N. Car.), 15 Am. B. R. 386, 140 Fed. 460, holding that the bankrupt must own the personal property out of which he claims an exemption. 155a. In re Jennings & Co. (D. C, Ga.), 22 Am. B. E. 160, 166 Fed. 639. 156. In re Camp (D. C, Ga.), 1 Am. B. R. 165, 91 Fed. 745. 157. In re Schechter (D. C, Col.), 9 Am. B. R. 729; Cannon v. Dexter Broom & M. Co. (C. C. A., 4th Cir.), 9 Am. B. R. 724, 120 Fed. 657, 57 C. C. A. 327. See, also. In re Connor, 146 Fed. 998. In the case of In re Bailes (D. C. So. Car.), 23 Am. B. E. 789, 176 Fed. 460, it was held that a right of exemption of personal property cinnot be defeated by a claim for a loan of money with which the property claimed as ex- empt was purchased. 158. In re Campbell (D. C., Va.), 10 Am. B. R. 723, 124 Fed. 417. 159. McDowell v. Mcilurria, 107 Ga. 812, 73 Am. St. Rep. 155; In re Waxelbaum (D. C, Ga.), 4 Am. B. R. 120, 101 Fed. 228; In re Tollett (D. C, Tenn.), 5 Am. B. R. 305, 105 Fed. 425; reversed in s. c. (C. C. A., 6th Cir.), 5 Am. B. E. 404, 106 Fed. 866; In re Long (D. C, Pa.), 8 Am. B. R. 591, 116 Fed. 113; In re Duffy (D. C, Pa.), 9 Am. B. R. 358, 118 Fed. 926; In re Yost (D. C, Pa.), 9 Am. B. R. 153, 117 Fed. 792; In re Allen (D. C, Va.), 13 Am. B. R. 519, 134 Fed. 620; Matter of Alex. (D. C, Pa.), 15 Am. B E. 450, 141 Fed. 483. Failure to keep books. — In the case of In re Leverton (D. C, Pa.), 19 Am. B. E. 426, 155 Fed. 925, it was held that where a merchant did not keep any books and failed to ac- count for $3,000 during a period of three months, and the evidence showed that he had either made away Exemptions of Bankrupt. 159 § 6.] Property Fraudulently Conveyed. provided by statute that a debtor who is guilty of wilful fraud in the concealment of part of his property from his creditors loses his exemption.**" In Pennsylvania a bankrupt, who deliberately and wilfully conceals or denies the ownership of property, in order to prevent it from being subjected to the payment of his debts, forfeits his right to exemptions.*** Where the exact amount of personal property concealed by a bankrupt cannot be ascer- tained, he may not be allowed his exemptions until all his personal property is accounted for, or until the further order of the court.* *^ The failure of a bankrupt to schedule property, which was in the possession of his wife, is not a concealment for which his claim for exemptions will be denied.*** The rule independent of statute, is, however, that exemptions, being a matter of right, should not be denied, even if asserted in property fraudulently transferred or concealed and later recovered by the trustee.*** Where the bank- rupt acquires the property by fraud, he can have no exemption;*** and where the bankrupt has scheduled property out of which he claims exemptions, and the trustee later recovers other property which had been preferentially transferred, the former will not be permitted to abandon his previous claim and assert it against such property.*** It has been held that a bankrupt may daim exemp- tions in exempt property which has been surrendered as a prefer- with his goods or their proceeds, he 983. will be refused his exemption because 163. In re Diamond (D. C, Ala.), of a fraudulent concealment of assets. 19 Am. B. E. 811, 158 Fed. 370. 'Wliere the bankrupt bag re- 164. In re Park (D. C, Ark.), 4 moved a greater part of his property Am. B. R. 432, 102 Fed. 602; Wilcox from the jurisdiction of the court, a v. Hawley, 31 N. Y. 648; In re Noll, claim for an exemption from the bal- 2 N. B. N. Hep. 789; In re Bucking- ance will be disallowed. Matter of ham, 2 N. B. N. Rep. 617; In re Taylor (D. C, Col.), 7 Am. B. R. 410, Rothschild (Rep., Ga.), 6 Am. B. R. 114 Fed. 607. 43. Thus, even in Georgia, where the 160. Ga. Code, § 2830. In re "good faith" rule is in the local Thompson (D. C, Ga.), 8 Am. B. R. statute: In re Talbott (D. C, Ga.), 283, 115 Fed. 924; In re West (D. C, 8 Am. B. R. 427, 116 Fed. 417; af- Ga.), 8 Am. B. R. 564, 116 Fed. 767; firmed, sub nom. Bashinski v. Talbott In re Williamson (D. C, Ga.), 8 Am. (C. C. A., 5th Cir.), 9 Am. B. R. 513, B. R. 43, 114 Fed. 190, liolding that 119 Fed. 337, 56 C. C. A. 241; In re in Georgia the exemption provided by Neal (Ref., Ohio), 14 Am. B. R. 550. statute will not be allowed unless the 550. person claiming the same comes into 165. In re Haake, 5,883 Fed. Cas. court with clean hands; In re Ste- 2 Saw. 231; In re Wolcott (D. C, phens (D. C, Ga.), 8 Am. B. R. 53, N. Car.), 15 Am. B. E. 386, 140 Fed. 114 Fed. 192; In re Boorstin (D. C, 460. Ga.), 8 Am. B. R. 89, 114 Fed. 696. 166. In re White (D. C, Mo.), 6 161. In re Schafer (D. C, Pa.), 18 Am. B. R. 451, 109 Fed. 635; In re Am. B. R. 361, 151 Fed. 505. Coddington (D. C, Pa.), 11 Am. B. 162. In re Ansley Bros. (D. C, N. R. 122, 126 Fed. 891. Contra: In re Car.), 18 Am. B. R. 457, 153 Fed. Falconer (C. C. A., 8th Cir.), 6 Am. 160 The Law and Pbaotice in Bankeuptoy. Incumbered Property. [§ 8. ence,^®'' but there are decisions to the contrary in some States.*** The(re is a conflict of authority as to whether the purchase of exempt property on the eve of bankruptcy is fraudulent. It has been held that if a bankrupt purchases exempt property on the eve of bankruptcy, so as to secure the exemption, he commits a fraud upon his creditors which will give to the trustee a right to take the property from him, free from any claim of exemption.*®* But there are cases to the contrary.*''*' Where, however, the alleged fraudulent transaction involves the sale of non-exempt property, and the use of the avails in reducing an incumbrance against an exempt homestead, it will not avail.*''* And where, pending suit in a State court to set aside a deed of land, the debtor obtains a reconveyance of the land and executes a proper deed of homestead under the State law, and is adjudicated a bankrupt prior to a decree setting aside the conveyance, the bankruptcy court may determine the claim of homestead exemption in the land.*''^ A general assignment is not sufficiently fraudulent to come within the rules previously stated.* ^^ (9) Incumbeeed peopeety. — ^AU valid liens are preserved by the statute.*''* Under principles already discussed, a court of bankruptcy has no jurisdiction to determine either the existence or priority of liens on exempt property, unless such property is worth more than the exemption allowed by the State statute.*''^ In many B. R. 557, 110 Fed. 111. See, also, 170. In re Henkel, 6,362 Fed. In re Evans (D. C, N. Car.), 8 Am. Cas., 2 Sawy. 305; Kelly v. Sparks, B. R. 730, 116 Fed. 909; In re Neal 54 Fed. Rep. 70; Huenergardt v. Brit- (Eef., Ohio), 14 Am. B. E. 550. tain Dry Goods Co. (C. C. A., 8th 167. In re Falconer (C. C. A., 6th Cir.), 8 Am. B. R. 341, 116 Fed. Rep. Cir.), 6 Am. B. R. 557, 110 Fed. Ill; 31; In re Irwin (0. C. A., 8th Cir.), Bashinski v. Talbott (C. C. A., 5th 9 Am. B. R. 689, 120 Fed. Rep. 733; Cir.), 9 Am. B. R. 513, 119 Fed. 337; affg. In re Stone (D. C, Ark.), 8 affg. In reTalbott (D. C, Ga.),8 Am. Am. B. R 416, 116 Fed Rep 35- %%*%'eh\^ ii\mB R 868^773 ^'°°"°^" " ^^S^^' ^^ ^*<='^- 366; Ja- F^d ^i'le ""^y ^- Di«""i°g Co., 41 Minn. 227, 168. in re White (D. C, Mo.), 6 fJl' Comstock v. Bechtel, 63 Wis. Am. B. R. 451, 109 Fed. 635; In re ,', ^ Long (D. C, Pa.), 8 Am. B. R. 591, ^^^- I" " Boston (D. C, Neb.), 3 116 Fed. 113; In re Evans (D. C, ^^- ^- ^- 388, 98 Fed. 587. N. Car.), 8 Am. B. R. 730, 116 Fed. ^''Z. In re Allen (D. C, Va.), 13 909. Am. B. R. 518, 134 Fed. 620. 169. In re Boothroyd, Fed. Cas. ^'''S- In re Tilden (D. C, Iowa), 1,652, 14 N. B. R. 223; In re Lammer, 1 -*.m. B. R. 300, 91 Fed. 500. Fed. Cas. 8,031, 7 Biss. 269; In re *''*• Bank. Act, § 67-d; in re Parker, Fed. Cas. 10,724, 5 Sawy. Thomas (D. C, Wash.), 3 Am. B. R. 58; Pratt v. Burr, Fed. Cas. 11,372, ^9, 96 Fed. 828. 5 Biss. 36; In re SouthoflF, Fed. Cas. ^'''S- In re Hopkins (Ref., Ala.), 17,380, 8 Biss. 35; In re Wright, Fed. ^ Am. B. R. 209; In re Grimes (D. Cas. 18,607, 3 Biss. 359; Long v. Mur- ^■> N. Car.), 2 Am. B. R. 730, 96 phy, 27 Kan. 375; Brackett v. Wat- ^*^- ^^9; In re Hatch CD. C, Iowa), kins, 21 Wend. 68. Exemptions of Bankrupt. 161 § 6.] Incumbered Property. States the bankrupt has an absolute right to selection in specie ; and, it seems, he can insist on it even though he thereby destroys the surplus value belonging to the trustee.^''® Where the lien is dissolved by the bankruptcy as that of an execution following a judgment recovered within four months, the bankrupt is entitled to his exemption in the property which was affected by such lien,''^^ or, if it has been sold, from the proceeds of the sale. There seems some reason for the rule laid dovm in some courts that liens pro- cured through legal proceedings during the four months period are not annulled so far as they affect property claimed by the bank- rupt as exempt, ^^* since, by § 67-f, the annulment of such liens is apparently for the purpose of passing over the property affected to the trustee for the benefit of the estate, freed from all such incumbrances. On the other hand the provision referred to is absolute in its effect; all liens, etc., acquired through legal pro- ceedings during the four months period are annulled absolutely and there seems no good reason why the provision should not inure to the benefit of the bankrupt as well as his creditors.^ ''^ As between incumbered and unincumbered property exempt in specie, the bankrupt wiU be given the unincumbered. But where the debtor, within four months of the bankruptcy, gave a mortgage on his stock in trade, otherwise exempt, but without specifying the exemption, the mortgage is a preference and will not be declared good to the extent of the exemption allowance, because a claim to exemption is personal to the bankrupt and must be made by him.''*" It has even been held, on a strict construction of § 64-a, that taxes on an exempt homestead must be paid out of the general fund.'** This decision rests on a strict construction of the law. The rule seems well settled in those States that grant exemptions in specie, provided the property with taxes paid, is not worth the amount allowed. 4 Am. B. E. 349, 102 Fed. 280; In re 178. McKenney v. Cheney, 118 Ga. Wells (D. C, Ark.), 5 Am. B. R. 308, 387, 11 Am. B. R. 54; In re Durham 105 Fed. 762; In re Durham (D. C, (D. C, Ark.), 4 Am. B. R. 760, 104 Ark.), 4 Am. B. R. 760, 104 Fed. Fed. 231; Powers Dry Goods Co. v. 231. But see In re Tune (D. C, Nelson, 10 N. Dak. 580, 7 Am. B. R. Ala.), 8 Am. B. E. 285, 115 Fed. 506; Jewett Bros. v. Huffman, 14 N. 906. Dak. 110, 13 Am. B. R. 738. 176. In re Grimes (D. C, Ala.), 179. In re Beals (D. C, Ind.), 8 2 Am. B. R. 730, 96 Fed. 529. Am. B. R. 639, 116 Fed. 530; In re 177. In re Tune (D. C, Ala.), 8 Tune (D. C, Ala.), 8 Am. B. R. 285, Am. B. R. 285, 115 Fed. 906; Matter 115 Fed. 906. of Downing (D. C, Ky.), 15 Am. B. 180. In re SchuUer (D. C, Wis.), R. 423, 139 Fed. 590; In re Arnold 6 Am. B. R. 278, 108 Fed. 591. (D. C, Ky.), 2 Am. B. R. 180, 94 181. In re Tilden (D. C, Iowa), Fed. 1,001. 11 162 The Law and Peaotice in Bankeuptcy. Practice on Exemptions. [§6. IV. PRACTICE. a. In general — ^A difficulty arises when the bankrupt claims exemptions and no creditors appear at the first meeting. By Gen- eral Order XV, a tmstee may be and usually is dispensed with. This leaves the court without the officer whose duty it is to report on and set off the exemptions. It is thought that in such cases the judge or referee may try the validity of the claim summarily. In some of the districts this practice is sanctioned by rule.'^^ Where such a practice is followed, the claiming bankrupt should at least be required to file an affidavit giving facts in addition to those stated in his Schedule B (5), and such affidavit should show him clearly entitled under the State law to the property claimed. If the bankrupt inadvertently omits from his schedule a valid claim of exemption an amendment will be permitted upon satisfactory proof of the mistake.^** But an amendment will not be permitted where it does not appear that an error or mistake was made,^®* or where the avowed purpose of the amendment is to pay debts due to 1 Am. B. E. 300, 91 Fed. 500; In re Baker (Eef., Tex.), 1 Am. B. E. 526. 182. In the Erie County Dis- trict of the Western District of New York, Eule 15(1) provides as follows : " 1. Where there is no trustee ap- pointed, the exemptions claimed by the bankrupt may be set off to him at the time the order to that effect is signed, and, in that event, the fol- lowing clause shall be inserted in Form 27: " ' And it appearing that the said bankrupt is entitled to the exemp- tions claimed in the schedules ac- companying the petition herein, it is further ordered that the property claimed in said schedules, being ex- empt pursuant to § 1390 of the Code of Civil Procedure of the State of New York, be, and the same is hereby set off to the said the bankrupt.' " Prior to asking for such order the bankrupt shall satisfy the referee, by affidavit or otherwise, as to the value of such exemptions, and that he is entitled to the same." The court may set off the exemp- tions where no trustee has been ap- pointed. In re Allen & Co. (D. C, Va.), 13 Am. B. E. 518, 134 Fed. 620; In re Smalley v. Langenour, 196 U. S. 93, 49 L. Ed. 400; In re Smith (D. C, Tex.), 2 Am. B. E. 190, 93 Fed. 791. 183. In re Tollett (C. C. A., 6th Cir.), 5 Am. B. E. 404, 106 Fed. 866; In re Falconer (C. C. A., 8th Cir.), 6 Am. B. E. 557, 110 Fed. Ill; In re White (D. C, Pa.), 11 Am. B. E. 556, 128 Fed. 513; In re Duflfy (D. C, Pa.), 9 Am. B. E. 358, 118 Fed. 926; In re Fisher (D. C, Va.), 15 Am. B. E. 652, 142 Fed. 205; In re Maxson (D. C, Iowa), 22 Am. B. E. 424, 170 Fed. 356; In re Goodman (C. C. A., 5th Cir.), 23 Am. B. E. 504, 174 Fed. 644. But the claim must be season- ably made; a petition to amend claim after a sale of all of the bank- rupt's property will be denied. In're Von Kerni (D. C, Pa.), 14 Am. B. E. 403, 135 Fed. 447; and see In re Sharr (D. C, Ohio), 15 Am. B. E. 491; In re Wunder (D. C, Pa.), 13 Am. B. E. 701, 133 Fed. 821; Matter of Sharr (Ref., Ohio), 15 Am. B. R. 403, ItO Fed. 761. See, also, supra this section " Assertion or Waiver of Claim, Effect of." 184-. In re Neal (Eef., Ohio), 14 Am. B. R. 550. Exemptions of Bankrupt. 163 Practice on Exemptions. [§ 6 creditors against whom he has waived his right to claim exemp- tions ; '*' nor should such an amendment be allowed after the bankrupt has received his discharge.'^"" The following rulings on practice will be found valuable: The claim must be clearly stated, especially if of property in specie;"" while, as a rule, the trustee has no power to sell the exempt property, he must sell it,'*' where it is inseparable from other property, the expense of sale to be borne by the general estate,"' and the bankrupt is then entitled to his pro rata of the proceeds."" Thus, where all of a bankrupt's real estate is covered by a mortgage under which the mort- gagee would have the right to sell and convey the title in fee dis- charged of any exemption, and the mortgagee submits his claim to the bankruptcy court, it may sell the land and allot the bankrupt his homestead from the proceeds, but it has no power to order the amount paid to the mortgagee.'"" The bankrupt, having made claim for his exemption within the time fixed by the act, is not debarred because the goods were sold with his consent,'"' and where an exemption will be defeated unless its allowance be in cash out of the proceeds of a sale, it will, if practicable, be ordered paid out of such proceeds.'"^ But, in Pennsylvania, after a sale of property not exempt, a bank- rupt, even though entitled to an exemption in cash in the first in- stance, cannot assert his claim against the cash proceeds of such sale.'"^ Under the laws of that state it is the goods, and not the pro- ceeds of their sale, that he is entitled to.'"^* The trustee first deter- mines what is exempt,'"* but this determination is not final, for cred- itors may file exceptions within twenty days, and the referee then decides.'"'' A referee's findings of fact on a claim to exemptions will 185. Moran v. King (C. C. A., 4th Am. B. R. 521, 149 Fed. 614; Lipman Cir.), 7 Am. B. E. 176, 111 Fed. 730. v. Stern (C. C. A., 3d Cir.), 14 Am. 185a. In re Irwin (C. C. A., 3rd B. R. 30, 134 Fed. 235; In re Arnold Cir.), 23 Am. B. R. 487, 174 Fed. 642. (O. C. Ga.), 22 Am. E. R. 392, 169 186. In re Wilson (D. C, Va.), 6 Fed. 1000, holding that where prop- Am. E. E. 287, 108 Fed. 197. erty set apart as exempt was sold 187. In re Oderkirk (D. C, Vt.), with the bankrupt's consent upon the 4 Am. E. R. 617, 103 Fed. 779. agreement that his exemption should 188. In re Hopkins (D. C, Vt.), be paid from the proceeds of sale, and 4 Am. E. E. 619, 103 Fed. 781. they only bring 66 per cent, of the 189. In re Richard (D. C, N. inventory value, he is only entitled to Car.), 2 Am. B. R. 506, 94 Fed. 633; his pro rata part of such proceeds. In re Kane (C. C. A., 7th Cir.), 11 193. In re Haskin (D. C, Pa.), 6 Am. E. E. 533, 127 Fed. 552; In re Am. B. E. 485, 109 Fed. 789- In re Le Vay (D. C, Pa.), 11 Am. B. E. Manning (D. C. Pa.), 7 Am. E. R. 114, 125 Fed. 913, in which case the 571, 112 Fed. 948; In re Staunton bankrupt was permitted to share in (D. C, Pa.), 9 Am. E. E. 79, 117 the proceeds of the sale of perishable Fed. 507. property sold by a receiver under the 193a. In re Donahey (D. C, Pa.), direction of the court; In re Stein 23 Am. E. E. 796, 176 Fed 458 (D. C, Pa.), 12 Am. E. R. 384, 130 194. In re Friedrich (C. C. A.,' 7th Fed. 629, affirmea 14 Am. E. E. 30. Cir.), 8 Am. B. E. 801, 100 Fed. 284; 190. In re Paramore & Ricks (D. his report should be itemized, In re C, N. Car.), 19 Am. B. R. 130, 156 Manning (D. C, Pa.), 7 Am. E. R Fed. 208. 571, 112 Fed. 948. No issue can be 191. In re Renda (D. C, Pa.), 17 raised as to the bankrupt's exemp- Am. E. E. 521, 149 Fed. 614. tions until the tendered report is filed 192. in re Luby (D. C, Ohio), 18 In re Campbell (D. C, Va.), 10 Am. Am. B. R. 801, 155 Fed. 659. See, E. E. 723, 124 Fed. 417. also, In re Eendar (D. C, Pa.), 17 195. In re Smith (D. C, Tex.), 2 164 The Law and Practice in Bankruptcy. Costs and Exuenses. [§ 6. not be disturbed unless palpably erroneous ;^'* but where a trustee has been dispensed with, the judge cannot review the decision of the referee."' It seems to follow from the above that a bankrupt's sole remedy is to review the referee's decision, while a creditor may except both to the trustee's set-off and to the referee's action thereon. ^°' The bankrupt having sold goods after the filing of the petition for ad- judication and used the proceeds, the amount thereof should be de- ducted in the allowance of his exemptions."" Where, to entitle any one to the benefits of a homestead exemption statute, he is required to cause " homestead " to be entered in the margin of his record title to the same, such entry may not be made after the qualification of his trustee in bankruptcy.^"" b. Costs and expenses, — Costs may be paid out of exempt prop- erty where there are no other assets.^"^ And if the bankrupt consents the costs and expenses of administering his estate may be paid out of the exemption allowed to him, and the creditors may not object thereto.^''^ But where all the property of the bankrupt estate is sold for the purpose of converting into cash the bankrupt's homestead exemption the amount of the exemption should be paid to the bank- rupt without deduction of the costs of administration.^"^* A bank- rupt will be required to deposit the amount of the costs and expenses of litigation where, being entitled to a homestead, she has been granted an exemption in kind, and the petition of the trustee to sell the assets of the estate has been denied.^"' The practice on exemptions is also discussed in the previous para- Am. B. R. 190, 93 Fed. 791; In re 2 Am. B. R. 190, 93 Fed. 791- In re White (D. C, Vt.), 4 Am. B. R. 613, Dobbs (D. C, Ga.), 23 Am.' B. E 103 Fed. 774; but the issue may be 569, 175 Fed. 319. certified to the judge without de^i- 198. But see In re Ellis (Ref., sion. McGahan v. Anderson (C. C. Ohio), 10 Am. B. R. 754, holding that A., 4th Cir.), 7 Am. B. R. 641, 113 the bankrupt also may except to the ^^^- 115. trustee's report on exempt property. Exceptions to be filed. — ^Until 199. In re Ansley Bros. (D. C, exceptions are filed to the trus- N. Car.), 18 Am. B. R. 457, 153 Fed. tee's report there is no issue on 983. the question whether the exemp- 200. In re Youngstrom (C. C. A., tion is properly allowable. In re 8th Cir.), 18 Am. B. R 572 153 Campbell (D. C, Va.), 10 Am. B. R. Fed. £8. 723, 124 Fed. 417. Exceptions filed 201. In re Collier (D. C, Tenn.), more than twenty days after the 1 Am. B. R. 182, 93 Fed. 191; In re filing of the trustee's report must be Bean (D. C, Vt. ), 4 Am. B.'r. 53, dismissed. Matter of Aroos (Ref., 100 Fed. 262; In re Hines (D. C., w' Ga.), 19 Am. B. R. 804. And Va.), 9 Am. B. R. 27, 117 Fed. Voo! a failure to file exceptions or 202. In re Castleberry (D. C, contest the bankrupt's claim will de- Ga.), 16 Am. B. R. 430, 133 Fed. 821 prive the creditor of his right to re- 202a. Dunlap Hardware Co. v. open the matter. In re Reese (D. C, Huddleston (C. C. A., 5th Cir ) 21 Ala.), 8 Am. B. R. 411, 115 Fed. 993. Am. B. R. 731, 167 Fed. 433 196. In re Waxelbaum (D. C, 203. Matter of Lillian Jacksoa Ga), 4 Am. B. R. 120, 101 Fed. 228. (Ref., Ga.), 18 Am. B. R. 216. 197. In re Smith (D. C, Tex.), Exemptions of Bankrupt. 165 § 6.] Table of Cases. graphs of this section. It is simple and should usually be summary. Appropriate forms will be found in the proper place, post. V. TABLE OF CASES ON EXEMPTIONS UNDER THE PRESENT LAW, ARRANGED BT STATES. Alabama: Garden, In re, 1 Am. B. E. 582, 93 Fed. 433; reversed in In re Moore, 7 Am. B. E. 285, 112 Fed. 289. Hopkins, In re, 1 Am. B. E. 209. Sellers v. Bell, 2 Am. B. E. 529, 94 Fed. 801. Tune, In re, 8 Am. B. E. 285, 115 Fed. 906. Arkansas: Durham, In re, 4 Am. B. E. 760, 104 Fed. 231. Falconer, In re, 6 Am. B. E. 557, 110 Fed. 111. Meriwether, In re, 5 Am. B. E. 435, 107 Fed. 103. Morrison, In re, 6 Am. B. E. 488, 110 Fed. 734. Overstreet, In re, 2 Am. B. E. 486. Park, In re, 4 Am. B. E. 432, 102 Fed. 602. Stone, In re, 8 Am. B. E. 416, 116 Fed. 35. California: Diller, In re, 4 Am. B. E. 45, 100 Fed. 931. Fly, In re, 6 Am. B. E. 550, 110 Fed. 141. Hindman, In re, 5 Am. B. E. 20, 104 Fed. 331. Peterson, In re, 2 Am. B. E. 630, 95 Fed. 417. Scheld, In re, 5 Am. B. E. 102, 104 Fed. 870. Colorado : Nye, In re, 13 Am. B. E. 142. Prager, In re, 8 Am. B. E. 356. Florida: Carpenter, In re, 6 Am. B. E. 465, 109 Fed. 558. Georgia: Boorstin, In re, 8 Am. B. E. 89, 114 Fed. 696. Camp, In re, 1 Am. B. E. 165, 91 Fed. 745. Castleberry, In re, 16 Am. B. E. 159, 133 Fed. 821. Dobbs, In re, 23 Am. B. E. 569, 175 Fed. 319. Evans v. Eounsaville, 8 Am. B. E. 236. Hill, In re, 2 Am. B. E. 798, 96 Fed. 185. Jeffers, Matter of, 17 Am. B. E. 368. Lynch, In re, 4 Am. B. E. 262, 101 Fed. 579. Nunn, In re, 2 Am. B. E. 664. Ogilvie, In re, 5 Am. B. E. 374. Eothschild, In re, 6 Am. B. E. 2. Stephens, In re, 8 Am. B. E. 53, 114 Fed. 192. 166 The Law and Practice in Bankeuptcy. Table of Cases. [i 6. Swords, In re, 7 Am. B. R. 436, 112 Fed, 661. Talbott, In re, 8 Am, B, R, 427, 116 Fed, 417, Thompson, In re, 8 Am, B, E, 283, 115 Fed. 924, Waxelbaum, In re, 4 Am, B, E, 120, 101 Fed, 228. West, In re, 8 Am, B, E, 564, 116 Fed, 767, Williamson, In re, 8 Am, B, E, 42, 114 Fed, 190. Woodruff, In re, 2 Am, B, E, 678, 96 Fed, 317; reversed on appeal as Woodruff v, Cheeves, 5 Am, B, E. 296, 105 Fed. 601, Indiana: Beds, In re, 8 Am. B. E, 639, 116 Fed, 530. Iowa: Hatch, In re, 4 Am, B, E, 349, 102 Fed, 280, Lange, In re, 1 Am, B, E, 186 ; reversed on review as Lauge, In re, 1 Am. B, E, 189, 91 Fed. 361. Little, In re, 6 Am, B, E, 681, 110 Fed. 621. Pope, In re, 3 Am. B. E. 525, 98 Fed. 722. Eafferty, In re, 7 Am. B. E. 415. Steele & Co., In re, 3 Am. B. E, 549, 98 Fed. 78 ; reversed on appeal as Steele v. Buel, 5 Am, B, E. 165, 104 Fed. 968. Tilden, In re, 1 Am. B. E. 300, 91 Fed, 500, Kansas: Parker, In re, 1 Am, B, E, 708, Kentucky: Carmichael, In re, 5 Am, B, E. 551, 108 Fed. 789. Downing, In re, 15 Am, B, E, 423, 139 Fed. 590 ; s. c, 148 Fed, 120, Sale, In re, 16 Am. B. E. 235, 143 Fed. 310. Maine: Matter of Mullen, 15 Am, B, E. 275, 140 Fed, 206. Maryland: Beauohamp, In re, 4 Am. B. E. 151, 101 Fed. 106. Steiner v. Marshall, 15 Am. B. E. 486, 140 Fed. 710. Massachusetts: Anderson, In re, 6 Am. B. E. 555, 110 Fed. 741. Collier, In re, 7 Am. B. E. 131, 111 Fed. 503. TumbuU, In re, 5 Am, B, E, 231; affirmed on review as Tumbull, In re, 5 Am. B. E, 549, 106 Fed, 666. Michigan: Hatch, In re, 2 Am. B, E, 36. Missouri: Hostin, In re, 7 Am. B. E. 362. Lynch, In re, 1 Am. B. E. 245. Exemptions of Bankrupt. 167 § 6-] Table of Cases. Miller, In re, 1 Am. B. K. 647. Stout, In re, 6 Am. B. E. 505, 109 Fed. 794. White, In re, 6 Am. B. K. 451, 109 Fed. 635, New Yorh: Ellithorpe, In re, 5 Am. B. R. 681; affirmed on review aa EUithorpe, In re, 7 Am. B. E. 18, 111 Fed. 163. Lewensohn, In re, 3 Am. B. E. 594, 99 Fed. 73. Osborn, In re, 5 Am. B. E. Ill, 104 Fed. 780. Stokes, In re, 4 Am. B. E. 560. New Jersey: Demarest, In re, 6 Am. B. E. 232, 110 Fed. 638. North Carolina: Dingerhoef Bros., In re, 6 Am. B. E. 242, 109 Fed. 866. Duguid, In re, 3 Am. B. E. 794, 100 Fed. 274. Evans, In re, 8 Am. B. E. 730, 116 Fed. 909. Grimes, In re, 2 Am. B. E. 160, 94 Fed. 800. Grimes, In re (II), 2 Am. B. E. 610; modified on review as Grimes, In re, 2 Am. B. E. 730, 96 Fed. 529. Eichard, In re, 2 Am. B. E. 506, 94 Fed. 633. Eoyal, In re, 7 Am. B. E. 106, 112 Fed. 135. Walcott, In re, 15 Am. B. E. 386, 140 Fed. 460. Seabolt, In re, 8 Am. B. E. 57, 113 Fed. 766. Steed & Curtis, In re, 6 Am. B. E. 73, 107 Fed. 682. Stevenson & King, In re, 2 Am. B. E. 230, 93 Fed. 789. Wilson, In re, 4 Am. B. E. 260, 101 Fed. 571. Woodard, In re, 2 Am. B. E. 692, 95 Fed. 956. North Dakota: Jewett V. Huffman, 13 Am. B. E. 738. Oregon: Barrett, In re, 16 Am. B. E. 46. Daubner, In re, 3 Am. B. E. 368, 96 Fed. 805. Ohio: Groves, In re, 6 Am. B. E. 728. McClintock, In re, 13 Am. B. E. 606. Ehodes, In re, 6 Am. B. E. 173, 109 Fed. 117, ' Pennsylvania: Black, in re, 4 Am. B. E. 776, 104 Fed. 289, Bolinger, In re, 6 Am. B. E. 173, 108 Fed. 374. Brown, In re, 1 Am. B. E. 256 ; modified on review as Brown, In re, 4 Am. B. E. 46, 100 Fed. 441. Donahey, In re, 23 Am. B. R. 796, 176 Fed. 458, Haskin, In re, 6 Am. B. R. 485, 109 Fed. 789. Hoover, In re, 7 Am. B. R. 330, 113 Fed. 136. Jackson, In re, 8 Am. B. R. 594, 116 Fed. 46. 168 The Law and Peactice in BANKEtrpTCY. Table of Cases. [§ 6. Long, in re, 8 Am. B. E. 591, 116 Eed. 113. Manning, In re, 7 Am. B. E. 571, 112 Fed. 948. Myers, In re, 4 Am. B, E. 536, 102 Fed, 869. Rhode Island: Caswell, In re, 6 Am. B. E. 718. Jamieson, In re, 6 Am. B. E. 601. South Carolina: Anderson, In re, 4 Am. B. E. 640, 103 Fed. 854; modified on appeal as McGahan v. Anderson, 7 Am. B. E. 641, 113 Fed. 115. McCutchen, In re, 4 Am. B. E. 81, 100 Fed. 779. Texas: Baker, In re, 1 Am. B. E. 526. Burow V. Grand Lodge, 13 Am. B. E. 542, Coffman, In re, 1 Am. B. E. 530, 93 Fed. 422. Harrington, In re, 3 Am. B. E. 639, 99 Fed. 390. Smith, In re, 2 Am. B. E. 190, 93 Fed. 791. Smith (II), In re, 3 Am. B. E. 140, 96 Fed. 832. Tennessee : ToUett, In re, 5 Am. B. E. 305, 105 Fed. 425 ; afiBrmed on appeal as ToUett, In re, 5 Am. B. E. 404, 106 Fed. 866. Vermont: Alfred, In re, 1 Am. B. E. 243. Bean, In re, 4 Am. B. E. 53, 100 Fed. 262. Dawley, In re, 2 Am. B. E. 496, 94 Fed. 795. Gordon, In re, 8 Am. B. E. 255, 115 Fed. 445. Grady, In re, 14 Am. B. E. 238, 138 Fed. 935. Hopkins, In re, 4 Am. B. E. 619, 103 Fed. 781. Libby, In re, 4 Am. B. E. 615, 103 Fed. 776. Marquette, In re, 4 Am. B. E. 623, 103 Fed. 777. Mosier, In re, 7 Am. B. E. 268, 112 Fed. 138. Oderkirk, In re, 4 Am. B. E. 617, 103 Fed. 770. Trombley, In re, 16 Am. B. E. 598. White, In re, 4 Am. B. E. 613, 103 Fed. 774. Virginia: Fisher, In re, 15 Am. B. E. 652. Gamer, In re, 8 Am. B. E. 263, 115 Fed. 200. Ingalls, In re, 13 Am. B. E. 512. Moran, In re, 5 Am. B. E. 472, 105 Fed. 901 ; affirmed on appeal as Moran v. King, 7 Am. B. E. 176, 111 Fed. 730. Eichardson v. Woodward, In re, 5 Am. B. E. 94, 104 Fed. 873. Sisler, In re, 2 Am. B. E. 760, 96 Fed. 402. Exemptions of Bankrupt. 169 § 6.] Table of Cases. Tobias, In re, 4 Am. B. R 555, 103 Fed. 68. "Wilson, In re, 6 Am. B. E. 287, 108 Fed. 197. Allen, In re, 13 Am. B. E. 518, 134 Fed. 620. Washington: Buelow, In re, 3 Am. B. E. 389, 98 Fed. 86. Herbold, In re, 14 Am. B. E. 116. Thomas, In re, 3 Am. B. E. 99, 96 Fed. 828. Holden, In re, 12 Am. B. E. 96, 127 Fed. 980. Smalley v. Laugenour, 13 Am. B. E. 692, 196 U. S. 93. Thompson, In re, 15 Am. B. E. 283, 140 Fed. 251. Wisconsin: Friedrich, In re, 95 Fed. 282; modified on appeal as Fried- rich, In re, 3 Am. B. E. 801, 100 Fed. 284. Hoag, In re, 3 Am. B. E. 290, 97 Fed. 543. Jones., In re, 3 Am. B. E. 259, 97 Fed. 773. Kaufman, In re, 16 Am. B. E. 118, 142 Fed. 898. Mayer, In re, 6 Am, B. E. 117, 108 Fed. 599. Nelson, In re, 2 Am. B. E. 566. Peterson, In re, 1 Am. B. E. 254. SchuUer, In re, 6 Am. B. E. 278, 108 Fed. 691. Kaufman, In re, 16 Am. B. E. 118, 142 Fed. 852. SECTION SEVEN. DUTIES OF BANKR1TFTS. § 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 dis- charge, 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 prop- erty in foreign countries ; (6) immediately inform his trustee of any attempt, by his creditors or other persons, to evade the pro- visions 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 trus^tee; (8) prepare, make oath to, and file in court within ten days, unless further time is granted, after the adjudication, if an involuntary bankrupt, and with the petition if a voluntary bankrupt, a schedule of his prop- erty, 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 cred- itors and other persons, the amount, kind, and whereabouts of his property, and, in addition, all matters which may affect the ad- ministration 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 princi- pal place of business, or to examine claims except when presented to him, unless' ordered by the court, or a judge thereof, for cause shovm, 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. 170 Duties of Bankrupt. 171 i 7.] Synopsis of Section. Analogous provisions: In V. S.: As to (5), Act of 1867, § U, R. S., § 5051; As to (8), Act of 1867, §§ 11, 26, 42 (as amended by Act of July 27, 1868), R. S., §§ 5014, 5015, 5016, 5017, 5020, 5030, 5044; Act of 1841, § 1; As to (9), Act of 1867, § 26, R. S., § 5086; Act of 1800, §§ 18. 52. In Eng.: As to (8), Act of 1883, § 16; As to (9), Act of 1883, § 17. See, also, General Rules 184 to 189-A, and 217, 218. Cross references: To the law: As to (1), §§ 14-b, 55-a; As to (2), §§ 1(4), 2(4) (13) (14) (15) (16), 14-b(6) ; As to (3), § 57; As to (6) and (7), § 29; As to (8), §§ 18-a, 39-a(6), 59-a-b, 70-a; As to C9), §i 14-b(6), 21, 29, 38-a, 39-a, 41; Proviso clause, R. S., § 876. To the General Orders: V, IX, X, XT, XII, XXII. To the Forms: Nos. 1, 14, 28, 29. SYNOPSIS OF SECTION". DITTIES OF BANKRUPTS. I. Miscellaneous Duties. a. Attendance on meetings. (1) In genekal. (2) Attendance at distance ; expenses. (3) Peactice. b. Obedience to lawful orders. c Examination of claims and notification of trustee of proof of false claims. d. Execution and delivery of papers. e. Notification of trustee of attempt to evade act. II. Preparation and Filing of Schedules. a. In general. b. When to be prepared and filed. c. By whom to be prepared and filed. d. Punishment for failure to file. e. Use of schedules as evidence. f . Framing schedules. (1) In geneeai,. (2) Contents. (3) Schedule of ceeditoes and liabilities. • (4.) Schedule of assets. (5) Claim of exemptions. (6) Veeification. g. Ameridment of schedules. 172 The Law and Peaotice in Bankettptcy. Attendance on Meetings. [§ 7-a(lf. III. Public Examination of Bankrupt. a. In general. b. How brought on. c. Method of conducting. d. Subject matter of examination. e. Unsatisfactory answers. f. Criminating questions. g. Effect of % U-b (6). In. Effect of false swearing. i. Examination of third persons. I. MISCELLANEOUS DUTIES. a. Attendance on meetings. — (1) In geneeal. — The firsit statu- tory duty of the bankrupt prescribed by this section is to " 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 dis- charge, if filed." Four things should be noted : (a) The bankrupt is not obliged to attend the first or any other meeting of creditors, unless ordered to do so; (b) if his home or usual place of business is more than one hundred and fifty miles from the place of meet- ing, he caimot be required to attend save for cause shown ; (c) if ordered to attend a meeting other than in the place of his residence, he is entitled to actual expenses out of the estate ; and (d) that, none of these limitations seeming to apply to a hearing on dis- charge, he must attend such a hearing, wherever it is and at his own expense, even though not ordered to do so.^ There was no like clause in the act of 1867. Under the former law, it was held that, in the absence of an order to attend, the bankrupt might stay away;^ also, that, for sicknras or other good cause, he might be excused f and that he must, when ordered, attend a meeting called to consider a proposed composition.* Under the present law, it has been held that the bankrupt's presence at the first meeting of the creditors is required when ordered by the court, to aid the referee in assisting the creditors.^ The bankrupt's presence is not indispensable.® In the case of a bank- rupt corporation the attendance of the ofiicers of the corpora- 1. In re Shanker (D. C, Pa.), 15 4. In re Scott et al., Fed Cas. Am. B. E. 109, 138 Fed. 862, quoting 12,519. this paragraph with approval. 5. In re Eagles & Crisp (D. C, No. 2. In re Dumahaut, Fed. Cas. 4,124. Car.), 3 Am. B. R. 733, 99 Fed. 695. 3. In re Carpenter, Fed. Cas. 2,427. 6. In re Parker (Ref. Kan.), 1 Am B. R. 615. Duties of Bankrupt. 173 § 7 -a (2).] Attendance at Meetings; Obedience to Orders. tion may be required.^ The case of Eagles v. Crisp is a brief mono- graph on practice at meetings of creditors, though its holding that a bankrupt is required to be present at the first meeting, apparently whether ordered to do so or not, may be questioned (2) Attendance at distance; expenses. — The proviso at the end of this section does not require attendance at a place more than 150 miles from his home or principal place of business, and pro- vides for the payment of his expenses from the estate when re- quired to attend at any place other than the city, town or village of his residence. This does not require payment of the bankrupt's expenses where he voluntarily removes from the district after bankruptcy.* (3) PpvACtice. — By Form No. 14, the bankrupt is at the time of the adjudication ordered to appear before the referee on a day certain. Thisi in actual practice should be forthwith, since, under the words of the form and of General Order XII (1), there is doubt whether the referee acquires jurisdiction until he does so. In some districts, this day is fixed as that for the first meeting of creditors and, if so, the bankrupt must attend. The more common practice, however, is to notify the attorney in charge to produce the bankrupt at the time of the first meeting, a practice somewhat loose, as not probably amounting to such an order as to require the bankrupt's presence under this subsection, or sufficient to predicate thereon a report for contempt under § 41-a(l) and b. If once ordered to attend a meeting, he must attend every continuance of the meeting; but a referee will not permit the bankrupt to be harassed by repeated applications for adjournments. When the presence of the bankrupt seems not likely to be required at a continuance or at subsequent continuances, he should be excused and a minute made of such order.® b. Obedience to lawful orders. — The section requires the bank- rupt to " comply with all lawful orders of the court." " Bank- rupt " includes any person against whom a petition has been filed.^" The moment a person voluntarily files a petition in bankruptcy he submits himself personally to the jurisdiction of the court and becomes bound to obey its orders and directions, even before adju- 7. See Bankr. Act, § 1 (19); In re on the practice of the Erie County Alphin & Lake Cotton Co. (D. C, District of the Western District of Ark.), 12 Am. B. E. 653, 131 Fed. 823. New York. 8. In re Groves (Ref. Ohio), 6 Am. 10. Bankr. Act, § 1 (4). In re B. R. 732. Bromley, 3 N. B. R. 686. 9. The above suggestions are baaed 174 The Law and Peactice in Bankeuptcy. Obedience to Lawful Orders. [§7-a(2). dication." What are lawful orders depends on many facts, such as jurisdiction, and the like, and such orders may be concerning any of the thousand and one acts which under the law a bankrupt and his creditors or other persons may be required to do or to refrain from doing.^^ Thus, a bankruptcy court may make an order directing a bankrupt to turn over to his trustee goods found to be in his posses- sion and under his control.^' But the failure to turn over property which is not in the bankrupt's possession and over which he has no control, does not constitute contempt ;" and a bankrupt has a right to a hearing before he can be committed for contempt.^^ If a bankrupt explains a discrepancy as to goods purchased by him prior to his bankruptcy, a summary order to turn over such goods should not be granted.^'3 It is not for the bankrupt or his counsel to de- termine whether the order made is lawful.'* It stands until it is modified or withdrawn by the courf even though the court be without jurisdiction.^' This may be accomplished by a personal appearance and motion to that end, or the court may act propria motu. It has been held that the order need not necessarily be in writing;'" indeed, referees^ often give oral directions to the bank- rupt which, if properly noted on their record books, are as effective for all purposes (including a proceeding to punish for contempt) as if reduced to writing and actually served. It is under this sub- section that referees frequently report contempts growing out of a ±1. In re Kyler, Fed. Gas. 7,956, 14. Ex parte Comingor (C. C. A., 2 Ben. 414 ; In re Harris, 3 N. Y. Leg. 6th Cir. ) , 5 Am. B. R. 537, 107 Fed. Obs. 152. Any voluntary appearance 898, aflf'd 7 Am. B. R. 421, 184 U. S. has been held sufficient to bring a per- 18; Boyd v. Glucklich (C. C. A., 8th son within the jurisdiction of the Cir.), 8 Am. B. R. 393, 116 Fed. 131; court. In re Ulrich, Fed. Cas. 14,327, In re Cole (C. C. A., 1st Cir.), 16 3 Ben. 355; In re Kirtland, Fed. Cas. Am. B. R. 302, 144 Fed. 392. 7,851, 10 Blatch., 515. 15. In re Herschkowitz (D. C, N. 12. Bankr. Act, § 2 (16), and dis- Y.), 14 Am. B. R. 86, 136 Fed. 950; cussion thereunder, ante. In re Davison (D. C, R. I.), 16 Am. 13. In re Purvine (C. C. A., 5th B. R. 337, 143 Fed. 673; In re Cole Cir.), 2 Am. B. R. 787, 96 Fed. 192; (C. C. A., 1st Cir.), 16 Am. B. R. In re Greenberg (D. C, N. Y.), 5 Am. 302, 144 Fed. 392. B. R. 840, 106 Fed. 496; In re Rosser 15a. In re Reese, (D. C, Pa.), 22 (C. C. A., 8th Cir.), 4 Am. B. R. Am. B. R. 521, 170 Fed. 986. 153, 101 Fed. 562; Ripson Knitting 16. U. S. v. Memphis, etc., R. R. Works V. Schreiber (D. C, Wash.), 4 Co., 6 Fed. 238; Atlantic Co. v. Ditt- Am. B. R. 299, 101 Fed. 810; In re mar Powder Mfg. Co., 9 Fed. 317; Schlesinger (C. C. A., 2nd Cir.), 4 Goodyear v. Mullee, Fed. Cas. 5,577; Am. B. R. 361, 102 Fed. 117; In re Burr v. Kimback, 29 Fed. 432; So- Wilson (D. C Ark.), 8 Am. B. R. ciete v. Western Distilling Co., 42 612, 116 Fed. 419; In re Shachter (D. Fed. 96; Ullman v. Ritter, 72 Fed. C, Ga.), 9 Am, B. R. 499, 119 Fed. 1,000. 1,010; In re Felsnn (D. C. N. Y.) , 10 17. Worden v. Searls, 121 U. S. Am. B. R. 716, 124 Fed. 288; Sehweer 14; Wagner v. U. S. (C. C. A., 6th V. Brown (C. C. A., 8th Cir.), 12 Cir.), 4 Am. B. R. 596, 104 Fed. 133. Am. B. R. 178, 130 Fed. 329; In re 18. In re Eaton, 51 Fed. 804. Averiek, (D. C. Pa.), 22 Am. B. R. 19. Bridges v. Sheldon, 7 Fed. 45. 518, 170 Fed. 521. Duties of Banketipt. 175 § 7-a(3) (7).] Examination of Claims; Notice of False Claims. bankrupt's refusal to obey an order requiring the surrender of money or property in his possession.^" Punishment for a refusal to obey a lawful order may be by fine or imprisonment, or by fine and imprisonment.^* Since the amendatory act of 1903, there is a further penalty, the refusal of a discharge.** c. Examination of claims and notification of trustee of proof of false claims. — Subdivisions 3 and 7 of this section should be considered together. The former makes it the duty of the bank- rupt to " examine the correctness of all proofs of claims filed against his estate;" and the latter requires him to notify the trustee " in case of any person having to his knowledge proved a false claim against his estate."** The section further limits this duty by providing in the proviso at the end thereof that he shall not be required " to examine claims except when presented to him unless ordered by the court or a judge thereof for cause shown."** In actual practice, these subsections are rarely construed. The importance of a personal examination of all proofs of claims by the bankrupt is apparent, especially if he kept no books or his busi- ness records are unreliable. As a rule, the bankrupt sits by at the call of claims on the first meeting and informs the referee whether they are correct. He may, of course, be put on oath, if desired. He should also be frequently consulted by the trustee concerning the correctness of claims subsequently presented. At all times until his discharge, or until the final closing of adminis- tration if the discharge is granted sooner, it is also his duty to inform the trustee immediately in case he knows that a false claim has been proven. There seems to be no penalty, either by contempt or as for the commission of a crime, in case the bankrupt fails to perform these duties.*^ H© also has sufficient standing to move to ZO. In re Wilson (D. C, Ark.), 8 Fed. 694, holding that in the absence Am. B. R. 612, 116 Fed. 419. Com- of evidence that defendant bankrupt pare text and cases referred to in §§ had neither examined or approved 2(13) (15), 23-b, 41-a(l). claims filed against his estate, they 21. Bankr. Act., § 2 (13) (15). See are not competent as admissions on discussion under such subsections, his part as to ownership or possession ante, pp. — . of property, and the admission of such 22. See Bankr. Act, § 14-b(6), evidence was erroneous and preju- post. dieial. 23. For proof and allowance of 25. Surely not under § 2(13(15), claims generally, see Bankr. Act, § 57, unless there is an order by the court; POS*- nor under § 41-a(l), for the same 24. Jacobs v. United States (C. C. reason; nor under § 29-b(3) which A., 1st Cir.), 20 Am. B. E. 550, 161 refers only to creditors. 176 The Law and Peactice in Bankeuptcy. Execution of Papers; Notice of Attempt to Evade Act. [§ 7-a(4) (5) (6). expunge a false claim, though where there is a trustee, the latter, as the representative of all the creditors, should do this.*® d. Execution and delivery of papers. — Subdivisions 4 and 5 require the bankrupt " to execute and deliver such papers as shaK be ordered by the court," and " to execute to his trustee transfers of all his property in foreign countries." Under the former law, a formal assignment was given the assignee (trustee) by the judge or register (referee).*'' This seems to have been for record purposes, a difficulty now met by the requirement permitting the recording of the order approving the trustee's bond in the proper record office,*® and the new subsection requiring the recording of a copy of the adjudication.** No formal assignment is now necessary; the assets of the bankrupt at the time the petition was' filed, by operation of law, passing, as of the date of the adjudication, to the trustee subsequently to be appointed.^" When, however, the property is subject to the laws of another nation, a formal instru- ment, evidencing the transfer, often becomes necessary, and must tben be executed by the bankrupt.^ ^ But, under the broad terms of these subdivisions, the court may order the bankrupt to execute any other papers ; as, for instance, such consents as will permit the substitution of the trustee in a pending suit in a State court.^* Under the present law, a bankrupt has been by the court com- pelled to execute the assignment of a license,'^ and to transfer his interest in an insurance policy.** e. Notification of trustee of attempt to evade act. — Subdivision 6 requires the bankrupt to " immediately inform his trustee of any attempt, by his creditors or other persons, to evade the provisions of this act, coming to his knowledge." " To evade the provisions of the act " refers only to an attempted evasion within the bank- rupt's knowledge. If the evasion be an accomplished fact, that there was an attempt to evade would probably follow. It would seem, too, that the attempt can be predicated on acts antedating the filing of the petition, as the acceptance of a preference void- 26. In re Ankeny (D. C, Iowa), 4 Bank (C. C. A., 8th Cir.), 14 Am. B. Am. B. R. 72, 100 Fed. 614. R. 404, 137 Fed. 818, affirming 12 Am. 27. Act of 1867, § 14; R. S. § B. R. 727. 5,044. 32. Samson v. Burton, Fed. Gas. 28. Bankr. Act, § 21-e. 12,285; In re Clark, Fed. Cas. 2,798; 29. Bankr. Act, § 47-c, added by Clark v. Binninger, 39 How. Pr. 363. amendatory act of 1903. 33. In re Fisher (D. C, Mass.), 3 30. See Bankr. Act, § 70-a. Am. B. R. 406, 98 Fed. 891. 31. Compare Oakey v. Bennett, 11 34. In re Diack (D. C, N. Y.), 3 How. 33. See In re Granite City Am. B. R. 723, 100 Fed. 770. Duties of Bankeupt. 177 i7-a(8).] Schedules; Preparation and Filing. able under § 60-b, or the completion of a fraudulent transfer, with knowledge on the part of the transferee, under § 67-e, and as well of those that are in the law deemed continuing as of those actually after the bankruptcy.*'* There is, however, no penalty for failure to perform this duty. This is unfortunate. Were punishment prescribed and enforcement against the bankrupt's person possible, frauds on creditors, due to evasions of the provisions of the act, would rarely occur. II. fueparation and filing of schedules. a. In general. — Subdivision 8 of this section provides for prep- aration and filing by the bankrupt of a schedule showing the kind and value of his property, a list of his creditors and a claim for such exemptions as he may be entitled to. This provision as to the filing of schedules is imperative,-''® and one of the most important duties performed by a bankrupt's attorney consists in the prepara- tion of his schedules. The form prescribed*®* is carefully subdi- vided and elaborate in its invitation to details. The schedules often become of vital importance when application is made for a discharge, or when the discharge is pleaded in bar against a creditor at the time of the bankruptcy. The necessity for careful investigation increases proportionately to the remoteness in point of time of the failure whence came the debts. No voluntary peti- tion should be filed until the attorney in charge — by questioning and investigating the books of the debtor, and tracing the ovmer- siiip of, not merely ordinary debts like accounts and notes, but ako, from an examination of the records, of judgments and un- liquidated 'liabilities like bonds or notes accompanying mortgages — is reasonably certain that he knows every financial obligation of his client, its actual then owner, and what is the post-office address of that owner. The property interests of the debtor, whether present, in future, or contingent, should also be carefully ascertained, as should the exemptions allowed by the State law. Not until all these facts are in hand and summarized should the lawyer begin drawing the papers.*'^ 35. Compare Bankr. Act, § 29-b. phasized. Starting right will save 36. Matter of Back Bay Automo- many delays and much annoyances bile Co. (Ref. N. Y.), 19 Am. B. E. later, and, to the bankrupt, may 33, 37. amount to a discharge that can be 36a. See Form No. 1. relied on as a stout bar to all pos- 37. The importance of these sug- aible suits, or a mere reed that will gestions cannot be too strongly em- bend and break when most needed 12 178 The Law and Practice in Bankeuptcy. Schedules; by Whom Prepared. [§7-a(S). b. When to be prepared and filed. — It is the bankrupt's duty^* to file the schedules with a voluntary petition, or, if the proceed- ing be involuntary, within ten days after the adjudication, unless further time is granted.^* For the place where such petition must be filed, and by and against whom it can be filed, reference should be had to the appropriate sections.^" Whether a voluntary petition can be filed while there is an involuntary petition pending against the petitioner, is a mooted question, as it was under the previous law." c. By whom to be prepared and filed. — The schedules may be prepared and filed either by the bankrupt, by the creditors, or by the referee. Thus, if the bankrupt, in an involuntary case, fails to prepare and file schedules within ten days, or where the bankrupt otherwise fails, refuses, or neglects so to do, the referee must do or cause it to be done ;*^ to this end the bankrupt may be ordered to appear and testify. This provision, however, seems to be modified by General Order IX. By its terms, in involuntary cases, the initiative is put on the petitioning creditors. If the bankrupt can be served with notice, his failure to file schedules entitles them to an attachment against his person ;*^* if he cannot be found, they must file a schedule giving the names and places of residence of ail the creditors, according to their best information. They, as a rule, know little or nothing about the other creditors. Hence where the bankrupt has disappeared, in some districts a practice has grown up of bringing into courts on subpoenas all persons who would be likely to know the facts, and, in a prelimin- ary proceeding, on the evidence of such persons, making up the list required. Such a procedure is certainly within the broad powers conferred on courts of bankruptcy, and may be instituted both by the petitioning or other creditors, or by the referee himself. Such schedules, when prepared, should, of course, be in triplicate, and conform as nearly as possible to those which make a part of Form No. 1, though they need give only names and addresses. 38. In re Granite City Bank (C. C. But the filing contemplated in § 12-a A., 8th Cir.), 14 Am. B. R. 404, 137 must, I think, if the most natural Fed. 818. and reasonable construction is sought, 39. In re Back Bay Automobile Co. be the filing required by § 7-a(8)." (D. C, Mass.), 19 Am. B. R. 8,35, 158 40. See Bankr. Act, §§ 2, 3, 4, 5, Fed. 679, in which the court said: 18, 59 and 63. "The bankrupt must file his schedules 41. Compare In re Flanagan, Fed. in court according to § 7-a(8) within Cas. 4,850, with In re Stewart, Fed. ten days after adjudication. It may Cas. 13,419. See, also, under § IS be true, as the referee says, that there of this work, can be no objection to the bankrupt 42. Bankr. Act, § 39-a(6). voluntarily filing them at "ny time. 42a. An order to show cause DuTijis OF Bankeupt. 179 §7-a(8).] Framing Schedules. d. Punishment for failure to file. — A bankrupt may be adjudged guilty of contempt of court for refusing' and neglecting to file a schedule as required by this section.*^ In New York, Southern District, a bankrupt who refuses or neglects to file his schedules is fined, in the first instance, a suflicient sum to compensate the attorneys for making the motion to punish the contempt; if the imposition of such fine is ineffectual, punishment by imprisonment is inflicted.** e. Use of schedules as evidence. — A bankrupt's schedule is in the nature of a pleading so as to bring it within the protection of § 860 of the U. S. Eev. Stats., and is incompetent as evidence against him in a criminal prosecution for concealing from his trustee property belonging to the estate; the reception of such schedule in evidence over a general objection to its competency, duly excepted to, is reversible error.*"* f. Framing schedules. — (1) In general. — As under the act of 1867, the forms accompanying the general orders include a form for schedules. It has been held that a failure to use this form warrants a dismissal of the petition.*^ The form prescribed covers property in reversion, remainder or expectancy, includes property held in trust for the debtor, or subject to any power or right to dispose of or to charge, including a particular state- ment of property which had been conveyed for the benefit of cred- itors.*^ Manifestly the use of the form is in the interest of uni- formity and for the convenience of the courts and parties ; but a failure to precisely observe the form is not necessarily fatal.** Schedules conforming saibstantially to the requirements of the statute and not necessarily to the rules and forms also would be sufficient.** General Order V provides that the schedules shall be why a bankrupt should not be com- 46. Mahoney v. Ward (D. C, N. pelled to file his schedules may be Car.), 3 Am. B. E. 770, 100 Fed. 278; granted without notice. In re Brady Matter of McClintock (Ref., Ohio), 13 (D. C, Ky.), 21 Am. B. R. 364. Am. B. E. 607. 43. Matter of Fellerman (D. C, 47. In re Gailey (C. C. A., 7th N. Y.), 17 Am. B. E. 785, 149 Fed. Cir.), 11 Am. B. R. 539, 127 Fed. 538. 244. As to jurisdiction of referee to 48. Burke v. Guarantee Title & require filing schedules, see Bankr. Trust Co. (C. C. A., 3d Cir.), 14 Am. Act, § 38(1) and discussion there- B. R. 31, 134 Fed. 562. under. 49. In re Soper (Ref., N. Y.), 1 44. In re Schulman & Goldstein Am. B. E. 193; Burke v. Guarantee (D. C, N. Y.), 20 Am. B. E. 707. Title & Trust Co. (C. C. A., 3d Cir.), 45. Johnson v. United States (C. 14 Am. B. R. 31, 134 Fed. 562. See, C. A., 1st Cir.), 20 Am. B. E. 724. also, under § 18. 180 The Law and Pkactice in Bankeuptcy. Framing Schedules. [ § 7-a ( 8 ) . written out plainly, without abbreviation or interlineation, except where such abbreviation and interlineation may be for the pur- pose of reference. The earlier blanks could not be used in type- writing machines. As they must be filed in triplicate, the use of those blanks that are so printed as to permit their being type- written and, therefore, manifolded, is advised. It should be noted also that the statute requires that the schedules only be in tripli- cate. A voluntary petition may be a separate paper, though this is unusual. (2) Contents. — The schedules divide themselves naturaiUy into three parts, (a) of creditors, (b) of assets, and (c) of exemp- tions. The official form, however, includes the exemption in the property schedule. The official form prescribes in extensive de- tail the items to be included. Care should be used in observing this form. It would serve no useful purpose to describe this form in this place. The form must be examined and. applied to the fullest possible extent to the circumstances of each particular case. (3) Schedule of creditoes and liabilities. — By far the most important schedule is that of creditors.^" Its purpose is threefold; (a) to give the court information as to the persons entitled to notice, (b) to inform the trustee as to the claims against the estate and the considerations on which they rest, and (c) to an extent at least, to limit the effect of the bankrupt's discharge to parties to the proceeding. It follows that the requirements of the statute — " a list of his creditors, showing their residences, if known, if unknown, that fact to be stated, the amounts due to 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," should be strictly observed. It has been held that ditto marks should not be used.^^ The practice of writing in the word " none " where the facts come within the terms of the forms is now quite universal and should be followed. The names of cred- itors should be written in with care;^^ and when the creditor is a copartnership whose claim has been reduced to judgment in favor of the individuals, the names both of the firm and of the indi- viduals should be set out. Even greater care should be observed in the matter of addresses. It is still questionable whether a notice addressed to a creditor resident in a large city, without giv- ing the street number or post-office box, complies with the stat- 50. Schedule A (1) (2) (3) (4) 52. See Liesum v. Kraus, 71 N. Y. (5) of Form No. 1. Supp. 1,022. See, also, In re Arohen- 51. In re Mackey (Ref., N. Y.), 1 brown. Fed. Cas. 504. Am. B. R. 593. Duties of Bankrupt. 181 §7-a(8).] Schedules; Creditors and Liabilities. ute.^' Schedules are defective if they do not contain the addresses of creditors, stating street and number, in case creditorsi reside in large cities, or unless the schedules show that after diligent effort no better addresses can be obtained.''* If the residence cannot be ascertained, that fact must be stated, and the proper practice re- quires that the bankrupt shall state what eilorts he has made to ascertain the fact."" If a wrong address of a creditor is inserted in the schedule, so that it is fair to assume that he did not receive notice of the proceedings, he will not be affected thereby and a discharge of the bankrupt will not be a defense in an action by the creditor on his claim."* Abbreviated addresses, such as " 135 Bway," are not allowed under General Order V."^ It seems that a debt is not " duly scheduled " when the office address instead of the residence is shown in the schedule under the designation of residence,"* or when the debt of A. Custard appears in the sched- ules under the name of A. Castard."® All creditors should be scheduled, even those barred by the statute of limitations; but scheduling the latter is not a revival of the debt.®"* Accuracy is not so important in stating the amount of the debt, its considera- tion, or when and where contracted; but ^ese facts should be fully set out when possible. The description of securities should be sufficient to inform the court of their value, should a motion be made at the first meeting to adjust the same for voting purposes.®^ Where the claims have been reduced to judgment, the creditor to be scheduled is the record holder, whoever may be the actual 53. Compare, for effect of omission tained after due search has been of creditor, under §§ 14 and 17 of this made." work. 56. Westheimer v. Howard, 14 Am. 54. In re Brumelkamp (D. C, N. B. R. 547, 47 N. Y. Misc. 145, 93 N. Y.), 2 Am. B. R. 318, 95 Fed. 814. Y. Supp. 518; Matter of Quacken- 55. In re Pulver, 1 N. B. R. 46, bush, 19 Am. B. E. 647, 122 N. Y. Fed. Cas. 11,466. App. Div. 456; Murphy v. Blumen- Froof of search for address. — rich, 19 Am. B. R. 910, 123 N. Y. In the case of In re Dvorak (D. App. Div. 645. C, la.), 6 Am. B. R. 66, 107 57. Sutherland v. Lasher, 11 Am. Fed. 76, the court said: "The B. R. 780, 41 Misc. (N. Y.) 240. act requires the bankrupt to fur- 58. Weidenfeld v. Tillinghast (C. nish a list of creditors and their C, N. Y.), 18 Am. B. R. 531. addresses, and in cases like the pres- 59. Custard v. Wiggerson (Sup. ent, when the bankrupt gives a list Ct., Wis.), 17 Am. B. R. 337. of creditors, but states that their ad- 60. In re Lipman (D. C, N. Y.), dresses are unknown, the referee 2 Am. B. R. 46, 94 Fed. 353; In re should require the addresses to be Resler (D. C, Minn.), 2 Am. B. R. furnished or satisfactory proof to be 602, 95 Fed. 304 ; In re Kingsley, Fed. made that the same cannot be ascer- Cas. 7,819, 1 N. B. R. 329. 61. Bankr Act, § 57-e. 182 The Law and Practice in Bankeuptcy. Schedule of Assets; Exemptions. [§7-a(8). holder.®^ The effect on the discharge of the omission of creditors from the schedule is discussed under Section Seventeen, post. (4) Schedule of assets. — The words of the statute require this schedule to show " the amount and kind of property, the loca- tion thereof," and " its money value in detail." What has been said in the previous paragraph as to accuracy and details applies with equal force here. The oath to this schedule calls for an affi- davit that it is a statement of " all his estate, both real and per- sonal," words which mean what they say.®* While, where the omission of assets is charged, it is not usually difficult to show either mi&talse in law or want of intent, the only safe way is to schedule all interests in property,®* including, of course, property claimed to be exempt, whether such property seems to pass to the trustee or not.*^ Property transferred by the bankrupt by general assiignment or otherwise, if his act will be voidable by his trustee, as well as all property fraudulently conveyed, should be included." The grantee of lands subject to a trust for the benefit of the grantor takes an interest in the lands and must schedule the same upon becoming a bankrupt.®^ A bank account should be scheduled as an asset. ®^ Por interesting authorities as: to what is and what is not property, see the cases cited in the footnote.®' (5) Claim of exemptions. — The law does not compel a de- tailed specification of the articles claimed as exempt,''"' although Schedule B. (5) of Form 'So. 1 should be observed.''^ Where the schedule, duly filed, contains a claim for exemption, the bankrupt is entitled thereto out of the proceeds of a sale of all the assets 62. Sellers v. Bell (C. C. A., 5th Cir.), 11 Am. B. R. 539, 127 Fed. Cir.), 2 Am. B. E. 529, 94 Fed. 811. 538. Under the statute of 1841 it was held 68. Steinhardt v. National Park that a judgment previously confessed Bank, 19 Am. B. R. 72, 120 N. Y. though without consideration was App. Div. 255. proper to be inserted in the schedule, 69. In re Bean (D. C, Vt.), 4 Am. though not binding on the assignee. B. R. 53, 100 Fed. 262; In re Barrow In re Robertson, 1 N. Y. Leg. Obs. 20. (D. C, Va.), 3 Am. B. R. 414, 98 63. See Bankr. Act, §§ 14 and 29, Fed. 582; In re Harris (Ref., 111.), 2 post. Am. B. R. 359, 99 Fed. 71 ; In re Wal- 64. In re Real, Fed. Cas. 1,156. ther (D. C, N. Y.), 2 Am. B. R. 702, 65. In re Todd (D. C, Vt.), 7 Am. 9; Fed. 941; In re Wood (D. C, N. B. R. 770, 112 Fed. 315. See Bankr. Y.), 3 Am. B. R. 572, 95 Fed. 946. Act, § 70, as to certain insurance pol- 70. Burke v. Guarantee Title & icies. Trust Co. (C. C. A., 3d Cir.), 14 Am. 66. In re Pierce, Fed. Cas. 11,141; B. R. 31, 134 Fed. 562; Lipman v. In re O'Bannon, Fed. Cas. 10,394. Stein (C. C. A., 3d Cir.), 14 Am. B. Contra: In re Robertson, Fed. Cas. R. 30, 134 Fed. 235. Compare In re 11,921; In re Hussman, Fed. Cas. Wunder (D. C, Pa.), 13 Am. B. R. 6,951, 2 N. B. R. 437. 701, 133 Fed. 821. 67. In re Gailey (C. C. A., 7th 71. Matter of Mcriintoc': (Ref., Ohio), 13 Am. R. Tt. 6nn. Duties of Bankeupt. 183 §7-a(8).] Exemptions; Verification. by a receiver, prior to the filing of the schedule.'^* The banknipt should not be permitted to omit from his schedules cash on hand or any other property on his claim that he was entitled thereto as an exemption; such a course would defeat one of the plain pro- visions of the law and deprive creditors of their rights.'"^ His claim of exemptions must be filed with his schedulesi as a part thereof; this is the practice indicated by the statute and the ofiicial forms. While the State statute controls as to the amount and kind of exemptions, the time and manner of claiming them are regulated by the bankrupt act,''* and a claim therefor in the schedules of an involuntary bankrupt will be regarded as effect- ive.''^ The future action of the trustee in setting apart the bank- rupt's exemptions are based upon the schedules containing the claim, and it is the aisisertion of the claim in this manner which gives the court jurisdiction.''® It is not sufficient to merely claim the exemptions in general terms ; the exact property claimed should be accurately described.''^ If when the schedules are filed the property is still in specie, the articles themselves should be de- scribed,^* and he will not be permitted to subsequently claim his exemptions out of the proceeds of the property sold.''' The form of the schedule, B (5), recognizes the propriety of estimating the value of the articles claimed and of mentioning the State statute under which the article is claimed. (6) Vebification. — The previous statute required the sched- ules to be verified before a Federal officer. !Now, they can be verified before State officers.'*" The oaths, like each separate sheet of the schedules, should be signed by the bankrupt. As the 72. Lipman v. Stein (C. C. A., 3d rington, 1 N. B. N. 513; In re Har- Cir.), 14 Am. B. E. 30, 134 Fed. 235. ber, 2 N. B. N. Rep. 449. 73. In re Royal (D. C, No. Car.), 77. In re Duffy (D. C, Pa.), 9 Am. 7 Am. B. R. 106, 112 Fed. 135. B. R. 358, 118 Fed. 926; In re Neal 74. In re Stein (D. C, Pa.), 12 (Ref., Ohio), 14 Am. B. R. 550; In re Am. B. E. 384, 130 Fed. 377; In re Von Kern (D. u., Pa.), 14 Am. B R. LeVay (D. C, Pa.), 11 Am. B. R. 403, 135 Fed. 447; In re Prince & Wal- 114, 125 Fed. 990; In re Grove ter (D. C, Pa.), 12 Am. B. R. 680, 131 (Ref., Ohio), 6 Am. B. E. 728; In re Fed. 546; In re Wunder (D. C, Pa.), Prince & Walter (D. C, Pa.), 12 Am. 13 Am. B. R. 701, 133 Fed. 821; In B. R. 680, 131 Fed. 646. " Donahey (D. C, Pa.), 23 Am. B. 75. In re Stein (D. C, Pa.), 12 ^■J^\^'^^ Fed. 458. Am. B. E. 384, 130 Fed. 377; Matter * J R i? "^s^" tnS i'^A vi'/^'' ^ * iij- riv 4. 1 /T> f ni,- \ to a™ -'^™- 2- ^- '^85, 109 Fed. 789; In re of McChntock (Eef., Ohio), 13 Am. Woodard (D. C., Pa.), 2 Am! B. R B. R. 606; In re LeVay (D. C, Pa.), 692, 95 Fed; 954. 11 Am. B. R. 114, 125 Fed. 990. 79_ !„ re Wunder (D. C, Pa.), 13 76. McGahan v. Anderson (C. C. Am. B. R. 701, 133 Fed. 821; In re A., 4t)i Cir.), 7 Am. B. R. 641, 113 Manning (D. C, Pa.), 7 Am. B. R. Fed. 115. See, also. In re Nunn (Ref., 57], ]]2 Kud. !)48; In re Stein (D. C, Ga.), 2 Am. B. R. 664; In re Har- Pa.), ]2 Am. B. R. 384, 130 Fed. 629! 80. See Bankr. Act, § 20-a. 184 The Law and Peactice in Bankeuptcy. . — — , 1 Amendment of Schedules. [§7-a(8). official forms are now printed, space is not provided for the sig- nature. It is not thought, however, that a separate verification is so essential as to affect jurisdiction provided the schedules accom- pany the petition; the oath to the latter, when coupled with ita reference to the schedules and what they contain, are enough to comply with the statute.*' g. Amendment of schedules. — It is the referee's duty to cause incomplete or defective schedules to be amended.*^ This he can do on his own motion, or in (response to an application under General Order XI. Amendments to the schedule of creditors often be- come necessary. If the first meeting has been held, an amendment may deprive a creditor brought in of his right to participate in the choice of trustee, and, therefore, the reason for the omission should appear to be sufficient.*^ Under the former law, it was frequently held that amendments might be made, even after objections had been filed to a discharge.** This is undoubtedly so under the pres- ent law, but the utmost good faith should appear.*^ It has been held in an exceptional case that a discharge might be opened to permit an amendment of schedules by the insertion of a claim omitted through mistake of law.*^^ Both petition and order should be in triplicate, and the copies intended for the clerk and the trustee should be immediately sent them by the referee. As already suggested the schedules may be amended so as to include a claim of exemption.*" A suggested practice on amendments of this character is set out in the footnote.*^ Forms for amending schedules will be found under " Supplementary Forms," post. 81. Matter of McConnell (Eef., 106, 112 Fed. 135; In re Mudd, 2 N. N. Y.), 11 Am. B. E. 418. B. N. Eep. 710. 82. Bankr. Act, § 39(2); In re Amendment. — ^Application has been Ankeny (D. C, Iowa), 4 Am. B. E. defeated after a year has elapsed and 72, 100 Fed. 614; In re Orne, Fed. where objections to the discharge Cas. 10,582; In re Brumelkamp {D. have been filed. In re Hawk (C. C. C, N. Y.), 2 Am. B. E. 318, 95 Fed. A., 8th Cir.), 8 Am. B. E. 71, 114 gl4 Fed. 916. Consult, also, for amend- 83. In re Myers (D. C, Ind.), 3 ments of claims to exemptions, § 6; Am. B. E. 760; In re Bean (D. C, and, for amendments to petition, § Vt.), 4 Am. B. R. 53, 100 Fed. 262; 18, and for amendments to proofs of In re Wilder, 3 Am. B. E. 761, 101 debt, § 57. See, also, " Supplemen- Fed. 104. ''^■■y Forms," post. 84. In re Heller, Fed. Cas. 6,339; 85a. In re McKee (D. C, N. Y.), In re Connell, Fed. Cas. 3,110; In re 21 Am. B. E. 306. Preston, Fed. Cas. 11,392. 86. S6e ante, p. 147. 85. In re Eaton (D. C, N. Y.), 6 87. Amendment o£ scbednles; Am. B. R. 531, 110 Fed. 731; In re practice.— 1. Prior to the time set Roynl (D. C, N. Car.), 7 Am. B. I!, for, or before the transaction of Duties of Bankrupt. 185 i7-a(9).] Public Examination of Bankrupt. III. PUBLIC EXAMINATION OF BANKRUPT. a. In general. — Subdivision 9 of this section requires the bank- rupt to submit to an examination concerning the conducting of his business, the cause of his bankruptcy, etc. The right to exam- ine the bankrupt is essentiai to a due administration of the law. It has existed since the very earliest of the English bankruptcy la-wH. The present English law provides for a public examination even before the first meeting of creditors,** Under our law, the examination may be had "at the first meeting of creditors or at such other times as the court shall order." This has been held to permit an examination for the purpose of making up the sched- ules,** or merely to lay a foundation for objections to a dis- charge,®" or after the discharge.*^ But the court should not order an examination concerning the acts, conduct, or propeirty of a bankrupt before the adjudication.®* The intent of this subdivision seems to be that creditors may have an examination of the bank- any other business at, the first clearly to the attention of the referee, meeting of creditors, a petition Similar schedules or paragraphs shall and schedules or other papers also be incorporated in any order may be amended and new par- granting amendments. Copies of or- ties may be brought in, as of ders which amend a petition and course and without notice, unless schedules, duly certified by the ref- otherwise ordered. Except as here- eree, shall be forthwith filed with the inbefore in this rule provided, at or clerk and, if then appointed, with the after the first meeting of creditors, a trustee. (Rule 5, Erie County Dis- petition and schedules or other papers trict, Western District of New York.) shall not be amended in any material 88. Act of 1883, § 16. This re- raatter, except on an application, sembles our requirement for an ex- made either at a stated meeting or amination in open court before a hearing, or upon motion and cause composition may be off'ered, § 12-a. shown, after due notice to the ad- 89. In re Franklin Syndicate (D. verse party or the creditor or other C, N. Y.), 4 Am. B. E. 244, 101 Fed. party in interest to be affected 402. thereby. In case the amendment will 90. In re Price (D. C, N. Y.), 1 add a party to the proceeding, such Am. B. E. 419, 91 Fed. 605. party shall be entitled to notice of 91. In re Peters (Ref., Mass.), 1 the motion, and any meeting already Am. B. E. 248; In re Westfall, etc., noticed may be adjourned for that Co. (D. C, Cal.), 8 Am. B. E. 431. purpose. If publication is begun or 92. In re Crenshaw (D. C, Ala.), is completed when the motion for 19 Am. B. R. 266, 155 Fed. 271, in the amendment adding other parties which case the court said : " When is made, further publication as to we consider those sections of the such parties may be dispensed with. Bankruptcy Act (§§ 21, 58 and 7(9) 2. All applications for amendments which pertain to the subject under shall be made by a verified petition consideration, and which should be addressed to the referee, and the construed together, with the forms amendments desired shall be set out which relate thereto, I think it mani- in separate schedules or paragraphs fest that both the act and forms im- and in such a way as to bring them ply that such examination is to be 186 The Law and Peacticb in Bankruptcy. Examination of Bankrupt; How Brought on. [§7-a(9). rupt at any time during the pendency of his proceedings."^ It has been held that where a bankrupt is present he may be examined with- out notice,"* and that he is not entitled to witness fees."^ An exam- ination may also be granted even though the creditor has not filed or formally proved his claim,"* unless the bankrupt can prove that the claim is legally invalid."' If present at a regular meeting of creditors, the bankrupt may be sworn, if with his consent, and, while there is authority the other way,"* without his consent if so ordered by the court — this under the general powers conferred by § 2(15) and the broad phrasing of the subdivision under discussion. The clause is to be so construed as to require the bankrupt's attendance upon a hearing of objections to a discharge, if requested by the creditors."" The pur- pose of an examination under this provision is to assist in the ad- ministration of a bankrupt's property, which the court undertakes only after adjudication.^"" And the obligation of a bankrupt to sub- mit to an examination involves the duty of answering truthfully and as intelligently, connectedly and fully as mental equipment will permit.^"^ b. How brought on. —At the first meeting of creditors, the referee should ask if an examination of the bankrupt is desired, and, if so should, if the bankrupt is present, order it to proceed. If the bank- rupt is absent, a direction through his attorney will usually secure his presence. If he is obdurate, the referee may, on his own motion or at the instance of any creditor whose claim is proven, or the trustee, make an order requiring his attendance for examination,'"- and failure or refusal to do so will be reported as a contempt. If the bankrupt is confined in prison or a state hospital for insane criminals, the court may, in its discretion, grant a writ of habeas corpus ad testificandum compelling the custodian of the bankrupt to produce him for examination.'"^^ An application for an order for the examinatio;i of a bankrupt is ex parte and no notice is required to be given to had subsequent to the adjudication." 98. In re Price (D. C., N. Y.), 1 93. In re Mellen (D. C, N. Y.), 3 Am. B. R. 419, 91 Fed. 635, and Am. B. R. 226, 97 Fed. 326. Bankr. Act, § 58-a (1). 94. In re Brandt, Fed. Cas. 1,812, 99. In re Shanker (D. C, Pa.), 1.5 2 N. B. R. 215 ; In re Bromley & Co., Am. B. R. 109, 138 Fed. 862. 3 N. B. R. 386. 100. In re Back Bay Automobile 95. In re Okell, Fed. Caa. 10,475, 2 Co. (D. C, Mass.), 19 Am. B. R. 835, Ben. 144; In re McNair, Fed. Cas. 158 Fed. 679. 8,907, 2 N. B. R. 219. 101. Matter of Fellerman (D. C, 96. In re Price (D. C, N. Y.), 1 N. Y.), 1/ Am. B. R. 785, 149 Fed. Am. B. R. 419, 91 Fed. 635; In re 244. Jehu (D. C, Iowa), 2 Am. B. R. 498, 102. In re Worrel (D. C, Pa.), 10 94 Fed. 638; In re Walker (D. C, N. Am. B. R. 744, 125 Fed. 159. See Dak.), 3 Am. B. R. 35, 90 Fed. 550; Form No. 28. In re Samuelsohn, (D. C, N. Y.), 23 102a. In re Thaw (C. C. A., 3rd Am. B. R. .528, 174 Fed. 911. Cir.), 21 Am. B. R. 561, 166 Fed. 97. In re Kingsley, Fed. Cas. 7,818, 71, holding also that where such writ 6 Ben. 300; In re Winship, Fed. Cas. is issued, it may be quashed by a 17,878, 7 Ben. 194; In re Belden, Fed. judge of another court, in his discre- Cas. 1,241, 4 N. B. R. 194. tion. Duties of Bankettpt. 187 §7-a(9).] Method of Conducting Examination. the opposite party.^"^ The application may be granted at any time before final disposition of the case,^"* but where an examina- tion already had is apparently full, an application for a further examination will be refused.-'"^ The fact that one creditor has ex- amined the bankrupt is no reason for withholding the privilege from another.*"^ A court of bankruptcy has no power to make an order of arrest, as the basis of extradition proceedings, for the purpose of an examination.^ "'' The proviso clause of this subdi- vision and the restrictions as to time, previously noted, are the only limitations, other than a sound discretion, on the granting of this order. The examination, when once begun, should, however, not be unnecesisiarily prolonged. Nor, after the completion of the main examination and the bankrupt has been excused, should he be recalled, save for good cause shown. c. Method of conducting — The usual method of question and answer is followed, but the rules of evidence are not the same as on ordinary trials. The examination is in the nature of an in- quisition, and great latitude is allowed the examiner. It may be taken down in narrative form, or in the form of question and answer,^**® and the referee may, upon the application of the trustee, authorize the employment of a stenographer for that purpose and order him paid out of the estate.^"® The fiction that, in every such case, the trustee has been directed to employ a stenographer, seems quite universal throughout the country. It is even the practice to employ such an assistant where there is no estate and to order the bankrupt to deposit with the referee a sum sufficient for that purpose. This practice, which is claimed to be sanctioned by General Order X, and is usually prescribed in local rules, is clearly within the broad powers conferred on courts of bank- ruptcy by § 2 (15), and has now been ratified by usage.^^" The 103. In re Macintire, Fed. Cas. 108. General Order XXII; Bankr. 8,821, 1 Ben. 277. Act, § 39-a(9). 104. In re Solis, Fed. Cas. 13,165, 109. See Bankr. Act, § 38-a(5). 4 Ben. 143; In re Vetterlein, Fed. IIO. Testimony taken by ste- Cas. 16,926, 5 Ben. 7; In re Fuzelle, nographer. — Rule II of Rules for Fed. Cas. 5,132, 5 N. B. R. 119. Western District of New York, Erie 105. In re Frisbie, Fed. Cas. 5,131, District, provide that: 13 N. B. R. 349; In re Isidor, Fed. i. The examination of the bank- Cas. 7,105, 2 Ben. 123. rupt and other witnesses at meetings 106. In re Adams, Fed. Cas. 40, 3 of creditors or otherwise, and all Ben. 7; In re Gilbert, Fed. Cas. 5,410, testimony offered on contested 1 Low, 340; In re Vogel, Fed. Cas. claims, or for any other purpose, will 16,984, 5 N. B. R. 393. be taken down by the official stenog- 107. In re Hassenbusch, 47 C. C. rapher in the form of question and A. 177, 108 Fed. 35. answer, and transcribed. One copy 188 The Law and Peaotice in Bankeuptcy. Method of Conducting Examination. [§7-a(9). examination, when reduced to writing, must be read over by the bankrupt and subscribed by him.^^^ The bankrupt may usually have counsel, but it is clearly improper for the bankrupt's counsel to conduct his examination on behalf of the trustee.*^^ Whether a bankrupt may consult counsel, before answering a question, is within the discretion of the examining magistrate.-'^' The bank- rupt may be cross-examined.^** The referee has ample power to administer oaths and compel the production of documents.-'*^ He should have entered on the record any objections to testimony and his rulings thereon, and any offers to prove which he rules out, as well as any statemetuts of counsel or the bankrupt when ass.erting the latter's constitutional privilege.*-'® thereof -will be inserted in the record book of the referee and the other copy will be delivered to the trustee. The expense of thus perpetuating tes- timony will be at the rate of ten cents (10c.) a folio for both copies, and shall be paid as follows: Where there are no assets, for one reasonable ex- amination on one day, by the bank- rupt, and thereafter by the creditor or party in interest for whose benefit or at whose request such examination is had; where there are assets, as may be ordered by the referee in each par- ticular case. 2. After the testimony has been transcribed the attorney in charge of the case will produce each witness be- fore the referee, that such testimony may be signed as provided in General Order XXII. 3. If indemnity is not demanded, all moneys advanced by the referee in publishing or mailing notices, or for traveling expenses, or for procur- ing the -attendance of witnesses, or for perpetuating testimony, or other- wise, shall be paid to the referee prior to, or at the time, application is made to him for the report or cer- tificate called for by District Rule X. 111. General Order XXII. Signature of bankrupt. — But where the testimony was not signed by the bankrupt, it was held that it could be received in evidence upon the testimony of the person who took the minutes. In re Bard (D. C, N. Y.), 5 Am. B. R. 810, 108 Fed. 208. 112. In re Teuthorn (Ref., Mass.), 5 Am. B. R. 767. 113. In re Tanner, Fed. Gas. 13,745, 1 Low 215; In re Jackson, Fed. Gas. 7,562, 2 Ben. 210; In re Lord, Fed. Gas. 8,502, 3 N. B. E. 243. 114. In re Levy, Fed. Gas. 8,296, 1 Ben. 496; In re Leachman, Fed. Gas. 8,157, 1 N. B. R. 391; In re Bragg, Fed. Gas. 1,799, 5 Law Rep. 323. 115. Bankr. Act, § 38-a (2). 116. The practice is clearly indi- cated in the following: " Referees may pass upon the com- petency, materiality and relevancy of evidence in matters properly before them for investigation, and shall have all the powers of the judge concern- ing the admission or rejection thereof, and shall note on the record all ob- jections, the rulings thereon and the exceptions which may be taken; and in eases where testimony is excluded they shall note a brief statement by the party offering the same of the facts he expects to prove thereby. Referees shall limit the inquiry before them to relevant and material mat- ters, and in case an examination or a cross-examination is unnecessarily prolix, or improperly prolonged, the referee may, in his discretion, limit the time of such examination; or he may impose costs, including the fees of the stenographer and other ex- penses, upon the party responsible for the improper prolongation." (Rule XXIT, Western District of New York. See, also. In re Gottardi (D. C., Cal.), 7 Am. B. R. 723, 114 Fed. 328; In re Lipset (D. C, N. Y.), 9 Am. B. R. 32, 119 Fed. 379; Dressel v. North Duties of Bankrupt. 189 § 7-a(9).] Subject Matter of Examination. d. Subject-matter of the examination. — This is pointed out by the words of the statute, i. e., " concerning the conducting of his business, the cause of his bankruptcy, his dealings with his cred- itors and other persons, the amount, kind, and whereabouts of his property, and, in addition, all matters which may affect the ad- ministration and settlement of his estate." Broader phrases could not well have been employed. ^^^ A bankrupt may be required to disdose to the trustee the combination of a safe,^^* and may prop- erly be asked whether he did not, shortly before his bankruptcy, sign a statement upon the strength of which he had obtained credit and merchandise from one of his present creditors.^-'® But the examination cannot as a rule be extended to property acquired after the petition was filed ;*^" or since his adjudication as a bank- rupt ;*^^ or to property which does not belong to the banknipt.^^^ On the other hand, it is not limited to transactions during the four months' period.''^* The difference between an examination under this subsection and one under § 21-a should always be borne in mind. It should also be noted that, unlike the register under the former act, the referee has full power to pass on the relevancy or materiality of evidence.^^* Suggestive precedents under both stat- utes will be found in the footnote. ^^^ State Lumber Co. (D. C, N. Car.), 9 In re Walton, 1 N. B. N. 533; In re Am. B. R. 541, 119 Fed. 531; In re Clark, Fed. Cas. 2,805, and In re Mc- Romine (D. C, W. Va.), 14 Am. B. Brien, Fed. Cas. 8,666. R. 785, 138 Fed. 837; In re Sturgeon 121. In re Patterson, Fed. Caa. (C. C. A., 2d Cir.), 14 Am. B. R. 681, 10,815, 1 Ben. 508; In re Levy, Fed. 139 Fed. 608 ; Bank of Ravenswood v. Cas. 8,296, 1 Ben. 496. Johnson (C. C. A., 4th Cir.), 16 Am. 122. In re Van Tuyl, Fed. Cas. B. R. 206, 143 Fed. 463. But in In 16,880, 1 N. B. R. 636. re Wilde's Sons (D. C, N. Y.), 11 123. In re Brundage (D. C, Am. B. R. 714, 131 Fed. 142, it was Iowa), 4 Am. B. R. 47, 100 Fed. 613. held that a referee should not admit 124. Bankr. Act, § 38-a (2). evidence which it would be his duty 125. In re Lange (D. C, N. Y.), to disregard. 3 Am. B. R. 231, 97 Fed. 197; In re 117. In re Horgan (C. C. A., 2d Cliffe (D. C, Pa.), 3 Am. B. R. 257, Cir.), 3 Am. B. R. 253, 98 Fed. 414, 97 Fed. 540; In re Tudor (D. C, affirming s. c, 92 Fed. 319; In re Col.), 4 Am. B. R. 78, 100 Fed. 796; Fixen (D. C, Cal.), 2 Am. B. R. 822, In re Kamsler, 2 N. B. N. & R. 97, 96 Fed. 748; In re Foerst (D. C, N. 97 Fed. 194; In re Carley (D. C, Y.), 1 Am. B. R. 259, 93 Fed. 190. Ky.), 5 Am. B. R. 554, 106 Fed. 862; 118. In re Hooks Smelting Co. (D. Peoples Bank v. Brown (C. C. A., 3d C Pa.), 15 Am. B. R. 83, 138 Fed. Cir.), 7 Am. B. R. 475, 112 Fed. 652; 954. U. S. V. Wechsler (D. C, N. Y.), 16 119. Matter of Jacobs & Roth (D. Am. B. R. 1; In re Bonesteel, Fed. C, Pa.), 18 Am. B. R. 728, 154 Fed. Cas. 1,628; In re Holt, Fed. Cas. 988. 6,646; In re Cooke, Fed. Ca«. 3,168; 120. In re Hayden (D. C. N. Y.), In re Sfilkcv, Fed. Cas. 12,252; In re 1 Am. B. R. 670, 96 Fed. 199; In re Campbell. Fed. Cas. 2,348; In re White, 2 N. B. N. Rep. 536. But see Hatje, Fed. Cas. 6,215. 190 The Law and Peactice in Bankedptcy. Examination; Unsatisfactory Answers ; Criminating Questions. [§7-a(9). e. Unsatisfactory answers. — It has been suggested that when, in reply to questions necessarily within the knowledge of the bank- rupt, the bankrupt replies : " I don't remember," or in like fashion, it amounts to a contempt. The English cases tend that way.^^' Pew American eases go to this extent, for our statutes are not so broad as the English statutes.^^^ Yet, under the former law, where the bank- rupts had concealed a large sum, and, when questioned, "had told all they knew on the subject," and refused to answer further ques- tions because " they knew no more about the matter," they were pun- ished for contempt.'^* A bankrupt may be guilty of contempt when he refuses to answer questions and withdraws from the ofBce of the referee ;^^'' and his testimony may be rejected where it is unworthy of credit.^'" Persistent evasion or refusal to answer material questions will be considered as contempt and be punishable as such.'^"^ The cases under the present law turn usually, not on the answers being un- satisfactory, but rather on the conclusions therefrom and from the other evidence that the bankrupt is withholding property from his trustee.'^^ It may be doubted whether In re SalTcey^^^^ amounts to what is claimed for it. TJ'nsatisfactory answers are, therefore, it would seem, while often contemptuous, not a contempt in law, unless it ap- pears from the conduct of the bankrupt that he deliberately intends to conceal material facts, which from their nature should be known to him, under a pretense of ignorance and stupidity.^^^'' f. Criminating questions. — The once-mooted question as to whether the words "but no testimony given by him shall be offered in evidence against him in any criminal proceeding " amount to the privilege against testifying against himself guaranteed by the Eifth Amendment to the Constitution seems no longer open. An array of judges and referees have held that the bankrupt need not answer criminating questions,^^^ and the authorities the other way seem not to have recognized the full force of Gounselman v. Hitch- 126. Ex parte Legge, 17 Jurist, 130. In re Tudor (D. C, Col.), 4 415; In re Martin, 11 Jurist, 461; Am. B. R. 78, 100 Fed. 796; In re Eae parte Lord, 10 Mees. & W. 463; jueslie (D. C, N. Y.), 9 Am. B. R. In re Bradbury, 11 Jur. 189, 14 C. B. 561, 119 Fed. 406. 15; In re Taylor, 8 Ves. 328; Ex. 130a. In re Singer (D. C. Pa.), parte Nowlan, 6 Dum & East 118, 6 23 Am. B. R. 28, 174 Fed. 208; In re T. R. 58. Fellerman, (D. C, N. Y.), 17 Am. 127. In re Mooney, Fed. Cas. 9,748, B. R. 785, 149 Fed. 244. 14 Blateh. 204. 131. In re McCormick (D. C, N. " I don't know."— Where a bank- Y. ) , 3 Am. B. R. 340, 97 Fed. 566 ; rupt, under examination before a, ref- In re Sclilesinger (D. C, N. Y.), 3 eree, persistently answers " I don't Am. B. R. 342, 97 Fed. 935 ; In re know" to questions about his prop- Deuell (D. C, Mo.), 4 Am. B. R. 60, erty, which he must and evidently 100 Fed. 633. does know, and could answer fully, he 131a. Fed. Cas. 12,253. refuses "to be examined according to 131b. In re vSchulman (D. C, ''". law," finrt is guilty of "contempt." Y.), 21 Am. B. R, 288; aflfd. 23 Am. In re Gitkin (D. C, Pa.), 21 Am. B. B. R. 809, 177 Fed. 191. R. n.^, 164 Fed. 71. 13?. In re Reott (D. C, Pa.), 1 128. In re Salkey, Fed. Cas. 12,253. Am. B. R. 49, 95 Fed. 815; In re 129. In re Vogel, Fed. Cas. 16,984, Hathorn (xlef., La.), 2 Am. B. R. 5 N. B. R. 393. Duties of Bankrupt. 191 § 7-a ( 9 ) .] Criminating Questions. cock.^^^ The supreme court has not yet passed upon this important question, but the case just mentioned seems to preclude any other view.^'* The bankrupt may even assert his privilege in a plea in response to a petition that he be ordered to surrender property."' It may be that the privilege will not in the end be extended to transactions like those under examination in the Sapiro and Walsh cases."^ At present, however, the reliability even of the rules there asserted must be considered still debatable. That the protection ex- tends only to prosecution in the Federal courts,^^' and that the bank- rupt's books taken possession of by his receiver in bankruptcy cannot be used against him,^^* are holdings equally in doubt. The use of the bankrupt's schedules before the grand jury, on consideration of which the bankrupt was indicted, has been held an invasion of his constitu- tional rights.^'* But it has been held in Pennsylvania that the bank- rupt's privilege does not prevent the use of his schedules in a criminal action brought in a state court.^^^* If the court is convinced that an answer to a question cannot by any possibility criminate the bank- rupt, and especially if he does not swear that he believes it would, it is the duty of the court to compel him to answer.^*" The inhibition not only protects one from the disclosure of facts which would tend to prove his guilt, but also from disclosure of facts which might furnish a clue or a link in a chain of evidence by which a criminal offense might be made known.^*^ The provision does not exempt the bankrupt from prosecution for an unlawful act concerning which he voluntarily testifies, but only provides that his testimony so given cannot be used against him on such prosecution.^*^ Where a bankrupt 298 ; In re Rosser ( D. C, Mo. ) , 2 Am. in Federal courts. B. R. 755, 96 Fed. 305; In re Feld- 138. People v. Swarts, etc. (C. stein (D. C, N. Y.), 4 Am. B. R. 321, C, 111.), 8 Am. B. R. 487, 24 Nat. 108 Fed. 794; In re Henschel (Ref., Corp. Rep. 266. N. Y.), 7 Am. B. R. 207; In re Shera 139. United States v. Chambers (D. C, N. Y.), 7 Am. B. R. 552, 114 (C. C, N. Y.), 13 Am. B. R. 708, 135 Fed. 207; In re Nachman (D. C, S. Fed. 1023. Car.), 8 Am. B. R. 180, 114 Fed. 995; Under section 860 of the United In re Kanter (D. C, N. Y.), 9 Am. States Revised Statutes a bank- B. R. 104, 117 Fed. 356; U. S. V. Gold- rupt's schedules are incompetent as stein (D. C, Va.), 12 Am. B. R. 755, evidence against him upon the trial 132 Fed. 789. of an indictment charging him with 133. 142 U. S. 547. See, also, knowingly and fraudulently conceal- Brown v. Walker, 161 U. S. 591. ing assets from his trustee: Cohen v. 134. Among the cases contra are; United States (C. C. A., 4th Cir.), Mackel v. Rochester (C. C. A., 9th 22 Am. B. R. 333, 170 Fed. 715- Cir.), 4 Am. B. R. 1, 102 Fed. 314; Johnson v. United States (C. C. A.', In re Franklin Syndicate Co. (D. C, 1st Cir.), 20 Am. B. R. 724 163 N. Y.), 4 Am. B. R. 511, 114 Fed. 205. Fed. 30. 135. In re Glassner (Ref., Md.), 139a. Commonwealth v. Ensign 8 Am. B. R. 184. (Super. Ct. Pa.), 22 Am. B. R. 797, 136. In re Sapiro (D. C, Wis.), 1 40 Pa. Super. Ct. 157. Am. B. R. 296, 92 Fed. 340; In re 140. Matter of Levin (DC N Walsh (D. C, S. Dak.), 4 Am. B. R. Y.), 11 Am. B. R. 382, 131 Fed. 388; 693, 104 Fed. 518. In re Hess (D. C, Pa.), 14 Am. B. R. 137. In re Nachman (D. C, S. 559, 136 Fed. 988. Car.), 8 Am. B. R. 180, 114 Fed. 995. 141. Edelstein v. United States In the case of Commonwealth v. (C. C. A., 8th Cir.), 17 Am. B R Ensign (Super. Ct. Pa.), 22 Am. B. 649, 149 Fed. 636. R. 797, 40 Pa. Super. Ct. 157, it 142. Burrell v. State, 12 Am B was held that § 860 of U. S. R. S. R. 132, 194 U. S. 572, aflSrming 27 only applies to criminal proceedings 192 The Law and Practice in Bankruptcy. Effect of Bankrupt's Death or Insanity. [§8. asserts his constitutional privilege against a production of books of account alleged to contain incriminating evidence, the books should be produced so as to enable the court or referee to determine whether they do in fact contain such evidence; the court or referee may then make an order protecting the bankrupt from the use of such evidence, and at the same time enable the trustee to obtain other necessary in- formation from such books.^*^ If the bankrupt surrenders his books without protest or claim of constitutional privilege, he waives such privilege so far as such books are concerned.^*'® The bankrupt is not protected by this clause against the use of his testimony given upon an examination where he has been indicted for perjury in relation to the bankruptcy pi'oeeedings.^*^^ g. Effect of § 14-b (6). — The amendatory act of 1903 makes the bankrupt's refusal "to obey any lawful order or to answer any material question approved by the court" an objection to a dis- charge. The new clause is clearly aimed at the difficulty mentioned in the preceding paragraph. Its constitutionality was questioned even in advance of its becoming the law.'** But a discharge in bankruptcy is not a natural right. It is rather in derogation of the great natural right of property. Some have called it more aptly a boon. The bankrupt comes into court asking this boon. His privilege from test- ifying is also a boon given him by the organic law. He has the option to choose between them. There are as yet no cases construing this new subsection or passing on its constitutionality. h. Effect of false swearing. — This subject and the right to use the bankrupt's examination as a means to prevent his discharge is discussed in detail later. '*° i. Examination of third persons. — § 7-a (9), previously dis- cussed, has to do only with the examination of the bankrupt. The procedure on and the subject-matter and effect of the examination of other witnesses, and the bankrupt, too, for that matter, under § 21-a, will be found in another place.'*" Mont. 282, 70 Pac. 982 ; United States 143a. Matter of Tracy & Co (D V. Simon (D. C, Wash.), 17 Am. B. C, N. Y.), 23 Am. B. R. 438,' 177 R. 41, 146 Fed. 89; Edelstein v. Fed. 532. United States (C. C. A., 8th Cir.), 17 143b. United States v. Brod (C Am. B. R. 649, 149 Fed. 636. It was C, Ga.), 23 Am. B. R. 740; Edelstein held in the case of Commonwealth v. v. United States (C. C. A., 8th Cir.), Ensign (Super. Ct. Pa.), 22 Am. B. 17 Am. B. R. 649, 149 Fed 636. R. 797, 40 Pa. Super. Ct. 157, that 144. See Editor's note to In re the schedules of the bankrupt and Feldstein (D. C, N. Y. ), 4 Am. B. R. books offered by him are to be eon- 321, 103 Fed. 269. But see contra, siderei as voluntarily offered. In re N.'^chnian (D. C, S. Car.), 8 x43. In re Hess (D. C, Pa.), 14 Am. B. R. 180, 114 Fed. 995. Am. B. R. 559, 134 Fed. 109; Matter 145. Under Bankr. Act, §§ 14 and of Hark (D. C, Pa.), 14 Am. B. R. 29. 624, 136 Fed. 986; Matter of Rosen- 146. See Bankr. Act, § 21, and dis- blatt (D. C, Pa.), 16 Am. B. R. 306, cussion thereunder. 143 Fed. 663. SECTION EIGHT. DEATH OR INSANITY OF BANKRUPTS. §8. Death or Insanity of Bankrupts. — a The death or in- sanity of a bankrupt shall not abate the proceedings, but the same shall be conducted and concluded in the same manner, so far as possible, as though he had not died or become insane : Provided, 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. Analogous provisions: In V. S.s Act of 1867, § 12, K. S., § 5090; Act of 1800, § 45. In Eng.: Act of 1883, § 108. Cross references: To the laxr: §§ 4, 5-a. To the General Orders: Kone. To the Forms: None. StlfOPSlS' OF SECTION. I. Comparative legislation. II. Effect of bankrupt's death or insanity on the proceeding. a. In general. t>. On right to discharge. III. Effect on statutory rights oi widow and children. a. In general. b. Dower and statutory allowances. I. COKFARATlirE UBGISUITION. There is at present no substantial difference between the Eng^ lish and American statutes, save that the English section provides for the contingency of death only.* But there the court may, in its discretion, refuse to proceed.* The English practice also per- mite the service of process on the personal representatives of the debtor, if he dies before such service.* Our law, in providing that there shall' be no abaftement after a petition filed, seems to war- 1. "Ebg. Bankr. Act of I8»», § Ms-. In fe Walker, 54 L. T. N. S. 682, un- 2. CoHiptfre In re Obbafd, 24 L; f. der that of 1883. N. S. 145, under the Act of 1869, with 3. Ex parte Hill, 4 MorrcU, 281. 13 in.T 194: The Law and Peactice in Bankeuptct. Effect of Bankrupt's Death or Insanity. [§ 8. rant this practice. The analagous section in our statute of 1800 provided only for the due distribution of assets in case of death " after any commission in bankruptcy sued forth ;" that of 1867 was permissive, not mandatory, and was applicable only " after the issue of the warrant" (in this being identical with that of 1800), but had no provision relative to insanity or concerning dower or allowances.* II. EFFECT OF BANKRUPT'S DEATH OB INSANITY ON THE PROCEEDING. a. In general. — The language of this section is mandatory. The proceeding " shall not abate " and " shall be conducted and con- cluded in the same manner, as far as possible " as though the debtor had not died or become insane. It was held under the former law that involuntary proceedings abated on the death of the alleged bankrupt before the trial, but not if the adjudication had been made, even though the warrant had not been issued;* but the rule was different where one of two or more partners died after the filing of a petition against the copartnership.* Only the case last cited is now applicable. The filing of a petition begins " the proceedings," and there can be no abatement after that.^ Thus, it is manifest, that if a party committed an act of bankruptcy while sane, and by reason of such act the court obtained jurisdiction, it can continue the proceedings, notwithstanding the subsequent insanity of the bankrupt.* If the bankrupt was insane at the time the alleged act of bankruptcy was committed the petition should be dismissed.' The rule as to the non-abatement is the same whether the cause be death or insanity, but, if the latter, a committee ad litem should be appointed.^" It has also been held 4. Act of 1867, § 12 ; E. S., § 5,090. Vniere the defense is insanity 5. F^azier v. McDonald, Fed. Cas. at the time of the commission of the 5,073; In re Litchfield, Fed. Cas. alleged act of bankruptcy the issue of ^'^«^'tt i T. 1 T^ J ^ a ana insanity must be tried in the bank- 6. Hunt V. Pooke, Fed. Cas. 6,896. , •' , . . ., ,. ,. "• "" - '• -^ Tj„n 1 r>„ no^ ruptcy court, and while an admdica- Compare Ew parte Hal], 1 De tiex, .. '^ •', , . . ... o^ i ooo tion of his insanity by a State court 7. In re HicKs (D. C, Vt.), 6 Am. after the filing of the petition in B. R. 182, 107 Fed. 910; Matter of bankruptcy may be prima facie evi- Spalding (C. C. A., 2d Cir.), 14 Am. dence of the fact, it does not conclude B. R. 129, 137 Fed. 1,020 (reversing the bankruptcy court. In re Ward 13 Am. B. R. 223, on other grounds) ; jd q n. J.), 20 Am. B. R. 482, 161 Phute V. Patterson (C. C. A., 8th ^ , »., Cir.), 17 Am. B. R. 99, 147 Fed. 509. -^ ™- ' •^''- j ,r> r. xt t > on The word "bankrupt" in this ^ I" ""^ Ward (D. C, N. J.), 20 section refers to a person against Am. B. R. 482, 161 Fed. 755. whom a petition has been filed, as 10. Compare In re O'Brian, 2 N. well as one who has already been B. N. Rep. 312; In re Burka (D. C, adjudicated a bankrupt. In re Lar- Tenn.), 6 Am. B. E. 843, 107 Fed. kin (D. C, N. Y.), 21 Am. B. R. 674 711, 168 Fed. 100. 8. In re Kehler (C. C. A., 2d Cir.), 19 Am. B. R. 513, 162 Fed. C74, re- versing 18 Am. B. R. 596, 153 Fed. 235. jDeath or Insanity of Bankrupt. 195 § 8.] Rights of Widow and Children. that this section applies to a corporation seeking to defeat bankruptcy proceedings by a voluntary dissolution begun after petition filed.'' b. On right to discharge. —The decisions under the previous law to the effect that a discharge could not be granted where the bankrupt had died after the adjudication, are no longer applicable," for the simple reason that such cases rested on the requirement of that law that the bankrupt should, when applying for his discharge, take a certain oath. No such oath is now necessary, and a discharge will be granted, even though the requirement calling for the personal presence of the bankrupt cannot be complied with,'* for it is only possible to successfully oppose the discharge by proving one of the acts described in section fourteen of the bankruptcy act, and such proof may be made whether the bankrupt be sane or insane, living or dead." m. EFFECT ON STATUTORY SIGHTS OF WIDOIV AND CHILDBEN. a. In general. — The proviso protects all the rights, dower and otherwise, granted to the widow and children under State statutes. The clause is a new enactment, but it does not change existing law.'' The doctrine rests on the principle that the trustee's title is charged with the same liens and burdens, whether actual or inchoate, as was the bankrupt's. It is not material that the husband died after the vesting of the title in the trustee." It has been held that, notwith- standing the reference in this section to the laws of the state of the bankrupt's residence, a wife's right of dower in lands situated in an- other state is protected, although the laws of the state where the bank- rupt lives have abrogated the right of dower.'** b. Dower and statutory allowances. — What would be the effect of this clause provided the rights or allowances were not actually inchoate at the time the proceedings began, has not yet been de- ll. Scheuer v. Smith, etc., Co. (C. Am. B. R. 679, 142 Fed. 383, affirm- C. A., 5th Cir.), 7 Am. B. R. 384, 112 ing 13 Am. B. R. 227, 132 Fed. 114, Fed. 407 ; White Mountain Paper Co. holding that where a statute provides V. Morse (C. C. A., 1st Cir.), 11 Am. that a widow shall have as part of B. R. 633, 127 Fed. 643. her dower one-third of the personal 12. In re O'Farrell, Fed. Cas. estate " whereof the husband died 10,446 ; In re Gunike, Fed Cas. 5,868. seized or possessed," she is not en- 13. In re Parker (Ref., Kan.), 1 titled to dower in the proceeds of the Am. B. R. 615; In re Hicks (D. C, sale of the personalty of her husband, Vt.), 6 Am. B. R. 183, 107 Fed. 910. who died after his adjudication as a See, also, under Bankr. Act, § 14. bankrupt. Judge Adams dissented, 14. In re Miller (D. C, Pa.), 13 basing his conclusion upon the Slack Am. B. R. 345, 133 Fed. 1,017. case. The statement of the text seems 15. Porter v. Lazear, 109 U. S. 84; to accord with a proper interpretation In re Shaeffer (D. C, Pa.), 5 Am. of the proviso. B. R. 248, 105 Fed. 352. 16a. Thomas v. Woods (C. C. A., 16. In re Slack (D. C, Vt.), 7 Am. 8th Cir.), 23 Am. B. R. 132, 173 B. R. 121, 111 Fed. 523. Contra; In Fed 585. re McKenzie (C. C. A., 8th Cir.), 15 196 The Law and Pkaotice in Bankeuptcy. Eights of Widow and Children. t§8. cided; the words used would, however, seem sufficient to cover such a case.^' The rule as to dower applies to allowances to widow or children by the State statutes. The beneficiaries take them, as if there had been no bankruptcy. Where such allowances are author- ized by State statutes the bankruptcy court may make them.^' If the wife of a bankrupt consents to the sale of real estate free from her dower, she is entitled to the value of such dower as fized by the laws of the State of the bankrupt's residence.^" 17. But compare Hawk v. Hawk (D. C, Ark.), 4 Am. B. R. 463, 102 Fed. 679. Inchoate riglit of dower. — The proviso of section 8a, that in case of the death of a bankrupt pending the proceedings, 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, was intended simply to preserve such rights as already existing, and where a bankrupt is living his wife may assert her right of dower in his real property in accordance with the State law. Thomas v. Woods (C. C. A., 8th Cir.), 23 Am. B. R. 132, 173 Fed. 585. 18. In re Newton (D. C, Ct.), 10 Am. B. R. 345, 122 Fed. 103; In re Parsehen (D. C, Ohio), 9 Am. B. R. 389, 119 Fed. 976. Contra; In re Seabolt (D. C, N. Car.), 8 Am. B. E. 57, 61, 113 Fed. 766. 19. In re George Forbes (Ref., Ohio), 7 Am. B. R. 42. SECTION NINE. PROTECTION AND DETENTION OF BANKRUPTS. § 9. Protection and Detention of Bankrupts. — a A bankrupt shall be exempt from arrest upon civil process except in the fol- lowing cases: (1) When issued from a court of bankruptcy for contempt or disobedience of its lawful orders; (2) when issued from a Staite court having jurisdiction, and served within such State, upon a debt or claim from which his discharge in bank- ruptcy 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 performance of a duty imposed by this act. b The judge may, at any time after the filing of a petition by or against a pereon, and before the expiration of one month after the qualification of the trustee, upon satisfactory proof by the afiidavits 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 that 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 condi- tioned 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. Analogous provisions: In U. S.: As to (a), Act of 1867, § 26, K. S., § 5107; Act of 1800, §§ 22, 38, 60; As to (b). Act of 1867, § 40, E. S., § 5024. In Eng.: As to (a). Act of 1883, § 9(1), Cross references: To the law: §§ 1(4), 2(13) (15), 10, 11-a, 17, 63. Compare, also, R. S., §§ 752, 753. To the General Orders: XII, XXX. To the Forms: None. I SYNOPSIS or SECTION. PROTECTION AND DETENTION OF BANKRUPTS. I. Comparative Legislation; Scope of Section. a. Analogous provisions. b. Scope of section. 197 198 The Law and Peactice in Bankeuptct. Scope of Section. [§ 9. II. Protection of Bankrupts. a. When right to protection begins and ends. b. On what depends. e. Kind of liability. d. Practice. e. General Order XXX. III. Detention of Bankrupts. a. Purpose of subsection, h. Practice. I. COMFAKATIVE LEGISLATIOH'; SCOPE OF SECTION. a. Analogous provisions. — The corresponding clause in the English act of 1883 applies both to protection from arrest and to the Bitay of suits; a bankrupt from the moment of the receiving order is immune from arrest on civil process.^ Our first statute exempted the bankrupt from arrest for forty-two days — this, to give ample time for his examination — no matter what the char- acter of the indebtedness, and from an arrest based on a debt owing before the bankruptcy duiing the pendency of the proceed- ing. The law of 1867 diifers little from the present law, save in omitting entirely the two excepted classes stated in subheads (1) and (2). Minor differences will be discussed later. b. Scope of section. — This section has undoubtedly a threefold purpose: (a) to preserve unimpaired the authority of the court of bankruptcy over the persons of the parties to the proceeding, (b) to protect the debtor from imprisonment on all civil suits in which the remedy will be barred by the siubsequent discharge, and (c), as incidental to the first purpose and analogous to that expressed in § 10, to detain a bankimpt in the district when there seems a likelihood of his departing from it. There are two kinds of pro- tection from arrest, (a) the absolute right, which existed at com- mon law , i. e., while in attendance on court or engaged in performing a duty imposed by the bankruptcy act, and (b) the qualified right, which may not exist as against a liability to which a discharge is not a release, or a warrant or order of commitment based upon a bankrupt's contempt or disobedience of the lawful orders of a court of bankruptcy. The section itself is somewhat narrower than its supplement, General Order XXX f this same 1. Eng. Bankr. Act of 1833, § 2. In re Baker (D. C, Kan.), 3 9(1) (2). Am. B. R. 101, 96 Fed. 954. Peotection and Detention of BANKRtrPTS. 199 § 9-a.] Protection of Bankrupt; on what Depends. discrepancy existed under the former laws.^ So far as possible, however, the two should be construed together. But § 9-b should not be confounded with § 11-a; nor should the right to detain the person be confused with the right to seize that person's property ;* and jurisdiction to protect from arrest, which is similar to the jurisdiction to restrain proceedings which may result in arrest, should always be clearly distinguished from it.^ It should be noted also that the General Order XXX refers only to cases where the bankrupt has been actually imprisoned, while General Order XII has to do with protection from an arrest not yet accomplished. II. PROTECTION OF BANKRUPTS. a. When right to protection begins and ends. — The right con- ferred by subsection a is personal to the bankrupt. By § 1(4), a person who files a petition or one against whom a petition is filed is from that moment a bankrupt. The right is not available after he ceases to be a bankrupt, i. e., when he is discharged.^ This period is not, as a rule, later than eighteen months after the ad- judication; but may be, as where a contest develops on the appli- cation for the discharge. It is conceivable, also, that a petitioner may delay the adjudication so as to prolong the time. But the courts can impose terms on granting orders of protection, and such an effort would be quickly checked. b. On what it depends. — Protection is, as a rule, granted only to bankrupts. It has been held, however, that, under the common law, the right of protection extends to witnesses,'' and to parties, including creditors, while attending banlcruptcy proceedings.^ The protection given to such persons is, however, only that always al- lowed to those in attendance on a court, or in going and coming to the court, in response to itei summons or mandate. There seem to be some limitations to this right, even when asserted by the bank- rupt himself. Thus, it has been held that this section does not warrant a release from custody under an arrest made before the filing of the petition,* although it has been held with more reason 3. See § 26, Law of 1867, with Gen- ex rel. Kelley v. Peters (D. C, III.), era! Order XXVII, under that law. 22 Am. B. R. 177, 166 Fed. 613. 4. Consult, also, under §§ 2, 3 and 6. In re Dole, Fed. Cas. 3,964, 11 69. Blatch. 499 ; In re Kimball, Fed. Cas. 5. See under § 11, and compare In 7,768, 6 Blatch. 292; In re Wiggers, re Walker, Fed. Cas. 17,060; In re Fed. Cas. 17,623. Hazelton, Fed. Cas. 6,287. 7. Lamkin v. Starkey, 7 Hun (N. 5a. Section and General Orders y.), 479. to be construed together.— Sec- g Eas 'parte List, 2 Ves. & B. 373; tion 9a which restricts the immunity p^^^g^ ^ Hotchkiss, 1 Wall. Jr. 269; f t^^^ y^t M '™P"^°"™«"*' Matthews v. Tufts, 87 N. Y. 568. to debts which would be released by „ ^ A, .^ ,t^ /-, -vt -.r > i- a discharge, and General Orders No. ^- ^^ ^^ Claiborne (D. C, N. Y.), 5 12 and 30, which relate to practice Am. B. R. 812, 109 Fed. 74. And un- only, and announce no rule as to the der Act of 1867, In re Seymour, 1 effect of a discharge, are in pari Ben. 348, Fed. Cas. 12,684; In re materia and should be construed to- Walker, Fed. Cas. 17,060. gether as a whole. United States, 200 The Law and Peactice in Bankeuptct. On what Right Depends; Kind of Liability. [§ 9-a. that the filing of a petition in bankruptcy terminates the detention based upon a contractual obligation.^'* Where the claim, though provable, isi not dischargeable, the bankrupt is not protected from arrest.^ ^ This latter doctrine has, however, been questioned, for the reason, among others, that the words " to continue until the final adjudication upon his application for discharge," in General Order XII may be considered an interpretation of the exception found in the last clause of § 9-a(2).i^ Still, while the bankrupt is entitled to a liberal construction, it is hardly supposable that the intention of Congress was to exempt him from arrest on civil process during the entire period of hiei bankruptcy, merely because he is bound to testify or perform certain duties during that period.^^ The phrasing of General Order XXX seems also to limit the right to protection from an arrest already made to volun- tary bankrupts. Under the policy of the law, as indicated by § 1(1), this right, however, is equally available to involuntaiy bankrupts.^* Pending a petition to review an order denying a peti- tion to revoke a discharge, the court may restrain the arrest of the bankrupt based upon a claim coming within clause a of this section.^^ c. The kind of liability. — The debt on which custody rests must be dischargeable in bankruptcy. This is imported negatively from the affirmative exception stated in § 9-a (2). Some of the cases where protection has been granted or refused under the present law will be found in the foot-note.^" The dischargeability of debts 10. In the case of People ex rel. 1,3. For what is doubtless the Taranto v. Erlanger (D. C, N. policy of the law, see the 42-day ex- y.), 13 Am. B. R. 197, 132 emption provided by § 22 of the Act Fed. 883, Judge Holt dissented of 1800. from this doctrine and held that 14. See under the Law of 1867, In a bankrupt who was taken into re Wiggers, Fed. Cas. 17,623; In re custody upon an order of arrest in a Williams, Fed. Cas. 17,700. civil action on a contract debt, prior 15. In re Chandler (D. C, 111.), 13 to adjudication, is entitled to be re- Am. B. R. 614, 135 Fed. 893. leased from imprisonment. Matter of 16. In re Lewensohn (D. C. N. Wenman (D. C, N. Y.), 16 Am. B. Y.), 3 Am. B. R. 594, 98 Fed. 576; R. 690, 153 Fed. 910. In re Marcus (C. C. A., 1st Cir.), 5 11. In re Baker (D. C, Kas.), 3 Am. B. R. 365, 105 Fed. 907; In' re Am. B. R. 101, .96 Fed. 954; In re Smith (Ref., N. Y.), 3 Am. B. R. Marcus (C. C. A., 1st Cir.), 5 Am. 67; In re Houston (D. C, Ky.), 2 B. R. 365, 105 Fed. 907. Am. B. R. 107, 94 Fed. 119; In' re 12. Compare In re Kimball, Fed. Nowell (D. C, Mass.), 3 Am. B. R. Cas. 7,768, with In re Lewensohn (D. 837, 99 Fed. 931; Wagner v. U S. & C, N. Y.), 3 Am. B. R. 594, 98 Fed. Houston (C. C. A., 6th Cir.), 4 Am. 576. See, also, Matter of Dresser (D. B. R. 596, 104 Fed. 133- Scott v Me- C, N. Y.), 10 Am. B. R. 270, 124 Aleese (C. C. A., 3d Ci'r.), 1 Am. B. le.l. i)I5. R. 650; In re Fife (D. C, Pa.), 6 Peotection and Detehtion 0¥ Bankhupts. 201 § 9-a.] Practice on Application for Protection. is discussed in detail under section 17, post. How far the deter- mination of the court of bankruptcy on the question as to whether the debt is dischargeahle, or not, should be followed by the State courts later, is for such courts to decide. It may thus happen that, during the bankruptcy proceedings, a debtor will be pro- tected, only to find the discharge of no avail when pleaded in habeas corpus in a State court on a subsequent arre&t.^^ Where the application is for protection against arrest while in attend- ance or while performing some duty prescribed by the act, the dischargeability of the debt is, of course, not material. d. Practice, — If the application is before arrest, it often takes the form of a petition for a stay, on the theory that the order of arrest is a step in a suit ; and, if so, it will be in accordance with the practice indicated under section 11. Where, however, the bankrupt desires protection against arrest generally, the proper method is to apply for an order of protection, which can be granted by the referee.^* This order is a matter of right, but extends only to process resting on debts which are dischargeable, and should be in terms so limited. If the bankrupt has already been arrested and he applies for release on the ground that the debt is discharge- able, comity suggests an application in the first instance to the State court,^' though such an application can be made to a Federal court having jurisdiction, if that course is preferred.^* It is doubtful whether an application of the latter kind should be made to the referee.^* Where a bankrupt wilfully disobeys an order made in proceedings supplementary to execution, a subsequent order of the bankruptcy court, restraining his arrest upon civil process, doee not prevent his commitment by the State court as punishment for disregard of its authority.^^ e. General Order XXX. — The practice is well outlined in Gen- eral Order XXX.^* Where the reason for the application is that the bankrupt may attend an examination or perform any other Am. B. K. 258, 100 Fed. 880; In re prohibition. Compare, also, forms un- McCauley ( D. C., N. Y. ) , 4 Am. B. E. der " Supplementary Forms," post. 122, 101 Fed. 223; In re Grist (Ref., 19. Scott v. McAleese (C. C. A., 3d N. Y.), 1 Am. B. E. 89. Cir.), 1 Am. B. E. 650. 17. Compare In re Tinker (D. C, 20. In re Seymour, Fed. Cas. N. Y.), 3 Am. B. E. 580, 99 Fed. 79, 12,684. with Colwell v. Tinker, 6 Am. B. E. 21. See second sentence of General 434, 35 N. Y. Misc. 330. Order XXX. Compare, by way of 17a. United States ex rel Mans- analogy. General Order XII (3). field V. Flynn (D. C, N. Y.), 23 Am. 22. In re Fritz (D. C, N. Y.), 18 B. E. 294. Am. B. E. 244, 152 Fed. 562. 18. See In re Marcus (C. C. A., 1st 23. See General Order XXX and Cir.), 5 Am. B. E. 365, 105 Fed. 907, cases thereunder, post. which contains a form for an order of 202 The Law and Pbactice in Bankeuptcy. Detention of Bankrupt; Purpose. [§ 9-b. duty under the act, either method of affording protection is avail- able, and the application should be made to the referee. But, if any of the bankrupt's debts are not dischargeable, the order of protection should be limited in time and the body of the banlirupt returned to the jailer as soon as the examination is completed or the duty performed; unless the arrest post-dated the petition, when, it iseems, he should be discharged from imprisonment.^* No protection can be afforded by any other court to a debtor under arrest for contempt or disobedience of the lawful orders of a court of bankruptcy. Whether, on a contested application, the court will go behind the face of the papers, was a disputed question under the former act.^^ The better opinion seems to be that it will, i. e., that it is the character of the debt which is the subject of investiga- tion and the court, being a paramount court, should hear all dis- puted facts. This view seems in accordance vnth the provisions of General Order XXX. III. DETENTION OF BANKRUPTS. a. Purpose of subsection. — It is apparent that the purpose of subsection b of this section is to provide a means to keep the bank- rupt within the district, if the court is satisfied that he is about to leave it to avoid examination.^* The law of 1867 contained no clause exactly analogous ;^^ for detention was nx>t authorized save before adjudication in an involuntary case,^* and then only as incident to a seizure of the bankrupt's property similar to that now authorized by §§ 3-e and 69-a. The warrant and its purpose were more like the writ of ne exeat, referred to in the next para- graph.^® The present section is, however, for a very different purpose. That the bankrupt is about to depart, that he intends thereby to avoid examination, and that his departure will tend to defeat the proceedings in bankruptcy, must satisfactorily appear. Otherwise, a warrant under this subsection cannot be issued. b. Practice. — The limitations here are important. Such an ap- 24. See first sentence of General " his departure will delay or hinder Order XXX. the proceeding;" and the reason for 25. Compare In re Robinson, Fed. the change in the statement of the Caa. 11,939; In re J. H. Kimball, Fed. conferees on the part of the House. Cas. 7,769, and other like cases, with Cong. Record, 55th Congress, Vol. 1, In re Williams, Fed. Cas. 17,700, and p. 7,205. In re Alsberg, Fed. Cas. 261. " 27. See Act of 1867, § 40; U. S. 26. See § 46 of the Torrey Bank- Kev. Stat., § 5024, post. ruptcy Bill, S. 1035, Fifty-fifth Con- 28. Usher v. Pease, 116 Mass. 440. gress, introduced by Senator Lindsay 29. Griswold v. Hazard, 141 U. S. on March 22, 1897, under which a 260. bankrupt might have been detained if Peotection and Detention of Bankeupts. 203 § 9-b.] Detention of Bankrupt; Practice. plication can be made only between the time of filing the petition and the expiration of one month after the qualification of the trustee ; and the bankrupt, if taken into custody, can be detained only ten days. The affidavits of two persons are necessary; they must show facts, not opinions, and must be reasonably conclusive. The bankrupt cannot be actually imprisoned. Within these limi- tations and on a showing of the facta indicated in the last para- graph, the judge may, on petition or motion, issue a warrant. The bankrupt can, it seems, move for his release, or give bail. As soon as the ten days have elapsed, he must be released. There seems to be no prohibition on second or other like applications, but the court will not permit the use of this process to become persecution. The similarity between the detention here authorized and that made effective through the writ of ne exeat will be recognized.*" The latter is, however, not limited to a detention for the purpose of examination. It has been held that a court of bankruptcy may, under the broad powers conferred by § 2(15)^^ grant such a writ, and this procedure will usually be resorted to. But a warrant can- not be issued under this subsection solely as a basis for extradition proceedings in another district to bring the bankrupt to the district in which the detention warrant has been issued.*^ Where a bank- rupt arrested under a writ of ne exeat regno is released upon giv- ing a bond conditioned upon his remaining constantly within the jurisdiction of the court, his absence from the district from time to time without leave of the court, is a breach of the bond.** 30. See E. S., §§ 717, 5024. And sufficiency of affidavit to obtain a consult In re Hale, Fed. Gas. 5,911; writ of ne exeat, see HoflFschlaeger In re Hadley, Fed. Gas. 5,894; In re Go. v. Young Nap (D. G., Hawaii), McKibben, Fed. Gas. 8,859. 12 Am. B. R. 510. 31. In re Lipke (D. G., N. Y.), 3 32. In re Ketehum (C. C. A., 6th Am. B. R. 569, 98 Fed. 970; In re Cir.), 5 Am. B. R. 532, 108 Fed. 35. Cohen (D. C., 111.), 14 Am. B. R. 33. In re Appel (G. C. A., 1st 355, 136 Fed. 999; Matter of Cir.), 20 Am. B. E. 890, 163 Fed. Berkowitz (D. G., N. J.), 22 Am. 1,002. B. R. 231, 173 Fed. 1012. As to SECTION TEN. EXTRADITION OF BANKKTJFTS. § lo. 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. Aualogons provisions : None. Cross references: To the law: §§ 2(13) (14) (15), 9, 29-b, 41-a. To the General Orders: None. To the Fornui: None. SYNOPSIS OF SECTIOI^. EXTRADITION OF BANKRUPTS. I. Extradition of Bankrupts. a. When a bankrupt may he extradited. b. Practice. I. EXTRADITION OF BANKRUPTS. a. When a bankrupt may be extradited — This section is new. Clearly, only when a warrant for the apprehension of a bankrupt has been issued can extradition proceedings be instituted. Thus, when he has committed one of the offenses mentioned in § 29-b, or has been adjudged in contempt under § 2(13) (15), or § 41-a; but not, it seems, when the sole purpose of the warrant is to detain him for examination.^ He must also be found in the district whence extradition is sought. This implies positive identification. Further than this, however, the court need not go. The mere pro- duction of the warrant, authenticated either in writing or orally, appears to be sufficient. In this, extradition in bankruptcy seems to difFer from extradition for crime.^ b. Practice. — By the terms of this section, the practice on extra- dition in bankruptcy is assimilated to that provided by § 1014 of 1. In re Ketohum (C. C. A., 6th 886; Callan v. Wilson, 127 U. S. 540; Cir.), 5 Am. B. R. 532, 108 Fed. 35. In re Wolf, 27 Fed. 606; In re Has- 2. Compare In re Dana, 68 Fed. senbusoh, 47 C. C. A. 177, 108 Fed. 35. 204 EXTKADITION OF BaNKEUPT. 205' § 10.] Practice on Extradition. the Kevised Statutes.* The bankrupt is brought in on a warrant issued by a commissioner on complaint under oath; he may deny identity, or that the warrant was issued, or, if issued, that it was for his apprehension. The commissioner must either discharge him or commit him to custody. If the latter, he may be ad- mitted to bail. If no bail is offered, he must be taken before the judge, who, after inquiry into the facts, may either release him or grant an order or warrant for removal. And the marshal will then deliver him into the custody of the court which issued the orig- inal warrant of arrest.* 3. This section is as follows: nizance of the oflFense. Copies of the " § 1,014. For any crime or offense process shall be returned as speedily against the United States, the offender as may be into the clerk's oflSee of may, by any justice or judge of the such court, together with the recog- United States, or by any commissioner nizaneea of the witnesses for their of a, circuit court to take bail, or by appearance to testify in the case, any chancellor, judge of a supreme or And where any offender or witness is superior court, chief or first judge of committed in any district other than common pleas, mayor of a city, justice that where the offense is to be tried, of the peace, or other magistrate, of it shall be the duty of the judge of any State where he may be found, the district where such offender or and agreeably to the usual mode of witness is imprisoned, seasonably to process against offenders in such issue, and of the marshal to execute. State, and at the expense of the a warrant for his removal to the dis- united States, be arrested and im- triet where the trial is to be had." prisoned, or bailed, as the case may 4. For practice and forms, see be, for trial before such court of the works on Federal Procedure. United States as by law has cog- SECTION ELEVEN. SUITS BT AND AGAINST BANKRUPTS. § II. 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 bank- rupt, 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 determined. h The court may order the trustee to enter his appearance and defend any pending emit against the bankrupt. c A trustee may, with the approvial 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 bank- rupt estate subsequent to two years after the estate has been closed. Analogous provisions: In U. S.: As to right to maintain an action against a bankrupt, Act of 1867, § 21, E. S., § 5105; Act of 1841, § 5; As to stay of suits against a bankrupt, Act of 1867, § 21, R. S., § 5106; As to continuance of pending suits by trustee. Act of 1867, §§ 14, 16, K. S., § 5047; Act of 1841, §§ 3, 5; Act of 1800, § 13; As to limitations of actions against the trustee. Act of 1867, §§ 2, 14, E. S., §§ 5056, 5057. In Eng.! As to stays, Act of 1883, § 10(2). Cross references: To the law: §§ 2(7) (15), 9-a, 47-a(2). To the General Orders: XII (3). To the Forms: None. SYINTOPSIS OF SECTIOlSr. SUITS BV AND AGAINST BANKRUPTS. I. Comparative Legislation. a. Stays under previous acts. b. Differences between them and under the present law. II. Stays of Suits Begun After Filing Petition. III. Stay of Suit Against Bankrupt. a. Depending on dischargeability of debt. b. Power to grant stays discretionary. c. Power to stay should be exercised with caution. d. Effect of proof of debt on right of action. 206 Suits by and Against Bankeupts. 207 § ll-a.] Staya Under Previous Acts. ,IV. Suits or Proceedings in Which Stay May be Granted. a. Suits on proceedings in rem. (1) In general. (2) Peoceedings to enforce a lien. , b. Stay of proceedings under general assignments. c Suits or proceedings in personam. (1) In general. (2) When such stays will be granted. V. Practice and Pleadings. a. Application to State court. b. Application to judge or referee. c. Papers and procedure. VI. Duration of Stay. VII. Continuance of Suits by Trustee. a. Where bankrupt is defendant. b. Where bankrupt is plaintiff. c. Practice. VIII. Limitation on Suits by Trustees, a. Effect of limitation. b. When limitation begins to run; when estate is closed. I. COMPARATIVE I.EGISLATION. a. Stays under previous acts. — The power to stay suits concern- ing the person or property of the bankrupt is essential to the orderly administration of a bankruptcy law. This principle has always been recognized in England; and, while it is not yet authoritatively settled, it seems that there even an inferior county court, sitting in bankruptcy, may stay a suit on a debt in a su- perior, i. e., the high court.^ The English statute also deprives a creditor whose debt is provable in bankruptcy of all remedies against the bankrupt, including the right to sue, during the pend- ency of the proceedings, save with the consent of the court.^ In this country, for obvious reasons, stays on proceedings in State courts have been regarded with some alarm, and, as a rule, only those authorized by " any law relating to proceedings in bank- ruptcy " are permitted.* The act of 1841 contained no clause like that now under discussion, but, under it, the assignee was em- I. Baldwin on Bankruptcy, 9th ed., 2. Eng. Bankr. Act of 1883, § 9. p. 22. 3. E. S., § 720. 208 The Law and Puactice in Bankettptct. Stays of Suits Begun after Filing Petition. [§ 11-a. powered to prosecute or defend all pending suits, and the filing of a claim was deemed a waiver of all other remedies, l^ot so the law of 1867, which, by a specific grant of power to order stays, supplemented § 720 of the Kevised Statutes and rendered the jurisdiction to enjoin both affirmative and virile. There is, how- ever, a marked difference between the provisions of that and the present law. b. Differences between them and the present law. — These dif- ferences may be summarized thus: Stays under the former law were mandatory, if against a suit on a provable debt brought either before or during the pendency of the proceeding and lasted until the time of discharge, unless there was unreasonable delay in obtaining it; provided, however, that the court might permit the suit to go as far as judgment, thus to measure up the amount of the debt. Stays of suits under the present law are, strictly spea.k- ing, confined to actions pending at the time of the bankruptcy. They are mandatory if before the adjudication, and discretionary after it. They cannot be granted against suits founded on prov- able debts that are not dischargeable, and if granted, they put an end to all further proceedings, and if granted after the adjudica- tion, continue in force to the determination of the bankrupt's right to a discharge. II. STAYS OF SUITS BEGUN AFTER FILING OF PETITION. If, as has been said, a chief purpose of such stays is to prevent the harassnieint of the bankrupt by suits, pending^ a discharge which will be a bar, it would seem that a court of bankruptcy could, in its discretion,, restrain a suit begun after the filing* of the petition. There was no doubt about this under the law of 1867, as ^e cveir itor who proved elected his remedy,, and the creditor who did not could not prosecute his suit to jiudgment.* The omission is perhaps signifieamt. Yet, while a suit begun on a provable debt after the bankruptcy would seem but a shot intO' the air and likely to amount to naught save a liquidation of the debt,? the rale that a court of bankruptcy will stay an after-brought- suit only when and because directed. against possession of the bankrupt's property® 4. See R. S., §§ 5,106, 5,106, and 6. In re Chambers (D. C, R. !.)'. compare, however, to the eflCect that a 3 Am. B. R. 537, 98 Fed, 865? In re suit might be prosecuted, provided it RusseW et al. (G. C. A., 2d Cir..>' 3- did not reach a judgment. In re Am. B. R. 658, 101 Fed. 248. Ghiradelli, Fed'. Cas. 5,376. And see In the case of White v Schloerb Eyster v. Gaff, 91 U. S. 521. 178 U. S. 542, 4 Am. B. R. 178, 44 5. McDonald v. Davis, 105 N. Y. L, Edl 1,1'83, it was heldi that a'fter 508. an adjudication in bankruptcy,, aa Suits by and Against Bankkupts. 209 § ll-a.] stay of Suit; Dischargeability of Debt. by no means affects the broad doctrine here urged. Nor does the converse rule, that the court will not generally stay such a suit brought for the purpose of asserting a valid lien which attached before the beginning of the proceeding.'' Nor yet is it necessary to rely wholly, on the terms of § 2(15) for power to enjoin. The stay can be directed to the plaintiff, who, being doubtless a scheduled creditor, is a party to the proceeding; or, under § 2(6), such a plaintiff can be brought in, and them stayed.^ Either pro- cedure is well within the prineipile that, to protect its jurisdiction, a court will enjoin all parties from proceedings looking to the same remedy in another court of concurrent jurisdiction.® There are as yet, however, few cases directly in point under the present bankruptcy law.^° ni. STAY OF SUIT AGAINST BANKRUPT. a. Depending on dischargeability of debt. — The section under consideration provides for the stay of a suit which is founded upon a claim from which a discharge would be a release. This dischargeability of the debt is made the basis of jurisdiction. There can be no stay under this section unless the suit is founded upon a claim from which a discharge would be a release. -^^ The difference betweem the present § 11 and § 21 of the old law in this regard has already been noted. ^^ The words, " from which a dis- charge would be a release," are construed broadly, and suits not action in replevin cannot be com- 516; In re Mustin (D. C, Ala.), 21 menced and maintained against the Am. B. E. 147, 166 Fed. 506. bankrupt to recover property in the 11. Matter of Floyd (Spec, possession of and claimed by the bank- Com., N. Y. ) , 15 Am. B. E. 277 ; rupt at the time of that adjudication, Mackel v. Eochester (D. C, and in the possession of a referee in Mont.), 14 Am. B. E. 429, 135 bankruptcy at the time when the ac- Fed. 904; In re Cole (D. C, N. tion of replevin is begun. Y.), 5 Am. B. E. 780, 106 Fed. 837; 7. In re San Gabriel Sanitorium In re Sullivan (Ref., N. Y.), 2 Am. Co. (C. C. A., 9th Cir.), 7 Am. B. R. B. R. 30, laying down the rule that 206, 111 Fed. 892. the discretion to grant stays conferred 8. Bryan v. Bernheimer, 181 U. S. by this section should not be exer- 188, 5 Am. B. R. 623. cised unless the claim on whixih the 9. Moran v. Sturgis, 154 U. S. 256, suit is pending is clearly discbarge- 273; Texas & Pac. R. R. Co. v. John- able; In re Basch (D. C, N. Y.) 3 son, 151 U. S. 81. Am. B. R. 235, 97 Fed. 761; In 're 10. In re Kleinhans (D. C, N. Y.), Butts (D. C, N. Y.), 10 Am. B. R. 7 Am. B. R. 604, 113 Fed'. 107; In re 16, 120 Fed. 966; White v. Thompson Gutman (D. C, N. Y.), 8 Am. B. E. (C. C. A., 5th Cir.), 9 Am B. E 653 252, 114 Fed. 1,009. And see In re 119 Fed. 868. Basch (D. C, N. Y.), 3 Am. B. E. 12. See supra. For debts that are 235, 97 Fed. 761; In re Wollock (D. dischargeable and those that are not C, 111.), 9 Am. B. R. 685, 120 Fed. see under § 17 of this work 14 210 The Law and Peacticit in Bankettptcy. Stay of Suit; Dischargeability of Debt. [§ 11-a. strictly within them are sometimes stayed.^ ^ The word " suits " is' also given a wide meaning. It inolTides actions at law, suits in equity, and, in fact, any legal proceedings where the personal liability of the debtor is sought to be fixed. ^* It includes a pro- ceeding under a city ordinance to collect a debt which is made a charge upon the compensation due the bankrupt from the city.^° It embraces legal steps after judgment, such as supplementary proceedings',^* sheriffs' sales on execution, ^^ even the distribution of the proceeds of such sales,** as well as a wide range of pro- ceedings discussed later,** though, were it not for other sections of the law, it may be doubted whether the word could be extended so far.^" The fact that the creditor who is bringing the action has been omitted from the list of creditors on the bankrupt's schedule, does not necessarily prevent his action from being stayed, for his claim is still released by discharge, if he has notice of the bank- rupt proceedings.^* It is immaterial upon the question of juris- diction of the court to grant a stay, whether the determination as to the dischargeability of the debt is sound or unsound ; until re- versed it is binding and conclusive upon the parties.*^ In deter^ la. In re Hilton (D. C, N. Y.), 4 and to have the matter disposed of in Am. B. R. 774, 104 Fed. 981; In re the bankruptcy proceeding. In re Basch (D. C, N. Y.), 3 Am. B. R. Burke (D. C, N. Y.), 19 Am. B. R. 235, 97 Fed. 761. See, also. Ex parte 51, 155 Fed. 703. Christy, 3 How. 292. 17. In re Northrop (Ref., N. Y.), 14. In re Rosenberg, Fed. Gas. 1 Am. B. R. 427. 12,054; McKay v. Funk, 13 N. B. R. 18. In re Kenney (D. C, N. Y.), 334; Bailey v. Glover, 21 Wall. 342. 2 Am. B. R. 494, 95 Fed. 427; In re 15. In re Hicks (D. C, N. Y.), 13 Lesser (D. C, -N. Y.), 3 Am. B. R. Am. B. R. 654, 133 Fed. 739. 815, 100 Fed. 433; affirmed, s. c, 5 16. In re De Long (Ref., N. Y.), Am. B. R. 320, and both reversed in 1 Am. B. R. 66; In re Adams (Ref., Metealf v. Barber, 187 U. S. 165, 9 N. Y.), 1 Am. B. R. 94; In re Kletch- Am. B. R. 36. ka (D. C, N. Y.), 1 Am. B. R. 479, 19. In re Gutwillig (C. C. A., 2d 92 Fed. 901; In re Fortunato (D. C, Cir.), 1 Am. B. R. 388, 92 Fed. 337; N. Y.), 9 Am. B. R. 630, 123 Fed. Lea v. West Co. (D. C, Va.), 1 Am. 622; In re De Lany & Co. (D. C, N. B. R. 261, 91 Fed. 237. Y.), 10 Am. B. R. 634, 124 Fed. 280. 20. See In re Globe Cycle Works, Execution on a judgment re- (Ref. N. Y.), 2 Am. B. R. 447, 456, covered after the filing of the bank- decided Aug. 7, 1899. And compare rupt's petition in an action pending In re Southern Loan & Trust Co. v. at thfi ti.m« of the adjudication may Benbow (D. C, JST. Car.), 3 Am. B. be stayed. In re Beerman (D. C, R. !), 96 Fed. 514, decided Sept. 5, G.I.), 7 Am. B. R. 434, 112 Fed. 663; 1899. In re Tune (D. C, Ala.), 8 Am. B. R. 21. In re Beerman (D. C, Ga.), 7 285, 115 Fed'. 906; In re Kimball (D. Am. B. R. 434, 112 Fed. 663, citing C, Pa.), 3 Am. B. R. 161, 97 Fed. 29. Collier on Bankruptcy, 3d Bd., page AVhere supplementary pro- 128. ceedlngs are stayed upon the ad'judi- ZZ. Wagner v. U. S. (C. C. A., 6th cation of the judgment debtor, he is Cir.), 4 Am. B. R, 596, 104 Fed. 133. entitled to have the stay continued. Suits by and Against Bankrupts. 211 § 11-a.] Power to Grant Stay. mining whether the claim upon which the suit is based is a discharge- able debt, the court may be guided by the pleadings. ^^ An action brought in good faith against the bankrupt for damages for an al- leged deceit in obtaining a loan of money should not be stayed, for a judgment in such an action is not dischargeable.^^'' The privilege of a stay conferred by this section is to be accorded in both voluntary and involuntary bankruptcy.^* b. Power to grant stays discretionary.— The power given by this section to stay a suit upon a dischargeable debt is discretionary with the court, and the discretion should not be interfered with unless it has been abused. ^^ This power should be exercised by the court according as the interests of the bankrupt's estate shall require ; there may be cases when it will appear to the court that it is to the advantage of the estate that the suit should be defended rather than stayed.^" The stay should usually be granted (1) if the bankrupt is threatened with arrest or will be needlessly harassed; (2) if the suit is not in judgment; and even after judgment, if the rights of the general creditors, not parties to the suit will be jeopardized by further proceedings in the State courts; or (3) if the judgment is founded on a transaction which is an act of bankruptcy, or a fraud upon the creditors or upon the law." Where the suit involves nothing but a question of fraud, to which a discharge cannot be pleaded, its prose- cution should not be stayed.^* The power to grant the stay is per- missive and requires the court to examine into the equities of any application made therefor.^^^ If the trustee has no interest in the claim sued upon, the court should not intervene.^*'' c. Power to stay should be exercised with caution.— It fol- lows on the very nature of the power to stay that it should be exercised with caution. The right to enjoin has often been too broadly expressed."' Many of the cases are wayward guides. At 23. In re Adler (C. C. A., 2d Cir.), the State court has or can be givn 18 Am. B. R. 240, 144 Fed. 659. jurisdiction of the parties interested 23a. In re Lawrence (D. C, Ala.), in the distribution, including the een- 20 Am. B. R. 698, 163 Fed. 131. eral creditors represented by the 24. In re Geister (D. C, Iowa), 3 trustee in bankruptcy Am. B. R. 228, 97 Fed. 322. 28. In re Wallock (D. C. Ill ) 9 25. In re Lesser (C. C. A., 2d Am. B. R. 685, 120 Fed. 516; Mackel Cir.), 3 Am. B. R. 758, 100 Fed. 433; v. Rochester (D. C., Mont.), 14 Am New River Coal Land Co. v. Ruffner B. R. 429, 135 Fed. 904. Bros. (C. C. A., 4th Cir.), 21 Am. 28a. In re Mercedes Import Co B. R. ,74, 165 Fed. 881. (D. C, N. Y.), 20 Am. B. R. 648] 26. In re St. Alban's Foundry Co. revd. on other grounds, 21 Am B R (Ref., Vt.), 4 Am. B. R. 594. 591, 166 Fed. 427. " ' ' 27. Southern Loan & Trust Co. v. 28b. Matter of Mercedes Import Benbow (D. C, N. Car.), 3 Am. B. Co. (C. C. A., 2d Cir.), 21 Am B R E. 9, 96 Fed. 514; In re Globe Cycle 590, 166 Fed. 427, revg. 20 Am B R Works (. f., N. Y.), 2 Am. B. E. 648. ■ ■ - 447. In both of these cases it was 29. In re Rogers (Ref., Ky. ), I said that the injunction should never Am. B. R. 541 ; In re St. Alban's be granted if the judgment has rip- Foundry Co. (Ref., Vt.), 4 Am. B. ened into an execution sale, provided R. 594. 212 The Law aitd Peaotice iii Bankkuptct. Effect of Proof of Debt. [§ 11-a. the same time, it is impossible to phrase any exact rule. The present tendency is toward limitations on the power, rather than its opposite.'" Where creditors seek judgments against a bankrupt corporation to enable them to proceed against stockholders upon their unpaid sub- ccriptions, it has been held proper to permit them to prosecute their claims, although actions to enforce such claims were commenced subse- quent to the proceedings in bankruptcy against the corporation.'^ d. Effect of proof of debt on right of action. — This was much debated under the former law, which in terms provided that he who proved his debt in bankruptcy waived his right to enforce it by any other legal remedy. But the better opinion was that the waiver en- dured only until a discharge was granted or refused. The amendatory act of 1874 made this view also the written law. That the same is the law to-day,'^ with the exception that a suit may probably be beguu and, unless stayed, prosecuted to judgment, is undoubtedly true. So also is the old time rule that the remedy thus suspended comes into being the moment the discharge is granted or denied."' But the State court does not lose jurisdiction.'* The stay is directed to the suitor, not the court, and the latter may go on if the cause is moved by the person enjoined, and a judgment resulting will be valid.'^ The remedy of a party thus aggrieved is in contempt proceedings. It is important, however, to note that, if a stay is not granted and the suit proceeds and judgment is entered after the discharge, the latter cannot be set up as a release to the judgment.'" 30. In re Ward (D. C, Mass.), 5 a large majority of the creditors of Am. B. R. 215, 104 Fed. 985, a case, the corporation desire a sale of its at least since the amendatory act of property, under an order of the court 1903, of doubtful authority on the which appointeu the receiver, and no point there decided. Compare In re rights of minority creditors who did Currier (Ref., NY), 5 Am. B. R. not intervene in the equity action, 639. will be in any way affected, the bank- 31. In re Remington Auto & Motor ruptoy court, upon the filing of a Co. (D. C, N. Y.), 9 Am. B. R. 533, bankruptcy petition by them against 119 Fed.' 441. the corporation, will not restrain such The discharge of a corporatiou sale of its property. In re Edward does not prevent creditors from tak- Ellsworth Co. (D. C., N". Y.), 23 Am. ing judgment in a State court against B. R. 284, 173 Fed. 699. the corporation in such limited form 32. For instance, see Reed v. Equit- as may enable them to reap the bene- able Trust Co. (Sup. Ct., 6a.), 8 fit of the stockholders' or directors' Am. B. R. 242. liability. The judgment rendered will 33. In re Rosenberg, Fed. Cas. not be against the person or property 12,054; In re Rosenthal (D. C, N. of the bankrunt, and has no further Y.), 5 Am. B. R. 799, 108 Fed. 368. effect than to enable the plaintiff to 34. Bindseil v. Smith (Eq., N. J.), charge the directors or stockholders 5 Am. B. R. 40. in accordance with the State statute. 35. Flanagan v. Pearson, 14 N. B. In re Marshall Paper Co. {C. C. A., K. 37; Ewart v. Schwartz, 48 N. Y. 1st Cir.), 4 Am. B. R. 468, 102 Fed. Super. 390; Wood v. Hazen, 15 N. B. 872, overruling 2 Am. B. R. 653, 95 R. 491 ; In re Irving, Fed. Cas. 7,073. Fed. 419. 36. Dimock v. Revere Copper Co., Enjoining gale of corporate 117 U. S. 659; McDonald v. Davis, property in equity suit. — Where. 105 N. Y. 508. Suits by and Against Bankeupts. 213 g 11-a.] Stay of Suits oa Proceedings iu Kern. III. SUITS OR PROCEEDINGS IN WHICH STAY MAT BE GRANTED. a. Suits or proceedings in rem. — (1) In general. — The gen- eral rule is that the court that has acquired jurisdiction of the res will retain it. If the property has come into the possession of the bank- ruptcy court any suit or proceeding tending to interfere with such possession may properly be stayed. Thus, a Federal court will restrain a replevin creditor proceeding in a State court against property in the custody of the Federal Court,'' but will refuse a stay in most cases where the State court is in possession,^* or where the bankrupt had no legal or equitable title to the property sought to be replevined.'" But the rule yields, however, where the possession of the State court is (1) the result of a fraud on the law, or (2) of a lien declared void or voidable under the law. But if the lien is by a judgment creditor's suit begun more than four months before the bankruptcy, a stay will not be granted.*" Where a proceeding was commenced long prior to the proceedings in bankruptcy, and the property in controversy was under the control and in the possession of a receiver appointed by the State court, a bankruptcy court cannot enjoin the proceedings or order the property turned over to the trustee in bankruptcy.*^ A distinction is drawn as to the power of a bankruptcy court to enjoin proceedings of long standing in a State court, in which such court has acquired complete jurisdiction of the person and property of the bankrupt before the bankruptcy proceedings were commenced and the power to enjoin proceedings instituted within four months of the filing of the petition in bankruptcy. In the latter case the power is properly exer- cised.*'* Where before filing a petition against an involuntary bank- rupt, a creditor brings an attachment suit in a State court and such court acquires jurisdiction of the property attached, such suit should not be stayed.*^ If the property sued for was not claimed by the bank- 37. In re Russell (C. C. A., 2d injunction restraining proceedings in Cir.), 3 Am. B. R. 658, 101 Fed. 248. the disposition of property duly levied 38. Carter v. Hobbs (D. C, Ind.), on under an execution, issued upon a 1 Am. B. R. 215, 92 Fed. 594; In re judgment more than a year prior to Price (D. C, N. Y.), 1 Am. B. R. the adjudication in bankruptcy of the 606, 92 Fed. 987 ; Keegan v. King debtor is unwarranted. Contra : In (D. C, Ind.), 3 Am B. R. 79, 96 Fed. re Vastbinder (D. C, Pa.), 13 Am. 758; In re Seebold (C. C. A., 5th B. R. 148, 132 Fed. 718; In re Baugh- Cir.), 5 Am. B. R. 358, 105 Fed. 910; man (D. C, Pa.), 15 Am. B. R. 23, In re Russell (C. C. A., 2d Cir.), 3 138 Fed. 742, where Judge Arehbold Am. B. R. 658, 101 Fed. 248. Com- holds that a sale of the bankrupt's pare, also, In re Neely (D. C., N. Y. ), property under an execution issued 5 Am. B. R. 836, 108 Fed. 371, as upon a judgment more than four modified by s. c. on appeal, 7 Am. B. months prior to his adjudication may R. 312, 113 Fed. 210. be stayed; Matter of Pollman (Ref., 39. In re Smith (D. C, R. I.), 9 N. Y., 16 Am. B. R. 144. See, also, Am. B. E. 590, 119 Fed. 1,004; Mat- Nat. Bank v. Hobbs (C. C, Ga.), 9 ter of Kanter & Cohen (C. C. A., 2d Am. B. R. 190, 118 Fed. 626. Cir.), 9 Am. B. R. 372, 121 Fed. 984,. 41. Pickens v. Dent, 9 Am. B. R. 58 C. C. A. 260. 47, 187 U. S. 177, affirming 5 Am. B. 40. Metcalf v. Barber, 187 U. S. R. 644, 106 Fed. 663. 165, 9 Am. B. R. 30, reversing In re 41a. New River Coal Land Co. v. Lesser (C. C. A., 2d Cir.), 5 Am. B. Ruffner Bros. (C. C. A., 4th Cir.), R. 320, and s. c, 3 Am. B. R. 815. 21 Am. B. R. 474, 165 Fed. 881. Stay of execution. — In the case 42. Tennessee Producer Marble Co. of White V. Thompson (C. C. A., 5th v. Grant (C. C. A., 3d Cir.), 14 Am. Cir.), 9 Am. B. R. 653, 119 Fed. 868, B. R. 288, 135 Fed. 332. ■'56 C. C. A. 308, it was held that an 214 The Law and Peactice in Bahkeuptcy. Stay of Proceedings to Enforce Lien. [§ ll-a. rupt, nor included in his schedule, the bankruptcy court has no jurisdiction.*^^ (2) Proceedings to enforce a lien. — Stays of proceedings to enforce liens are usually sought to prevent either (1) the en- forcement of an execution or an attachment levied within the four months period or (2) the foreclosure of a valid mortgage. In the former, there seems little doubt about the pow^er to halt the lien creditor or of the wisdom of exercising it.*^ If the latter, while the power exists, the mortgaged premises being in the custody of the court,** yet, provided the mortgage is valid, it will not as a rule be exercised, and certainly not unless it appears that the equity of redemption vested in the trustee is of some value.*'* The decisions under the former class of cases are fairly uniform,** and. 42a. In re Bluestone Bros. (D. C, W. Va.), 23 Am. B. R. 264, 174 Fed. 53. 43. In re Eastern Com. & Imp. Co. (D. C, Mass.), 12 Am. B. R. 305, 129 Fed. 847. Execution, to reach bankrupt's salary. — Where an execution was is- sued pursuant to § 1,391 of the N. Y. Code of Civil Procedure as amended in 1908, which authorizes a judg- ment creditor to take under execu- tion 10 per cent, of the salary of a judgment debtor, and two weeks thereafter the debtor was adjudicated a bankrupt, the enforcement of the judgment against any portion of the bankrupt's present salary will be en- joined until it is determined whether he shall be granted a discharge in bankruptcy; and his employer* will be directed by an order to withhold a tenth of his salary until the question of his discharge is determined. In re Van Buren (D. C, N. Y.), 20 Am. B. R. 896, 164 Fed. 883; In re Van Buren (D. C, N. Y.), 21 Am. B. R. 338, 164 Fed. 883. A stay of garnish- ment proceedings under similar cir- cumstances was denied in In re i)rigg3 (D. C, N. Y.), 22 Am. B. R. 621, 171 Fed. 897; the effect of this decision was limited in the case of In re Sims (D. C, N. Y.), 23 Am. B. R. 899, 176 Fed. 645, so as to per- mit a stay of such proceedings as to salary earned after the adjudication of the bankrupt. 44. Quaere: Whether the mort- gagee, being a secured creditor, is not, under § 57-h, a party who is already within the jurisdiction of the court of bankruptcy? In the case of In re Dana (C. C. A., 8th Cir.), 21 Am. B. R. 683, 167 Fed. 529, it was held that where a court of bankruptcy is in actual possession of real property belonging to the bankrupt, it has jurisdiction to determine the amount and order of priority of liens thereon and to liquidate such liens, and in aid of its jurisdiction may, by in- junction, restrain the prosecution of actions brought in a State court be- fore the institution of the bank- ruptcy proceedings but within the four months period, to foreclose liens upon the property which are con- cededly valid. 45. In re Sabine (Ref., N. Y.), 1 Am. B. R. 315. Compare In re Pittel- kow (D. C, Wis.), 1 Am. B. R. 472, 92 Fed. 901. An action to foreclose a mort- gage upon a bankrupt's property brought in a State court after adjudi- cation will not be enjoined upon the petition of the trustee, but the court may direct the trustee to intervene in the action for the purpose of pro- tecting all the creditors of the bank- rupt. In re Porter (D. C, Ky.), 6 Am. B. R. 259, 109 Fed. Ill; In re Gerdes (D. C, Ohio), 4 Am. B. R. 346, 102 Fed. 318; In re Holloway (D. C, Ky.), 1 Am. B. R. 659, 93 Fed. 638, in which case it appeared that it was improbable that there would be a surplus remaining after the payment of the mortgage. See In re Rohrer (C. C. A., 6th Cir.), 24 Am. B. R. 52. 46. In re Kimball (D. C, Pa.), 3 Am. B. R. 161, 97 Fed. 29; Bear v. Chase (C. C. A., 4th Cir.), 3 Am. B. R. 746, 99 Fed. 920; In re Seebold (C. C. A., 5th Cir.), 5 Am. B. R. 358, 105 Fed. 910; In re Lesser (C. C. A., 2d Cir.), 5 Am. B. R. 320, 180 Fed. 201; In re Kenney (C. C. A.. 2d Cir.), 5 Am B. R. 355. 105 Fed. 897: In re Tune (D. C. Ala.), 8 Am. B. R. 285, 115 Fed. 906. Most of the cases contra rest on Bardps v. Bank, 178 U. S. 524, 4 Am. B. R. 163, and since the amendatory act of 1903, are no longer the law (for instance. In re Wells [D. C, Mo.], 8 Am. B. R. 75, 114 Fed. 222, and In re Shoemaker \T). C, Va.], 7 Am. B R. 437, 112 Fed. 648). But see In re Ogles (D. C, Tenn.), 1 Am. B. R. 671, 93 Fed. 426, and In re Franks (D. C, Ala.), 2 Am. B. R. Suits by and Against Bankkupts. 215 § 11 -a.] Stay of Proceedings to Enforce Lien. where there is a difference, now that the doctrine of Bardes v. Bank has been eliminated, turn, as a rule, on whether the action sought to be stayed is or rests upon a transaction which is void or voidable under the present law. Those under the latter class declaring against the exercise of jurisdiction to stay the fore- closure of a valid mortgage, and remitting the party who seeks the stay to the State court, are equally uniform,*^ and the earlier eases contra*^ are no longer controlling. Nor was this latter result appreciably affected by Bardes v. Bank.*^ However, in extreme cases, such as was In re Sabine, and in cases where the mortgage itself is voidable under the terms of the law, the right to stay will usually be exercised.^" A stay of a sale of real property seized under a judgment rendered in an action to foreclose a mortgage prior to the four months before the filing of the petition should not be granted.^"^ Where the lien creditor voluntarily makes himself a party to the proceedings,^^ as when he appears at the first meeting and asks that his security be ascer- tained for the purpose of voting on that part of his debt which may be unsecured, the rule is, of course, different. Such a creditor may later be stayed. But not, if the suit is a creditor's bill of long standing.^^ It will be noticed that under § 11-a a suit only may be stayed which rests upon a claim from which a discharge would be a release. It should be further noticed that the suit does not in any way affect a lien upon the bankrupt's property; it does not affect any suit maintained by a secured creditor to enforce a lien thereon. In recognition of this principle, a suit to enforce a mechanics' lien against real property of the bankrupt will not be 634, 95 Fed. 635. Even were this not 49. Compare, however. In re San so, the power to enjoin the consum- Gabriel Sanitorium Co. (C. C. A., 9th mation of a fraud on the law is by no Cir.), 7 Am. B. E. 206, 111 Fed. 892, means negatived by Bardes v. Bank, where, on reargument, the Circuit Compare Bryan v. Bernheimer, 175 Court of Appeals of the Ninth Circuit U. S. 274, 5 Am. B. R. 623. supersedes its former opinion, supra, 47. In re Holloway (D. C, Ky.), 1 on this ground. Am. B. R. 659, 93 Fed. 638; Heath v. 50. Carpenter Bros. v. O'Connor Shaffer (D. C, Iowa), 2 Am. B. R. (C. C, Ohio), 1 Am. B. E. 381, 16 98, 93 Fed. 647; In re Gerdes (D. C, Cir. C. Ohio, 526. Ohio), 4 Am. B. R. 346, 102 Fed. 318; 50a. Sample v. Beasley (C. C. A., In re Porter (D. C, Ky.), 6 Am. B. ,5th Cir.), 20 Am. B. R. 164, 158 Fed! R. 259, 109 Fed. HI. 607, citing Metcalf v. Barker, 187 U. 48. In re Sabine (Ref., N. Y.), 1 S. 165, 9 Am. B. R. 36; Pickens v. Am. B. R. 315; In re Pittelkow (D. Roy, 187 U. S. 177, 9 Am B R 47 C, Wis.), 1 Am. B. E. 472, 92 Fed. 51. In re Riker (C. C. A., 2d Cir.), 901 ; In re San Gabriel Sanitorium 5 Am. B. R. 720, 107 Fed. 96. Co. (C. C. A., 9th Cir.), 4 Am. B. E. 52. Pickens v. Eoy, 187 U. S. 177, 197, 102 Fed. 310. 9 Am. B. R. 47. 216 The Law and Peactice in Bankruptcy. Stay of Pi'oceedings Under Assignments. [§ 11-a. stayed "^ and such a suit may be brought against the trustee without leave of the court."* Where distress has been made by a landlord and afterwards the property has been transferred to another person who becomes a bankrupt, the result is to place the property under the con- trol of the bankruptcy court, and such court may restrain further pro- ceedings iinder the distress."" While courts of bankruptcy may, in the exercise of the discretion conferred by this section, stay proceedings where the property is in possession of an officer of a State court under a levy, yet such stay should not be granted unless the bankrupt's estate will be benefited thereby; if the property subject to the lien is insufficient to satisfy it, there will be no advantage to the general creditors from administration in bankruptcy, and the State court should be permitted to remain in possession."* b. Stay of proceedings under general assignments. — Prior to Bardes v. Bank, the cases were uniform in holding that, a general assignment being an act of bankruptcy and a constructive fraud on the law, the general assignee might be halted by an injunction from the court of bankruptcy."' Whatever doubt resulted from that case was eliminated by the same court's decision in Bryan v. Bernheimer.^^ Nor was the doubt restored by that court's decision in Louisville Trust Co. V. Commingor,^" a case which applied the Bardes rule only to the assignee and his attorneys and that, too, only when they had become vested with an adverse title prior to the bankruptcy. Since the amendatory act of 1903, Bardes v. Banh being no longer the law, the question is stripped of all dogmatic limitations. There can now be no doubt about the power of a court of bankruptcy to restrain general assignment proceedings; indeed, it becomes its duty propria motu, at once a petition, especially an involuntary petition, is filed. c. Suits or proceedings in personam. — (1) In general. — 53. Matter of Grissler (C. C. A., injunction from interfering with the 2d Cir. ), 13 Am. B. R. 508, 136 Fed. trustee's possession of the premises. 754; In re Greater American Exposi- In re Sehwartzman (D. C., So. Car.), tion (C. C. A., 8th Cir.), 4 Am. B. 21 Am. B. R. 885, 167 Fed. 399. R. 486, 102 Fed. 986. 56. Orr v. Tribble (D. C, Ga.), 19 54. In re Smith (D. C, N. Y.), 9 Am. B. R. 849, 158 Fed. 897. Am B. k. 603, 121 Fed. 1014. 57. In re Gutwillig (D. C, N. Y.), 55. In re Lines (D. C, Pa.), 13 1 Am. B. R. 78, 00 Fed. 475; affirmed, Am. B. R. 318, 133 Fed. 803. 1 Am. B. R. 388, 92 Fed. 337; Lea v. Restraining landlord from in- West (D. C, Va.), 1 Am. B. R. 261, terference with trustee. — Where, 91 Fed. 237 ; affirmed suh nom. West at adjudication, a tenant holds an Co. v. Lea, 174 U. S. 590, 2 Am. B. unexpired lease of the store occupied R. 467; Davis v. Bohle (C. C. A., 8th by him, his trustee is entitled to a Cir.), 1 Am. B. R. 412, 92 Fed. 325; reasonable time within which to dis- In re M. Solomon & Co., 2 N. B. N. pose of the valuable stock of goods Rep. 460. which is not removable without seri- 58. 181 U. S. 188, 5 Am. B. R. 623. ous loss to the estate and the landlord 59. 184 U. S. 18, 7 Am. B. R. 421. to whom the trustee has given a bond See, also, In re Carver (D. C, N. against loss, will be restrained by Car.), 7 Am. B. R. 539, 113 Fed. 128. Suits by and Against Bankeupts. 217 § ll-a.] Practice and Pleadings. Much of what has already been said may be applied here. Two classes of suits and proceedings are peculiarly against the person, — (1) or- dinary suits for the collection of simple debts, and (3) proceedings which may result in the attachment and detention of the body of the debtor. Stated broadly, the former, subject to limitations already discussed, especially where the debt proceeded on is the result of a fraudulent preference,'" will always be stayed. On the other hand, the latter class of cases will rarely be stayed, for the reason that, as a rule, arrest on civil process rests on obligations which are not dis- chargeable in bankruptcy.®^ To this generalization there are, of course, exceptions, as where the remedy on a simple contract debt "given by the State law includes arrest ;°^ or the well-known Kentucky alimony case, where a stay was granted on a State court's enforcement of its mandate by contempt."' Where the order sought to be restrained per- tains to some act of the bankrupt consisting of an offense against the dignity of the State court, it should not be stayed,''* nor should a stay be granted to prevent the punishment of the bankrupt for dis- obedience of a lawful order of a State court prior to filing a petition in bankruptcy."'* (2) When such stays will be granted. — Cases already cited under previous paragraphs indicate the conditions under which suits and proceedings in personam will be stayed. A stay should be granted where the proceedings may result in the arrest or imprisonment of the bankrupt,'* or where it is sought to punish the bankrupt for con- tempt alleged to have been committed by the bankrupt prior to ad- judication.'^ Where an attempt is made to enforce a dischargeable claim in a State court by proceedings to punish the bankrupt for contempt, the bankruptcy court, may, in its discretion, restrain such proceedings." An injunction restraining further proceedings in an action in a State court operates in restraint of proceedings in such court to punish the bankrupt for an alleged contempt committed before the adjudication in bankruptcy." V. PRACTICE AND PLEADINGS. a. Application to State court.— Subdivision a of this section is general in its effect ; the jurisdiction thereby conferred on the 60. In re Nathan, 92 Fed. 590. Am. B. R. 498, 170 Fed. 721. 61. For instance: In re Cole (D. 64. In re Grist (Ref., NY) 1 C, N. Y.), 5 Am. B. R. 780, 106 Fed. Am. B. R. 89; In re Adler (C. C. A., 837, and, for what debts are not dis- 2d Cir.), 16 Am. B. R. 414, 144 Fed! charged, see generally § 17 of this 659. work. 65. In re Fortunate (D. C. N. 62. In re Grist (Ref., N. Y.), 1 Y.), 9 Am. B. R. 630, 123 Fed. 622; Am. B. R. 89. Contempt in alimony case, see Wag- 63. In re Houston (D. C, Ky.), 2 ner v. Houston (D. C, Vt.), 4 Am Am. B. R. 107, 94 Fed. 119; on ap- B. R. 596, 104 Fed. 133. peal, Wagner v. Houston (C. C. A., 66. Matter of Adler (C. C. A 2d 6th Cir.), 4 Am. B. R. 596, 104 Fed. Cir.), 16 Am. B. R. 414, 144 Fed 133. 195. 63a. Matter of Koronsky (C. C. 67. In re Fortunate (D. C N A., 2d Cir.), 21 Am. B. R. 851, 170 Y.), 9 Am. B. R. 630, 123 Fed. 622] I'ed. 719. See In re De Lany & Co. (D. C , N 63b. In re Hall (D. C, N. Y.), 22 Y.), 10 Am. B. R. 634, 124 Fed. 280. 218 The Law and Practice in Bankeuptcy. Application for Stay. [§ 11-a. courts of bankruptcy is not exclusive. Application may be made to a State court, and the mandatory provisions of the section are as binding on that court as on the Federal court.** Where the suit is pending in a State court the application should ordinarily be made in that court in the iirst instance.®* In that event, the practice will be that provided by the State law. The production of a certified copy of the petition or of the adjudication will be enough to establish the fact that such a proceeding haS' been begun. But it is in no sense the duty of the State court to stay merely because it hears of the bankruptcy of a suitor. It must be informed of the facts by proper pleadings.'''* b. Application to judge or referee — If the application is made to the court of bankruptcy, it should be made to the judge. Gen- eral Order XII (3) effectually limits the power of a referee to grant " an injunction to stay of a court or officer of the United States, or of a State," and requires an application therefor to be heard and decided by the judge. '^^ The weight of authority is now 68. In re Rosenberg, Fed. Cas. 12,054; In re Metealf, Fed. Cas. 4,494. The following are cases arising under the present law where applications were made to State courts for stays and refused because the proceedings were for the enforcement of liens: Reed v. Equitable Trust Co. (Sup. Ct., Ga.), 8 Am. B. R. 242, 115 Ga. 780, 42 S. E. 102; Carter v. Bank, (K. J. Ch.), 4 Am. B. R. 211, 35 S. E. 61; Reed v. Cross (Super. Ct., 111.), 1 Am. B. R. 34; Continental Nat'l Bank v. Katz (Super. Ct., 111.), 1 Am. B. R. 19. 69. In re Geister (D. C, Iowa), 3 Am. B. R. 228, 97 Fed. 322; In re Siebert (D. C, N. J.), 13 Am. B. R. 348, 133 Fed. 781; Hill v. Hareling, 107 U. S. 631, where the court, in speaking of a similar provision in the act of 1867, said: "This provision, like all laws of the United States made in pursuance of the Constitu- tion, binds the courts of each State as weII as those of the nation. Upon the application of the bankrupt to the court. State or national, in which the suit ia pending, it is the duty of that court to stay the proceedings." 70. Johnson v. Bishop, Fed. Cas. 7,373; Boynton v. Ball, 121 U. S. 457, 30 L. Ed. 985. 71. Application to referee. — In the former editions of this work it has been said: "If the ap- plication is made to the court of bank- ruptcy it should be made to the judge if there has yet been no order of refer- ence; otherwise to the referee in charge, under the former law, the register's functions were more clerical than judicial and he had no such power. It has been thought that Gen- eral Order XII (3) is a limitation on the power to enjoin implied form § 38-a(4); but the latter authorizes courts of bankruptcy and not the Su- preme Court, to abridge this power. Further, cases contra must be con- sidered at least impliedly overruled by Mueller v. Nugent, 7 Am. B. R. 224, 184 U. S. 1, the power to issue an order to show cause why property should not be restored being an ana- logous exercise of jurisdiction, and of a higher class than a mere stay." It is submitted that this is a reasonable exposition of the law on the question. A number of referees have contended that they had jurisdiction in such cases. In re White (Ref. Ala ) 10 Am. B. R. 790, 799; In' re Sabine (Ref., N. Y.), 1 Am. B, R. 315; In re Northup (Ref. N. Y.), 1 Am. B R 427. But the weight of authority Suits by and Against Bankeupts. 219 § 11 -a.] Papers and Procedure. apparently in favor of the doctrine that referees may not enjoin proceedings in a State court, '^^ although they may grant restraining orders and injunctions in other cases. ^^ Where the courts of bankruptcy have by their rules restricted the povyer of referees to the granting of temporary restraining orders only/* care should be taken to ask no more than the referee can grant. If the parties, upon an application for a stay, submit the question to a referee, they are bound ; even if the right of a referee to award an injunc- tion to stay suits and proceedings cannot be regarded as finally settled.^' c. Papers and procedure. — Save in the interval between the filing of the petition and the adjudication, a stay is always dis- cretionary. Suits, except those asserting remedies incident to valid liens, should, as a rule, be stayed. Unless there has been an abuse of discretion, the stay will not be interfered with on appeal.''* Application is usually made by a petition setting out the juris- dictional facts, such as the name of the suit, in what court, for what it is brought, the names of the persons sought to be enjoined, of their attorneys of record, and the like, and, if on information and belief, accompanied by sustaining affidavits J'' The petition for a stay sihould sufficiently show that the proceeding is pending in a district in which it is made.''* The petition may be verified seems to be opposed to this conten- to prevent injury to the property of tion and we have reluctantly departed the bankrupt, or otherwise, grant a from the rule laid down in the former temporary restraining order staying text, with the belief, however, that proceedings until the hearing and de- the question is not yet settled. cision of said motion. In case all 72. In re Berkowitz (D. C, Pa.), parties in interest agree that said mo- 16 Am. B. R. 251, 143 Fed. 598, hold- tion be heard by the referee in charge, ing that a referee may exercise the they may file with the referee a writ- power of the judge except in certain ten stipulation to that effect. The specified cases, one of the exceptions decision of the referee on such motion being that he may restrain a court or shall be filed with the clerk, and if ofiicer of the United States or a State, the referee decides that an injunction unless there be a pressing necessity to shall issue, an order to that effect act, to which a certificate of the clerk may be made by the judge." (Rule is the essential prerequisite; In re XXI. Northern and Western Districts Siebert (D. C, N. J.), 13 Am. B. R. of New York.) 348, 133 Fed. 781; In re Steuer (D. 75. In re Benjamin (D. C, Pa.), C, Mass.), 5 Am. B. R. 209, 104 Fed. 15 Am. B. R. 351, 140 Fed. 320. ^''6- 76. In re Lesser (C C. A., 2d 73. In re Steuer (D. C, Mass.), 5 Cir.), 3 Am. B. R. 758. 99 Fed 913 Am. B. R. 209, 104 Fed. 976. See § 77. !„ re Keiler, Fed. Gas. 7,647. 1(15) and discussion thereunder, ante, 78. In re Goldberg (D. C. N Y ) P- *■ 9 Am. B. R. 156, 117 Fed. 692, hold- 74. Thus, " When a motion for ing that a petition in a pending bank- an injunction is pending or is about ruptoy proceeding, described as: "In to be made the referee may, in order the District Court of the United 220 The Law and Peactice in Bankettptct. Papers and Procedure on Application. [§ 11 -a. by the attorney where it is shown that the moving parties live at a distance and that the application is made by their attorney in their behalf and for their benefit, and states why it is so made.''* The reasons why the stay should be granted must clearly appear. If there be a trustee, he should apply, though, if he refuses or neglects so to do, or if a trustee be not yet appointed, any party in interest, including the bankrupt, may do so. Before adjudica- tion, the petitioning creditors are the proper persons, but any party interested in the proceeding may also apply. The stay is granted ex parte, in the same manner as other Federal writs. If a stay proper, as distinguished from a mere temporary injunction coupled with an order to show cause, the granting of it may be indorsed on the petition by the judge or the referee, and the clerk must then issue a writ of injunction, which, in turn, must be served by the marshal, in the same manner as other Federal writs. If a temporary restraining order, the practice of the State courts usually controls as to recitals, the signature of the judge or re- feree, and the method of service.*** Omnibus stays are not fre- quent and the writ or order will, as a rule, be addressed to the party stayed eo nomine; however, stays directed generally " to all other persons " seem to bind all persons served.*^ Whether, if the person to be stayed is not a party to the proceeding, he must be brought in by a subpoena served at the same time, is a ques- tion. There is high authority for the practice,*^ even under the present law; but the wording of the subsection under discussion does not swm to make it necessary. In actual practice, it is rarely essential and much less rarely done. Motions to modify or vacate are made in the usukl way, on notice and affidavits, and are often subject to district rules or the practice of the local State courts. How far courts will in- vestigate the merits of contested applications depends largely on the conscience and industry of the judge or referee. The better authority seems to be that a court of bankruptcy will, if necessary, determine such merits, even swearing witnesses or ordering a referee to ascertain the facts. It will, indeed must, determine whether the debt is dischargeable or not.*^ To do this it must States for the Northern District of 9 Am. B. R. 156, 117 Fed. 692. New York. In Bankruptcy No. 1,141," 80. Useful forms will be found un- and which stated that the petition in der " Supplementary Forms," post. bankruptcy was filed on a certain date 81. In re Lady Bryon Mining Co., and a writ of subpoena issued " here- Fed. Cas. 7,980. in," was sufficient to show that a 82. Bryan v. Bernheimer, 181 U. S. proceeding in bankruptcy was pending 188, 5 Am. B. R. 623. in the Northern District of New York. 83. In re Basch (D. C, N. Y.), 3 79. In re Goldberg (D. C, N. Y.), Am. B. R. 235, 97 Fed. 761. Suits by and Against Bankrupts. 221 § ll-b.] Duration of Stay; Continuance of Suits. often declare the legal effect of pleadings in the State court, and sometimes of a judgment there granted.** The petition, if pre- sented to a referee, should he filed in the office of the clerk of the district court.*" VI. DURATION OF STAY. If the application for a stay is made prior to adjudication the stay is granted until after an adjudication or the dismissal of the petition. When granted before adjudication it is dissolved by the adjudication, although it may subsequently be renewed. If granted after the adjudication the stay may be continued until " twelve months after the date of such adjudication," but, if within that time such person applies for a discharge, then until the ques- tion of such discharge is determined. If the year goes by and the bankrupt obtains the extension permitted by § 14-a, it is question- able whether another stay cou,ld be granted under the terms of this section of the law ; but it probably could under the general equity powers of the court, already discussed under § 2(15). It is thought, however, that the words " the question of such discharge is determined " are sufficient to embrace the time consumed on an appeal, seasonably taken and diligently prosecuted. Once the dis- charge is granted or refused, the eitay is dissolved. No order to that effect is required. Better practice, however, suggests the application for and entry of such an order, though it is the duty of the court to make such entry, in any event.*® Where an action against a bankrupt was stayed by the bankruptcy court where the question of the bankrupt's discharge was pending, a motion to continue the stay after his discharge is granted should be denied.*'^ VII. CONTINUANCE OF SUITS BY TRUSTEE. a. Where bankrupt is defendant.^Subdivision h of this sec- tion provides that " The court may order the trustee to enter his appearance and defend any pending suit against the bankrupt." The words here used are not the same as those of the former law,** but their effect is' similar.** One option is with the trustee — he may or may not decide to defend®" — though, when in doubt, he 84. Burnham v. Pidcock, 5 Am. B. 87. In re Flanders (D. C, Vt.), E. 590, 58 N. Y. App. Div. 273; Knott 10 Am. B. R. 379, 121 Fed. 236. T. Putnam (D. C, Vt.), 6 Am. B. E. 88. Act of 1867, § 16, R. S., § 80, 107 Fed. 907. 5,047. 85. In re Gerdes (D. C, Ohio), 4 89. Price v. Price, 48 Fed. 823. Am. B. R. 346, 102 Fed. 318. 90. Traders' Bank v. Campbell, 14 86. In re Rosenthal (D. C, N. Y.), Wall. 87; Reade v. Waterhouse, S2 5 Am. B. R. 799, 108 Fed. 368. N. Y. 587. 222 The Law and Practice in Bankruptcy. Continance Where Bankrupt is Plaintiff. [§ 11-c. should report at a meeting of creditors for instructions. If he decides to intervene in a pending suit he should secure the approval of the court.""^ The other option is with the court ; it may,'' but need not, order the trustee to intervene. Where the suit affects the bankrupt estate and its determination, if adverse to the bankrupt, may deplete the assets, the trustee may properly be ordered to intervene;"^ and a court of bankruptcy may restrain an aetiori in a State court for such time as will permit the trustee to prepare his papers and make a motion for an order allowing him to intervene.*^ The State court may not compel a trustee to intervene ; °* although a plaintiff may be entitled to have a trustee made a party defendant, but he cannot be compelled to answer unless by direction of the bankruptcy court."*'^ He can plead to the jurisdiction, or make any defense which the bankrupt could have made, or even any defense which any creditor could have asserted affirmatively."^ Once a party to such suit, he is bound by the judgment therein."" If the judgment is already entered, and the State court refuses to open it on a motion of the trustee, the court of bankruptcy cannot, it seems, force the State court to open the case by restraining the enforcement of its judgment."'' It would also seem that a trustee, when once a party, could, on showing the required facts, secure a removal of the cause to the proper Federal court; there are, however, no cases in point. If a trustee does not intervene, he is bound by the judgment to the same extent that any party acquiring an interest pending suit would be bound."^ A trustee may not oust the jurisdiction of a State court by pointing out the pendency of the bankruptcy proceedings."" b. Where bankrupt is plaintiff. — Subsection c of this section permits the trustee, with the approval of the court, to prosecute as trustee any suit commenced by the bankrupt prior to the adjudica- tion, with like force and effect as though it had been commenced by him. The words of this subsection are strikingly similar to those of the law of 1867.^°° They have, however, been given a 90a. Hahlo v. Cole, 122 N. Y. 96. In re Skinner (D. C, Iowa) App. Div. 636, 15 Am. B. R. 591; 3 Am. B. R. 163, 97 Fed. 190; In re Kessler v. Herklotz (App. Div., N. Van Alstyne (D. C, N Y ) 4 Am Y. ) , 22 Am. B. R. 257. B. R. 42, 100 Fed. 929 ; Des' Moines 91. In re Porter & Bros. (D. C, Savings Bank v. Morgan Jewehv Co Ky.), 6 Am. B. R. 259, 109 Fed. 111. 123 Iowa, 432, 12 Am. B. R 781 " 92. Heath v. Shaffer (D. C, 97. In re Franklin (D. C Mass ) Iowa), 2 Am. B. R. 98, 93 Fed. 647. 6 Am. B. R. 285„ 106 Fed. 666, afii'd 93. In re Klein (D. C, 111.), 3 sub nom. Jaquith v. Rowley 188 U Am. B. R. 174, 97 Fed. 31. S. 620, 9 Am. B. R. 525. Compare 94. Ohver v. Cunningham, Fed. Neiman v. Shoolbraid, 2 N. B N Cas. 10,493. But compare Bear v. Rep. 668. Chase (C. C. A., 4th Cir.), 3 Am. B. 98. Thatcher v. Rockwell 105 TT R. 746, 99 Fed. 920. S. 407. ' 94a. Victor Talking Machine Co. 99. Des Moines Savings Bank v v. Hawthorne, etc., Co. (C. C, Pa.), Morgan Jewelry Co., 123 Iowa 432* 23 Am. B. R. 234, 173 Fed. 617. 12 Am. B. R. 781. 95. London v. Blandford, 56 Ga. lOO. Act of 1867. 5 16 T! R 8 150; Sanford v. Sanford, 58 N. Y. b/; 5,047. , ^. o., s Knox V. Bank, 12 Wall. 379. Suits by and Against Eankeupts. 223 § ll-c] Intervention by Trustee; Practice. somewhat limited meaning. Thus, only such suits asi may be beneficial to the estate should be continued by the trustee.^"*^ If, then, actions not beneficial to the estate are pending, what may the bankrupt do? The authorities are not uniform. ^"^ The analogy between such a right of action and any other valueless or burden- some property is striking, and, it is thought, on proper application to the referee in charge, the trustee may be excused from prosecut- ing such a suit, and the bankrupt authorized to do so for his own benefit.^"* The consent of the bankruptcy court to the substitution of the trustee for the bankrupt in the State court should first be obtained and affirmatively shown. ^"^ A cause of action for damages arising out of a personal wrong suffered by the bankrupt does not pass to his trustee in bankruptcy and the trustee should not be per- mitted to continue the action, since this subsection only relates to actions that are a part of the bankrupt's estate, or in which his estate has an interest.''"^ If the trustee intervenes, the suit will be continued in his name;^"^ but the trustee is liable only for costs after he intervenes, and for costs personally only when guilty of mismanagement or bad faith. ^"''' c. Practice. — The order to intervene and the consent to defend should be granted upon application made by petition or motion. This application, as a rule, may be heard at a meeting of cred- itors. It may, however, be granted ex parte. In some districts the practice is to grant the consent in the form of an order author- izing the trustee to apply to the proper State court for substitu- tion.^"* How far an adverse party in the State court should be heard in opposition to the motion is an open question. He cer- 1 ainly should not, if he is not a creditor, and any effort on his part 101. In re Haensell (D. C, Cal.), bankrupt may have an interest in the 1 Am. B. R. 286, 91 Fed. 355; In re recovery which he is entitled to pro- Franks (D. C, Ala.), 2 Am. B. E. teet. In re Haensell (D. C, Cal.), 1 634, 95 Fed. 635. Am. B. R. 286, 91 Fed. 355; Hahlo v. 102. Tdwle V. Davenport, 16 N. B. Cohn, 15 Am. B. R. 591, 112 N. Y. R. 478; Noonan v. Orton, 12 N. B. App. Div. 636. R. 405 ; Gilmore v. Bangs, 55 Ga. 403 ; 104. Hahlo v. Cohn, 15 Am. B. R. Sutherland v. Davis, 42 Ind. 26. 691, 112 N. Y. App. Div. 636. 103. Griffin v. Mutual Life Insur- 105. In re Haensell (D. C, Cal.), ance Co., 11 Am. B. R. 622, 119 Ga. 1 Am. B. R. 286, 91 Fed. 355. 663, 46 S. E. 870, in which it was held 106. Ames v. Gilman, 51 Mass. 239. that if no trustee is appointed, or if 107. Norton v. Switzer, 93 U. S. the bankruptcy court does not con- 355; Reade v. Waterhouse, 52 N. Y. aider it to the interest of the estate 587. to permit the trustee to prosecute the 108. In re Price (D. C, N. Y.), 1 suit the action does not abate nor is Am. B. R. 606, 92 Fed. 987; Hahlo v. the bankrupt's debtor discharged from Cohn, 15 Am. B. R. 591, 112 N. Y. lUbility in the pending action; the App. Div. 636. 224 The Law and Practice in Bankruptcy. Limitation on Suits by Trustee. [§ 11-d. summarily to determine the controversy on the merits should be checked; the State court is the forum for such determination. Permission once granted, the scene shifts to the State court, and the application there will, of course, be iu accordance with the rules and practice of that court.^"* Throughout, the practice under these subs'ections is closely analogous to that where a trustee initiates a eiuit, discussed under the appropriate sections, post^^° VIII. LIMITATION ON SUITS BT TRUSTEES. a. Effect of limitation. — Subsection d provides that " Suits shall not be brought by or against a trustee of a bankrupt estate subsequent to two years after the estate has been closed." It has reference to suits initiated by the trustee, rather than those pend- ing at the time of the bankruptcy.^" It is similar to the cor- responding clause under the act of 1867 in period only. It con- stitutes an arbitrary limitation on all suits; as to computation of time at least superseding all statutes whether State or Federal,^ ^^ provided the action is not barred by the State statute at the time the petition in bankruptcy was filed. ■'^^ It seems also that the character of the suit is immaterial, provided it amountsi to the prosecution of a demand in a court of justice,^^* in respect to the property or rights of property of the bankrupt."^ It applies also to writs of error sued out to review a judgment of a State court, as well as to suits initiated by the trustee. ■'^^ It does not apply to an application to reopen a case upon the ground that the proceeding was closed before the estate was fully administrated.^ ^^ Under familiar principles, this limitation does not affect juris- dictions; to be available, it must be pledged.^^* 109. Bank of Commerce v. Elliott 113. Sheldon v. Parker (Sup. Ct., (Sup. Ct., Wis.), 6 Am. B. R. Neb.), II Am. B. E. 152, 66 Neb. 610, 409, holding that if an order be 92 N. W. 923. made directing a trustee to inter- 114. Bailey v. Glover, 21 Wall, vene in a State court, the trustee per- 342; Ames v. Oilman, 51 Mass. 239; forms his full duty when he makes a Union Canal Co. v. Woodside, 11 Pa. proper application to be let in; in dis- St. 176. posing of the application the statutes 115. In re Conant, Fed. Cas. 3,086; of the State, and the rules and prac- Stevens v. Hauser, 39 N. Y 302! tice of its courts must necessarily 116. Jenkins v. Bank, 106 U. S. govern, the same as when any other 571 : Walker v. Towner, Fed. Cas. party invokes the court's jurisdiction. 17,089. 110. See s§ 60, 67 and 70 of this 117. Matter of Paine (D. C, Ky.) work. II Am. B. R. 351, 127 Fed. 246. 111. Compare Maybin v. Raymond, 118. Chemung Bank v. Judson 8 Fed. Cas. 9,338. N. Y. 254. See, also, Gormley' v. 112. Freelander v. Holloman, Fed. Bunion, 138 U. S. 623, 630, 34 L. Ed. CfiR. 5 081. 1,086; Ritzer v. Wood, lOo'u. S." IS?) Suits by and Against Bankeupts. 225 § ll-d.] When Limitation Begins to Run. b. When limitation begins to run; when estate is closed. — Under the present law the two-year limitation begins to run on and after the estate has been closed; under the act of 1867, the time began to run when the cause of action accrued in favor of or against the assignee.^^* Failure to commence the action with- in the required time because of inability to serve process is no excuse.^*" The phrase " after the estate has been closed " does not mean the date of the discharge or refusal to discharge; nor does it mean the date the referee remits the papers of a closed case to the clerk.^^* It rather refers to the date when the final decree approving the trustee's account and discharging him is granted. •'^^ Even this is, however, not accurate, for in no-asset bankruptcies, no trustee may be appointed, and yet a cause of action may develop; while in many cases when a trustee is appointed, he finds himself unable to find assets and, there being no funds with which to pay the expenses incident to a meeting for his' discharge, files no report and is not discharged. There are as yet no decisions construing the meaning of this phrase. It is suggested that, where no trustee is appointed, the two years will begin to run from the day when the order dis- pensing with a trustee is granted, and that, when a trustee is ap- pointed who does not report or seek a final discharge, it will not begin until such discharge is granted. It has been held that where an estate is declared closed, but is subsequently reopened, the two-year period begins to run from the subsequent closing of the estate. *^^ 27 L. Ed. 900; Upton v. McLaughlin, 120. Amey v. Watertown, 130 U. 105 U. S. 640, 26 L. Ed. 1,197; Lyon S. 320. V. Bertram, 20 How. 149, 15 L. Ed. IZl. See Bankr. Act, 5 39-a(7). 847. 122. See Bankr. Act, § 2(8). 119. For a somewhat remarkable 123. Bilafaky v. Abraham, 183 example of the effect of the limitation Mass. 401, 67 N. E. 318. under the former law, see Scott v. Devlin, 89 Fed. 970. 15 SECTION TWELVE. COllEPOSITIONS -WHEN CONFINED. § 12. Compositions, when Confirmed.— o A bankrupt may offer, either before or after adjudication, terms of composition to his creditors after, but not before, he has been examined 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. In 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 bankrupt, 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.* b An application for the confirmation of a composition may be filed in the court of bankruptcy after, but not before, it has been ac- cepted 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 bank- rupt to his creditors, and the money necessary to pay all debts which have priority and the cost of the proceedings, 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 each 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 has not been guilty of any of the acts or failed to perform any of the duties which would be a bkr to his discharge; and (3) the offer 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. When- ever a composition is not confirmed, the estate shall be administered in bankruptcy as herein provided. Analogous provisions: In IT. S.: B. S., § 5103-A (Act of June 3i/, 1874). In Eng. : Act of 1890, § 3, which supersedes Act of 1883, § 18. See, also. Act of 1883, § 33. See, also, Deeds of Arrmgement Acts of 1887 and 1900. Cross references: To the law: §§ 3 (9), 13, 14-c, 17-a, 31-f-g, 35-a, 39-b (5), 38-a (4), 40-a, 48a, 58-a (3), 66, 70-f . To the General Orders ; XII (3), XII (3), XXIX, XXXII. To the Forms ; Nos. 60, 61, 63, 68. * The amendment of 1910 is in italics. 226 Compositions, when Confikmed. 227 § 12.] Synopsis of Section. SYNOPSIS OF SECTIOK COICPO&ITIONS, WHEN CONFIRMED. I. History and Comparative Legislation. a. The English system. b. Continental systems. c. Compositions under act of 1867 as amended in 1874. II. Compositions Under the Present Law. a. In general. b. Constitutionality. c. Section, how construed. d. Who may offer composition. e. General purpose and effect. f. Practice. III. Informal Compositions. IV. Offering Composition. a. In general. b. When offer should he made. c. Meeting of creditors. d. Acceptance by creditors. (1) When to be made. (2) How OBTAINED. (3) Who mat accept. (4) How MANY MUST ACCEPT. e. Deposit of consideration. (1) In genebal. (2) n^atuee and amount of consideration. (3) When deposit in cash is necessaet. (4) Deposit of assets of estate. f. Practice before confirmation. (1) In geneeal. (2) asceetaining whethee a majoeitt has consented. (3) Eepoeting to judge. V. Confirming or Rejecting Composition. a. Objections to confirmation. (1) In geneeal. (2) Because against best inteeests of ceeiv ITOES. 228 The Law and Pkactice in Bankeuptct. The English System. [§ 12. (3) Because or commission of acts oe failuee TO PEEFOEM DUTIES WHICH WOULD BAE A DISOHAEGE. (4) Because of absence of good faith. b. Effect of fraud on composition already confirmed. c. Practice. VI. Distribution in Composition. a. In general. b. Practice. c. Dismissal of the case. VII. Appeals. I. HISTORY AND COMPARATIVE LEGISLATION. a. The English system. — Not until 1825, was a composition with creditors permitted in England, nor did this first statute discharge the debts of dissentient creditors'. The act of 1849, which required the bankrupt to make a cessio bonorum, provided for a discharge available against all creditors whether consenting or not. The act of 1869, § 126, is concededly the progenitor of our system of eompoeition. Since then, two statutes have been passed in England, that of 1883 and that of 1890. The latter repeals the former's provisions concerning compositions, and is now the law. By it, in connection with § 23 of the act of 1883, a scheme of composition may be offered either between the entry of the receiving order (petition) and the adjudication, or after that date. When the offer is after that date, the practice seems not unlike our own ; but a composition outside of, i. e., before an actual bankruptcy, is not possible under our law.^ The English statutes also provide for " deeds of arrangement " with creditors, a procedure someihing like those of our State insolvency laws that require the assent of creditors in advance.^ In actual practice, these deeds of arrangement are more general than compositions proper.' In England schemes of arrangement as distinguished from compositions are possible even after bankruptcy proceedings are begun. 1. Compare § 23, Eng. Act of Bank- ity of deeds of arrangement in Eng- niptey, 1883, with § 3, Act of 1890. land is, from our point of view, diflS- 2. See §§ 2,149-2,187, N. Y. Code of cult to understand. Our insolvency Civil Procedure. laws, requiring in advance the assent 3. See Eng. Deeds of Arrangement of creditors, are practically dead let- Acts of 1887 and 1890. The popular- ters. Compositions, when Confiemed. 229 § 12.] Compositions under Act of 1867. b. Continental systems. — The laws of the continental countries distinguish between compoeitions without the relinquishment of assets, and compositions with relinquishment. The first class differs from the English method in that it cannot take place until after a bankruptcy proceeding has been begun, and results in a part payment and the creation of a " debt of honor " for the bal- ance, the bankrupt being restored to his business, but compelled to perform the terms of his composition agreement. In effect, this is merely an extension, but, when consented to by certain percentages of the creditors, is binding on all. It is, on the Continent, decidedly the more general and more popular method. The other kind of composition resembles that in vogue here, but seems to be possible only in France and Greece. Besides, some countries permit an arrangement with creditors before bankruptcy, to prevent or avoid bankruptcy, and, therefore, properly called " preventive compositions." These correspond to the English deeds of arrangement, either in or out of the proceeding proper, if made before the actual adjudication.* The modem tendency is towards arrangements or compositions between the creditor and the debtor, as distinguished from the harsher rules of the older bankruptcy laws. The section now under discussion will, therefore, become increasingly important as the years go on. c. Compositions under act of 1867 as amended in 1874." — Our first and second bankruptcy laws did not provide for compositions. Neither did the law of 1867, until amended by the act of June 22, 1874.* The corresponding section of the present law is not only more terse, but, in effect, in several particulars unlike that of the law of 1874. The latter, and the adjudicated cases under it, are, therefore, not always in point. Its main features should, however, be understood and will be briefly outlined here, the foot-notes indi- cating the leading cases. The discussion of the present section, post, is confined, as far as' possible, to the meaning of the words of the statute, whether or not already interpreted by the courts. Under the act of 1874, a composition could be offered in a pending proceeding either before or' after the adjudication.'' If 4. The writer is greatly indebted in 1874, Ch. 390, S 17, 18 Stat, at Large, this connection to "Bankruptcy, a 182), post. Study in Comparative Legislation," 6. The parentage of this act is by S. Whitney Dunscomb, Jr., Esq., made clear in In re Scott, Fed. Gas. of the New York Bar; being No. 2, 12,519, where the English and Ameri- Vol. IL of the Columbia College Stu- can laws on compositions are sot out dies in History, Economics, and Pub- in parallel columns. He Law. ''• In re Reiraan, Fed. Cas. 11,673; 5. R. S., § 5,103-a (Act of Tune 22, nffirmed, 9. c, Fed. Cas. 11,674; In re 230 The Law and Practice in Bankeuptct. Compositions under Act of 1867. [i 12. offered, a meeting of creditors was called/ at which the debtor was obliged to be present and answer all inquiries made of him, and also to produce a statement of assets and liabilities with the names and addresses of his creditors.* At such meeting, a resolu- tion accepting the proposed composition became operative if passed by a majority in number and three-fourths in amount of creditors preeient or represented,^* and binding if confirmed by the signa- tures of the debtor and two-thirds in number and one-half in value of all his creditors. ^^ Creditors in fifty dollars or less were counted as' to amoimt but not as to number;^" and secured creditora were not counted unless they relinquished their security.^* The reso- lution, if thus operative and confirmed, with a statement of assets and liabilities,^* was submitted to the judge, who thereupon called a meeting of creditors,^^ and, if (a) satisfied that the resolution was lawfully pa'seed,^® and (b) that it was for the best interests'^' of all concerned, caused it to be recorded. A composition once agreed to could be varied by a similar procedure.^^ Compositions provided for the pro rata satisfaction in money of all debts not secured or entitled to priority.^* When accepted, they were bind- ing on all creditors scheduled in the statement produced by the debtor at the meeting at which the resolution was passed,^" and could be enforced by the court summarily or by contempt proceed- Morris, Fed. Cas. 9,824; In re Odell, 14. In re Haskell, Fed. Cas. 6,192. Fed. Cas. 10,427. 15. In re Scott, Fed. Cas. 12,519. 8. In re Spades^ Fed. Cas. 13,196; 16. In re Sawyer, Fed. Cas. 12,395; In re Haskell, Fed'. Cas. 6,192; In re In re Walshe, Fed. Cas. 17,118; In re Spencer, Fed. Cas. 13,229; Lieke v. Cavan, Fed. Cas. 2,528; In re Green- Thomas, 116 U. S. 605. baum. Fed. Cas. 5,769. 9. In re Haskell, Fed. Cas. 6,192; 17. In re Haskell, Fed. Cas. 6,192; In re Holmes, Fed. Cas. 6,632; In re In re Weber Furniture Co., Fed. Cas. Dobbins, Fed. Cas. 3,943 ; In re Proby, 17,330; In re Reiman, Fed. Cas. Fed. Cas. 11,439; In re Little', Fed. 11,673; In re Whipple, Fed. Cas. 17,- Cas. 8,392. 513; In re Welles, Fed. Cas. 17,377. 10. In re Holmes, Fed. Cas. 6,632; 18. In re McDowell, Fed. Cas. In re Spades, Fed. Cas. 13,196; In re 8,776; In re Reiman, Fed'. Cas. 11,673 Gilday, Fed. Cas. 5,422; Eao parte 19. In re Reiman, Fed. Cas. Jewett, Fed. Cas. 7,303; In re Keller, 11,673; In re Langdon, Fed. Cas! Fed. Cas. 7,654. 8,058; In re Louis, Fed.' Cas. 8,528;" 11. In re Gilday, Fed. Cas. 5,422; In re Clapp, Fed. Cas. 2,785; In re In re Spillman, Fed. Cas. 13,242; In McNab, Fed. Cas. 8,906; In re Hurst re Scott, Fed. Cas. 12,519; Home Nat. Fed. Cas. 6,925; In re' Wilson, Fed! Bank v. Carpenter, 129 Mass. 1. Cas. 17,781. 12. In re Wald, Fed. Cas. 17,054. 20. In re Hurst, Fed. Cas 6 925- 13. In re Spades, Fed. Cas. 13,196; In re Reiman, Fed. Cas. 11,673- In re In re Van Auken, Fed. Cas. 16,828; Lytle, Fed. Cas. 8,650; In're Bechet In re O'Neil, Fed. Cas. 10,528; Flower Fed. Cas. 1,210; In re Hamlin Fed' V. Greenbaum, 50 Fed. 190. Cas. 5,994. ' Compositions, when Confirmed, 231 § 12.] Compositions under Present Law. ings.** If a oomposition was not ordered, or, when ordered could not be carried out, the bankruptcy proceeding went on.^'* II. COMPOSITIONS UNDER THE PRESENT I.AW. a. In general. — The more important changes made by the pres- ent law are discussed later. A few of them are: (1) there can now be no oomposition until after adjudication and a meeting of creditors; (2) it cannot be offered until the bankrupt has filed his schedules and been examined, and the proposed terms have been accepted in writing by a majority in number and amount of all claims allowed, and the consideration to be paid to creditors and the money necessary to pay debts entitled to priority and the ex- penses of administration shall have been deposited in court; (3) there are now three available objections to a composition, the first only being the same as that under the former law, and any avail- able objection to the debtor's discharge being equally effective to prevent a composition. The court, and not the debtor, distributes the consideration. The practice, too, is necessarily different. Fur^ ther, the section is silent as to some things specifically stated in the former law. b. Constitutionality. — This objection was raised to the act of 1874. But, if the present section amounts, as it does, to a cessio honorum, whence each creditor obtains substantially as great a pro rata as he would through distribution in bankruptcy, the sections on compositions are clearly within the power given Con- gress to establish a uniform system of bankruptcy.^* ISTor does the fact that, in compositions, the question whether the bankrupt shall be released from his debts depends upon a majority vote by his creditors, render the law unconstituticmal. The discharge and the manner of awarding it are mere incidents.^* The essential purpose of bankruptcy laws is a pro rata distribution of assets.*' c. Section, how construed. — Since it is in derogation of the common law, and compels any dissenting creditors to accept the percentage accepted by the majority and deprives them of their remedies on the balance thereafter, this section is strictly con- 21. In re McKeon, Fed. Cas. 8,858; 23. In re Reiman, Fed. Cas. In re Tooker, Fed. Cas. 14,096; In re 11,673; In re Chamberlain, Fed. Cas. Eenisen, Fed. Cas. 11,698; In re 2,580. Waetzfelder, Fed. Cas. 17,048. 24. Hanover Nat. Bank v. Moyses, 22. In re Bayly, Fed. Cas. 1,144; 186 U. S. 181, 8 Am. B. R. 1. ' Bidwell V. Bidwell, 92 Pa. St. 61 ; 25. See U. S. v. Fisher, 2 Cranch, Whittemore v. Stephens, 48 Mich. 359, 396; McCulloch v. Maryland, 4 573: In re Kohlsaat, Fed. Cas. 7,918. Wheat. 316, 321. 232 The Law akd Peactice in Bankeupcty. General Purpose and Effect of Section. [§ 12. strued.^* Where the parties and the referee follow a course of procedure utterly at variance with the law, confirmation may be refused. d. Who may offer composition. — ^Any " bankrupt," that is, any person, copartnership, or corporation adjudged to be bankrupt, may offer a composition.^* This seems to have been so under the former law, though the word then was " person."^® e. General purpose and effect. — The act itself seems to recog- nize that composition is in some respects outside of bankruptcy, for it is provided in § 12(e) that if composition is not confirmed " the estate shall be administered in bankruptcy as herein prir- vided."*** If the judge refuses to confirm the composition, the bankruptcy proceding per se is revived and must be proceeded with as if no offer of composition had been made. If it is confirmed a formal order is entered to that effect.^ ^ This order and that dis- missing the case are not the same. The title to the bankrupt's property immediately vests in him.^* The effect of composition is to supersede the bankruptcy proceedings and re-inve&t the bank- rupt with all his pr(yperty free from the claims of creditors.^^ A certified copy of the order, when recorded, acts as a deed.^* The ordei' of confirmation becomes in effect a discharge and may be pleaded in bar with like effect.*' But it does not affect his obli- gation created as a part of the composition ;** and, if notes given as 26. In re Shields, Fed. Cas. 12,784; Jenkins, 4 Am. B. R. 568, 176 Mass. In re Rider (D. C, N. Y.), 3 Am. B. 544, 57 N. E. 1,002. R. 178, 96 Fed. 808; In re Frear (D. 34. Bankr. Act, § 21-g. C, N. Y.), 10 Am. B. R. 199, 120 Fed. 35. Glover Grocery Co. v. Dome, 978. Text cited with approval in 8 Am. B. R. 702, 116 Ga. 216; Ross Broadway Trust Co. v. Manheim, 14 v. Saunders (C. C. A., 1st Cir.), 5 Am. B. R. 122, 47 N. Y. Misc. 415. Am. B. R. 350, 105 Fed. 915; Broad- 28. Compare Bankr. Act, § 1 (4) way Trust Co. v. Manheim, 14 Am. B. with § 1(19). And see §§ 4 and 5. R. 122, 47 N. Y. Misc. 415; Mandell 29. In re Weber Furniture Co., & Co. v. Levy (N. Y. Sup. Ct.), 14 Fed. Cas. 17,330; affirmed on appeal, Am. B. R. 549. See, also. In re Mer- 8. c, Fed. Cas. 17,331; Pool v. Mc- riman. Fed. Cas. 9,479; In re Becket, Donald, Fed. Cas. 11,268. Fed. Cas. 1,210. For its effect on a 30. In re Lane (D. C, Mass.), 11 claim for deficiency by a record credi- Am. B. R. 137, 125 Fed. 772. tor, see In re Stowell, 24 Fed. 468; 31. Form No. 62. Paret v. Ticknor, Fed. Cas. 10,711. 32. Bankr. Act, § 70-f; In re Aug- The oonfirmation of a composi- ust, Fed. Cas. 645; In re Shaw, Fed. tion shall discharge the bankrupt Cas. 12,716; In re Rodger, Fed. Cas. from his debts other than those agreed 11,992; In re Winship Co. (C. C. A., to be paid by the composition, and 7th Cir.), 9 Am. B. R. 638, 120 Fed. those not affected by the discharge. 93, 56 C. C. A. 45. Bankr. Act, § 14-c. See, post. 33. In re Rider (D. C, N. Y.), 3 36. Bankr. Act, § 14-c. See, also. Am. B. R. 178, 96 Fed. 808; Stone v. generally as to debts not affected, un- der § 17 of this work. Compositions, when Confirmed. 233 S 12-a.] Offering Composition. the consideration are not paid, they are payable in their original amount.^'' The effect of a composition or discharge on the liability of a codebtor is discussed elsewhere.** But like a discharge, a composition, if not pleaded, is deemed waived.** f. Practice. — This is detailed in subsequent paragraphs. The law is not as instructive on this point as was the act of 1874. Nor are the general orders exactly illuminating,*" or the forms pre- scribed by the supreme court reliable.*' Supplementary forms will, however, be found among the " Supplementary Formsi," post. m. IMFORBIAI. COMPOSITIONS. A practice of compromising debts outside of the proceeding in bankruptcy which is sometimes attempted in an informal way should be condemned. A bankrupt's estate can be wound up under the statute in but two ways : (1) by distribution in bankruptcy, or (2) by distribution in composition. The effort is sometimes made to start a proceeding in bankruptcy and then settle with creditors outside the proceeding ; either letting the latter die of inanition or else asking for a sale of the assets at a nominal figure to him who furnishes the consideration for the informal settlement. The dif- ficulties attending such an effort are indicated in In re Lockwood.*'' It can never be entirely successful until every creditor has accepted the settlement offered. As an attempt to evade the law, fruitful in possibilities of wrong to creditors who may not have notice, it will usually be checked when brought to the attention of the court. Nothing short of positive proof that every creditor has been ascer- tained and, without exception, paid the same pro rata, will war- rant an order for the sale of the assets, even to him who comes into court claiming to be smbrogated to the rights of the creditors; indeed, it may be doubted whether the court, thus informed of an attempted evasion of the law, will set the machinery of that law in motion for the benefit of him who admits such an attempt. IV. OFFERING COMPOSITION. a. In general. — The offer of terms of composition should be made as directed by the statute. The offer should be made to all 37. In re Reiman. Fed. Cas. 11.673 Dimock v. Revere Copper Co., 117 U. and 11,675; In re Hurst, Fed. Cas. S. 559. 6,925; In re Negley, 20 Fed. 449; In 40. General Orders XII (3), re Carton & Co., 148 Fed. 63. XXXII. 38. See Bankr. Act, § 16, and dis- 41. Forms Nos. 60, 61, 62, 63. cuBsion thereunder. 42. (D. C, ]S. Y.) 4 Am. B. R. 30. In re Tookcr, Fed. Cas. 14,096; 731, 104 Fed. 794. 234 The Law and Peactice in Bankkuptcy. Offer of Composition ; Meeting of Creditors. [§ 13-a. the creditors, whether they have proved their debts or not.*^ Section 13a recognizes this where it says " a bankrupt may offer terms of com- position to his creditors." b. When offer should be made — Subsection a provides that the offer to his creditors may be made after, but not before, he has been examined in open court or at a meeting of his creditors, and has filed in court the required schedules.** Some doubt arose under the law as it existed prior to the amendatory act of 1910 as to whether the examination here referred to may be made after the proceedings are instituted and before the adjudication. Under the amendatory act of 1874 composition was permitted " whether an adjudication had been had or not."- The act as' amended by the amendatory act of 1910 contains a similar provision and it is now provided that an offer of composition may be made " either before or after adjudication," thus effectually nullifying the effect of decisions holding that composition may not be offered until the bankrupt has submitted to an examina- tion under § 7 (9) at the first meeting of his creditors which under § 55a may only be held after an adjudication.*' No offer can be made after a discharge ; the person offering is no longer a bankrupt. c. Meeting of creditors. — The statute does not require the offer to be made at a meeting of creditors. Form No. 60 indicates the practice, for it provides for a petition for a meeting of creditors to act upon a proposal for composition. It seems that the offer may be made at the first meeting of creditors,*' and that it may even be oral ; provided there has been an examination of the bankrupt begun at such meeting. But where there has been a reference, the offer and its acceptance should, in the first instance, be filed with the referee. It would seem also that such acceptance by the required number of creditors can be tendered immediately after the offer. This was not so under the former law. A special meeting of creditors, on not less than ten days' notice, was required whenever the bankrupt proposed a composition. d. Acceptance by creditors. — (1) When to be made. — But though the offer may be made, application for its confirmation cannot be made until after the offer has been accepted in writing by a majority in number of all creditors whose claims have been 43. In re Eider (D. C, N. Y.), 3 45. In re Back Bay Automobile Am. B. R. 178, 96 Fed. 808. Co. (D. C, Mass.), 19 Am. B. R. 835, 44. See Bankr. Act, § 7(8). The 158 Fed. 679, reversing 19 Am. B. R. schedules and lists of creditors are 33. properly filed with the referee. In 47. In re Hilborn (D. C, N. Y.), re Bloodworth-Stembridge Co. (D. 4 Am. B. E. 741, 104 Fed. 866. C, Ga.),24 Am. B. R. 156. Compositions, when Confibmed. 235 § 12-a.] Acceptance of OflFer by Creditors. allowed representing a majority in amount. Claims can be al- lowed only in the way prescribed by the law.^^ It results, there- fore, that, before application can be made for confirmation, an ad- judication must be had, else there can be no allowed claims. Thua is accomplished the first wide gap between the former and the present law. There is no statutory limitation as to time of accept- ance, and it is thought the consents of creditors can be obtained at any time after the petition for bankruptcy is filed, and, within the usual limitations as to laches, even after the year for the proving of claims has expired.^* They could even be obtained at the first meeting, provided a majority in number and amount were present. (2) How OBTAINED. — Any paper containing an unqualified acceptance of the bankrupt's offer and signed by the creditor or a proxy duly authorized to that end, will comply with the statute. The usual method is to send printed forms of acceptance to the creditors. But there must be no improper influences or false repre- sentations used to secure signatures, lest the composition be refused confirmation on that ground.^" A creditor who has once accepted cannot, in the absence of fraud or misrepresentation, withdraw his acceptance.*^ (3) Who mat accept. — Only creditors who would be entitled to vote for a trustee can be counted.®^ Priority claims are " al- lowed " like other claims, but, as the cash to pay them in full must be deposited as a condition precedent, the injustice of counting such claims is apparent. Secured claims will be counted only to the amount unsecured ; they can be " allowed " only to suci. an amount.^* Mortgagees whose debts are dependent solely upon the contingency of a deficiency arising upon foreclosaire are neither necessary nor proper parties to a proposed composition.** (4) How MANY MUST ACCEPT. — Here the present statute is widely different from its predecessor. A majority only of claims allowed, constituting a majority in amount of such claims, is suffi- cient for the consent required by this subsection ; and the assignee of a large number of creditors will be counted as one creditor only.** But a bankrupt will not be permitted to select a time 48. Compare Bankr. Act, | 55-b, 53. Note In re Spades, Fed. Cas. witli § 57-d. 13,196; In re Scott. Fed. Cas. 12,519; 49. Bankr. Act, § 57-n. In re O'Neil, Fed. Cas. 10,528; In re 50. See " Because of Absence of Van Auken, Fed. Cas. 16,828. Good Faith" under this section, post. 54. Matter of Kahn (D, C, N. Y.), 51. In re Levy (D. C, Pa.), 6 Am. 9 Am. B. E. 107, 121 Fed. 412. B. R. 299, 110 Fed. 744. 55. In re Messengill (D. C, N. 52. See Bankr. Act, § 56-a. Car.), 7 Am. B. R. 669, 113 Fed! 366. 236 The Law and Practice in Bankeupcty. Deposit of Consideration. [§ 12-a. when but few creditors have proved and then present his terms only to creditors friendly to his interests. Indeed, it has been thought that the phrasing of Form 'No. 60 implies that a court of bank- ruptcy should notify creditors of a meeting at which it is proposed to offer a composition ; and such a practice in cases where but a small number of creditors or creditors apparently controlled by the bankrupt have proven, should usually be followed.*® e. Deposit of consideration. — (1) In general. — Not only must there be a requisite acceptance, but the consideration of the composition must have been deposited in such place as shall be designated by and subject to the order of the judge. That this has been done will, if the acceptance is filed in the first instance with the referee, usually be shown by a certificate from the clerk. Whatever the nature of the consideration, it should in value be suhsitantially as much as the property can reasonably be expected to yield to the creditors.^ ^ (2) Nature and amount of consideeation. — Under the for- mer law, where money was required to be deposited, it was fre- quently held that notes or other evidences of indebtedness could be deposited in lieu of money."* Whether this can be done under the present law was doubted by a previous editor of this work.'* However, the setting-off of the word " consideration," as applied to common creditors, against the word " money," as applied to priority creditors, is significant; and the word "paid" but little affects the result. It isi not doubted, therefore, that any consider- ation which would have been sufficient under the former law will be under this.®* Such a conchision is also in line with the ten-. dency to permit compositions that are in effect but extensions of 56. Compare In re Rider (T). C, N. view of this and kindred branches of Y.), 3 Am. B. R. 178, 96 Fed. 808, the law of compositions in the ooinion with In re Hilborn (D. C, N. Y.), 4 of Mr. Referee Judson, in In re Rider, Am. B. R. 741, 104 Fed. 866. 1 N. B. N. 483. 57. It was, however, held under the Deposit of money. — In the case former law that, since assets in the of In re Frear (D. C, N. Y.), hands of the failing debtor were worth 10 Am. B. R. 199, 120 Fed. more than in the hands of assignees, 978, Judge Ray (N. D., N. Y.), the existence of a reasonable margin refused to confirm a composition which could be saved by the debtor where promises to pay money or through composition proceedings was merchandise at a future day had been immaterial. In re Weber Furniture substituted for money. Co., Fed. Cas. 17,330 and 17,331; In 60. See, also, Bankr. Act, § 14-c, re Whipple, Fed. Cas. 17,513. which exempts from the eflfect of the 58. In re Reiman. Fed. Cas. 11,673 discharge, following the confirmation and 11,675; In re McNab, Fed. Cas. of a composition "those agreed to be 8,906; In re Hurst, Fed. Cas. 6,925. paid' by the terms of the composi- 59. Compare, however, careful re- tion." Compositions, when Confiemed. 237 § 12-a.] Deposit of Cash or Assets. time, so well recognied already in the laws of the continental na- tions. The amount deposited must be enough to pay all creditors the stipulated percentage.®^ Secured claims, not liquidated, should not be considered in determining the amount."* While the sec- tion makes no reference to taxes, it seems reasonable to require the deposit of a sum sufficient to pay taxes, which by § 64 are made preferred claims.** (3) When deposit in cash is necessary. — Clearly, sufficient cash " to pay all debts which have priority and the cost of the proceedings " must be deposited.** This was not so under the former law, if there were no appreciable assets.*^ There can be no doubt, however, that in all cases now this cash deposit must be made. How the " cost of the proceeding " is to be ascertained in advance is a bit puzzling. It includes the referee's, and, since the amendatory act of 1903, the trustee's commission, and the allow- ances to the attorneys for the bankrupt at least, and may include receivers' and appraisers' fees, and allowances to the attorneys for petitioning creditors. The only safe practice vrould seem to be to deposit such a sum as will be certainly larger than the total of all possible expenses, allowances, and fees.** (4) Deposit of assets of estate. — This question does not sfem to have been authoritatively decided under the former law.*^ Under the present law, title will have passed from the bankrupt 61. In re Fox (Eef., Ohio), 6 Am. amounts and the method of their pay- B. R. 525; In re Harvey (D. C, Pa.), ment. If there be an attorney's fee 16 Am. B. R. 345, 144 Fed. 901. not waived, the attorney should agree 62. In re Harvey (D. C, Pa.), 16 with the parties on the amount, or if Am. B. R. 345, 144 Fed. 901. disagreed, application should be made 63. In re Flynn (D. C, Mass.), 13 to the court to fix the fee, and so of Am. B. R. 720, 134 Fed. 145; In re the receiver or the trustee; and with Fisher & Co. (D. C, N. Y.), 14 Am. every item not distinctly fixed by the B. R. 366, 135 Fed. 223. statutes or rules of practice, this 64. In re Fisher & Co. (D. C, N. should be done, as a preliminary of J.), 14 Am. B. R. 366, 135 Fed. 223; the composition agreement and as a In re Fox (Ref., Ohio), 6 Am. B. E. part of it. When the amounts are 525; In re Harvey (D. C, Pa.), 16 ascertained, the parties should agree Am. B. R. 345, 144 Fed. 901. whether the costs come out of the 65. In re Chamberlain, Fed. Cas. deposit for creditors, or whether the 2,580. bankrupt provides an additional sum 66. Costs of proceedings. — ^In to meet costs." the case of In re Harris (D. C, As to amonnt of counsel's fee, Tenn.), 9 Am. B. R. 20, 117 Fed. 575, see In re Dalton (D. C, No. Car.), 14 the court said: "Composition is Am. B. R. 617, 137 Fed. 178. wholly a matter of arrangement by 67. Boese v. Locke, 53 How. Pr. the bankrupt and his creditors, and (N. Y.) 148, and Goodrich v. Lincoln, the negotiations should always com- 93 111. 359, have been deemed some- prehend a disposition of all the costs, what in point, with u. definite understanding of 238 The Law and Peactice in Bankeupctt. Practice Before Confirmation. [§ 12-b. ere lie can offer composition ; it may even have vested in a trustee. Thus, where there has been a sale of perishable property by an assignee, which is ratified by the trustee and the avails turned over to him. The difficulty is, however, more theoretical than existent, for the offer of composition could provide for notes payable on a day certain, and on that day, the composition having been mean- while confirmed, the court could order the notes surrendered to the bankrupt in exchange for cash in the hands of the trustee, and that the latter be disbursed in place of notes. Section 12-e has been thought an insuperable obstacle to this practice; but, it is sug- gested that a court of bankruptcy will not dismiss the proceeding until its work is done, and that, therefore, the express provisions of the former law, requiring the enforcement of the composition by the court, by implication at least, still survive.®* The opposite view would, in the nature of things, make compositions impossible, save through a loan on the security of property to which the bank- rupt has not title. In effect, it would render a beneficent and wise system of arrangement between the debtor and his creditors but an exasperating illusion. It can safely be asserted, then, that, even under the present law, the assets of the bankrupt, even after the same are vested in the trustee, can be used by him, if not by direct deposit, at least by indirection, to accomplish a composi- tion.«9 f. Practice before confirmation. — (1) In geneeal. — Much that has gone before indicates the steps in composition proceedings up to the application for confirmation. (2) " Examined." — This does not necessarily mean that the examination of the bankrupt must be completed, but that there must have been a sufficient examination. If creditors so desire, the judge or referee will, in proper cases, adjourn the meeting to per- mit an extended examination, before allowing the offer to be made. If there is no meeting pending, and there has been no previous ex- amination, one must be called for the purpose of examination, and the regular procedure to that end must be observed.''" (2) Ascertaining whethee a majoeity has consented. — This seems to be the duty of the referee, where the case has been referred. Only those creditors may accept a composition who oould vote for trustee. This excludes, besides' priority creditors 68. See In re Fox (Ref., Ohio), 6 In re Frear (D. C, N. T.), 10 Am. Am. B. R. 525. B. R. 199, 120 Fed. 978. 69. But see, as tending to disap- 70. For instance, notice must be prove of the statement in the text, given, see Bankr. Act, § 68-a(l). Compositions, When Confirmed. 239 § 12-b.] Objections to Confirmation. and secured creditors to the amount of their securities/* preferred creditors also, for the reason that their claims, if presented, will not be allowed unless accompanied by a surrender.'^ (3) Eepoeting to the judge. — Only the judge has power to confirm a composition.'^ If the offer and acceptance are made after reference, the referee will arrest the proceedings and report the pro- posed composition to the judge. This may be done by handing up a a transcript of his record-book, showing ( 1 ) the filing of the debtor's schedules, (2) his examination, (3) his oifer, (4) its acceptance by the required majority in number and amount of claims allowed, and (5) the consideration to be deposited, and (6) a list of creditors and their addresses, the referee meanwhile, however, keeping the meeting of creditors alive by repeated continuances, so as to permit a prompt resumption of administration in case the proposed composition is not confirmed. If it is, the referee has no other duty, save subsequently, to report the case closed. The proper practice is detailed in the " Supplementary Forms," post. V. CONFIRMING OR REJECTING COMPOSITION. a. Objections to confirmation. — (1) In general. — The ob- jection that the composition is not offered in accordance with the law (as where it is asserted that a majority in number and amount has not consented), which was a statutory objection under the former law, should probably now be taken specially; and, in thai; event oppor- tunity to correct the error will probably be given. It seems that the only grounds which can be alleged in the formal written objections are those stated in subsection d.''^ The burden is, of course, on the objector." There must be a positive showing to rebut the presumption that the action of the majority is for the interest of all.''' The court is only concerned with the bankrupt estate ; it has nothing to do with that part of the agreement which provides for raising funds which do not come out of the estate.''"^ (2) Because against the best interests of the creditors. — This was an objection under the former law and useful prece- dents will be found in the reported cases. The English rule seems to be that, unless fraud is shown, the decision of the creditors will be final.'' That this is not the rule in this country is emphasized by the 71. See p. 235, ante. And com- (C. C. A., 5th Cir.), 5 Am. B. R. 736, pare In re Scott, Fed. Cas. 12,519. 107 Fed. 236. 72. Bankr. Act, §§ 57-g and 60-b. 76. In re Weber Furniture Co., 73. Matter of Sonnabend (Ref., Fed. Cas. 17,330 and 17,331; In re Mass.), 18 Am. B. R. 117; In re Greenbaum, Fed. Cas. 5,769. Bloodworth-Stembridge Co. (D. C, 76a. In re Linderman (D. C., Ga.), 24 Am. B. R. 156. Pa.), 22 Am. B. R. 131, 166 Fed. 593! 74. In re Rudwiek (D. C, Mass.), 77. Adler v. Jones (C. C. A., 6th 2 Am. B. R. 114, 93 Fed. 787. Cir.), 6 Am. B. R. 245, 109 Fed. 967. 75. City Nat. Bank t. Doolittle See Eod parte Jewett, Fed. Cas. 7,303; In re Morris, Fed. Cas. 9,824. 240 The Law and Peactice in Bankruptcy. Objections to Confirmation. [§ 12-b. requirement of the present statute that the judge must be " satisfied." The point usually made is that the offer is less than would be realized on a sale of the assets in bankruptcy. It is the duty of the court to investigate the facts, independently of any agreement or composition the creditors may have made.''^^- While this is true, the fact that a majority of the creditors have consented to the composition is prima facie evidence that it is for the best interests of all,^* yet any gross discrepancy between the offer and the amount to be reasonably ex- pected from the sale of the assets will justify a refusal to confirm,'^* but not a slight difference.*"- A bona fide offer of a larger sum for the assets than the bankrupt, through the composition, is willing to pay, would seem sufficient to warrant a rejection of the composition. That part of a composition agreement which provides for a provisional order of adjudication will not be approved.*"* In the nature of things, each case must turn on its own facts. (3) Because of commission of acts or failuee to perform DUTIES which would BAR A DISCHARGE. — This objection was not available under the former law. But since the confirmation of a composition discharges the bankrupt,*^ it is reasonable that the same grounds which prevent a discharge on a direct petition should also prevent a discharge on an application for confirmation of a composition.*^ If he has concealed or destroyed books of accounts and records with the fraudulent intent of concealing his true financial condition, confirmation should be refused even though the creditors may lose by the defeat of the proposed composition.** The intention clearly is to prevent one who cannot get a discharge from securing its equivalent through a composition. For available objections to a discharge, see under sections fourteen and twenty- nine of this work.** In New York a failure to carry out to the letter a composition agreement revives the original debts.*" If a bankrupt has committed an offense available as an objection to his discharge the court will refuse to confirm the proposed composition 77a. In re Levy (D. C, Mass.), 80a. In re Llnderman (D. C, 22 Am. b. R. 769, 172 Fed. 780. Pa.), 22 Am. B. E. 131, 166 Fed. 78. In re Waynesboro Drug Co. 593. (D. C, Ga.), 19 Am. B. E. 487, 157 81. Bankr. Act, § 14c. Fed. 101. 82. In re Comstoek (D. C, R. I.), 79. In re Whipple, Fed. Cas. 17,- 19 Am. B. E. 65, 154 Fed. 747. 513; Ex parte Williams, 10 L. R., 83. In re Olman (D. C, Ohio), 13 Eq. C. 55; In re Waynesboro Drug Am. B. R. 398„ 134 Fed. 681- In re Co. (D. C, Ga.), 19 Am. B. R. 487, Godwin (D. C, Penn.), 10 Am. B. R. 157 Fed. 101. 252, 122 Fed. 111. 80. Thus in In re Arrington Co. 84, In re Wilson (D. C, Pa.), 5 (D. C, Va.), 8 Am. B. R. 64, 113 Am. B. R. 849, 107 Fed. 83. Fed. 498, and in In re Criterion 85. In re A. B. Carton & Co (D Watch, etc., Co. (Ref., N. Y.), 8 Am. C, N. Y.), 17 Am. B. R. 343, 148 B. R. 206. See also cases under law Fed. 63. of 18C7, ante. Compositions, when Confiemed. 241 § 12-d.] Absence of Good Faith; Effect of Fraud. without regard to the interests of the creditors, and the fact that but one creditor objects is of no importance,^® as where it appears that the bankrupt has failed to keep books from which his true financial condition might be ascertained.®^ The new objections to discharges*® will make this subsection more valuable. It is thought that the provision that a petition for a discharge cannot be filed after a year subsequemt to the adjudication does not apply to compositions. A composition has primarily to do with adminis- tration, and that may, from one cause or another, be delayed for years. (4) Because of absence of good faith, — ^Where the entire course of conduct of a bankrupt is consistent only with an intent to keep his creditors and his trustee in ignorance, and to defraud them by a concealment of hie assets, the court cannot confirm a composition.®' Fraud is sufficient to warrant a refusal to con- firm,®" but it must be fraud connected with the offer or acceptance of the composition. Cases cited under the succeeding section will also be found in point Fraud on the part of a single creditor is enfficent,*^ as where a creditor proves a false claim.'^ The giving of money to induce a creditor to sign vitiates the composition,*' and, if it is extorted by the creditor, is a crime also.** Any secret advantage given one creditor over his fellows accomplishes the same result.*' Purchasing claims for the purpose of using them to accomplish a composition is not necessarily fraudulent, but will be so held unless an honest motive appears.*® Improperly inducing a creditor to withdraw has the same effect as improperly persuad- ing him to join in the composition. The good faith of both debtor and creditors must be of the highest order. b. Effect of fraud on a composition already confirmed. Not 86. In re Godwin (D. C, Pa.), 10 interests of the creditors would be ad- Am. B. R. 252, 122 Fed. 111. vanced by a refusal to confirm. In re 87. In re Olman (D. C, Ohio), 13 Seligman (D. C, N. Y.), 20 Am. B. Am. B. R. 395, 134 Fed. 681. R. 774, 163 Fed. 549. 88. Bankr. Act, § 14-b(3) (4) (5) 90. Bankr. Act, § 13. (6). 91. In re Sawyer, Fed. Gas. 12,- 89. In re Comstoek (D. C., R. I.), 395; In re Whiting, Fed. Gas. 17,580. 19 Am. B. R. 65, 154 Fed. 747. 92. Compare Bankr. Act, § 29-b(3). 89. False statement. — Where a 93. In re Sawyer, Fed. Gas. 12,395. statement of assets made by a bank- 94. Bankr. Act, § 29-b{5). rupt a year prior to his adjudication 95. In re Jacobs, Fed. Gas. 7,159- is not shown to have been materially Bean v. Amsinck, Fed. Gas. 1 167 on false, and to have been made to obtain appeal, s. c. Bean v. Amsinck 10 credit, a composition consented to by Blatchf. 361 ; Bean v. Brookmire all the creditors, except the objecting Fed. Gas. 1,170. creditor who had once consented, will 96. In re Sawyer, Fed. Gas. 12 395 be approi'Pfl, it not appearing that the 16 242 The Law and Peactice in Bankeuptcy. Distribution oq Composition. [§ 12-2. only may the composition be objected to, but, if obtained by fraud, it is void and unenforceable, and the consideration may be recovered.'^ It would seem, however — a certified copy of the order confirming a composition being evidence of the jurisdiction of the court, the regularity of the proceedings and the fact that the order was made,*' — that a composition if attacked for fraud must be so attacked in a court of bankruptcy. c. Practice. — The practice, from the time the referee's report reaches the judge is identical with that on contested applications for discharge,"' except, perhaps, as modified by subsection c "parties in interest" is a broader term than "creditors." The same phrase is used in § 14-b. It is difiBcult to suppose a ease when it will include others than those persons who have proved or may prove their claims. Ordinarily, after the time to enter appearances has expired, and there are none and no objections, there is a reference in any event to the referee in charge, as special master,"" it being the duty of the court to satisfy itself affirmatively as to the three facts set out in subsection d'^""^; in this the practice differs from that on discharges. When objections are filed, there must be a hearing, and the same reference to a special master is customary. The date and place fixed for the hear- ing must be convenient, but the former is usually set after conference with the respective attorneys. The court may allow costs in its dis- cretion. A bankrupt after composition, including payment of all costs, has been confirmed, must pay his attorney in the matter."^ VI. DISTRIBUTION IN COMPOSITION. a. In general. — Subsection e provides that "upon the con- firmation of a composition, the consideration shall be distributed as the judge shall direct, and the case dismissed." It will be noticed that the judge is to direct as to the manner of distribution,"^ and the referee has no jurisdiction unless delegated to him by the judge.'"' b. Practice. — The law is silent as to practice on distribution. The consideration has been deposited "in such place as shall be designated by the judge.""* It can only be distributed "by check or warrant, signed by the clerk of the court, or by a 97. Bean v. Amsinck, Fed. Cas. 101. In re Martin (DC N 1,167. See, also § 13 of this work. Y.), 18 Am. B. R. 250, 152 Fed' 582' 98. Bankr. Act, § 21-f. 102. In re Lane (D. C, Mass.), 99. See under § 14 of this work. 11 Am. B. R. 137, 125 Fed 772 i*^- Note General Orders XII(3) 103. In re Fox (Ref., Ohio), 6 and XXXII and § 38-a(4). Am. B. R. 526. lOOa. In re Levy (D. C, Mass.), 104,. Bankr. Act, § 12-b. 22 Am. B. R. 769, 172 Fed. 780. . 8 ^^ "• Compositions, when Confibmed. 243 § 12-e.] Distribution on Composition; Dismissal. trustee, and countersigned by the judge of the court, or by a ref- eree designated for that purpose, or by the clerk or his assistant under an order made by the judge."^"' But the distribution may be made " as the judge shall direct." Form No. 63 seems to imply that it shall be made by the derk, and this practice| ampli- fied by district rules, has been generally adopted. At the same time, a convenient method is to make the referee in charge a dis- tributing agent to the extent of performing the clerical work required j^"* the checks, however, to be signed by the clerk. Other- wise, the referee should furnish the derk with a list of claims allowed, specifying the names, amounts, addresses, and the like.'"^ As to the proof of claims the course of proceeding is the same whether there be composition, or the proceedings are carried through in ordinary course. Claims not proved within one year from the date of adjudication are not to share in the composition funds,*"* and the bankrupt may be heard to object to the allowance in composition of a claim offered for proof after the expiration of such year.^°* The judge having ample power to pass on claims, proofs filed after a composition has been accepted should be for- warded to the clerk. It seems that none of the officers named in the act can collect additional fees for making the distribution, their fees being limited by both i* and the general orders. Now that the trustee may receive an allowance in composition cases,*'" such oflBcer, if appointed, may properly be called upon to distribute the consideration. c. Dismissal of the case. — Not until the distribution is com- pleted, should the case be dismissed. If scheduled debts remain unproved or claimants cannot be found, the case proceeds to final distribution as in cases of unclaimed dividends.*** But not until the consideration is entirely distributed by a transfer of the re- maining funds into a new fund for distribution as unclaimed divi- dends, will the case be dismissed. A formal order to this effect should be entered, and the referee notified, that he may file the case as closed. It is not thought that the requirement of § 58-a(8) 105. General Order XXIX. Am. B. R. 588, 123 Fed. 336, see 106. Compare In re Hamlin, Fed. Bankr. Act, § 57, cl. n., post. Gas. 5,994. 109. In re Lane (D. C. Mass.), 11 107. Perhaps this is his duty un- Am. B. R. 136, 125 Fed. 772. der General Order XXIV, though that llO. See Bankr. Act, § 48-a, as rule being merely an inheritance from amended by the Act of 1903. the rules in force under the former 111. See Bankr. Act, § 66. Com- law, it is quite generally ignored. pare In re Hinsdale, Fed. Cas. 6,526. 108. In re Brown (D. C, Col.), 10 244 The Law and Practice in Bankeupcty. Appeal from Order. [§ 12. makes a notice tx> creditors of a proposed dismissal of this kind necessary. VII. AFPEAI.S. Whether there may be an appeal from the order of a judge con- firming or refusing to confirm a composition has already been somewhat debated. The word " satisfied " suggests a discretion from which no appeal will lie ; the words of § 25-a emphasize this impression. That an appeal will not lie has been held/^^ though that ruling was reversed by the circuit court of appeals of the sixth circuit.^^^ The latter decision has already been departed from in the first circuit;^** indeed, it may be suggested that it loses sight of the fundamental difference between a discharge^ '^ and a com- position, which, strictly, is a branch of administration, and, for convenience only, has the effect of a discharge. Even if confirma- tion is refused, -the bankrupt is not aggrieved, for his rights w^re exercised when he made the offer, and he may still apply for a discharge in the bankruptcy proceeding. He, at least, should not be heard on the appeal. If he cannot, creditors surely cannot, as not within the words or intendment of § 25-a. The question is, how- ever, still an open one. It has been held that the creditors assent- ing to a composition, and who have received the amount due them thereunder, are necessary parties to an appeal from the order of confirmati on. -^ ^ * 112. In re Adier (D. C, Tenn.), 115. A discharge proper may be 4 Am. B. R. 583, 103 Fed. 444. appealed from. See Bankr. Act, § 113. U. S. V. Adler (D. C, Tenn.), 25-a (2). 4 Am. B. R. 736, 104 Fed. 862. See, 116. Field & Co. v. Wolf & Bro. also, Adler v. Jones (C. C. A., 6th Dry Goods Co. (C. C. A., 8th Cir.), dr.), 6 Am. B. R. 245, 109 Fed. 967. 9 Am. B. R. 693, 120 Fed. 815, 57 C. 114. Ross V. Saunders (C. C. A., C. A. 326. 1st Cir.), 5 Am. B. R. 350, 105 Fed. 915. SECTION THIRTEEN. COMPOSITIONS, WHEN SET ASIDE. § 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. Analogous proTiiioBB: In V. S.: K. S., § 5103-A (Act of June 22, 1874). In Eng.i Act of 1890, § 3(15) . Cross references: To the law: §§ 2(9), 12, 15, 21-f, 44, 64-c, 70-d. To the General Orders: None. To the Forms: None. SYNOPSIS OF SECTION". COMPOSITIONS, AVHEN SET ASIDE. I. When composition will be set aside. a. In general. b. What constitutes fraud. II. Practice on application to set aside composition. a. Who may mahe application. b. To whom and when made. c. Petition; practice as on discharge. d. Notice to creditors. 0. Trial. f. Impeaching order setting aside. III. Effect of setting aside. I. WHEN COMPOSITION WII.I. BE SET ASIDE. a. In general. — The striking similarity between this section and § 16 should be noted at the outset.^ The marked difference between it and the corresponding clauses of the former law will 1. For what degree and kind of set aside a discharge or a composi- fraud will sustain a proceeding to tion, see under §§ 15 and 13. 245 246 The Law and Peacticb in Bankruptcy. "What Constitutes Fraud. [§ 13. also be observed.'' Then, a composition could be set aside, if it ap- peared that, in consequence of legal difficulties, or for any sufficient cause, it could not proceed without injustice or undue delay. This, with the added objection that " the approval of the court was obtained by fraud," is the law in England to-day.* This added objection stands alone in our present law. Those available under the law of 1867 have been discarded. Most of the cases under that law are thus of little value.* b. What constitutes fraud. — Fraud as a reason for refusing to confirm a composition has been discussed under section twelve, anteJ^ Such fraud as would warrant the refusal of confirmation to a composi- tion will warrant its setting aside, with this difference ; the fraud must have been discovered since the confirmation of the composition.* It must, of course, have been practiced in the procuring of the com- position. In this respect § 13 is clearly a limitation on § 3 (9) .'' Only when a fraud, as thus restricted, appears and is proven, can the jurisdiction to set aside a composition and reinstate the case be exer- cised.' The court may annul the composition where it appears that the fraud was that of the trustee and the bankrupt in inducing credi- tors to accept it by misrepresentation and concealment.* The making of a false schedule, and a false oath to a schedule, and the conceal- ment of property by fee bankrupt constitute fraud " practiced in the procuring of such composition." ^^ It is fraud sufficient to justify the setting aside of a composition, to assure a creditor that his claim will be included, while it was the purpose of the bankrupt to secure a confirmation of the composition without the con- sideration of such claim. ^"^ In considering an application to set aside a composition the court may determine whether the fraud shown is such that, had the circumstances been known at the time of the confirmation, the composition would have been rejected.^'- A failure 2. Act of 1867, as amended by Act Cas. 11,268; In re Shaw, 9 Fed. 495. of June 22, 1874; U. S. K. S., § Only where there is fraud in 5,103-a, post. the transaction resulting in the com- 3. Eng. Act of Bankruptcy of position will such composition be set 1890, § 3(15). aside. Matter of Cooper Bros. (D. 4. For instance. In re Dupee, Fed. C, N. Y.), 20 Am. B. E. 634; Matter Cas. 4,lo3, has already been declared of Abrams & Rubins (D. C, N. Y.), inapplicable in In re Rudwick (D. C, 23 Am. B. R. 25, 173 Fed. 430. Mass.), 2 Am. B. R. 114, 93 Fed. 787, 9. In re Wrisley Co. (C. C. A., 7th though this ruling may be doubted. Cir.), 13 Am. B. R. 193, 133 Fed. Compare In re Dietz (D. C, N. Y.), 388. 3 Am. B. R. 316, 97 Fed. 563. 10. In re Roukous (D. C, R. I.), 5. See p. 241, ante. See, also, El- 12 Am. B. R. 128, 128 Fed. 645. felt v. Snow, Fed. Cas. 4,342; In re 10a. ^.latter of Abrams & Rubins Sturgea, Fed. Cas. 13,565. (D. C, N. Y.), 23 Am. B. R. 25, 173 6. In re Roukous (D. C, R. I.), Fed. 430. 12 Am. B. R. 128, 128 Fed. 645. 11. Matter of Sacharoflf & Kleiner 7. In re Rudwick (D. C, Mass.), (D. C, N. Y.), 20 Am. B. R. 2 Am. B. R. 114, 93 Fed. 787. 814, 163 Fed. 664, in which 8. Cases under the former law are case it appeared that on a com- Fairbanks v. Amoskeag Bank, 38 position certain creditors received Fed. 630; Pool v. McDonald, Fed. promissory notes in excess of their Compositions, when Set Aside. 247 § 13.] Practice on Application to Set Aside. to fulfil the terms of the composition agreement will not of itself be sufficient basis for setting aside the composition. A bankrupt may by his acts deprive himself of the benefit of a composition ; he may so behave that the composition order ceases to be a shield, but that furnishes no reason why the order should be vacated in any other manner or for any other reason than that specified in the act." n. PRACTICE ON APPUCATION TO SET ASIDE COSCPOSI- TION. a. Who may make application. — The application to set aside a composition must be made by the parties in interest. This will generally be deemed equivalent to the " creditors " of the bank- rupt, although often meaning more.** A creditor who has assigned his claim, although induced to do so by the bankrupt's misrepre- sentations is not a " party in interest."** But the assignee of an original claim against a bankrupt is entitled to object to the con- firmation of a composition on the ground of fraudulent conceal- ment and disposal of assets.*® b. To whom and when made. — The application should be made to the judge, and should be filed within six months after the com- position has been confirmed.*® The judge only has power to hear the application, not, however, because of the limitation on anal- ogous proceedings found in § 38-a(4), but because only "the judge . . . may set . . . aside a composition." A ref- eree to whom a petition to set aside a composition has been referred may grant an order reopening the estate.*^ c. Petition; practice as on discharge. — The petition should show (1) that the petitioner is a party in interest, (2) that the pro rata share, and because of 19 Am. B. R. 65, 154 Fed. 747. inability to pay any of the composi- 16. Matter of Eisenberg (D. C, N. tion notes a second petition in bank- Y.), 16 Am. B. R. 776, 148 Fed. 325, ruptcy had been filed against the in which case the ground of the appli- bankrupt, and the motion of a creditor cant's motion was that the bankrupt who had himself received a preference falsely represented that the proposed was denied, and the notes declared indorsers of composition notes were void. solvent, although they were at the 12. Matter of Eisenberg (D. C, N. time known to be insolvent, and the Y.), 16 Am, B. R. 776, 148 Fed. 325. failure to make the application within 13. But compare In re Scott, Fed. six months after confirmation was Cas. 12,519. held fatal; In re Jersey Island Paek- 14. In re Wrisley & Co. (C. C. A., ing Co. (D. C, Cal.), 18 Am. B. R. 7th Cir.), 13 Am. B. R. 193, 133 Fed. 417, 154 Fed. 839. 388. 17. Matter of Sonnabend (Ref., 16. In re Comstock (D. C, R. I.), Mass.), 18 Am. B. R. 117. 248 The Law and Practice in Bankeupcty. Notice to Creditors,; Trial. [§ 13. composition was confirmed not more than six months before, (3) that fraud was practiced in procuring it and the nature and per- petrators of such fraud, and (4) that such fraud was not dis- covered by the petitioner until after the confirmation of the com- position.^* It is not necessary to allege restoration or offer to restore consideration.^® Leave to file the petition should be granted unless from the facts therein alleged it is clear that the petitioner cannot be afforded the relief asked for.^* In the absence of rules of practice, the procedure followed when application is made to revoke a discharge, perhaps, even the practice on application for a • discharge, may be adopted.^^ d. Notice to creditors. — Notice should be given to all cred- itors,^^ they, and not the bankrupt, being the real parties in in- terest; but not necessarily the notice required by § 58-a. The former law prescribes the practice on notice. It is thought that an order to show cause, similar to that used on an application for discharge, will be sufficient. But the judge can change the form or method of service, and make it returnable when or where he wisheiS'; but, from the analogy of other sections, both time and place should, however, be convenient for the parties in interest. e. Trial. — It has been thought that the word " trial " makes a jury necessary. T^ot only is the proceeding a purely equitable remedy, but, elsewhere in the statute, the same word is used in such ways as to negative, in connection with the clear meaning of § 566 of the Revised Statutes as limited by § 19 of the law, such a view. The hearing required in §§ 12 and 14 is, therefore, no different from the trial made mandatory by §§ 13 and 15. In actual prac- tice, these trials will usually be before the referee sitting as a special master. f. Impeaching the order setting aside. — This cannot be done collaterally. A certified copy is evidence of jurisdiction, regu- larity, and that the order was made.^* III. EFFECT OF SETTING ASIDE. Setting aside the composition revests the title in the tmstee; but, it does more. It takes from the debtor all property acquired 18. See In re Roukous (D. C, R. 20. In re Wrisley Co. (C. C, 7th I.), 12 Am. B. R. 128, 12S Fed. 645. Cir.), 13 Am. B. R. 193, 133 Fed. 388. 19. In re Roukous (D. C. R. I.), 21. See under §§ 14 and 15, post. 12 Am. B. R. 128, 128 Fed. 645. Com- 22. Ex parte Hamlin, Fed. Cas. pare Marshall Field & Co. v. Wolfe 5,994; In re Diggles, Fed. Cas. 3,905; Dry Goods Co. (C. C. A., 8th Cir.), 9 In re Dunn et al., 53 Fed. 341. Am. B. R. 696, 120 Fed. 816. 23. Bankr. Act, § 21-t. Compositions, when Set Aside. 249 § 13.] Effect of Order Setting Aside. since the adjudication and applies it in payment of debts con- tracted while the composition was in force.^* This is the only approximation in our statute to the English doctrine that results in drawing in all property acquired after the receiving order and before the discharge. The rule, too, is eminently just. As to pay- ments made under the composition, it seems that they are not affected.^^ The order setting aside also reinstates the ease, and provision is made elsewhere in the statute for the election of a trustee in such cases.^® A trustee once elected, the ca^e proceeds as though there had been no composition, and every one is re- stored, so far as possible, to the rights and remedies existent at the time the composition was confirmed. 24. See Bankr. Act, § 64-c. I.), 12 Am. B. E. 128, 128 Fed. 645, 25. Ex parte Hamlin, Fed. Cas. citing text. 5,994. See In re Eoukous (D. C, R. 26. See Bankr. Act, § 44. SECTION FOURTEEN. DISCHARGES, WHEN GRANTED. § 14. Discharges, when Granted. — a Any person may, after the expiration of one month and within the next twelve months sub- sequent to being adjudged a bankrupt, file an application for a discharge in the court of bankruptcy in which the proceedings are pending ; if it shall be made to appear to the judge that the bankrupt was unavoidably prevented from filing it within such time, it may be filed within but not after the expiration of the next six months. b The judge shall hear the application for a discharge, and such proofs and pleas as may be made in opposition thereto by the trustees or other * parties in interest at such time as will give the trustee or f parties in interest a reasonable opportunity to be fully heard, and in- restigate 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 con- dition,^ 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 state- ment in writing made by him * to any person or his representative f 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 permitted 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 discharge 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 :t Provided, That a trustee shall not interpose objections to a bankrupt's discharge until he shall be au- thorized 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 affected by a discharge. 1. Here the word " fraudulent " plation of bankruptcy " were stricken was stricken out by the amendatory out by the same. act of 1903. 4. Here the word " such " takes the 2. Here the word " true " was place of the words " his true " in the stricken out by the same. original act. 3. Here the words "and in contem- * Amendments nf 1910 in italics. f Amendment of 1908 added clauses 3 to 6, inclusive. 250 DiSCHAEGES, WHEN GrANTED. 251 § 14.] Synopsis of Section. Analogous provialons: In XT. S.; As to the a.pplication and hearing, Act of 1867, § 29, R. S., §§ 5108 (as amended by Act of July 26, 1876), 5109; Act of 1841, § 4; As to objections to discharge, Act of 1867, §§ 29, 30, 33, R. S., §§ 5110, 5112, 5112-A (added by the Act of June 22, 1874), 5116; Act of 1841, § 4; Act of 1800, §§ 36, 37; As to proofs and pleadings, Act of 1867, 5 21, R. S., § 5111; Act of 1841, § 4; As to oaths and verification. Act of 1867, § 29, R. S., § 5113; As to pro- ceedings, certificate of discharge and second applications, Act of 1867, i§ 30, 32, R. S., §§ 5114, 5115, 5116; Act of 1841, § 12; Act of 1800, § 57. In Thig.; As to application, hearing, objections, and procedure, Act of 1890, § 8(l)-(8). Crou references: To the law: §§ 2(12), 3-a(l), 7-a(g), 11-a, 12, 15, 17, 29-b, 38-a(4), 63-a, 70-a-d. To tbe General Orders: XII (3), XXXI, XXXII. To tbe Forms: Nos. 57, 58, 59. SYNOPSIS OF SECTION. DISCHARGES, WHEN GRANTED. I. History and Comparative Legislation. a. Discharge under Roman and continental systems. b. Discharge under English system. c. Origin of the discharge. d. Discharge in the United States. II. Discharge Under Present Law. a. Definition. b. Discharge under original and amended act. c. Constitutionality of restrictions. d. Jurisdiction. e. Law governing proceedings. III. Application for Discharge. a. Who may apply. b. Time of making application, c. To whom made. d. Petition for discharge. (1) In oeneeal. (2) Veeification of petition. (3) Wheee filed. (4) Amendments. e. Notice to creditors and trustee. IV. Hearing on Application for Discharge. a. Appearances. h. Specifications of objections. (1) In general. (2) Who may file specifications. 252 The Law and Pkactice in Bankeupcty. 5 140 Synopsis of Section. (3) Form and coni'ents Of specifications. (4) Amendment of specifications. (5) Waivee of defects. (6) Exceptions to specifications. c. Creditor proceeding under specifications of another creditor. d. Verification of specifications. e. Reference to special master. f. Proceedings on hearing. (1) In geneeal. (2) Rules of evidence; peoof EEQurEED. (3) Minutes and eepoet. V. Grounds of Opposition to Discharge. a. In general. b. Offence of larceny. e. Under the original law, and under the law as amended. VI. Commission of Offense Punishable by Imprisonment. a. In general. b. Concealment of property. (1) "^^hat constitutes. (2) Evidence of concealment of assets. (3) Continuing concealment. (4) Miscellaneous cases. c. A false oath in the proceeding. (1) In general. (2) FOEMEE examination (3) Instances of false oath. VII. Failure to Keep, Destruction or Concealment of Books. a. In general. b. Act committed after passage of law. c. Act by bankrupt. d. Intent to conceal financial condition. e. What constitutes failure, destruction or concealment. f. Burden of proof. VIII. False Statement of Credit. a. In general. b. Elements of proof; pleading. c. Meaning of the clause. (1) In genee-vl. (2) Obtaining property on ceedit. (3) a statement of financial condition. (4) In writing. DiSCHAKGES, WHEN GkANTED. 253 § 14.] History and Comparative Legislation. (5) Materially false. (6) Foe the puepose of OBTAiiiriNG such pbop- ertt feom the oeeditoe. (7) By the bankeupt, IX. Fraudulent Transfer. a. In general. b. Elements of proof. c. Are general assignments objections to discharges? X. Previous Discharge in a Voluntary Bankruptcy Within Six Years. a. In general. b. Effect and application. e. Measure of time. XI. Refusal to Obey a Lawful Order, or to Answer a Material Question Approved by the Court. a. In general. h. Refusal to obey. c. Refusal to answer. XII. The Discharge. a. In general. b. Costs. c. Vacating discharge. XIII. Effect of Discharge. a. In general. b. On liens. c. Discharge must be pleaded. XIV. Effect of Composition. I. HISTORY AND COMPARATIVE LEGISLATION. a. Discharges under Roman and continental systems. — Re- publican Rome punished the bankrupt with slavery, and, it is said, in some cases, even permitted the creditors to pro-rate the debtor's body, as well as his estate; Rome under the emperors, however, granted a discharge to the honest insolvent. The savagery of the early Latins, though much softened, still survives in the continental bankruptcy systenjs of to-day. Thus, in France, not only must a bankrupt in effect pay his debts in full, but there are three classes of bankrupts: (1) those whose condition is due to misfortune, and who are, therefore, not liable to imprisonment; (2) those who have been guilty of misconduct not tantamount to an actual fraud, who 254 The Law and Peactice in Bankkupcty. Origin and Nature of Discharge. [§ 14. may be imprisoned from one month to two years; and (3) those whose bankruptcy is fraudulent, who may be sentenced to penal servitude for not less than five nor more than twenty years. These restraints on the liberty of the dishonest trader are characteristic of all European laws. They are a survival of the time when inability to pay a debt was a crime. b. Discharges under English system. — England stands about midway between the above referred to systems and our own. Fraudulent bankruptcy is a crime/ but, except as against certain well-defined statutory objections, a discharge may generally be obtained whatever be the rate per cent, paid,^ c. Origin and nature of the discharge — ^We have grown to look upon the discharge feature as the primal element of bankruptcy jurisprudence. Being too easily obtained, it has resulted in abuse, and, therefore, reprobation. The fact is, however, that the dis- charge feature was not grafted on our Anglo-Saxon bankruptcy system until the fourth year of Anne, two hundred and fifty years after England's first bankruptcy law, and that, in its inception, it was a device to keep bankrupts in England.^ Strictly speaking, it is no more a part of a bankruptcy law — which concerns itself with the equitable division of a debtor's assets — than are those 1. See English Debtors Act of 1869, debt without at the time having rea- Part II. sonable ground or expecation of abil- 2. English law as to discharge, ity to pay it, or (5) the failure to — Since the Bankruptcy Act of account satisfactorily for deficiency in 1890 in England, the court has, on assets, or (6) that the bankruptcy proof of certain facts like our objee- was brought on by rash speculation tions to a discharge, four options, (1) extravagance in living, gambling or to refuse the discharge absolutely, culpable neglect of business, or (7) (2) to suspend it for not less than his interposing any frivolous or vexa- two years, (3) to suspend it until a tious defense to any action properly dividend of not less than 50 per cent, brought, or (8) within three months has been paid, or (4) to require the incurred unjustifiable expense in so bankrupt to permit entry of judgment doing, or (9) while insolvent and for the balance unpaid, execution, within three months gives an undue however, not to issue thereon without preference, or (10) within three leave of court. Act of 1890, § 8(2). months incurred liabilities for the The facts, or objections to discharge purpose of making his assets equal as we would call them, are (1) that, to ten shillings in the pound, or (11) save in eases of misfortune not had a previous bankruptcy, ' composl- amounting to misconduct, the assets tion or arrangement with creditors or do not amount to ten shillings in the (12) been guilty of fraud or frau'du- pound, or (2) the bankrupt's omission lent breach of trust. Act of 1890 55 to keep proper books of account with- 8 (3) (a) (b) (c) (d) (e) (f) le] in three years, or (3) continuance in (h) (i) (j) (k) (i)_ ^ trade after knowing himself to be in- 3. See 4 Anne, chap. 17 solvent, or (4) the contracting of a DiSCHAEGES, WHEN GeANTED. 255 § 14.] Discharges in tlie United States. sections which define bankruptcy crimes. It is unfortunate that our legislators and jurists have so long overlooked its origin. Else we would not to-day, from this point of view, seem a people given to financial jubilees.* The fundamental and original element of every system of bank- ruptcy has been to provide for and regulate the distribution of the bankrupt's property equally among his creditors; latterly a second element was added in the provisions for discharge upon such terms and conditions as the act may provide." d. Discharges in the United States. — Each of our laws, save that of 1800, was the result of agitation in the interest of the hope- less insolvents of well-known periods of financial depression. Our first law required the consent of two-thirds in number and value of the creditors, and a discharge might be withheld for concealment of assets, fraud, losses in gambling, and the like.* Available objections under the law of 1841, among others of less importance, were fraud, conceal- ment of assets, preference of creditors, wilful omission or refusal to obey orders of the court, misappropriation of trust funds, or, if a merchant, failure to keep books of account; nor could a discharge be granted — subject however, to a judicial inquiry as to its justness — where a majority in number and value of creditors filed a written dissent.'' The law of 1867, modeled in this feature after the then Eng- lish law, went further and denied a discharge to him who had wilfully sworn falsely in the proceeding, or concealed assets, or been guilty of fraud or negligence as to his property, or destroyed or falsified his books, or secreted his assets with intent to defraud, or given a fraudu- lent preference, or made a fraudulent transfer, or lost property in gaming, or admitted or failed to disclose a fictitious debt, or if a mer- chant, had not kept proper books, or procured the assent of a creditor by a pecuniary consideration, or in contemplation of bankruptcy made a preference, or been convicted of a crime under the act, or been guilty of any fraud contrary to the true intent of the law.* After the first year, and until 1874, the debtor was obliged to pay fifty cents on the dollar, unless he had the consent of a majority in 4. Compare the Hebrew Jubilee In fortunate and Insolvent debtor Leviticus, Chap. XXV. from the burden of his debts and his 5. In re Neeley (Ref., N. Y.), 12 restoration to business activity in Am. B. R. 407; In re Gutwillig (D. the interest of his family and the C, N. Y.), 1 Am. B. R. 78, 90 Fed. general public, are the main, if not 475; In re Salmon (D. C, Mo.), 16 the most Important objects of the Am. B. R. 122, 134, 143 Fed. 395; In Bankruptcy Act, Hardie v. Swaf- re Hall Co. (D. C, Conn.), 10 Am. ford Bros. Dry Goods Co. (C. C. A., B. R. 88, 95, 121 Fed. 992; In re 5th Cir.), 21 Am. B. R. 457, 165 Fed. Curtis (D. C, 111.), 1 Am. B. R. 440, 588. 91 Fed. 737; In re Marshall Paper 6. Act of 1800, §§ 36, 37. Co. (C. C. A., 1st Cir.), 4 Am. B. R. 7. Act of 1841, § 4. 468, 102 Fed. 872. 8. Act of 1867, § 29, R. S., § 5,110. Tbe release of tbe bonest, nm- 256 The Law and Practice in Bankeupcty. Discharge Under Original and Amended Act. [§ 14. number and value of creditors to take a less sum f a restriction which, after 1874, was abolished in involuntary oases, and modi- fied in voluntary cases to a required dividend of thirty per cent., save with the assent of one-fourth of the creditors in number and one^:hird in amount.'" Nor, save by consent of creditors, was a bankrupt granted a second discharge, short of paying seventy cents on the dollar to all creditors.^' There were undoubtedly frauds on creditors, followed by discharges, under that law, but, if so, it was not the fault of the law-making power. n. DISCHARGES UNDER PRESENT LAW. a. Definition. — Under our present act a discharge is defined as " the release of a bankrupt from all of his debts which are provable in bankruptcy, except such as are excepted by this act."'^ b. Discharges under original and amended act. — It is conceded that the act of 1898 was woefully weak in its discharge features. The bill as introduced was not,'' but, in the compromises that accompanied its passage, nearly all the objections to discharges, not amounting to bankruptcy crimes, disappeared. As the law was passed, a discharge could be refused only on a showing of (1) concealment of assets, (2) false swearing in the progress of the proceeding, and (3) destruction of, concealment of, or failure to keep, books of account, accompanied by fraudulent intent to con- ceal financial condition and a purpose of going into bankruptcy. Even these meager bars on dishonesty have been necessarily cut through by judicial constructions; and the country has witnessed the spectacle of a commercial jail delivery. This condition was subsequently met by the amendatory act of 1903, which added four new objections to a discharge, discussed in detail later. c. Constitutionality of restrictions. — Congress may prescribe any regulations concerning discharges in bankruptcy that are not so unreasonable as to be incompatible with fundamental laws, and there is nothing in the act relative to discharges which renders it unconstitutional." 9. Act of 1867, § 29, R. S., § 5,112. specified in Bankr. Act, § 17-b, post 10. Act of June 22, 1874, R. S., 13. See Torrey bill, S. 1,035, 55th § 5,112-a. Congress, 1st Session, introduced by 11. Act of 1867, § 30, R. S., § Senator Lindsay, March 22, 1897, § 5,116. 51; also the Henderson bill, § 13 ' p 12. Bankr. Act, § 1(12). U. S. 2,039, Vol. 31, Cong. Record, 55th ex rel. Adler v. Hammond (C. C, 6th Congress, 2d Session Cir.), 4 Am. B. R. 736, 739, 104 Fed. 14. Hnnover Nat.Bank v. Mbyses 862. The debts not dischargeable are 186 U. S. 181, 8 Am. B. R. 1. ' DiSCHAEGES, WHEN GkANTED. 257 § 14-a.] Application for Discbarge. d. Jurisdiction. — The jurisdiction of courts of bankruptcy in respect to discharges is expressly conferred by § 2(12) and is subject to the same restrictions, territoirially and otherwise, as in other matters pertaining to bankruptcy. By subsection a of this section the application is to be filed in the court in which the pro- ceeding is pending. Jurisdiction ie conferred where it appears that the applicant resided within the district for practically all of the six months preceding the filing of the petition in bankruptcy.*" It has been held that a creditor who has participated in all the proceedings without objection cannot raise the question of lack of jurisdiction on the bankrupt's application for a discharge.-'® Unless the application for a discharge is filed within the required time the court is without jurisdiction.^^ e. Law governing proceedings. — The proceedings are to be gov- erned by the law as it existed when the bankrupt filed his petition for adjudication.*^ Statutory provisions regulating the conditions on which bankrupts may be discharged are remedial in their nature with respect to the bankrupts or their creditors, and the strict rules of construction or interpretation appropriate to retro- active or retrospective laws are inapplicable to them. The amend- ment of this section by the act of 190t3 deals solely with a condition precedent to the discharge of a bankrupt in future cases.*® HI. APPLICATION FOR DISCHARGE. a. Who may apply. — Subsection a provides that any person who has been adjudged a bankrupt may file an application for a dis- charge; unless he is within the reS'trictions of § li-b and § 29-b he will be entitled to it.^" The application may be filed even by one refused a discharge in a former proceeding,** but a second petition cannot be filed where a first petition in the same bank- ruptcy was denied on the merits.*^ Application may be filed by a 15. Matter of Harris (Ref., N. J.), Minn.), 10 Am. B. R. 355; In re H Am. B. R. 649. Chamberlain (D. C, N. Y.), 11 Am. Jurisdiction. — Where a court did B. R. 95, 125 Fed. 629. not have jurisdiction to adjudicate as 19. In re Scott (D. C, Del.), 11 to the bankruptcy because of lack of Am. B. R. 327, 126 Fed. 981, citing residence, it cannot grant a discharge, many authorities under former acts, the question being first raised on the 20. In re Crist (D. C, Ala.), 9 application therefor. In re Clisdell Am. B. R. 1, 116 Fed. 1.007. (Ref., N. y.), 2 Am. B. U. 424, 21. In re Herrman (D. C, N. Y.)„ 16. In re Polakoff (Ref., N. Y.), 4 Am. B. R. 139, 102 Fed. 753; In re 1 Am. B. R. 359. Claff (D. C, Mass.), 7 Am. B. R. 128, 17. In re Fahy (D. C, la.), 8 Am. Ill Fed. 506. B. R. 354, 116 Fed. 239. 22. In re Royal (D. C, N. Gar.), 18. Matter of Petersen (Ref., 7 Am. B. R. 636, 113 Fed. 146; Mat- 17 258 The Law and Peactice iit Bankeuptcy. Time of Making Application. [§ 14-a. corporation when it has been adjudicated a bankrupt.^* A bankrupt's right to a discharge is not affected by his insanity, which prevented his examination by creditors/* and the same is probably true in case of death ; "^ in either event the personal representative should be permitted to institute the proceedings for a discharge. b. Time of making application. — The application should be filed after one month, and within twelve months ^* subsequent to the adjudication, a bankrupt may apply for a discharge. His time, on cause shown, may be and usually is extended six months, but such extension can be granted only by the judge.^^ An extension should not be granted unless it clearly appear that the bankrupt was unavoidably prevented from filing his application within the twelve months; laches will be fatal.^' An adjudication of bankruptcy will not be opened for the sole purpose of extending the time of making an application for a discharge.^^* The affidavit, upon which the exten- sion is asked for, should contain a valid excuse ; a statement that the counsel for the bankrupt was busy with other matters and had over- looked it is insufficient ; -^ and mere illness in the family of the bank- rupt will not suffice.'" It must be shown that the petitioner was un- avoidably prevented from filing his application during the entire period of one year.'"- The granting of the extension is discretionary and no notice to creditors is required.^^* It is doubtful whether the court may grant a nunc pro tunc order granting leave to file an application for a discharge after the period of eighteen months has expired ; '^ it has been held that the court has no juris- ter of Feigenbaum (C. C. A., 2d Little (C. C. A., 7tli Cir.), 13 Am. B. Cir.), 9 Am. B. R. 595, 121 Fed. 69, R. 640, 137 Fed. 521; In re Wagner reversing 7 Am. B. R. 339. (D. C, Nev.), 15 Am. B. R. 100, 139 23. In re Marshall Paper Co. (D. Fed. 87; In re Harris (D. C, Pa.), C, Mass.), 2 Am. B. R. 653, 95 Fed. 15 Am. B. R. 705. Where an ex- 419; afBrmed on appeal, s. c, 4 Am. tension is granted, creditors are con- B. R. 468, 102 Fed. 872. fined to statutory objections. In re 24. In re Miller (D. C, Pa.), 13 Haynes & Son (D. C, Pa.), 10 Am. Am. B. R. 345, 133 Fed. 1,017. B. R. 13, 122 Fed. 560. 25. In re Miller (D. C, Pa.), 13 Proof may be required showing Am. B. R. 345, 133 Fed. 1,017. Com- why the application for a discharge pare In re Hicks (D. C, Vt.), 6 Am. was not made within the specified B. R. 181, 107 Fed. 910. time. In re Glickman (D. C, Pa.), 26. As to computation of time, see 21 Am. B. R. 171, 164 Fed. 209. Bankr. Act, § 31; In re Holmes (D. 28a. In re Morse (D. C. N Y.) C, Vt.), 21 Am. B. R. 339, 165 Fed. 21 Am B. R. 709, 168 Fed. 157. 225. 29. In re Anderson (D. C, 27. For petition, certificate of the Mom.), 14 An. B. R. 221, 134 Fed referee in charge, and order, see 319. "Supplementary Forms," post. 30. In re Lewin (D. C, Tex), 14 28. In re Wolff (D. C, Cal.), 4 Am. B. R. 358, 135 Fed. 252. Am. B. R. 74, 100 Fed. 430; In re 31. In re Harris (D. C, Pa.) 15 Fahy (D. C, Iowa), 8 Am. B. R. 354, Am. B. R. 705; In re Lewin (D.' C, 116 Fed. 239; In re Knauer (D. C, Tex.), 14 Am. B. R. 358, 135 Fed 252. Iowa), 13 Am. B. R. 503, 133 Fed. 3Ia. In re Fritz (DC NY) 805, holding that it is not the duty 23 Am. B R. 84, 173 Fed. 560 " ' of the referee to notify the bankrupt 32. In re Wolff (D. C. Cal.) 4 when the year will expire; In re ' ■;, DiSCHAEGES, WHEN GkANTED. 259 § 14-a.] Petition for Discharge. diction after the expiration of the time limit.*' The failure of an involuntary bankrupt to apply for a discharge within twelve months of his adjudication will prevent him from obtaining a discharge in a subsequent voluntary proceeding from debts which were scheduled in the prior proceeding.** The failure to apply for a discharge within the time limited has the same effect as a denial of a discharge from the debts involved in the proceedings, and the bankrupt may not thereafter institute voluntary proceedings for the purpose of securing a discharge from debts scheduled in the former proceedings.''*^ If the court has permitted a petition to be filed more than a year after the adjudication, upon an insufficient showing, the remedy is by motion to vacate.*^ The application will be dismissed if not diligently prosecuted.*" c. To whom made. — The section contemplates that the applica- tion shall be made to the judge and by § 38-a (4) questions arising out of applications for discharges are expressly excepted from the jurisdiction conferred upon referees. All such questions are original questions for the court,*' although after application reference may be made to the referee as a special master to hear and report on the facts.*' d. Petition for discharge.— (1) In general. — The application for a discharge is made by a petition, which should " state concisely, in accordance with the provisions of the act and the orders of the court, the proceedings in the case and the acts of the bankrupt."** If the application is by member of a firm, the petition should indi- cate that the intention is to bar his partnership liability.*" (2) Vekieication of petition. — Neither the statute, the gen- eral orders nor the official form indicates that the petition must be Am. B. R. 74, 100 Fed. 430, holding 37. In re Johnson (D. C, Ark), that such a nunc pro tunc order may 19 Am B. E. 814, 158 Fed. 342; In re not be granted except where the delay ICIby (D. C, Iowa), 19 Am. 'b. R. was caused by some act of the court 734, 157 Fed. 935. or its officers. 38. See post, under section 38. In 33. In re Fahy (D. C, la.), 8 Am. re Randall (D. C, Pa.), 20 Am B B. R. 354, 116 Fed. 239. R. 305, 159 Fed. 298. Such applica- 34. In re Bramlett (D. C, Ga.), tion or any specified issue arisin<» 20 Am. B. R. 402, 161 Fed. 588; In thereon may be sent to the referee to re Van Borries (D. C, Wis.), 21 Am. ascertain and report the facts and no B. R. 849, 168 Fed. 718, holding that one is prejudiced thereby. In re Mc- in subsequent bankruptcy proceedings DuflF (C. C. A., 5th Cir.), 4 Am. B. the bankrupt will only be granted a R. 110, 101 Fed. 241. discharge as to such debts as were 39. See General Order XXXI and incurred since the institution of the Official Form No. 57. first bankruptcy proceedings. 40. In re Laughliii (D. C, Iowa.). 34a. In re Stone (D. C, Ore.), 23 3 Am. B. R. 1, 96 Fed. 589. See, also Am. B. R. 24, 172 Fed. 947; In re In re Hale (D. C, N. Car.), 6 Am. B Schnabel (D. C, N. Y.), 23 Am. B. R. 35, 107 Fed. 432; In re Carmichael R. 22, 166 Fed. 383; In re Pullian (D. C., Iowa), 2 Am. B. R. 815, 96 (D. C. Tenn.), 22 Am. B. R. 513, Fed. 594; In re Russell (D. C., Iowa), 171 Fed. 595. In re Kuffler (CO. 3 Am. B. R. 91, 97 Fed. 32; In re A., 2d Cir.), 18 Am. B. R. 16, 151 McFaun (D. C, Iowa), 3 Am. B R Fed. 12; In re Silverman (C. C. A.), 66, 96 Fed. 592. See for individuai 19 Am. B. R. 460, 157 Fed. 675. petition after refusal of discharge to 35. In re Haynes & Sons (D. C, partnership. In re Feigenbaum (C C Pa.), 10 Am. B. R. 13, 122 Fed. 560. A., 2d Cir.), 9 Am. B. R. 595 121 Fed 36. In re Lederer (D. C, N. Y.), 69. Compare for rule under law of 10 Am. B. R. 492, 125 Fed. 96. 1867. In re Pierson, Fed. Cas. 11,153. 260 The Law and Peactic in Bankeuptcy. Notice to Creditors and Trustee. [14-a. verified. In conformity with the practice in other similar proceed- ings it would seem more suitable to verify the petition.*^ The elaborate oath prescribed by the law of 1867 is no longer neces- sary.*^ (3) Where filed. — All petitions should be filed with the clerk, and not with the judge or referee.** (4) Amendments. — The same liberality in respect to amend- ments to petitions for discharge should be permitted as in the case of other petitions in bankruptcy proceedings. But such forbear- ance should not be extended in favor of a bankrupt whose business career is tainted, and whose conduct toward his creditors has not been fair.** And where the time to file objections has expired an amendment to the petition in matter of substance is only allow- able where there is already a record sufficient to justify it.*' e. Notice to creditors and trustee. — Creditors are entitled to at least ten days' notice by mail of all hearings upon applications for discharge.*' When the petition for a discharge is duly filed the clerk may either himself send out the notices, or the referee may do it, upon the certificate of the clerk that the petition has been filed. It is usual for the clerk to issue an order to show cause to creditors, returnable before the judge. This order must be served by mail. In some districts, the practice outlined by the second part of Form No. 57 is literally followed. In others, local rules result in the referee giving the required notice by mailing and publishing the order to show cause, or a notice of its pendency, and then returning the proofs, with a certificate of conformity, to the clerk in time for the return day.*' The practice is not uniform throughout the country; local rules or customs should always be ascertained. Everywhere, however, all creditors and persons in interest must have at least ten days' notice of the hearing. 41. In re Glass (D. C, Tenn.), 9 44. In re Gross (Ref., N. Y.), 5 Am. B. E. 394, 119 Fed. 509; In re Am. B. R. 271. Brown (0. C. A., 5th Cir.), 7 Am. B. 45. In re Gift (D. C. Pa.), 12 Am. R. 252, 112 Fed. 49. B. R. 244, 130 Fed. 230. 42. Act of 1867, § 29, R. S., 46. Bankr. Act, § 58-a(2) and dis- § 5,108 (as amended by Act of July cussion thereunder. The mere fact 26 1876), post. ' that the receiver of a creditor, whose 43. See Bankr. Act, § 38-a(4) and name and address appeared in the General Order XII (3) ; In re Sykes proofs, did not receive notice, because (D. C, Tenn.), 6 Am. B. R. 264, 106 the creditor's name did not appear Fed. 669. in the schedules, is mot sufficient to In the Sontheni District o£ set aside the order granting the dia- Wew York the office of the referee is, charge. In re Fritz (DC NY) by force of District Court Rule II, 23 Am. B. R. 84, 173 Fed. 560. the office of the court, and filing a 47. This practice is recommended. petition for discharge with the referee For sample rules and forms, seeRules confers jurisdiction. In re Pincus X and XI., No. Dist. of N Y 1 N B (D. C, N. Y.), 17 Am. B. R. 331, 147 N. 109; and Fnrmg S. &'t Erie *'e'^- 621. County (N. Y.) Dist., 1 N. B. N. 123; DiSCHAKGES, WHEN GeANTED, 261 § 14-b.] Hearing; Appearances; Specifications of Objections. IV. HEARING ON APPLICATION FOB DISCHARGE. a. Appearances — -Upon the filing of the application and the giving of notice a creditor opposing the application must enter his appearance in opposition thereto on the day when the creditors are required to show cause.** This requirement should be strictly followed."" The appearance may be made by the creditor in per- son or by an attorney " who shall be an attorney or counsellor authorized to practice in the circuit or district court.'""* On the call of the case on the return day, if no appearance is entered or appearance filed, and the statutory facts as to time, publication and mailing, etc., appear, a discharge follows.^* The judge does not, as a rule, investigate further.^'' The bankrupt should be ordered to attend upon the hearing if the creditors so request."* The failure to appear on the return day will ordinarily preclude a creditor from subsequently filing specifications of objections.''* An objection going to the jurisdiction cannot, it seems, be made for the first time on the application for a discharge.^' Thus, the objection that a bankrupt is a non-resident will not be con- sidered.** b. Specifications of objections. — (1) In general. — If an ap- pearance is made in opposition to the discharge by any party in interest, such party must file a specification in writing of the also " Supplementary Forms," post, pearance and files objections to the See, also. In re Sykes (D. C, Tenn.), discharge of a bankrupt must be pre- 6 Am. B. R. 264, 106 Fed. 669. sumed to have authority so to do 48. General Order XXXII. without any special written power of 49. In re Clothier (D. C, Pa.), 6 (attorney to take such action. See Am. B. R. 203, 108 Fed. 199. Creditors v. Williams, Fed. Cas. Appearances must be entered 3,379; In re Palmer, Fed. Cas. 10,682; as required in General Order In re McVey, Fed. Cas. 8,932. XXXII; In re Grant (D. C, 51. See In re Marshall Paper Co. Pa.), U Am. B. R. 398, 135 (C. C. A., 1st Cir.), 4 Am. B. R. 468, Fed. 889; In re Levey (D. C, N. 102 Fed. 872. Y.), 13 Am. B. R. 312, 314, 133 52. In re Royal (D. C, N. Car.), Fed. 572. A failure to enter an 7 Am. B. R. 636, 113 Fed. 140. appearance on the return day pre- 53. In re Shanker (D. C. Pa.), 15 eludes the creditor from thereafter ap- Am. B. R. 109, 138 Fed. 862. pearing and filing specifications. In 54. In lo Gii=bu'a; iT>. C. Pa.^, re Ginsbury (D. C, Pa.), 12 Am. B. 12 Am. E. R. 459, 130 Fed. 627; In R. 459, 130 Fed. 627. re Eidom, Fed. Cas. 4,314. 50. General Order IV, Bankr. Act, 55. Allen & Co. v. Thompson. 10 § 1(9). In re Gasser (C. C. A., 8th Fed. 116; In re Ives, Fed. Cas. 7,115; Cir.), 5 Am. B. R. 32, 104 Fed. 537, In re PolakoiT (Ref., N. Y.), 1 Am. in which the court held that an attor- B. R. 358. ney at law admitted to practice in 56. In re Goodale (D. C, N. Y.), 6 the district court, who enters his ap- Am. B. R. 493, 109 Fed. 783. 262 The Law and Pkactice in Bankkuptcy. Specificationa of Objections. [§ 14-b. grounds of his opposition within ten days thereafter.'*' Under the general order the time may be enlarged by the judge, or, in given circumstances, a late specification may be filed nunc pro tunc.^^ The hearing must then go on " at such time as will give parties in interest a reasonable opportunity to be fully heard." It must be before the judge or before a special master appoinfed for that pur- pose; a jury cannot be demanded."* (2) Who mat file specifications. — Subsection & as amended by the amendatory act of 1910 limits the right to oppose to parties in interest, or the trustee when duly authorized by a meeting of the creditors called for that purpose. A party in interest is meant to include only a party who has some pecuniary interest in the dis- charge.°* Specifications may be filed by any person having a pe- cuniary interest in resisting the discharge of the bankrupt, as one owning an unliquidated claim,*^ even though such person has not proven a debt,*^ or his debt is no longer provable.*^ A creditor having a claim which is not dischargeable may not be heard in opposition.*'* Where petitioners simply allege that they are credi- tors of the bankrupt, it is insufficient to show that they are " parties in interest." *° If a member of a firm files objections he must 57. General Order XXXII; In re Albrecht (D. C, Pa.), 5 Am. B. K. 223, 104 Fed. 974. 58. In re Grefe, Fed. Gas. 5,794; In re Frice (D. C, Iowa), 2 Am. B. R. 674, 96 Fed. 611; In re Clothier (D. C, Pa.), 6 Am. B. R. 203, 108 Fed. 199. Entering appearance. — The dis- trict judge may, in his discretion, extend the time within which a cred- itor may enter his appearance and file specificationa in opposition to a bankrupt's discharge. In re Levin (C. C. A., 1st Cir.), 23 Am. B. R. 845, 176 Fed. 177. 59. Compare § 19. A jury trial was possible under the former law. 60. In re Frice (D. C, Iowa), 2 Am. B. R. 674, 96 Fed. 611. Pecuniary interest. — In the case of In re Levey (D. C, N. Y.), 13 Am. B. R. 312, 133 Fed. 572, the court said: "The court is of the opinion that it was the purpose of Congress to enable any person having a personal pecuniary interest or a representative pecuniary interest in preventing a discharge, to oppose the discharge of the bankrupt." 61. Ex parte Traphagen, Fed. Gas. 14,140; In re Shepard, Fed. Gas. 12,753 ; In re Smith, Fed. Gas. 12,977 ; In re Boutelle, Fed. Gas. 1,705 ; Books Case, Fed. Gas. 1,637. The plaintiff in an action on a promissory note, in which the bankrupt denies liability is a party interested to such an extent as to enable him to object to a dis- charge. In re Gonroy ( D. G., Pa. ) , 14 Am. B. R. 249, 134 Fed. 764. An allegation that the objector, " being interested as a creditor in the estate of Jacob Nathanson, a bank- rupt, does hereby oppose," etc., is suf- ficient to show that the objecting creditor is one of the parties in inter- est. Matter of Nathanson (D. G., N. Y.), 19 Am. B. R. 56, 155 Fed. 645. 62. In re Frice (D. G., Iowa), 2 Am. B. R. 674, 96 Fed. 611; Matter of Nathanson (D. C., N. Y.), 19 Am. B. R. 56, 155 Fed. 645. This was not so under the former law. Compare In re Murdock, Fed. Gas. 9,939. See, also. In re Beldon, Fed. Gas. 1,238, and In re Bush, Fed. Gas. 2,222. 63. In re Gonroy (D. C, Pa.), 14 Am. B. R. 249, 134 Fed. 764. A cred- itor who has been paid in full cannot onpose discharge. In re Harr (D. G., Mo.), 16 Am. B. R. 213, 143 Fed. 421. Nor can a creditor whose debt is barred by the statute of limitations. In re Burk, Fed. Gas. 2,156. 64. In re Servis (D. G., Iowa), 15 Am. B. R. 271, 140 Fed. 222; In re Maples (D. C., Mont.), 5 Am. B. R. 426, 105 Fed. 919. 65. In re Chandler (C. C. A., 7th Cir.), 14 Am. B. R. 512, 138 Fed. 637. DiSCHAKGES, WHEN GkANTED. 263 § 14b.] Specifications of Objections. show that he is acting with the consent of the other members."" It was held under the law prior to the amendment of 1910 that a trustee is a " party in interest " and may file objections, when it appears that he is seeking to recover from the bankrupt property alleged to belong to the estate."' In Pennsylvania a creditor may prosecute his ob- jections to the discharge of a bankrupt, in forma pauperis."^ (3) Form and contents of specifications. — Official Form No. 58 should be followed in preparing the specifications. It will require modification to meet the circumstances of the particular case. They should be in writing, and should contain allegations sufficient to show that all essential facts exist bringing the opposition within the grounds specified by the statute."" Specifications must be clear and unequivocal, and contain specific averments of facts; they should be pleaded with greater particularity than complaints in civil actions; indeed, they more nearly resemble indictments, especially if the com- mission of one of the offenses against the law is relied on,'" although 66. In re Hendrick (D. C, Ky.), 16 Am. B. R. 218, 143 Fed. 647. 67. In re Levey (D. C, N. Y.), 13 Am. B. R. 312, 133 Fed. 572. 68. In re Guilbert (D. C, Pa.), 18 Am. B. R. 830, 154 Fed. 676. 69. In re Peacock (D. C, N. Car.), 4 Am. B. R. 136, 101 Fed. 560; In re Quackenbush (D. C, N. Y.), 4 Am. B. R. 274, 102 Fed. 282; In re Kaiser (D. C, Minn.), 3 Am. B. R. 767, 99 Fed. 689; In re Hixon (D. C, Iowa,) 1 Am. B. R. 610, 93 Fed. 440. 70. In re Thomas (D. C, Iowa), 1 Am. B. R. 515, 92 Fed. 912; In re Holman (D. C, Iowa), 1 Am. B. R. 600, 92 Fed. 512; In re Hixon (D. C, Iowa), 1 Am. B. R. 610, 93 Fed. 440; In re Hirsch (D. C, Tenn.), 2 Am. B. R. 715, 96 Fed. 468; In re Kaiser (D. C, Minn.), 3 Am. B. R. 767, 99 Fed. 689; In re Peacock (D. C, JN. Car.), 4 Am. B. R. 136, 101 Fed. 560; In re Pierce (D. C, Wash.), 4 Am. B. R. 489, 102 Fed. 977; In re McGurn (D. C, Nev.), 4 Am. B. R. 459, 102 Fed. 743; In re Quackenbush (D. C, N. Y.), 4 Am. B. R. 274, 102 Fed. 282; In re Gross (Ref., N. Y.), 5 Am. B. R. 271; In re Wolfensohn (Ref., N. Y.), 5 Am. B. K. 60; Matter of Wetmore (Ref., N. Y.), 6 Am. B. R. 703; In re Idzall (D. C, Iowa), 2 Am. B. R. 741, 96 Fod. 314; In re Griffin Bros. (D. G., Ala.), 19 Am. B. R. 78, 154 Fed. 537; In re Talpin (D. C, Iowa), 14 Am. B. R. 360, 135 Fed. 861, holding that when the objection is based upon the commission of an offense punishable by imprisonment, the specification should state that it was done know- ingly an J. fraudulently. Concealment of or failnre to keep books — Sufficient allega- tions. — Objections to a bankrupt's discharge upon the ground that he " concealed or failed to have kept books of account or the records from which his financial condition might be ascertained," and that " while un- der examination under oath before the referee he failed to show what he did or had done with money which he al- leged to have borrowed from his sis- ter-in-law," naming her, are suflS- ciently specific. In re Randall (D. C, Pa.), 20 Am. B. R. 305, 159 Fed. 298. Where a bankrupt testifies that he kept no books of account, an objection to the granting of his discharge, fol- lowing the words of the statute, that he failed to keep books of account or records from which his financial con- dition might be ascertained " with in- tent to conceal his true financial con- 264 The Law and Pkactice in Bankkdptcy. Specifications of Objections. [§ 14-b. the strict rules applicable to indictments may not apply." Allega- tions must be specific and of such a character that their sufficiency may be met by demurrer, or by exceptions analogous to those allowed in equity; " mere general averments are not sufficient.'* If they fail to allege any fact which by any construction would be deemed ground for denying a discharge, they will be disregarded although not excepted to."* The specifications should allege that the objecting creditor will be affected by the discharge, and is therefore interested in defeating it.'* It is also necessary for the petitioners to aver in their application the facts showing their freedom from laches." Where it is charged that the bankrupt has committed an act punishable by imprisonment under the bankrupt act it must be alleged to have been done " know- ingly and fraudulently," '° but specifications may be amended so as to allege that the acts complained of were knowingly and fraudu- dition and in contemplation of bank- ruptcy " is sufficient. But this form of objection, following the language of the statute, may be criticised, in that it is impossible to tell whether an utter failure to keep books is in- tended to be charged, or whether the books that were kept are insufficient to show the true condition of the bankrupt's property. In re Lewis (D. C, N. Y.), 20 Am. B. R. 711, 163 Fed. 137. 71. In re Blalock (D. C, S. Car.), 9 Am. B. R. 266, 118 Fed. 679. CriiEiiiial indictment. — Where the offense is one prohibited by § 29 of the act the allegations should be set forth with substantially the exact- ness of a criminal indictment. Mat- ter of Wetmore (Ref., N. Y.), 6 Am. B. R. 703; In re Hirsch (D. C, Tenn.), 2 Am. B. R. 715, 96 Fed. 468; In re Quackenbush (D. C, N. Y.), 4 Am. B. R. 274, 102 Fed. 282. So far as the specifications ■charge or attempt to charge the com- mission of a crime, they must state facts showing the commission of the crime with substantially the same particularity and exactness required in an indictment. In re Levey (D. C, N. Y.), 13 Am. B. R. 312, 133 Fed. 572. 72. In re Troeder (C. C. A., 1st Cir.), 17 Am. B. R. 723, 150 Fed. 710. 73. In re Steed (D. C, N. Car.), 6 Am. B. R. 73, 107 Fed. 682; In re Peck (D. C, Conn.), 9 Am. B. R. 747, 120 Fed. 972; In re Parish (D. C, Iowa), 10 Am. B. R. 548, 122 Fed. 553; In re Chandler (C. C. A., 7th Cir.), 14 Am. B. R. 512, 138 Fed. 637; In re Servis (D. C, Iowa), 15 Am. B. R. 271, 140 Fed. 222. 73a. In re McCarthy (D. C, N. Y.), 22 Am. B. R. 499, 170 Fed. 859. 74. In re Servis (D. C, Iowa), 15 Am. B. R. 271, 140 Fed. 222; In re Brown (C. C. A., 5th Cir.), 7 Aiii. B. R. 252, 112 Fed. 49. 75. In re Griffin Bros. (D. C, Aia.), 19 Am. B. R. 78, 154 Fed. 537. 76. In re Blalock (D. C, S. Car.), 9 Am. B. R. 266, 118 Fed. 679; In re Peck (D. C, Ct.), 9 Am. B. R. 747, 120 Fed. 972; In re Patterson (D. C, N. Y.), 10 Am. B. R. 371, 121 Fed. 921; In re Levey (D. C, N. Y.), 13 Am. B. R. 312, 133 Fed. 572; In re Talpin (D. C, la.), 14 Am. B. R. 360, 135 Fed. 86L Wtere concealment of true fi- nancial condition is alleged, and there is no allegation as to knowledge or fraudulent intent, the specification is insufficient. In re Wetmore (Ref., N. Y.), 6 Am. B. R. 703. Where the allegation is that the bank- rupt has concealed assets, it must be alleged that such concealment was " knowingly and fraudulently " done. In re Mudd (D. C, Mo.), 5 Am. B. R. 242, 105 Fed. 348. See, also. In re Peck (D. C, Conn.), 9 Am. B. R. /47, 120 Fed. 972; In re Hirsch (D. C, Tenn.), 2 Am. B. R. 715, 96 Fed. 468; In re Adams (D. C, N. Y.), 22 Am. B. R. 613, 171 Fed. 599. Discharges, when Granted. 265 § 14-b.] Specifications of Objections. lently committed.'" The exact language of the statute should not be used;'" unless, as in the case of failure to keep books of accounts, the language of the statute is sufficient to serve the purpose of giving notice to the offender of the particular conduct which is charged against him as an offense.'" If vague or general, or merely asserting acts which would render certain debts not dischargeable, but not affect the right to a discharge proper, the specifications will be dismissed.'" Two grounds of objection should not be included in one specification. '* Where propeity has been fraudulently transferred or concealed the specifications should disclose a description of the property, together with the names of the persons holding the title, the time of the trans- fer, and any other facts necessary to identify the transaction.'^ Mere conclusions of law and alternative general averments are not suffi- cient.*' The rule has been stated to be that facts relied on to prevent a discharge must be pleaded with sufficient certainty of detail as to apprise the bankrupt of the charge he has to meet and to enable the court to understand the issue to be examined and determined.'"* (4) Amendment of specifications. — Amendments to correct error due to mistake or accident are usually allowed, if asked at any time prior to the submission of the case;'* though it is doubt- 77. In re Knaszak (D. C, N. Y.), 18 Am. B. R. 187, 151 Fed. 503. 78. In re McNamara (Ref., N. Y.) he concealed assets from the trustee, objectionable. 82. In re Parish (D. C, Iowa), 10 2 Am. B. R. 566; In re Hirsch (D. C., Am. B. R. 548, 122 Fed. 553. Tenn.), 2 Am. B. R. 715, 96 Fed. 468; In re Levey (D. C, N. Y.), 13 Am. B. R. 317, 133 Fed. 572; In re Wetmore (D. C, N. Y.), 6 Am. B. R. 704, 99 Fed. 703; In re Condict, Fed. Cas. 3,094; Matter of Remmers (C. C. A., 8th Cir.), 23 Am. B. K. 78, 173 Fed. 484. 79. In re Hirsch (D. C, Tenn.), 2 Am. B. R. 71o, 96 Fed. 468; In re Ginsburg (D. C, Pa.), 12 Am. B. R. 459, 130 Fed. 627; In re Patter- son (D. C, N. Y.), 10 Am. B. R. 371, 121 Fed. 921; Milgraum v. Ost (D. C, Pa.), 12 Am. B. R. 306, 129 Fed. 827; In re Brod (D. C, Ga.), 21 Am. B. R. 426, 166 Fed. 1,011. SO. In re Hixon (D. C, Iowa), 1 83. In 12 Quaclcenbush (D. C, N. Y.), 4 Am. B. R. 274, 102 Fed. 282. 83a. Matter of Remmers ( C. C. A., 8th Cir.), 23 An. B. R. 78, 81, 173 Fed. 484, citing In re McNamara (Ref., N. Y.), 2 Am. B. R. 566; In re Milgraum (D. C), 12 Am. B. R. 306, 129 Fed. 827; In re Thomas (D. C), 1 Am. B. R. 515, 92 Fed. 912; In re Holman (D. C), 1 Am. B. R. 600, 92 Fed. 512. 84. In re Quackenbush (D. C, N. Y.), 4 Am. B. R. 274, 102 Fed. 282; In re Carley (C. C. A., 3d Cir.), 8 Am. B. R. 720, 117 Fed. 130; In re Hi.xon (D. C, Iowa), 1 Am. B. R. 610, 93 Fed. 440 In re Pierce (D. C, N. Y.), 4 Am. B. R. 554, 103 Fed. Am. B. R. 610, 93 Fed. 440; In re 64; In re Morgan (D. C, Ark.), 4 Holman (D. C, Iowa), 1 Am. B. R. 600, 92 Fed. 512; In re Shepherd, 2 N. B. N. Rep. 1,020; In re Hill, Fed. Cas. 6,482; In re Bellis, Fed. Cas. 1,2/5. Compare Bragassa v. St. Louis Cycle (C. C. A., 5th Cir.), 5 Am. B. R. 700, 107 Fed. 77; In re Blalock (D. C, S. Car.), 9 Am. B. R. 266, 118 Fed. 679; In re Parish (D. C, Iowa), 10 Am. B. R. 548, 122 Fed. 553; In re Servis (D. C, Iowa), 15 Am. B. R. 271, 140 Fed. 222. 81. Matter of Wetmore (Ref., N. Y.), 6 Am. B. R. 703, holding a charge that the bankrupt made a false oath in the proceeding, and that Am. B. R. 402, 101 Fed. 982; In re Mudd (D. C, Mo.), 5 Am. B. R. 242, 105 Fed. 348; In re Osborne (C. C. A., 1st Cir.), 8 Am. B. R. 165, 115 Fed. 1; In re Glass (D. C, Tenn.), 9 Am. B. R. 391, 119 Fed. 509; Kentuckv Nat. Bank v. Carley (C. C. A., 3d Cir.), 10 Am. B. R. 375, 121 Fed. 822; In re Gift (D. C, Pa.), 12 Am. B. R. 244, 130 Fed. 230; In re Hen- drick (D. C, Ct.), 14 Am. B. R. 795, 138 Fed. 473: In re Gross (Ref., N. Y.), 5 Am. B. R. 271; In re Eaton (D. C, N. Y.), 6 Am. B. R. 531, 110 Fed. 731; In re Knaszak (D. C, N. Y.), 18 Am. B. R. 187, 151 Fed. 503. 2fifi The Law awd Practice its Bankrupcty. Waiver of Defects; Exceptions. [§ 14-b. ful whether a referee isitting as a special master may permit such amendments.*'* Leave to amend vague and indefinite specifications of objections may be granted.*® Specifications of objections to a bankrupt's discharge may be amended, in the discretion of the court, after the expiration of the ten days allowed by General Order XXXII, for the filing thereof.*® The specifications as amended must merely amount to an enlargement of the original, and if they exceed this they are not entitled to oome in.** Amend- ments are discretionary with the district courts, and are review- able in the circuit court of appeals, under section 24-b of the bank- ruptcy act.*" Leave to amend should not be granted where only the words of the statute are used.** (5) Waiver of defects. — All objections to the sufiiciency of specifications are waived unless made before trial ;*^ unless the specifications are fatally defective because failing to show some jurisdictional requirement, as, for instance, that the party filing them is a party in interest.*' Lack of verification may be waived,** and so may a defect consisting of a failure to allege that the offense was committed knowingly and fraudulently.*® (6) Exceptions to specifications. — Defective specifications not objected to in the lower court cannot be objected to on re- view.*® The bankrupt need not answer;*'^ the issue is made by the petition and the specifications. He may file exceptions to the latter, on the ground of insufficiency, or he may answer or demur 85. In re Osborne (C. C. A., 1st 93. In re Servis (D. C, Iowa), 15 Cir.), 8 Am. B. E. 165, 115 Fed. 1; Am. B. K. 271, 140 Fed. 222. In re Peek (D. C, Ct.), 9 Am. B. R. 94. In re Baerneopf (D. C, Pa.), 9 747, 120 Fed. 972. The referee has Am. B. E. 133, 117 Fed. 975. no power to allow an amendment to Lack of verification. — An ob- the specifications. In re Wolfensohn jection that specifications lack verifi- (Eef., N. Y.), 5 Am. B. E. 60. cation comes too late if made after 86. In re Wittenberg (D. C, Pa.), the submission of the case. In re 20 Am. B. E. 398, 160 Fed. 991. Robinson (D. C, E. I.), 10 Am. B. E. 88. In re Nathanson (D. C, N. 477, 123 Fed. 844. See, also, Gods- Y.), 18 Am. B. R. 252, 152 Fed. 585. halk Co. v. Sterling (C. C. A., 3d 89. In re Gift (D. C, Pa.), 12 Cir.), 12 Am. B. R. 302, 129 Fed. Am. B. R. 244, 130 Fed. 230. 580. 90. In re Carley (C. C. A., 3d 95. In re Osborne (C. C. A., 1st Cir.), 8 Am. B. R. 720, 117 Fed. 130. Cir.), 8 Am. B. R. 165, 115 Fed. 1. 91. In re Bromley (D. C, Pa.), 18 96. In re Headley, 2 N. B. N. Eep. Am. B. R. 227, 152 Fed. 493; In re 684, and In re Kaiser (D. C, Minn.), Peck (b. C, Conn.), 9 Am. B. R. 747, 3 Am. B. R. 767, 99 Fed. 689. 120 Fed. 972. 97. In re Logan (D. C, Ky.), 4 92. In re Baldwin (D. C, N. Y.), Am. B. R. 525, 102 Fed. 876; In re 9 Am. 6. E. 591, 119 Fed. 796. Crist (D. C, Ala.), 9 Am. B. E. 1, 116 Fed. 1,007. DiSOHABGES, WHEN GeANTED. 267 § 14-b.] Verification of Specifications; Reference. if he chooses.®" The creditors may not object to the referee's re- port because he failed to consider the bankrupt's exceptions.®** c. Creditor proceeding under specifications of another cred- itor. — Creditors may be allowed, in the discretion of the court, to enforce objections filed and abandoned by other creditors.®* And a claim by a creditor, whose objections to a discharge are held to be insufficient, of the right to proceed under objections filed on behalf of another creditor who did not appear on the hearing, should be passed upon by the district judge, and not the referee."" d. Verification of specifications. — Specifications should be verified,"^ although it has been held that lack of verification is not fatal.^"^ A verification of specifications of objections, made by the attorney far the objecting creditor, should explain why the oath was not made by the creditor himself.^ "^ An omission of verification may be supplied by amendment,^"* at any time before the testimony is all in and the argument commenced. ■"'^ e. Reference to special master — The referee being denied jurisdiction to determine discharges,^"* references to him, not as 98. In re Eosenfleld, Fed. Cas. case is submitted. In re Robinson 12,059. (D. C, R. I.), 10 Am. B. R. 477, 123 98a. Matter of Brockman (D. C, Fed. 844; In re Baerncopf (D. C, Ky.), 21 Am. B. R. 251, — Fed. — . Pa.), 9 Am. B. E. 133, 117 Fed. 975; 99. In re Houghton, Fed. Cas. Godshalk v. Sterling (C. C. A., 3d 6,730, 10 N. B. R. 337. Cir.), 12 Am. B. E. 302, 129 Fed. 100. Matter of Wetmore (Ref., N. 580. Y.), 6 Am. B. R. 703. 102. In re Jamieson (D. C, 111.), 101. Form of verification.— In 9 Am. B. R. 681, 120 Fed. 697; In re the case of In re Glass (D. C, Tenn.), Brown (C. C. A., 5th Cir.), 7 Am. B. 9 Am. B. R. 391, 119 Fed. 509, it was R. 252, 112 Fed. 49. held that the verification should be by 10,3. In re Randall (D. C, Pa.), 20 the oaths of the opposing creditors, in Am. B. R. 305, 159 Fed. 298. Order the form prescribed by Form No. 3, of court required before verification post. It was further held in this case by attorney. See In re Glass (D. C, that an attorney should not be per- Tenn.), 9 Am. B. R. 391, 119 Fed. mitted to verify the specifications ex- 509. cept by order of the court for cause 104. In re Meurer (D. C, Pa.), 15 shown. In re Meurer (D. C, Pa.), Am. B. R. 823, 144 Fed. 445; In re 15 Am. B. R. 823, 144 Fed. 445. g^^ < ^- °« ^-'/^o^Cir. ) , 21 Am. See, also In re Gift (D.C Pa.), j^g^ j^ ^^ Baerncopf (D. C, Pa.), 12 Am. B. R. 244, 130 Fed. 230; g ^^ g ^ jgg^ 117 Fed. 975. Milgraum v. Ost (D. C, Pa.), 12 io6. Bankr. Act, § 38-a (4); Gen- Am. B. R. 306, 129 Fed. 827, hold- eral Order XIII (3). ing that attorneys will not be per- A referee has no power to de- mitted to verify specifications unless cide any question relating to the bank- exceptional circumstances exist. An rupt's discharge until that subject has , . ,. . ■c„„4.;„„= f,^,. lonb- nf 066X1 referred to him by the ludge. In objection to specifications for lack of ^^ ^^^^^^^ ^y ^l) |m. B. verification cannot be made after the ^^ g^g^ jgg j,^^ ggg. 268 The Law and Peactice in Bankeuptcy. Proceedings on Hearing. [§ 14-b. referee, but as a special master in chancery to hear and report on the facts, are quite universal.'"' If such a reference is ordered, the special master sets a time and place for the hearing, which goes on before him as if before the judge. Special masters may pass on the relevancy or materiality of evidence,'*' and determine the sufficiency of specifications so far, at least, as to decide whether to permit testi- mony thereon. But a referee, acting as special master, should not base a finding upon the original examination of the bankrupt before him as referee.'"* All testimony objected to, with the objections noted therein and the decisions thereon, should be preserved and re- ported to the court.**"* f. Proceedings on hearing. — (1) In general. — The hearing is, in effect, a trial in equity. Objections to a bankrupt's dis- charge are the beginning of a distinct and separate dispute and easily fall within any accepted definition of a suit or an action."" The op- position to the discharge is always in the nature of a new suit. It requires proofs of the grounds set out in the specifications in opposition to the discharge."' All the grounds of objection urged against grant- ing a discharge should be passed upon, so as to prevent the necessity of sending the case back, if the referee's conclusions on particular charges are not concurred in by the court."^ The bankrupt may file such papers as he may desire, but he is not required to file any."^ (3) EuLES OF evidence; proof required. — The ordinary rules of evidence control. Proof must be strict and convincing, but not necessarily to the limit required in proving a crime."* 107. Fellows V. Freudenthal (C. C. Abbott (C. C. A., 8th Cir.), 21 Am. A., 7th Cir.), 4 Am. B. R. 490, 102 B. R. 436, 165 Fed. 852. Fed. 731; In re McDuff (C. C. A., 5th 110. In re Guilbert (D. C, Pa.), Cir.), 4 Am. B. R. 110, 101 Fed. 241; 18 Am. B. R. 830, 154 Fed. 676. In re Rauchenplat (D. C, P. Rico), 9 111. In re Prager & Son (D. C, W. Am. B. R. 763. Va.), 13 Am. B. R. 527, 134 Fed. As to rules governing a special 1,006. master upon a hearing, see In re 112. Matter of Haskell (D. C, N. Walder (D. C, Ct.), 18 Am. B. R. Y.), 20 Am. B. R. 914. 164 Fed. 301. 419, 152 Fed. 489. 113. In re Logan (D. C, Ky.), 4 108. In re Kaiser (D. C, Minn.), Am. B. R. 525, 102 Fed. 876; In re 3 Am. B. R. 767, 99 Fed. 689. Hendrick (D. C, Ct.), 14 Am. B. R. In the Sontbeni District of 79j, 138 Fed. 473. Ne-w York the matters are referred Demurrer. — The bankrupt need as of course to the referee who has not file a demur'-er to stipulation in acted in the proceeding, as special opposition to his discharge. In re master, and it is then the duty of the Crist (D. C, Ala.), 9 Am. B. R. 1, bankrupt to bring the matter on be- 116 Fed. 1,007. fore the referee. In re Eldred (D. C, 114. In re Polakoff (Ref., N. Y.) N. Y.), 18 Am. B. R. 243, 152 Fed. 1 Am. B. R. 358; In re Gross (Ref. 491. N. Y.), 5 Am. B. R. 271; In re Ber 109. In re Murray (D. C, Conn.), ner (Ref., Ohio), 4 Am. B. R. 383 20 Am. B. R. 700, 162 Fed. 983. In re Greenberg (D. C, Ct.), 8 Am 109a. In re Isaacson (D. C, N. B. R. 94, 114 Fed. 773; In re Da" Y.), 23 Am. B. R. 665, 174 Fed. 406; chy (D. C, N. Y.), 10 Am. B. R. 527 First Nat. Bank of Philadelphia v. DiSCHAKGES, WHEN GeANTED. 269 § 14-b.] Proceedings on Hearing. Evidence will be confined to the specifications.^^' The burden of proof is upon the opposing creditor,^'* unless the question pre- sented is the construction of a statute.^ ^'^ It is not necessary that the alleged ground for refusing a discharge be proved beyond a reasonable doubt, as in the case of the trial of a criminal offense, ^'^ although the conscience of the court should be satisfied by proper and sufficient evidence that the bankrupt is not entitled to his discharge.^ ^® If the ground depended upon is an offense for which the bankrupt may be punished it is probable that a greater degree of pfToof should be required.^^" How far testimony brought out on 122 Fed. 688. Text cited with appro- Failure to keep boohs. — Where val in In re Troeder (C. C. A., 1st the specification is based upon the Cir.), 17 Am. B. R. 723, 150 Fed. 710. ground that the bankrupt has, with 115. In re Rosenfield, Fed. Cas. intent to conceal his financial condi- 12,059; In re Hendrick (D. C, Ct.), tion, failed to keep books of account, 14 Am. B. R. 795, 138 Fed. 473. the burden of proof is upon the oppos- The bankrupt has the opportunity, ing creditor to show by convincing upon the hearing of an application proof both that he failed to keep for discharge, to argue before the books of account and that his omis- judge that the question put to him sion to do so was with intent to con- was not material. In re Weinreb (C. ceal his financial condition. In re C. A., 2d Cir.), 18 Am. B. E. 387, 153 Garrison (C. C. A., 2d Cir.), 17 Am. Fed. 363. B. E. 832, 149 Fed. 178. 116. In re Idzall (D. C, Iowa), 2 117. In re Gilpin (D. C, Pa.), 20 Am. B. R. 741, 96 Fed. 314; In re Am. B. E. 374, 160 Fed. 171. Brice (D. C, Iowa), 4 Am. B. R. 355, 118. In re Greenberg (D. C, 102 Fed. 114; In re Phillips (D. C, Conn.), 8 Am. B. R. 94, 114 Fed. 773; N. Y.), 3 Am. B. R. 542, 98 Fed. 844; In re Gross (Ref., N. Y.), 5 Am. B. In re Fitchard (D. C, N. Y.), 4 Am. R. 271; In re Berner (Ref., Ohio), 4 B. R. 609, 103 Fed. 742; In re Wet- Am. B. R. 383; In re Polakoff (Ref., more (D. C, Mo.), 2 Am. B. R. N. Y.), 1 Am. B. R. 360; In re Salis- 755; In re Finkelstein (D. C, N. bury (D. C, N. Y.), 7 Am. B. R. 771, Y.), 3 Am. B. R. 800, 101 Fed. 418; 113 Fed. 833; In re Howden (D. C, In re Cashman (D. C, N. Y.), 4 Am. N. Y.), 7 Am. B. E. 191, 111 Fed. B. R. 326, 103 Fed. 67; In re 723; In re Leslie (D. C, N. Y.), 9 Ferris (D. C, Iowa), 5 Am. B. Am. B. R. 561, 119 Fed. 406. R. 246, 105 Fed. 356; In re 119. In re Berner (Ref., Ohio), 4 Wolfensohn Ref., N. Y.), 5 Am. B. Am. B. R. 383; In re Gross (Ref., N. R. 60; In re Howden (D. C, N. Y.), Y.), 5 Am. B. R. 271. 7 Am. B. R. 191, 111 Fed. 723; In re 120. In re Gaylord (C. C. A., 2d Gaylord (C. C. A., 2d Cir.), 7 Am. Cir.), 7 Am. B. R. 1, 112 Fed. 668, B. R. 1, 112 Fed. 668; In re Chamber- holding that where a false oath is lain (D. C, N. Y.), 11 Am. B. R. 95, charged it is incumbent upon the op- 125 Fed. 629; In re Hamilton (D. C, posing creditor to establish satisfac- N. Y.), 13 Am. B. R. 333, 133 Fed. torily that the particular statements 823; In re Jacobs (D. C, N. J.), 16 of which perjury is predicated were Am. B. R. 482, 144 Fed. 868; In re false. fa^^^Li^^ ?'iS-."^T^' ^* i"!^ ^-/S- Presnmption of iimoceuce.-In 290, 135 Fed. 885; In re Eadcs (C. +^6 case of In re Troeder ^P r A C. A., 7th Cir.), 16 Am. B. R. 30, 143 ^ ^- > ,, a 1,^ ,L* , ■.„„.' Fed. 293; In re Brookman (D. C, 1^* ^"■^' ^^ ^'"- ^- ^- 723, 150 Fed. Ky.), 21 Am. B. R. 251, 164 Fed. 710, the ciurt gays that where 301; Hardie v. SwaflFord Bros. Dry a crime is charged, although only on Goods Co. (C. C. A., 5th Cir.), 21 Am. B. R. 457, 165 Fed. 588. 270 The Law and Peactice in Bankeitpcty. Proceedings on Hearing. [§ 14-b. the bankruptcy proceeding per se may be used as evidence on the discharge is a question ; some authorities holding that it is material only for impeaching purposes. •'^^ The accepted rule seems to be that the bankrupt's evidence, but not that of other witnesses, so far as it is mateirial to the issues, may be so used.-'^^ The whole record of the bankruptcy case proper is frequently stipulated in. Thia practice is loose and should not be followed. The better method, where a stipulation is possible, is to cull out those portions that are pertinent, and read them in. (3) Minutes and eepoet. — The testimony may be taJken down in narrative form, or by question and answer, and, if the latter, a stenographer may be employed, this perhaps by analogy to the procedure on the examination of the bankrupt.^^^ Equity Rules LXXIII to LXXXII should be consulted for details of procedure on such hearings. The right of referees sitting as special masters to compensation in addition to their fees as referees has already been well settled,^^* and reste on the ground that the duties re- quired of them are outside their functions as defined and paid for under the law. Section 72, added by the amendatory act of 1903, has not, it is thought, affected this rule. This compensation is often fixed by district rules. ^^^ If not, it is adjusted under Equity Rule LXXXII. The disbursements of the special master, as for a stenographer, are, of course, allowed.^^® At the conclusion of the reference, the special master makes up a report,^^^ embodying a civil issue, "it shocks the judicial 123. See General Order XXII. mind to refuse to give him the bene- 124. Fellows v. Freudenthal (C. C. fit of the usual presumption of inno- A., 7th Cir.), 4 Am. B. R. 490, 102 cence, unless the adverse proofs are so Fed. 731; In re Grossman (D. C, far satisfactory as to be convincing." Mich.), 6 Am. B. R. 510, 111 Fed. 121. In re Penny, 2 N. B. N. Rep. 507. In Bragassa v. St. Louis Cycle 1,001. See "Use of Former Examina- (C. C. A., 5th Cir.), 5 Am. B. R. 700, tion under § 7(9)" in this section, 107 Fed. 77, the referee seems to have post. been allowed extra compensation as 122. In re Bard (D. C, N. Y.), 5 referee and not as special master. Am. B. R. 810, 108 Fed. 208; In re 125. See, for rule in force in the Wilcox (0. C. A., 2d Cir.), 6 Am. B. Northern and Western Districts of B. 362, 109 Fed. 628 (superseding In New York, In re Gaylord (DC N re Cooke (D. C, N. Y.), 5 Am. B. R. Y.), 5 Am. B. R. 805. ' ' 434, 109 Fed. 631); In re Leslie (D. 126. In re Grossman (D C C, N. Y.), 9 Am. B. R. 561, 119 Mich.), 6 Am. B. R. 510, 111 Fed. 507! Fed. 406; In re Goodhile (D. C, 127. See "Supplementary Form," Iowa), 12 Am. B. R. 380, 130 Fed. post. Compare In re Steed (D. C. 782. See, also. In re Gaylord (D. C, N. Oar.), 6 Am. B. R. 73, 107 Fed N. Y.), 5 Am. B. R. 410, 106 Fed. 833; 682; Mahoney v. Ward (D. C, N. affirmed, s. c, 7 Am. B. R. 1, 112 Fed. Car.). 3 Am. B. R. 770, 100 Fed. 278, 668. Compare, also. In re Eaton (D. Report of special master— It C, N. Y.), 6 Am. B. R. 531, 110 fei. is the duty of the special master 731. to take and report evidence, and to DiSOHAKGES, WHEN GeANTED. 271 § 14-b.] Grounds of Opposition. a BTimmary of his findings and stating his opinion thereon, and files it, with his record and all papers and pleadings, with the clerk. This report is brought up on notice either on motion for confirma- tion or by exception, and the case then proceeds before the judge. ■'^* A referee's findings upon conflicting evidence are entitled to the same consideration as those of a district judge,^^® and cannot be disregarded where there is sufficient testimony to support them.^^° V. GnOVNUS OF OPPOSITION TO DISCHARGE. a. In general. — Subsection b of this section specifies the cases in which a bankrupt may be refused a discharge. As previously suggested, the specifications of objection must exhibit, and the evidence in support of them must prove, one of the objections specified in the law,^*^ and the only grounds of objection specified are those enumerated in sections fourteen and twenty-nine.-'^^ Even if the proof shows that the only debt is one which is not dis- chargeable, if the specifications are not sustained, a discharge return the same together with the Y.), 6 Am. B. R. 703; In re Steed (D. ruling as to its admissibility. It is C, N. Car.), 6 Am. B. R. 73, 107 Fed. not error for the special master to 682; Bauman v. Feist (C. C. A., 8th reserve decision as to the admissibility Cir.), 5 Am. B. R. 703, 107 Fed. 83; of testimony under insufficient specifi- In re Pierce (D. C, N. Y.), 4 Am. B. cations. In re Knaszak (D. C, N. R. 554, 103 Fed. 64; In re Black (D. Y.), 18 Am. B. R. 187, 151 Fed. 503. C, Pa.), 4 Am. B. R. 776, 104 Fed. 128. Compare Equity Rules and 289; In re Peacock (D. C, N. Car.), the various district rules for the prac- 4 Am. B. R. 136, 101 Fed. 560; In re tice. See, for effect of findings of Marshall Paper Co. (C. C. A., 1st referee, In re Covington (D. C, N. Cir.), 4 Am. B. R. 468, 102 Fed. 872; Car.), 6 Am. B. R. 373, 110 Fed'. 143; In re Logan (D. C, Ky.), 4 Am. B. also, that findings of fact are conclu- R. 525, 102 Fed. 874; In re Crist (D. sive on a petition for rehearing, In re C, Ala.), 9 Am. B. R. 1, 116 Fed. Royal (D. C, N. Car.), 7 Am. B. R. 1,007; In re Griffin Bros (D. C, 636, 113 Fed. 140. Ala.), 19 Am. B. R. 78, 154 Fed. 537, 129. In re Simon v. Sternberg (D. holding that buying of the claims of C, Ga.), 18 Am. B. R. 204, 151 Fed. an opposing creditor so as to secure 507; In re Wheeler (C. C. A., 7th the withdrawal of objections consti- Cir.), 21 Am. B. R. 262, 164 Fed. tutes a bar to a discharge; In re 301. Fleishman (D. C, 111.), 9 Am. B. R. 130. In re Forth (D. C, N. Y.), 557, 120 Fed. 960; In re Blalock (D. 18 Am. B. E. 186, 151 Fed. 951. Thus C, S. Car.), 9 Am. B. R. 266, 118 a finding that the bankrupt made a Fed. 679; In re Howden (D. C, N. false oath and concealed his assets Y.), 7 Am. B. R. 191, 111 Fed. 723; will not be disturbed. In re Knaszak In re Schenck (D. C, Wash.), 8 Am. (D. C, N. Y.), 18 Am. B. R. 187, 151 B. R. 727, 116 Fed. 554. Fed. 503. 1*2. In re Griffin Bros. (D. C, 131. In re Frank (Ref., N. Y.), 6 Ala.), 19 Am. B. R. 78, 154 Fed. 537; Am. B. R. 156; Smith v. Keegan (C. Matter of Wetmore (Ref., N. Y.), 6 0. A., 1st Cir.), 7 Am. B. R. 4, 111 Am. B. R. 703; In re Thomas (D. C, Fed. 157; In re Wetmore (Ref., N. Iowa), 1 Am. B. R. 515, 92 Fed. 912. 272 The Law and Practice in Bankedpcty. Commission of Offense; Concealment. [§ 14-b(l). should be granted.-'^* But if one of several objections is well pleaded and sustained by the evidence, a discharge may be de- nied, ^s* b. Offense of larceny. — The offense of larceny, or larceny as bailee, committed by a bankrupt against an objecting creditor more than a year before the petition was filed, is not within the statutory grounds.^*^ c. Under the original law, and under the law as amended. — The additional objections made by the act of 1903 are important and far-reaching,^^" but they are not available as grounds for denying a discharge in proceedings instituted prior to the taking effect of said amendment.^^^ Neither the original act nor its amendments are retrospective; if the act complained of was not prohibited when it was committed a discharge may not be refused because under a subsequent enactment such act was prohibited.^^* VI. COMMISSION OF OFFENSE FITNISHABLE BY IMPRISON- MENT. a. In general. — Subdivision 1 of subsection h provides as the first ground of refusing a discharge the commission of " an offense punishable by imprisonment as herein provided." This, in effect, means the commission of either of the offenses specified in the first and second sTibdivisions of § 29-b.^** Those defined in the third, fourth or fifth subdivision cannot well be committed by a bank- rupt.^*" It has been thought also to include the commission of a contempt, though the use of the word " offense " necessarily nega- tives such a view.^*' b. Concealment of property. — (1) What coxstitutes. — To entitle the bankrupt to the privilege of a discharge there must be entire good faith on his part; he must surrender his property 133. In re Rhutasael (T). C, 137. In re Dauchv (D. C, N. Y.), Iowa), 2 Am. B. R. 607, 96 Fed. 507; 10 Am. B. R. 527, 122 Fed. 688. In re Tinker (D. C. N. Y.), 3 Am. B. 138. In re Webb (D. C, N. Y.), R. 580, 99 Fed. 79; In re McCarly 3 Am. B. R. 386. 9fi Fed. 404; In re in. C. 111.), 7 Am. B. R. 40, 111 Fed. Quackenbush (D. C, N. Y.), 4 Am. B. 151. Contra: In re Maples (D. C, R. ?74. 102 Fed. 282. Mont.), 5 Am. B. R. 426, 105 Fed. 139. Note here § 29 of this work. 919. 140. See Bankr. Act, § 29-b(3) (4> 134. Hudson v. Mercantile Nat. (5). Bank (C. C. A., 8th Cir.), 9 Am. B. 141. A contempt, even though pun- R. 432, 56 C. C. A. 250, 119 Fed. 346. ished by imprisonment, is not a crime. 135. In re Wolf (D. C, Pa.), 20 The offense must be one under the Am. B. R. 304, 159 Fed. 299. bankruptcy law. § 29 indicates what 136. See pp. 284-289, posf. constitutes such "offenses." Discharges, when Geanted. 273 § 14-b ( 1 ) ,] Concealment of Property. fully ; he may not retain or conceal any part thereof which should go to his creditors.^** The bankrupt cannot decide for himself whether a specific piece of property may be retained by him, and conceal the existence thereof by omitting it from his schedules; it is his duty to disclose the property and permit the court to determine whether it could go to his creditors. ^^^ To constitute concealment an objection to a discharge, it must be (1) by the bankrupt,^** while a bankrupt or after his discharge — in other words, after the filing of the petition^** — and (2) from his trus- tee, (3) of property belonging to the estate in bankruptcy, and (4) such concealment must be " knowingly and fraudulently " done. The latter is the most important of these elements, and, without clear proof sustaining it, the specifications must be dis- missed.*** Many of the cases involving the question of conceal- ment of assets depend for their determination upon whether the concealment was done " knowingly and fraudulently." If there was an entire absence of fraudulent intent there is no offense. Thus, an omission of include property in the schedules under an honest misitake of law or fact will not bar a discharge.**^ But, if such omission is not satisfactorily explained, it will usually amount to a concealment.*** Failure to schedule or surrender property to 142. In re Breitling (C. C. A., 7th Todd (D. C, Vt.), 7 Am. B. R. 770, Cir.), 13 Am. B. R. 126, 133 Fed. 146; 112 Fed. 315; In re Patterson (D. In re Baudouine (D. C, N. Y.), 3 0., N. Y.), 10 Am. B. R. 371, 121 Fed. Am. B. R. 55, 96 Fed. 536. 921; In re Blalock (D. C, S. Car.), 143. In re Gailey (C. C. A., 7th 9 Am. B. R. 266, 118 Fed. 679. See, Cir.), 11 Am. B. R. 539, 127 Fed. 538; also, In re Beebe (D. C, Pa.), 8 Am. Barton v. Texas Produce Co. (C. C. B. R. 597, 116 Fed. 48; Woods v. A., 8th Cir.), 14 Am. B. R. 502, 136 Little (C. C. A., 3d Cir.), 13 Am. B. Jll^JSS' Vehon V unman (C C. A, r. 742, 134 Fed. 229; In re Talpin 7th Cir. , 17 Am. B. R. 435, 147 Fed. .j. p Tn™^ id Am B Tf wn ^■^'i 694; Matter of Nelson (D. C, N. Y.), <^- *;' /°7>' ^* A^" \ ^- ^^^ ^^^ 23 Am B R 37 • ' "^^ GriflBn Bros. (D. C, 144.' In' re Meyers (D. C, N. Y.), ^^^■) < 19 Am. B. R. 78, 154 Fed. 537. 5 Am. B. R. 4, 105 Fed. 353, holding I*''- I" re Morrow (D. C, Cal.), that a discharge may be granted to a 3 Am. B. R. 263, 97 Fed. 574; In re wife, notwithstanding a concealment Wctmore (D. C, Pa.), 3 Am. B. R. of assets by her husband in managing 700, 99 Fed. 703; In re Blalock (D. her business. Compare In re Hyman C., N. Car.), 9 Am. B. R. 266, 118 (D. C, N Y.), 3 Am. B. R. 169, 97 ^^^- ^''^- ^"t see In re Eaton (D. Fed. 195. C., K Y.), 6 Am. B. R. 531, 110 Fed. 145. In re Webb (D. C, N. Y.), 3 ^^l. Am. B. R. 386, 98 Fed. 404. 1*8- I" ""e I^oyal (D. C., N. Car.), 146. In re Conn., (D. C, Ore.), 6 7 Am. B. R. 106, 112 Fed. 135; In re Am. B. R. 217, 108 Fed. 525; In re Finkelstein (D. C, N. Y.), 3 Am. B. Pierce (D. C, N. Y.), 4 Am. B. R. R- ^00, 101 Fed. 418; In re O'Gara 554, 103 Fed. 64; In re Freund (D. '■^- C-, Ore.), 3 Am. B. R. 349, 97 C, N. Y.), 3 Am. B. R. 418, 98 Fed. ^^^- ^^^- ^°'^ such an explanation, 81; In re Bryant (D. C, Tenn.), 5 ^^^ I" re Miner (D. C, Ore.), 8 Am. /m. B. R. 114, 104 Fed. 789; In re ^- ^- 248, 114 Fed. 988. 18 2Y4 The Law and Peactice in Banketiptcy. Concealment of Property. [§ 14-b (1). the trustee is not per se or ipso facto knowingly and fraudulently concealing it.^*" Whether an omission to schedule property fraudu- lently conveyed amounts to a concealment is a qiiestion; the better opinion is that it does,"" though lapse of time will often be sufficient cause."^ This question often arises where property has been given or transferred by a bankrupt to his wife and omitted from the sched- ules or otherwise concealed. ^''^ Where a bankrupt has property in his wife's name, for the purpose of keeping such property from his creditors, a discharge will not be granted.^"^ It seems, however, that an omission of assets from the schedule, on the advice of counsel, honestly given, is at least a presumptive excuse ; ^°* as where the bank- rupt was advised that his interest in his grandfather's estate was con- tingent and not vested.^°® The advice of counsel is no excuse unless it was based upon a full and truthful disclosure of all the facts per- taining to the omitted assets."^* Where a person prior to filing a petition in bankruptcy conveys property to a third person, to be held, in whole or in part, in secret trust for himself, and fails to schedule such interest, such failure constitutes a knowing and fraudulent conceal- ment from his trustee, while a bankrupt, of property belonging to his estate in bankruptcy, and will preclude his discharge.^^" Eeal property Fresuinption of concealment fer to her did not constitute a eonceal- ariaes from failure to account for ment. property in possession of bankrupt 153. In re Steindler & Hahn (Ref., shortly before adjudication, and not N. Y.), 5 Am. B. R. 63; In re Gil- included in schedules. The sufficiency bert (D. C, Pa.), 22 Am. B. R. 221, of the explanation is in the discretion 169 Fed. 149. of the district judge. Siegel v. Car- 154. In re Schreck (Ref., N. Y.), tel (C. C. A., 8th Cir.), 21 Am. B. R. 1 Am. B. R. 366; In re Berner (Ref., 140, 164 Fed. 691. Ohio), 4 Am. B. R. 383; In re Head- 149. In re Hirsch (D. C, Tenn.), ley, 2 N. B. N. Rep. 684; U. S. v. 2 Am. B. R. 715, 96 Fed. 468. Connor, 3 McLean, 573; In re Kyte 150. Bragassa v. St. Louis Cycle (D. C, Pa.), 23 Am. B. R. 414, 174 (C. C. A., 5th Cir.), 5 Am. B. R. 700, Fed. 867. But see In re Stoddard 107 Fed. 77; In re Skinner (D. C, (D. C, Wash.), 7 Am. B. R. 762 114 Iowa), 3 Am. B. R. 163, 97 Fed. 190; Fed. 486. In re Welch (D. C, Ohio), 3 Am. B. Donbtfnl ownership. — In the R. 93, 100 Fed. 65; In re Ferguson case of In re Alleman (D. C, Pa ) (D. C, N. Y.), 2 Am. B. R. 586, 95 20 Am. B. R. 745, it was held that a Fed. 429; In re McNamara (Ref., bankrupt will not be denied a dis- N. Y. ) , 2 Am. B. R. 566, 95 Fed. 429 ; charge upon the ground of a fraudu- In re Quackenbush (D. C., N. Y. ), 4 lent concealment of property, where Am. B. R. 274, 102 Fed. 282. his ownership is doubtful and, under 151. In re Goodale (D. C, N. Y.), the advice of counsel, the property in 6 Am. B. R. 493, 109 Fed. 783; In re question is omitted from the sched- House (D. C, N. Y.), 4 Am. B. R. ules. 603, 103 Fed. 616. 155. Woods v. Little (C. C. A., 3d 152. In re McCrea (C. C. A., 2d Cir.), 13 Am. B. R. 742, 134 Fed 229. Cir.), 20 Am. B. R. 412, 161 Fed. 155a. Matter of Remmers (C C 246; In re Brown (D. C, Vt.), 15 A., 8th Cir.), 23 Am. B. R. 78 173 Am. B. R. 350, 140 Fed. 383, in which Fed. 484. case it was held that since a Vermont 156. In re Breiner (D. C., Iowa), statute prohibits a contract between 11 Am. B. R. 684, 129 Fed. 155; In re husband and wife, an attempted trans- Dauchy (D. C, N. Y.), 10 Am.' B R. 527, 122 Fed. 688; In re Fleishman DlSCHAKGES, WHEN GeANTED. 275 § 14-b (1).] Concealment of Property. set apart to a divorced wife as alimony is not within the jurisdiction of a court in bankruptcy/'" and a failure to schedule such property does not constitute a concealment so as to defeat the wife's right to a discharge.'"^ Salary of a public officer does not pass to a trustee, and a failure to schedule the amount earned when the petition was filed is not a concealment of assets barring discharge.*'* It is not fraud for a bankrupt to collect insurance commissions and apply them to his own use, where a referee has decided that such commissions do not pass to the trustee, although the referee is subsequently re- versed."'*^ The participation of bankrupt partners in the fore- closure of a chattel mortgage, given anterior to the four months period, being charged as a fraudulent concealment of assets from the trustee, will prevent the granting of a discharge until the validity of the mortgage and the sufficiency of the forecloseure has been passed upon by a court of competent iurisdietion.*'" If a voluntary transfer be made in contemplation of future indebtedness it may amount to a concealment,**^ and so also where it appears that property was con- veyed in fraud of creditors and is held in secret trust.**^ The value of the property concealed is not material if it be shown that it was knowingly and fraudulently done.*'' If property is undervalued the fact may be considered in determining whether a concealment has been committed although it is not itself a concealment.*'* (2) Evidence of concealment oe assets. — A wilful and fraudulent concealment of assets by a bankrupt need only be shown by a fair preponderance of credible evidence.*'' If the (D. C, III.), 9 Am. B. R. 557, 120 prior to filing a petition in bank- Fed. 960; Hudson v. Mercantile Nat. ruptcy, conveys the whole or a part Bank (C. C. A., 8th Cir.), 9 Am. B. of his property to a third party to E. 432, 56 C. C. A., 250, 119 Fed. 346; be held in secret trust for himself, and In re Becker (D. C, N. Y.), 5 Am. fails to schedule it as a part of his B. R. 438, 106 Fed. 54; In re Bemis assets, such an act amounts to a (D. C, N. Y.), 5 Am. B. R. 36, 104 fraudulent concealment of assets Fed. 672; In re Welch (D. C, Ohio), which will defeat his right to a dis- 3 Am. B. K. 93, 100 Fed. 65. Com- charge. Hudson v. Mercantile Nat'l pare In re Kolster (D. C, Nev.), 17 Bank (C. C. A., 8th Cir.), 9 Am. B. Am. B. R. 52, 146 Fed. 138. R. 432, 436, 119 Fed. 346; In re Bemis 157. Audubon v. Shufeldt, 5 Am. (D. C, N. Y.), 5 Am. B. R. 36, 104 B. R. 829, 181 U. S. 575. Fed. 672; In re Welch (D. C, Ohio), 158. In re I^e Claire (D. C, Iowa), 3 Am. B. R. 93, 100 Fed. 65; In re 10 Am. B. R. 733, 124 Fed. 654. Becker (D. C, N. Y.), 5 Am. B. R. 159. In re Doherty (D. C, Ct.), 13 438, 106 Fed. 54. Am. B. R. 549, 135 Fed. 432. 163. In re Lowenstein (D. C, N. 159a. In re Wright (D. C, N. Y.), 2 Am. B. R. 193, 106 Fed. 51; Y.), 24 Am. B. R. 437. In re Becker (D. C, N. Y.), 5 Am. 160. In re Olansky (D. C, N. Y.), B. R. 438, 106 Fed. 54. 20 Am. B. R. 780. 163 Fed. 428. jg*. I„ re Semmel (D. C, Pa.), 9 Y) 2"Am B. KT'*''* * ' ^'°- ^- ^- 351. "8 Fed. 487. 162. In're'Bemer'(Ref., Ohio), 4 *®^- ^" ^^ Greenberg (D. C, Ct.), Am. B. R. 383. 8 Am. B. R. 94, 114 Fed. 773; In re Secret trust. — It has been held on Howden (D. C, N. Y.), 7 Am. B. R. several occasions that where a person. 276 The Law and Practice in Bankeupcty. Continuing Concealment. [§ 14-b(l). testimony is ttat of the banJsrupt alone, and the most that can be said is that the circumstances are suspicious, the objection to a discharge should be overruled.**** Where objecting creditors have made a prima facie case the burden is on the bankrupt to so weaken it by credible evidence as to present a question of fact.*®'^ If it appear that the bankrupt did not act in good faith in with- holding a part of his property from his creditors, the court will not countenance it by permitting his discharge.*** While fraudu- lent intent is essential it does not of itself justify a refusal of a discharge where it is not shown that the assets alleged to have been concealed belonged to the bankrupt's estate.*®* (3) Continuing concealment. — Concealment being possible only if the person is " a bankrupt," strictly, a concealment ac- complished before the bankruptcy is not within the penalty of the sitatute. This limitation has, however, led to the doctrine of " con- tinuing concealment," which is now generally recognized.*"* Although the concealment must have been done while a bankrupt or after discharge, yet where a bankrupt has dis^posed of property prior to bankruptcy but has possession or control of the proceeds subsequent to adjudication which he fails to disclose, there i^ a continuing concealment for which he is amenable to the law.'^* 191, 111 Fed. 723; In re Gaylord (C. it was held that the bankrupt could C. A., 2d Cir.), 7 Am. B. R. 1, 112 not be charged with concealing shares Fed. 668; In re Tillyer (D. C, Pa.), of stock because he had undervalued 17 Am. B. E. 125, 147 Fed. 860. them, but that fact, as well as the It is not necessary to establish fact that he did not name the stock, the concealment of assets beyond was a circumstance of more or less a, reasonable doubt. A fair pre- weight on the question of concealment, pondere of testimony is suflSeient. In if there was further evidence to bear re Delmour (D. C, N. Y.), 20 Am. it out; In re Jacobs (D. C, N. J.), 16 B. R. 405, 161 Fed. 689; Klein v. Am. B. R. 482, 144 Fed. 868. Powell (C. C. A., 3d Cir.), 23 Am. 168. In re Breitling (C. C. A., 7tli B. R. 494, 174 Fed. 640. Cir.), 13 Am. B. R. 126, 133 Fed. 146. 166. In re Kolster (D. C, Nev.), 169. Vehon v. Ullman (C. C. A., 17 Am. B. R. 52, 146 Fed. 138. 7th Cir.), 17 Am. B. E. 435, 147 Fed. 167. In re Leslie (D. C, N. Y.), 694. 9 Am. B. R. 561, 119 Fed. 406. In 170. Thus, see In re Quaekenbush this case it was held that an unex- (D. C, N. Y.), 4 Am. B. R. 274, 102 plained shrinkage in the bankrupt's Fed. 282; In re Bemis (D. C., N. Y.), assets of about $12,000 within a year 5 Am. 1>. R. 36, 104 Fed. 672. of his bankruptcy is insuflScient proof 171. U. S. v. Cohen (D. C., N. Y.), that he had that amount of money 15 Am. B. R. 359, 142 Fed. 983, hold- at the time of filing his petition and Ing that if a bankrupt before the concealed it from his creditors and the bankruptcy has concealed his prop- trustee. See, also, In re Blalock (D. erty, and after his trustee is ap- C, S. Car.), 9 Am. B. R. 266, 118 pointed continues to conceal it, he is Fed. 679; In re Baerncopf (D. C, criminally liable under § 29-b; In re Pa.), 9 Am. B. R. 133, 117 Fed. 975. Jacobs & Verstandig (D. C. Ore.), 17 Undervaluation. — In the case of Am. B. R. 470, 147 Fed. 797; In re In re Sammel (D. C, Pa.), 9 James (D. C, N. Car.), 23 Am. B. Am. B. R. 356, 118 Fed. 457, R. 703, 175 Fed. 894, affd. sub. nom. James v. Stone, 24 Am. B. R. 288. DiSCHAEGES, WHEN GbANTED. 277 S 14-b(l).] False Oath in Proceeding. The word " concealed " is sufficiently elastic to include " continu- ing concealments."^ ^^ Such a concealment once begun neces- sarily continues after the bankruptcy and is^ therefore, " from his trustee." Whether it is also of " property belonging to his estate in bankruptcy " is sometimes a difficult question, and usually turns on the bona fides of the transaction through which possession and title passed from the bankrupt. No hard and fast rule can be phrased ; the cases rest each on its own f acts.^'^^ (4) Miscellaneous oases. — In the foot-notes will be found a number of cases, not previously cited, in all of which the commis- sion of the offense of concealment has been alleged.*^* c. A false oath in the proceeding. — (1) In general. — ^^luch that has been said in the previous paragraphs applies with equal force here. The oath, if available as an objection to a discharge, must be (1) "in or in relation to any proceeding in bank- ruptcy;"*^' and (2) it musit have been knowingly and fraudulently made.*'^® The verification of an answer of a bankrupt, containing 172. In re Jacobs & Verstandig N. Y.), 3 Am. B. R. 586, 99 Fed. 81; (D. C, Ore.), 17 Am. B. R. 470, 147 Fields v. Karter (C. C. A., 5th Cir.), Fed. 797. 8 Am. B. R. 351, 115 Fed. 950; In re 173. In re March (D. C, Vt.), 6 Gross (Ref., N. Y.), 5 Am. B. R. 271; Am. B. R. 537, 109 Fed. 602; In r* In re Heyman (D. C, N. Y.), 4 Am. Adams (D. C, N. Y.), 4 Am. B. R. B. R. 735, 104 Fed. 677; In re Hoff- 696, 104 Fed. 72; In re Fitchard (D. mann (D. C, N. Y.), 4 Am. B. R. C, N. Y.), 4 Am. B. R. 609, 103 Fed. 331, 102 Fed. 970; In re Dews (D., 742; In re Jacobs (D. C, Ore.), 17 C, R. I.), 3 Am. B. R. 691, 96 Fed. Am. B. R. 470, 147 Fed. 797. 181; In re Holstein (D. C, Ct.)-, .8 174. Discharge granted: In re Am. B. R. 147, 114 Fed. 794; In re Locks (D. C, N. Y.), 5 Am. B. R. Greenberg (D. C, Ct.), 8 Am. B. 136, 104 Fed. 783; In re Hirsch (D. R. 94, 114 Fed. 773; In re Young C, N. Y.), 3 Am. B. R. 344, 97 Fed. (D. C, N. Car.), 15 Am. B. R. 477, 571; In re Cornell (D. C, N. Y.), 3 140 Fed. 728. Am. B. R. 172, 97 Fed. 29; In re On appeal: In re Otto (D. C, N. Polakoff (Ref., N. Y.), 1 Am. B. R. J.), 8 Am. B. R. 305, H5 Fed. 860; 358; In re Lesser (C. C. A., 2d Cir.), Osborne v. Perkins (C. C. A., 1st 8 Am. B. R. 15, 114 Fed. 83, revers- Cir.), 7 Am. B. R. 250, 112 Fed. 127; ing s. c. 5 Am. B. R. 330; In re i" "p^r"#7,°''n'?-/.i' ?;,^"->' ^ /-li /T.r ■^'"- B. R. 373, 110 Fed. 143. Countryman (D. C, Iowa), 9 Am. B. 175, Compare, for practice. In re R. 572, 119 Fed. 637; In re Semmei Goodale (D. C, N. Y.), 6 Am. B. R. (D. C, Pa.), 9 Am. B. R. 351, 118 493, 109 Fed. 783. The statement in Fed. 487. the above case that "the facts relied Discharge refused: In re Schenck npon to prove falsity" should be (D. C, Wash.), 8 Am. B. R. 727 118 stated does not mean that evidence Fed. 554; In re Bull winkle (D. C, ™"f* ^« set forth. Matter of Jacob N. Y.), 6 Am. B. R. 756, 111 Fed. ^"^^p^",'"" '^,- ^^l^'J;^' ^^if""" ?• ottA T /-. u i-r, n \t V ^ « ^- ^^' 1^5 Fed. 645 (false oath as to . ' i" "^ ^=^' I?- ^L ^- V.' ^ keeping of books). See In re Kretsch Am. B. R. 156; Ablowich v. Sturs- (p. c., N. Y.), 22 Am. B. R. 284, 172 burg (C. C. A., 2d Cir.), 5 Am. B. R. Fed. 523, holding that n false oath 403, affirming In re Ablowich (D. C, in the proceedings for discharge is not available to prevent a discharge. 178. In re Bryant (D. C., Tenn.), 278 The Law and Peactice in Bankeupott. False Oath in Proceeding. [§ 14-b(l). a false statement and filed after the time allowed by the bank- ruptcy act, does not constitute a false oath.^^'' A discharge in bankruptcy cannot be denied on the ground that the testimony of the bankrupt was evasive, and may have been false.^'^* A false oath may also amount to perjury. A common instance is where a bankrupt siwears that his schedule of property is a statement of " all his estate, both real and personal," and he has knowingly or fraudulently omitted assets therefrom.^''® The evidence must be definite and certain to the effect that the property omitted should have been scheduled as part of the bankrupt's assets.^*" Thus, the same act may be both a false oath and a concealment.**^ The analogy of this objection to a crime usually compels strict pleading and even stricter proof. **^ (2) False oath on foemee examination undee § 7(9). — This same analogy has led to much confusion concerning the right to predicate such an objection on a false oath during the bank- rupt's examination. It seems not to be doubted that on any oath voluntarily taken this objection may rest,*** but it has' been vigor- ously denied that a false oath under compulsion can be made the basis of an objection to a discharge. The earlier cases were quite uniform that it could not; this on the ground that, by § 7(9), the evidence then, adduced could not be used against a bankrupt in a criminal proceeding.*** This view has, however, now been ex- 5 Am. B. E. 114, 104 Fed. 789; In re ' 180. In re Hamilton (D. C.,N. Y.), Salisbury (D. C, N. Y.), 7 Am. B. E. 13 Am. B. R. 333, 133 Fed. 823; In 771, 113 Fed. 833; In re Beebe (D. re Ferris (D. C, Iowa), 5 Am. B. R. C, Pa.), 8 Am. B. R. 597, 116 Fed. 246, 105 Fed. 356; In re Fitchard (D. 48; In re Cohen (D. C, N. Y.), 18 C, N. Y.), 4 Am. B. R. 609, 103 Fed. Am. B. R. 84, 149 Fed. 908; Matter 742; In re Boyden (D. C, Pa.), 13 of liUftig (Ref., Mass.), 15 Am. B. R. Am. B. R. 269, 132 Fed. 991, holding 773. Compare, also, cases in footnote that discrepancy between statement of 146, p. 273, ante. his financial condition made prior to 177. In re Young (D. C, N. bankruptcy ana his schedules is not Car.) 15 Am. B. R. 477, 140 Fed. 728. necessarily evidence of a false oath. 178. In re Cohen (D. C, N. Y.), 181. In re Becker (D. C, N. Y.), 18 Am. B. E. 84, 149 Fed. 908. 5 Am. B. R. 438, 106 Fed. 54. 179. In re Breiner (D. C, Iowa), 182. In re Howden (D. C, N. Y.), 11 Am. B. R. 684, 129 Fed. 155; In re 7 Am. B. R. 191, 111 Fed. 723; In re Gailey (C. C. A., 7th Cir.), 11 Am. Gay lord (D. C, N. Y.), 5 Am. B. R. B. R. 539, 127 Fed. 538; In reRauch- 410, 106 Fed. 833. See, also, this enplat (D. C, P. Rico), 9 Am. B. R. case on appeal, 7 Am. B. R. 195, 111 763; In re Semmel (D. C, Pa.), 9 Fed. 717. Compare Matter of Rem- Am. B. R. 351, 118 Fed. 487; Barton mers (C. C. A., 8th Cir.), 23 Am. B. V. Texas Produce Co. (C. C. A., 8th R. 78, 173 Fed. 484, holding that the Cir.), 14 Am. B. R. 502, 136 Fed. objection need only be sustained by 355; In re Herman (C. C. A., 2d such proof as will overcome the pre- Cir.), 13 Am. B. R. 778, 69 C. C. A. sumption of the honesty of purpose 413, 134 Fed. 566; In re Schofield, of the bankrupt. 147 Fed. 862; In re Gilbert (D. C, 183. See reasoning in cases imme- Pa.), 22 Am. B. R. 221, 169 Fed. 149; diately post. In re Napier (Eef., Ky.), 23 Am. B. 184. In re Goldsmith (D. C, Pa.), E. 560. Discharges, when Gbanted. 2Y9 § 14-b (1).] False Oath in Proceeding. ploded."" It is a torturing of words to call a proceeding on dis- charge a criminal proceeding, merely because the same facts if proven in support of an indictment might result in conviction for crime. The contention that to permit the use of such testimony " would set a trap for the debtor" has been well answered by a distinguished judge to the effect that the opposite rule "would set a trap for the creditors, or else so set the trap that the debtor could get all the bait (the discharge) and yet not spring the trap."^'* (3) Instances of false oath. — The false oath must be on a matter material to the inquiry ,''^ and it has been held that it must have been made in the proceedings in which the bankruptcy of the petitioner was to be adjudicated and his estate administered.^'* But, if the false oath was due to a mistake in fact or the result of honest advice of counsel, a discharge will not usually be refused.'^*' A bankrupt, who omits from his sworn schedule securities which are absolutely worthless, is not guilty of making a false oath.^°" If, the securities omitted are deemed valuable by the bankrupt, evidenced by an effort made to recover them by suit against a pledgee, brought subsequent to the bankrupt's adjudication, his discharge should be denied.""'^ Cases where the bankrupt swears falsely to an account in the proceeding are rare. Usually such an oath would also amount to a false oath proper, and might often be a concealment. There are as yet no authorities in point. Additional eases where this ground of objection has been considered will be found in the foot-note.^'^ 4 Am. B. R. 234, 101 Fed. 570; In re N. Y.), 22 Am. B. E. 613, 171 Fed. Marx (D. C, Ky.), 4 Am. B. R. 521, 599. 102 Fed. 676; In re Logan (D. C, 190a. Matter of Remmers (C. C. Ky.), 4 Am. B. R. 525, 102 Fed. 876. A., 8th Cir.), 23 Am. B. R. 78, 173 185. In re Dow (D. C, Iowa), 5 Fed. 484. Am. B. E. 400, 105 Fed. 889; In re 191. Discharges granted: Bauman Gaylord (D. C, Mo.), 7 Am. B. R. v. Feist (C. C. A., 8th Cir.), 5 Am. 195, 111 Fed. 11/, affirming, s. c, 5 B. R. 703, 107 Fed. 83; In re Cren- Am. B. R. 410, 106 Fed. 833. shaw (D. C, Ala.), 2 Am. B. R. 623, 186. In re Dow (D. C, Iowa), 5 95 Fed. 632; In re Bates (D. C, Ct), Am. B. R. 400, 105 Fed. 889. 5 Am. B. R. 848; In re Troeder (C. 187. Compare, for testimony in C. A., 1st Cir.), 17 Am. B. R. 723, 150 State court. In re Eaton (D. C, N. Fed. 710. But compare In re Roy Y.), 6 Am. B. R. 531, 110 Fed. 731; (D. C, Vt.), 3 Am. B. R. 37, 96 Fed. and, to effect that testimony other 400; and Sellers v. Bell (C. C. A., than by the bankrupt is inadmissible, 5th Cir), 2 Am. B. R. 529, 94 Fed. In re Wilcox (C. C. A., 2d Cir.), 6 801. Am. B. R. 36^, 109 Fed. 628; In re Discharges refused: In re Gross- Strouse, 2 N. B. N. Rep. 64; In re man (D. C, Mich.), 6 Am. B. R. 510, Huber, 1 N. B. N. 431. Ill Fed. 507; In re Gamraan (D. C, 188. In re Blalock (D. C, S. Iowa), 6 Am. B. R. 482, 109 Fed. Car.), 9 Am. B. R. 266, 118 Fed. 679; 312; In re Lesser Bros. (D. C, N. In re Kretsch (D. C, N. Y.), 22 Am. Y.), 5 Am. B. R. 330, 108 Fed. 205, B. R. 284, 172 Fed. 523. (reversed on appeal, 8 Am. B. E. 15, 189. In re Eaton (D. C, N. Y.), 114 Fed. 83). In re Lewin (D. C, 6 Am. B. R. 531, 110 Fed. 731. See, Vt.), 4 Am. B. R. 636, 103 Fed. 852; also, cases cited under foot-note 147, In re Lowenstein (D. C, N. Y.), 2 ante. Am B. R. 193, 106 Fed. 51; In re 190. In re McCrea (C. C. A., 2d Williams, 2 N. B. N. Rep. 206; In re Cir.), 20 Am. B. R. 412, 161 Fed. Goodman (D. C, Pa.), 22 Am. B. R. 246. See also In re Adams (D. C, 570, 171 Fed. 287. 280 The Law and Pbaotice in Bankeupcty. Failure to Keep, Destruction or Concealment of Books. [S 14-b(2). VII. TAIl.VnS TO KEEP, DESTRUCTION OR CONCEAI,MENT OF BOOKS. a. In general. — A bankrupt who, " with intent to conceal his financial condition, destroyed, concealed or failed to keep books of accounts or records from which such condition might be ascer- tained " is not entitled to a discharge.^*^ The amendatory act of 1903 materially modified the original law, and greatly altered the essential elements of pleading and proof. We have indicated these changes in the notes to the text of section 14.^** The subdivision in its original form was highly objectionable, in particular, in that it required proof that the act complained of was " in contempla- tion of bankruptcy,"^** which was held to mean in contemplation of a bankruptcy proceeding. This requirement has been dropped out.*®^ So have the adjectives " fraudulent," as perhaps narrow- ing the meaning of " intent," and " true," as redundant when limit- ing the words " financial condition." These changes, however, by no means bring the law in this regard up to the level of its prede- cessor. It is still necessary to show that the failure to keep books was " with the intent to conceal his true financial condi- tion."^®* The former law, like the English law, made mere failure by a merchant or tradesman to keep proper books of account an objection to discharge; proof of intent was essential only when falsifying books was charged.'^®''^ To sustain this objection, the proof muat now show that (1) the act complained of was done after the passage of the bankruptcy law, (2) by the bankrupt or by some one acting under his' direction, (3) with intent to conceal his financial condition; and (4) the act must consist of either destruction, concealment — which, as has been seen, includes secreting, falsifying, and mutilating*®**- 192. Bankr. Act, § U-b(2), ante, lished in March, 1900, as fol- 19,3. See on«e, p. 250. lows: "The necessity of proving 194. In re Spear (D. C, Vt.), 4 intent to conceal condition, coupled Am. B. R. 617, 103 Fed. 779; In re with the still more difficult element Marx (D. C, Ky.), 4 Am. B. R. 521, of 'contemplation of bankruptcy,' 102 Fed. 676; In re Morgan (D. C, which means bankruptcy per se, and Ark.), 4 Am. B. R. 402, 101 Fed. 982; not mere insolvency, has rendered this In re Berkowitz (Ref., N. Y.), 4 Am. objection all but useless." See In re B. R. 37; Van Ingen v. Sohophofen Alvord (D. C. Conn.), 14 Am. B. R. (C. C. A., 8th Cir.), 12 Am. B. R. 24, 264, 135 Fed. 236. 129 Fed. 352. But see In re Feld- 196. In re Burstein (D. C, Conn.), stein (C. C. A., 2d Cir.), 8 Am. B. 20 Am. B. R. 399, 160 Fed. 765; In R. 160, 115 Fed. 259. re Griffin Bros. (D. C, Ala.). 19 Am. 195. The reasons for these B. R. 78, 154 Fed. 537. changes are indicated in a Re- 197. Law of 1867, § 29, R. S., § port of the Executive Commit- 6,110. tee of the National Association 198. See Bankr. Act, § 1(22). of Referees in Bankruptcy pub- Discharges, when Granted. 281 S14-b(2).] Intent to Conceal Financial Condition. failure to keep books of account or records from which the bank- rupt's condition might be ascertained. b. Act committed after passage of law. — The first of these elements flows by implication from the words of the law.'®* For instance a loss or disappearance of books prior to the enactment of the bankruptcy act will not justify a finding that there has been a failure to keep books with the intent to conceal the financial condition of the bankrupt.^"* The bankrupt's failure to enter loans in the books or records of his business is' not excused by the fact that the loans were made before the bankruptcy act was passed.^**' c. Act by bankrupt. — It is also dear that the act complained of must have been committed by the bankrupt or by some one acting under his direction.^"^ Where it appears that the bank- rupt's books were left by him in his office subject to the control of the trustee, he should not be charged with their concealment, in the absence of proof connecting him with the transaction.^"^ Books left in the bankrupt's safe, of which no one knew the combina- tion but himself, and which remained intact until it came into the hands of the receiver, will be presumed to have been taken out by the bankrupt, and his discharge will be denied.^"* It has been held that a falsifying of books by the bankrupt's partner is not an objection to his discharge.^"® Although if he destroys or muti- lates books of a partneirship of which he is a member, his discharge should be refused.^"* d. Intent to conceal financial condition. — The act complained of must have been done by the bankrupt with intent to conceal his 199. In re Shertzer (D. C, Pa.), fraudulently failed to keep true books 3 Am. B. R. 699, 99 Fed. 706; In re of account from which her financial Lieber (Ref., Pa.), 3 Am. B. R. 217; condition could be ascertained, and it In re Carmichael (D. C, Iowa), 2 was held that his fraud could not Am. B. R. 815, 96 Fed. 594; In re under these circumstances be imputed Shorer (D. C, Ct.), 2 Am. B. R. 165, to her and her discharge should be 96 Fed. 90; In re Stark (Ref., N. Y.), granted. 1 Am. B. R. 180; In re Polakoff (Ref., 203. In re Eades (C. C. A., 7th N. Y.), 1 Am. B. R. 358. Cir.), 16 Am. B. R. 30, 143 Fed. 293. ZOO. In re Prager (D. C, W. Va.), 204. Matter of Lewin (D. C, N. 13 Am. B. R. 527, 134 Fed. 1006. Y.). 18 Am. B. R. 72, 155 Fed. 501. 201. In re Feldstein (C. C. A., 2d 205. In re Schultz, Jr. (D. C, N. Cir.), 8 Am. B. R. 160, 115 Fed. 259. Y.), 6 Am. B. R. 91, 109 Fed. 264; 202. In re Hyman (D. C, N. Y.), In re Garrison (C. C. A., 2d Cir.), 17 3 Am. B. R. 169, 97 Fed. 195, in which Am. B. R. 831, 149 Fed. 178. case it appeared that the business of 206. In re Conley (D. C, Ga.), 9 a bankrupt was conducted entirely by Am. B. R. 496, 120 Fed. 42. her husband; he intentionally and 282 The Law and Peactice in Bankeupcty. What Constitutes Failure, Destruction or Concealment. [§ 14-b(2). financial condition.^"^ This means that the act must have been committed " knowingly."^**^ The dropping out of the word " fraudulent " has made many of the cases no longer in point. Mere scienter and a purpose to conceal, without, however, the addi- tional purpose by such concealment to defraud, are enough. Mere failure to keep books and records is not enough.^"* But if the failure to keep such books is with an intent to conceal the bank- rupt's financial condition, the offense is established,^"®^ and an allegation in the specifications of objections to the effect that the bankrupt did with intent to conceal his financial condition fail to keep books of account or records from which such condition might be ascertained, is sufiicient, although it did not specify what books of account the bankrupt should have kept.^^" e. What constitutes failure, destruction or concealment — The statute itself indicates what will constitute the offense. " Con- ceal" includes "secrete, falsify and mutilate."^" The phrasing here is even broader than was that of the law of 1867. Any act or series of acts with relation to business records which may reason- ably be held to be within the meaning of " destruction," " conceal- ment," " secreting," " falsifying," " mutilation," or " failure to keep " will be within the interdiction of the law. Where a man of business experience and intelligence conducting a business ordi- narily requiring books to be kept, fails to keep them, it will be presumed that he intended to conceal his financial oondition.^^* The failure of the superintendent of a mine to keep books of ac- 207. In re Burstein (D. C, Conn.), enactment of the Bankruptcy Act, In 20 Am. B. R. 399, 160 Fed. 765; In re Prager (D. C, W. Va.), 13 Am. re Griffin Bros. (D. C, Ala.), 19 Am. B. R. 527, 134 Fed. 1,006. B. R. 78, 154 Fed. 537; Godschalk Intent not to be presumed from V. Sterling (C. C. A., 3d Cir.), 12 either bad bookkeeping or mere failure Am. B. R. 302, 129 Fed. 580; In re to keep books. In re Brockman (D Allendorf (D. C, Iowa), 12 Am. B. C, Ky.), 21 Am. B. R 251 — Fed R. 320, 129 Fed. 981 ; In re Rauchen- _. plat (D. C, Porto Rico), 9 Am. B. 209a. In re Goldick (D. C. Pa.) R. 764; In re Feldstein (C. C. A., 2d 21 Am. B. R. 249, 164 Fed. 882! In re' £"":!' ^ f?T ^-^ ^- ^^^' ^^^ ^^^- 259; Hanna (C. C. A., 2d Cir.), 21 Am. Matterof Napier (Ref.,Ky.), 23 Am. B. R. 843, 168 Fed. 238; In re Ji.K. 560. Schachter (D. C, N. Y.), 22 Am B 208. In re Allendorf (D. C, Iowa), R. 389, 170 Fed. 683 12 Am. B. R. 320, 129 Fed. 981; In re 210. Godshalk Co. v. Sterlinff (C ^^""^^r^?--,^! Ct), 12 Am. B. R. C. A., 3d Cir.), 12 Am. B. R.^302 I'na T^ «i , , ,r. r. c ^2^ ^^^- 580; In re Ginsburg (D. C. 209. In re Blalock (D. C, S. Pa.), 12 Am. B. R. 459, 130 Fed. 627: Car.), 9 Am. B. R. 266, 118 Fed. 679; In re Patterson (D. C., NY) 10 T? P Pflf',,?,.^;,' \P' ^^ .^!?- ^'"- ^- »• 371- 121 Fed. 921.'''But a. R. 290, 135 Fed. 885; especially see In re Milgraum v. Ost (D. C. where it appears that the bankrupt Pa.), 12 Am. B. R. 306, 129 Fed. 827* had not been engaged m business for 211. Bankr. Act, § 1 (22) more than three years prior to the 212. In re Alvord (D. C, Ct ) 14 •Am. B. R. 264, 135 Fed. 236. ' Discharges, when Geanted. 283 § 14-b (2).] Burden of Proof. count, which are not required by his personal business, does not in- dicate a fraudulent intent for which he may be denied his discharge."^^ An omission to make entries of payments to or loans from^^''^ rel- atives should be explained. A claim of mere negligence in bookkeep- ing will be rejected.^^* A failure to show by the books a large shrink- age of assets during a short period of time may prevent a discharge.^"* Where a person keeps books in such a condition as to be suspicious on their face, a discharge should be refused,'"^ as where a partnership purchases goods not of a kind in which it dealt, and failed to make entries of such purchases in its books, there is a presumption of an intent to conceal its financial condition.^^^^ The destruction of vouchers or other business papers is as fatal as would be the destruction of books.^'° All books and records which are material to a proper understanding of the bankrupt's financial condition are within the protection of the act.^" The placing of certain books in the cellar as a mere incident of the work in closing out his business has been held not to prevent the bankrupt's discharge.^^* Other cases where this ob- jection has been urged against a discharge will be found in the foot- note.-'" The practitioner is, however, warned against those cases which turn on the existence of a " contemplation of bankruptcy " or a " fraudulent " intent to conceal financial condition. These elements, as has been seen, are no longer the law. f. Burden of proof. — In this as in other grounds of objection to a discharge the burden is on the objecting creditor, and the act must be shown by a clear preponderance of evidence ;^^" but not, 213. In re McCrea (C. C. A., 2d 124 Fed. 945. Cir.), 20 Am. B. R. 412, 161 Fed. 246. 217. In re Conley (D. C, Ga.), 9 213a. Pomerkrantz v. Hopkins (D. Am. B. R. 496, 120 Fed. 42. C, Pa.), 21 Am. B. R. 857, 168 Fed. 218. In re Murray (D. C, Conn.), 444; In re Koelle (D. C, Pa.), 22 20 Am. B. R. 700, 162 Fed. 983. Am. B. R. 515, 171 Fed. 257. 219. Discharges granted: Bauman 214. Matter of Haskell (D. C, N. v. Feist (C. C. A., 8th Cir.), y.), 20 Am. B. R. 914, 164 Fed. 301. 5 Am. B. R. 703, 107 Fed. 83; 214a. In re Brod (D. C, Ga.), 21 In re Corn (D. C, Ga.), 5 Am. B. R. Am. B. R. 426, 166 Fed. 1011. 478, 106 Fed. 143; Sellers v. Bell (C. 215. In re Leopold (Ret, N. Y.), C. A., 5th Cir.), 2 Am. B. R. 529, 94 5 Am. B. R. 278. Fed. 801; In re Dews (D. C, R. I.), Books improperly kept. — If the 3 Am. B. R. 691, 96 Fed. 181; In re discharge is opposed on the ground Liafleehe (D. C, Vt.), 6 Am. B. R. 483, of books improperlyi kept, and 109 Fed. 307; In re Rauchenplat (D. the evidence does not sustain the C, P. Rico.), 9 Am. B. R. 763; In re objection, the discharge will not Garrison (C. C. A., 2d Cir.), 17 Am. be denied on the ground that he B. R. 831, 149 Fed. 178. kept no books. In re Halsell Discharges refused: In re Morgan (D. C, Tex.), 13 Am. B. R. (D. C, Ark.), 4 Am. B. R. 402, 101 107, 132 Fed. 562. See, also. In re Fed. 982; In re Idzall (D. C, Iowa), Hamilton (D. C, N. Y.), 13 Am. B. 2 Am. B. R. 741, 96 Fed. 314; In re R. 333, 133 Fed. 823. Kenyon (D. C, Iowa), 7 Am. B. R. 215a. In re Schachter (D. C, N. 527, 112 Fed. 658; In re McBachron Y.), 22 Am. B. R. 389, 170 Fed. 683. (D. C, Wis.), 8 Am. B. R. 732, 116 216. Godshalk Co. v. Sterling (C. Fed. 783. C. A., 3d Cir.), 12 Am. B. R. 302, On appeal: In re Pierce, ante; In 129 Fed. 580 (as to checks and check re Feldstein (D. C, N. Y.), 6 Am. B. stubs) ; Matter of Studebaker (C. C. R. 458, 108 Fed. 794; affirmed s. c.j A., 2d Cir.), 11 Am. B. R. 384, 127 8 Am. B. R. 160, 115 Fed. 259. Fed. 951, reversing 10 Am. B. R. 205, 220, In re Boasberg (Ref., N. Y.), 284 The Law and Peacticb in Bankeuptcy. False Statement of Credit. [§ 14-b (3). it is thought, with the same degree of certainty as in the objections already discussed. VIII. FALSE STATEMENT OF CREDIT. a. In general. — It is provided in subdivision 3 of subsection a of this section as amended by the Amendatory Act of 1910 that a bankrupt's discharge may be refused if he has " obtained money or property on credit upon a materially false statement in writing made to any person or his representative for the purpose of obtaining credit from such person." This new objection to a discharge was added by the amendment of 1903, and will prove the most valuable only to care- ful traders.^^^ b. Elements of proof: pleading. — The creditor alleging this objection must prove that the bankrupt (1) obtained money or prop- erty on credit, that he did so on (3) a statement of his financial con- dition relied on by the creditor, that such statement was (3) in writing, that it was (4) materially false, and (5) that it was so made for the purpose of obtaining credit from such creditor. To these should be added the usual elements, that the obtaining of property must have been (6) by the bankrupt or by some one duly authorized by him.^22 The .effect of this new objection will be that every trades- man, whose credit is not unquestioned, will be asked to give a mer- cantile statement as a condition precedent to dealing, and, it may be suggested, a new statement with every transaction. The specifications of objections should set out the false representation, and the name of the person alleged to have been defrauded."!" It has been held that this objection to a discharge may be pleaded by any creditor.^" c. Meaning of the clause. —(1) In general.— Nothing like this clause appears in any previous bankruptcy law."' Even the English law has no equivalent, though there, one who at the time of contracting a debt had not a reasonable expectation of paying it, is denied a discharge."" This ground for denying a discharge was evidently leveled particularly at the practice of making false statements of one's financial condition by a borrower or buyer for the purpose of obtaining from the person to whom such false statement is made, 1 Am. B. R. 353; In re Phillips (D. 223. In re Levev (DC N Y1 C, N. Y.), 3 Am. B. R. 542, 98 Fed. 13 Am. B. R. 312, 133 Fed 572 844; In re Garrison (C. C. A., 2d 224. In re Harr (D C Mo ) 16 Cir.), 17 Am. B. R. 831, 149 Fed. 178. Am. B. R. 213, 143 Fed. 421 221. See Report of Ex. Com. of Tte right to object on this Nat. Ass'n of Referees in Bankruptcy, ground is not confirmed to the person published in March, 1900, p. 17. defrauded Dut belongs to anv mrtv 222. In re Scott (D. C, Del.), 11 in interest. In re Carton & Co (D Am. B R. 327, 126 Fed. 981 (in which C, N. Y.), 17 Am. B. R. 343, 148 Fed! case it was held that the amendment 63. would apply to a false statement to 225. Compare In re Steed (D C obtain credit made before the amend- N. Car.), 6 Am. B. R. 73 107 Fed' ment became a law ) . See, also, In re 682. ' Petersen (Ref., Minn.), 10 Am. B. R. 226. Enijlish Bankruptcy Act of 355. 1890, § 8 (3) (d). Discharges, when Granted. 285 § 14-b (8).] False Statement of Credit. the articles or money derived " on credit ".^^"a In effect, the objection means that, where a creditor has been defrauded in a given sale on credit by the purchaser's material misstatements as to his financial condition given for the purpose of obtaining credit for the goods pur- chased, the creditor has the option of interposing a bar to a discharge affecting all debts, or of permitting the discharge to be granted, and then asserting his claim on after-acquired property, on the ground that his claim is not affected by the discharge. (2) Obtaining property on credit. — The phrase "obtaining property on credit" includes a borrowing of money on time. Thus, a bankrupt, who obtained a loan of money from a bank on the faith of a materially false statement in writing, will be denied a dis- charge.^^' even though made prior to the four months' period, if the property was obtained within that time.'""'^ It has been held that an intent to defraud is essential ; the word " false " means more than " erroneous " or " untrue ", and imports an intention to deceive, and a materially false statement in writing must have been knowingly or intentionally untrue to bar a discharge.''''' (3) A statement of financial condition. — A mere letter, if otherwise within the clause, would seem enough. Details are unneces- sary, but the statement ought at least to inform the creditor of the net worth of the debtor, or perhaps of the total of his assets and liabilities. In a majority of cases, these statements will be made on blanks calling for items, and so phrased as to avoid some of the legal pitfalls noted later. A bankrupt, who issues a statement of his financial condition under his signature and does not mention loans made to him by relatives and friends, will be denied a discharge, although the aggregate amount of said loans would not have materially curtailed his credit.^'* (4) In writing. — Of this term the framers of the amendatory act of 1903 have said : " This objection, as is proper, will be of no avail when a commercial report is obtained in the haphazard fashion of a hasty interview. The statement must be in writing, which, of course, implies the signature of the person to be charged thereby." How far a statement made by an employee will avail depends, of course, on the authority given him by his employer and the latter's acquiescence. Where alleged false statements do 226a. Firestone v. Harvey (C. C. 429, 165 Fed. 607 revg. In re Gilpin A., 6th Cir.), 23 Am. B. R. 468, 174 (D. C, Pa.), 20 Am. B. R. 374, 160 Fed. 574. Fed. 171; In re Terens (D. C., Wis.), 227. In re PfafSnger (C. C. A., 6th 22 Am. B. R. 895, 175 Fed. 495- Fire- Cir.), 19 Am. B. R. 309, 154 Fed. 328. stone v. Harvey (C. C. A., 6th Cir.), reversing 19 Am. B. R. 41 ; In re 23 Am. B. R. 468, 174 Fed. 574. Darevski (D. C, Pa.), 22 Am. B. R. Contra In re Shaffer (D. C. W Va )' 571, 171 Fed. 288. 22 Am. B. R. 147, 169 Fed. 724, hoid- Property has been held to include ing that the good or mistaken faith anything of value, hence money is with which a false statement is made property within the meaning of the cannot be taken into consideration, phrase obtaining property on credit. The effect of an erroneous statement Pinie v. Chicago Title & Trust Co., of financial condition may be waived 182 U. S. 438, 5 Am. B. R. 814. In re Russell (C. C. A., 2d Cir ) 23 227a. In re Terens (D. C, Wis.), Am. B. R. 850, 176 Fed 253 22 Am. B. R. 895, 175 Fed. 495. 229. Matter of Brener (D C N 228. Gilpin v. Merchants Nat. Y.), 20 Am. B. R 644 ' " Bank (C. C. A., 3d Cir.), 21 Am. B. R. 286 The Law and Pkactic in Bankeuptcy. False Statement of Credit. [§ 14-b(3). not appear by the specifications of objection to have been made in writing they are not within the provisions of this section and the discharge should not be refused.^'" It must be shown that the bankrupt's alleged false statement in writing was either know- ingly false or made so recklessly as to warrant a fiinding that he acted fraudulently. ^^^ (5) Materially false. — The falsity of the statement must be proven; and so it is thought that it should be shown that the debtor knew it to be false, or at least did not know it to be true.^^^ The word " false " means no more than not true.^^' It is not usually necessary to show intention to deceive, but intention is always material as an element of proof.^^* Intention to deceive is, of course, different from a purpose "of obtaining such property on credit." The statement also must be material to the trans- action ;2== it must have been, if not the moving cause of the sale on credit, a contributing cause, L e., the seller must to an extent at least have relied on it.^'* A fair test would seem to be: was the statement so "materially false" as to warrant a suit for the rescission of the sale? Numerous decisions in the State courts determining what are actionable false representations may be con- sulted with profit. (6) Foe the puepose or obtaining ceedit from the CEEDiTOE. — This element will presumably always exist where a sale results from the statement. At the same time, there must be some proof of intention, though it need not amount to intent to defraud. This interesting question, as to how far a false state- ment once made may be availed of by a creditor who subsequently 230. In re Lewis (D. C, N. Y.), 234. In re Epstein (D. C, Ark ) 2 Am. B. R. 711, 163 Fed. 137. 6 Am. B. R. 60, 109 Fed. 878, contra 231. Thus, where a bankrupt in to In re Russell (Ref., N. Y.), 5 Am. preparing a statement in writing of B. R. 608; Turner v. Ward, 154 U. s! his financial condition for the purpose 618. Compare, also, In re' Steed (D of obtaining property on credit, in C, N. Car.), 6 Am. B. R. 73, 107 good faith, omitting an existing liabil- Fed. 682. ity, he will not be denied a discharge 235. Addington v. Allen 11 Wend under § 14-b(3). In re Collins (D. C, (N. Y.) 375; Bruce v. Burr 67 N Y Ark.), 19 Am. B. R. 688, 157 Fed. 120. 237; Hanna v. Rayburn, 84 111. 533 232. Schwabacher v. Riddle, 99 236. In re Goodhile (D. C, Iowa) III. 343; Lynch v. Mercantile Trust 12 Am. B. R. 380, 130 Fed. 782. See Co., 18 Fed. 486; Stone v. Covell, 29 In re Ganey (D. C, N. Y.), 4 Am. B. Mich. 359; Cooper v. Schlesinger, 111 R. 576, 103 Fed. 9.30. Compare Peo- U. S. 148; In re Russell (Ref., N. Y.), pie v. Haynes, 11 Wend. 557; Phelps 5 Am. B. R. 608; Matter of Brener v. Court, 83 N. Y. 436- Matter of (D. C, N. Y.), 20 Am. B. R. 644. Knplain (D. C, Pa.), 15 Am. B. R. 233. In re Gilpin (D. C, Pa.), 20 534, 141 Fed. 463. Am. B. R. 374, 160 Fed. 171. Debts not Apfected by a Discharge. 287 § 14-b (4).] Fraudulent Transfer. sells a second or other bill of goods, without asking a new state- ment or for a correction of the old,^'" is not important since the Senate's amendments to the Eay bill. The crucial words are " such property." They limit this objection in a way that will prove troublesome in practice. Statements made to mercantile agencies, unless, perhaps, in the form of special reports, the giving of which by the purchaser can be proven to have been " for the purpose " of the identical credit in question, will be of no value as objections to discharges ^^'^ although it has been suggested that the statement need not be made directly to the person defrauded.^'* The striking out from the Eay bill by the Senate of the words " or of being communi- cated to the trade" is significant. (7) By the bankrupt. — This follows from the nature of the transactions here, in a sense, interdicted.^'" A false statement by one partner, made in the course of the partnership business will not be a bar to the discharge of a partner who did not participate therein and had no knowledge thereof,^*" but vrill be a bar to the discharge of the partnership.^^"* IX. FBAUDTTLENT TRANSFER. a. In general. — If a bankrupt at any time within the four months period has "transferred, removed, destroyed or con- cealed, or permitted to be removed, destroyed or concealed, any of his property with intent to hinder, delay or defraud his creditors," his discharge should be refused. Under the law of 1867, the making of both a fraudulent preference and a fraudulent transfer were objections to discharge. The original draft of the amendatory bill of 1903 did the same.^*^ Under the definition of transfer,"^ it is difficult to conceive of a preference that does not amount to a transfer, and, if fraudulent, either transaction will come within the present clause. The words of subdivision 4 are doubtless a definition or explanation of the words "fraudulent transfer" there used. Hinder, delay or defraud creditors applies 237. In re Russell (Ref., N. Y.), Barton, 47 N. Y. 167; Perley v. Cat- 5 Am. B. R. 608. lin, 31 111. 533. 237a. In re Russell (C. C. A., 2d 240. Hardie v. Swafford Bros. Drv Cir.), 23 Am. B. R. 850, 176 Fed. 253; Goods Co. (C. C. A., 8th Cir.), 21 Am. Matter of Napier (Ref., Ky.), 23 Am. B. R. 457, 165 Fed. 588 rev'g In re B. R. 560. Hardie & Co. (D. C, Tex.), 16 Am 238. In re Dresser & Co. (C. C. B. R. 313, 143 Fed. 553; Frank v A., 2d Cir.), 16 Am. B. R. 561, 140 Michigan Paper Co. (C. C. A, 4th Fed. 383, s. c., 13 Am. B. R. 616. Cir.), 24 Am. B. R. 261. Compare In re Pincus (D. C, N. Y.), 240a. Frank v. Michigan Paper 17 Am. B. R. 331, 147 Fed. 621; In re Co. (C. C. A., 4th Cir.), 24 Am. B. Carton & Co. (Spec. M., N. Y.), 17 R. 261. Am. B. R. 343. Compare In re Kyte 241. Compare Report of Ex. Com. (D. C, Pa.), 23 Am. B. R. 414, 174 of National Association of Referees in Fed. 867. Bankruptcy, previously mentioned. 239. As to fraud practiced by an 242. See Bankr. Act, § 1 (25). agent of the bankrupt, see Durst v. 288 The Law and PKAoriCE in Bankeupcty. Fraudulent Transfer; Proof. [§U-b(4). to the whole body of the bankrupt's creditors, and not a conversion of property belonging to a single creditor.''^* b. Elements of proof. — The creditor alleging this objection must show, in substance, the commission of the first act of bank- ruptcy. The variances between the phrasing here and that of § 3-a(l) are immaterial. "Destroyed" occurs here only, but it adds nothing, as " removed " may include it and " concealed "^** surely does. The words of limitation refer to the four months bankruptcy period, discussed in section three, ante. How far an adjudication on the first act of bankruptcy will be res adjudicata on an objection to a discharge need not be considered ; a court which finds the first will not easily be persuaded to refuse to find the second. Nor is any discussion as to the technical meaning of the words important. Any transfer, destruction, or concealment of property within the inhibition of the statute of frauds, if within the four months period, will, if seasonably pleaded and duly proven, bar a discharge. If the transfer be made within the limited period it will be a bar although not knowingly and fraudulently made.''** If made prior to the four months period it is no bar, even if made for the purpose of defeating a just claim."*' But in Ifew York a conveyance of real estate made by a bankrupt long anterior to the four months period, with intent to hinder, delay, and de- fraud creditors, may be alleged as a ground for objection to his discharge, where the conveyance is not recorded until within the four months period ;^*^ and whether such conveyance was made with intent to hinder, delay, and defraud creditors, is a question of fact."** A preferential transfer consisting of a payment of money on account of an existing indebtedness, in the absence of evidence that such payment was made in fraud of creditors is not within the meaning of this clause."*® An assignment of stock by a bankrupt to his wife to repay borrowed money has been held not to defeat his right to a discharge."'" If the trustee failed in his action to set aside a fraudulent transfer, such transfer cannot 243. Matter of Berry & Co. (D. C, Y.), 19 Am. B R. 103. 152 Fed 733 N. Y.), 15 Am. B. K. 360. 146 Fed. 248. Matter of McKane (D. C, N. Y.). 19 Am. B. R. 103, 152 Fed. 733. 623 244. Bankr. Act, § 1(22). _._ -.. ., , ,, , 245. In re Gift (D. C, Pa.), 12 ,/*»• *'^''"«'- '>f ^^h" (". C, Am. B. R. 244, 130 Fed. 230. Mass.), 16 Am. B. R. 340, 144 Fed. 246. In re Brumbaugh (D.C.Pa.), 503, affirming 15 Am. B. R. 786. See 12 Am. B. R. 204, 128 Fed. 971. See also In re Battle (D. C, N. Car.), 19 In re Dauohy (C. C. A., 2d Cir.), 11 Am. B. R. 40, 154 Fed. 741. Am. B. R. 511, 130 Fed. 532; In re 250. In re Hedley (D C N Y 1 f5ri69 Fed''727^'-^' "' """• ^^ ^^ '^ ^'"- ^- ^- *»»' ''^ ^'^'i 314. 247. Matter of McKane (D. C, N. Discharges, when Gbanted. 289 § 14-b(5).] Previous Discharge. be set up as a bar to a discharge.-"^ Cases cited in the proper paragraphs of secftion three of this work will be found valuable.^^^ Other cases are collected in the foot-note.^"* c. Are general assignments objections to discharges? — A question which may arise under this clause is whetheo" a previous general assignnaent is a bar to a discharge. That such an assign- ment is a transfer is elementary; that it amounts to an iritent to hinder or delay creditors is now thought well settled.^^* It would seean to follow, that if within the interdicted period, a general assignment is a sufficient objection to a discharge. The question is fraught with large results as one of the defects in the adminis- tration of the law rests on the proneness of failing debtors to assign under the State systems, thus accomplishing troublesome conflicts of jurisdiction and often mulcting their estates in double fees. An authoritative ruling that general aissignments are suffi- ciently fraudulent to bar a discharge would thus solve many problems. Debtors desiring discharges would not then care to assign. X. PRETIOTTS DISCHARGE IN A VOLTTNTARY BANKRUPTCY WITHIN SIX YEARS. a. In general. — The purpose of subdivision 5 is clear. Through oversight, the original law permitted discharges ad libitum, and instances of two and even three discharges to the same person in as many years are on record. The English law does not permit a second application, no matter after what duration of time.^®* The law of 1867 allowed it only when the bankrupt's estate was suffi- cient to pay seventy per cent., but three-fourths of his creditors in value could consent to a discharge on his paying a smaller 251. In re Tiffany (D. C, N. Y.), B. R. 66, 112 Fed. 323; as, however, 17 Am. B. R. 296, 147 Fed. 314. reversed by Carling v. Seymour Lum- 252. See pp. , ante. ber Co. (C. C. A., 5th Cir.), 8 Am. B. 253. In re Freeman, Fed. Cas. R. 29, 113 Fed. 483; Scheuer v. Smith 5,082; In re Hannahs Fed. Cas. (C. C. A., 5th Cir.), 7 Am. B. R. 384, 6.032; In re Wolf skill. Fed. Cas. 17,- 112 Fed. 407; In re Milgraum v. Ost 930. Compare In re Diehl, 15 Fed. (D. C, Pa.), 12 Am. B. R. 306, 129 234. And see In re Jones, Fed. Cas. Fed. 827 (as to sufficiency of speeifica- 7,446; In re Miller (D. C, Va.), 14 tions). Compare also, under the for- Am. B. R. 329, 135 Fed. 591. mer law, In re Chadwiek et al., Fed. 254. In re Gutwillig (D. C, N. Cas. 2,569; In re Pierce, Fed. Cas. Y.), 1 Am. B. R. 785, 90 Fed'. 475; s. 11,141; Haas v. O'Brien, 66 N. Y. 597; c., on appeal, 1 Am. B. R. 388, 92 Fed. Mayer v. Hellman, 91 U. S. 496. 337; In re Harper (D. C, N. Y.), 3 255. English Act of Bankruptcy of Am. B. R. 804, 100 Fed. 266; In re 1890, § 8(3) (k). Macon Sash, etc. (D. C, Ga.), 7 Am. 19 290 The Law and Peactice in Bankeuptcy. Previous Discharge ; Measure of Time, [§ 14-b (5). amount.^"" The present clause is apparently an effort to omit the too harsh provisions of the former, and, at the same time, to escape the dangers lurking in any devise which calls for the consent of creditors.^'' b. Effect and application. — The amendment of 1903 was not retroactive, but only fixed a new condition of discharge in ease of petitions filed after its passage.^"' As to its effect where the creditors petition, but the bankrupt either consents to an adjudication or peti- tion, and is adjudicated while the involuntary proceeding is pending, quaere? If application for a discharge has been made and it has neither been granted nor refused, the limitation of the clause would not seem applicable. If an application for a discharge had been re- fused in one proceeding the question of the bankrupt's right to discharge from the same debts in a subsequent proceeding is res ad- judicata."^^ The discharge in the subsequent proceedings must except all debts provable in the first bankruptov' and which could have been discharged therein.'=»a ^nd the fact that a debt proved in the first proceeding was put in judgment after a refusal of the bankrupt's dis- charge, does not create a new debt so as to entitle the bankrupt in the second bankruptcy proceeding to retry his right to a discharge from such debt.^°" And where a discharge has been granted in voluntary proceedings a second discharge cannot be granted within six years in an involuntary proceeding.^"^ c. Measure of time — The six years unquestionably begin to run from the date of the order granting the discharge; the time is thus to be measured between such date and the second discharge, not the date of filing a second petition in bankruptcy.^*^ Where, within five years of his discharge, a voluntary bankrupt is again adjudicated a bankrupt, upon his own petition, his motion for leave to withdraw the proceedings because he could not obtain a 256. Act of 1867, § 30, R. S., § 260. In re Kuffler (D. C N J ) 5.116- 19 Am. B. R. 181, 153 Fed. 667, aff'd' 257. See Report of Ex. Com. of 22 Am. B. R. 289, 168 Fed. 1021 ; In National Association of Referees in re Stone (D C, Ore.) 23 Am b' R Bankruptcy, p. 18, previously men- 24, 172 Fed. 947; In re Schnabel (D tioned. C, N. Y.), 23 Am. B. R. 22, 166 Fed" 258. In re Seaholm (C. C. A., 1st 383: In re Van Borries (D C Wis ) Cir.), 14 Am. B. R. 292, 136 Fed. 144. 21 Am. B. R. 849, 168 Fed 718 259. Kuntz V. Young (C. C. A., 8th 261. Matter of Neelv IT) C TJ Cir.), 12 Am. B. R. 505, 131 Fed. Y.), 12 Am. B. R. 407, 134 Fed 667 • 710; In re Weintraub (D. C, N. J.), In re Seaholm (CCA 1st Cir )' 13 Am. B. R. 711, 133 Fed. 1,000; In 14 Am. B. R. 292, 136'Fed 144- ukt- re Kuffler (D. C, N. Y.), 19 Am. B. ter of Haase (D. C. N Y ) 17 Am R. 181, 153 Fed. 667; Matter of Julius B. R. 528, 155 Fed. 553 Silverman (C. C. A., 2d Cir.), 19 262. In re Little (CCA 7th Am. B. R. 460, 157 Fed. 675; In re Cir.), 13 Am. B. R. 640 137 Fed'521- Elby (D. C, Iowa), 19 Am. B. R. In re Jordan (D. C , Pa ) l-i Am W 734, 157 Fed. 935; Matter of Elkind R. 449, 142 Fed. 292. The six vea7s & Schwartz (C. C. A., 2d Cir.), is to be measured backward from the 23 Am. B. R. 166, 175 Fed. 64. time of the hearing. Matter of Haase 259a. In re Pullian (D. C, Tenn.), (D. C, N. Y ) 17 Am R R WH i « 22 Am. B. R. 513, 171 Fed. 595. Fed. 553.'' ' ^^ ^^^' ^^^ DiSCHABGES, WHEN GbANTED. 291 § 14-b(6).] Refusal to Obey or Answer. discharge therein " within six years " after the granting of the former discharge, will be denied where his creditors object.*** XI. REFUSAL TO OBEY A ULWFUL ORDER, OR TO ANSWER A MATERIAL QUESTION APPROVED BT THE COURT.aei a. In general. — The nearest equivalent to this new objection is found in the act of 1841, whereby a discharge might be denied a bankrupt who should " wilfully omit or refuse to comply with any orders or directions of such court.*** Refusal to obey or to answer are in despite of the court, and the bankrupt may well say he thereby became liable for nothing more than a contempt. The amendatory act has added another consequense. Recalcitrancy is now also an objection to his discharge. But it must be " in the proceedings in bankruptcy." b. Refusal to obey. — This seems to include failure to answer questions, provided the order requiring the answer is lawful. As has been seen, the words " lawful orders " occur elsewhere in the act. Whether the order is lawful or not will often be the only question. If authorized in words or by implication from the stat- ute, it will be. Contempt of court, provided the order ignored was lawful, under this clause, becomes thus in effect an available ob- jection to discharge. It is suggested, however, that mere neglect, not amoimting to refusal to obey, would not be sufficient. c. Refusal to answer.— This is not essentially different from refusal to obey. On refusal to answer a proper question, the court wiU usually order the bankrupt to answer. These word® were inserted as a means to compel replies where the bankrupt asserts his privilege.*** A bankrupt's refusal to answer a question, upon the ground that it will tend to degrade and incriminate him, will prevent his discharge, although he subsequently signifies his will- ingness to answer.**^ But where there is nothing to show that a bankrupt, in giving evasive and disrespectful answers to questions concerning his property wilfully concealed testimony, preventing his creditors from obtaining the property, his conduct is not 263. Matter of Smith (D. C, N. 265. Act of 1841, § 4. Y.), 19 Am. B. R. 63, 155 Fed. 688. 266. See p. 192, ante. 264. Note remarks of Judge Braw- 267. Tn re Weinreb (C. C. A., 2d ley, in In re Nachman (D. C, S. Cir.), 18 Am. B. R. 387, 153 Fed Car.), 8 Am. B. R. 180, 114 Fed. 995. 363. 292 The Law and Practice in Bankbupcty. Granting Discharge; Costs. [§ 14. ground for refusing to grant him a discharge.^®* This clause is not in conflict with the fifth amendment to the constitution.^** Xn. THE DISCHARGE. a. In general. — The granting or withholding of discharge is within the sound judicial discretion of the judge.^^" If the judge sustainis the specifications or any of them, an order refusing the discharge is granted and entered ; such an order precludes another application in the same proceeding.^''^ If he overrules them, an order of discharge follows. A discharge may not be refused be- cause the bankrupt hasi been dilatory in bringing the matter to a hearing,^ ''^ or because one or more debts will not be released by {^273 'pjjQ insanity of the bankrupt does not affect his right to a discharge.^'* The referee's findings are not usually reversed except for palpable error.^^* Unlike the certificate under the former law, the discharge of to-day is silent as to the debts affected thereby.^ ''^ Its effect caQ only be determined when it is asserted as a bar elsewhere.^^^ Where a bankrupt has been denied a discharge in one proceeding he cannot in a second proceeding be discharged from debts provable in the former proceeding,^ '^^ even though they are barred by the statute of limitations.^''® A discharge may be amended after the term at which it was granted.^*" b. Costs. — Costs on contested applications for discharge are 268. Matter of Fanning (D. C, N. Am. B. E. 345, 133 Fed. 1,017. Y.), 19 Am. B. R. 55, 155 Fed. 701. 275. In re Covington (D. C, N. 269. In re Dresser (C. C. A., 2d Car.), 6 Am. B. R. 373, 110 Fed. 143. Cir.), 16 Am. B. R. 561, 145 Fed. 276. See Form No. 59, and com- 1,021. pare Audubon v. Schufeldt, 181 U. S. 270. Woods V. Little (C. G. A., 3d 575, 5 Am. B. R. 829. See, also, In re Cir.), 13 Am. B. R. 742, 134 Fed. 229. Claff (D. C, Mass.), 7 Am. B. R. 128, A discharge should not be granted 111 Fed. 506. until the specifications of objection 277. See under § 17, post, and thereto have been disposed of. In re compare for rulings in advance of dis- Randall (D. C, Pa.), 20 Am. B. R. charge on application for stays, under .S05, 159 Fed. 298. § 11, and later under this section,. 271. Matter of Feigenbaura (C. C. "Effect of the Discharge." A., 2d Cir.), 9 Am. B. R. 595, 57 C. 278. In re Kuffler (D. C, N. Y.),. C. A. 409, 121 Fed. 69, reversing 7 16 Am. B. R. 305, 144 Fed. 445; Blu- Am. B. R. 339. menthal v. Jones, 19 Am. B. R. 288 272. In re Wolff (D. C, Cal.), 13 208 U. S. 64. Am. B. R. 95, 132 Fed. 396. 279. In re KufiBer {D. C, N. Y.),. 273. In re Blumberg (D. C, 19 Am. B. R. 181, 153 Fed. 667. Tenn.), 1 Am. B. R. 633, 94 Fed. 476. 280. In re Kaufman (D. C, N. 274. In re Miller (D. C, Pa.), 13 Y.), 14 Am. B. R. 393, 136 Fed. '262! DiSCHAEGES, WHEN GeANTED. 293 § 14.] Effect of Discharge. discretionary, and are often granted ;^*^ but not to the attorney for the bankrupt out of the estate.^** c. Vacating discharge. — It has been held that, when, after dis- charge granted, it appears that a creditor has been bought off, this is prima facie evidence that the debtor was not entitled to dis- charge, and his discharge will be vacated.^** Xin. EFFECT OF DISCHARGE. a. In general. — A discharge goes to the remedy; it does not cancel the debt. It destroys the remedy on all debts except those falling within the terms of § 17-a, discussed later.^^* Its effect on partnership debts and the debts of corporations has already been consideired ;^*^ its effect on the liabilities of codebtors will be examined later.^** b. On liens. — A discharge is personal to the debtor. It follows, therefore, that a lien in good faith is not affected thereby.^*^ This doctrine should not, however, be confused with the other which avoids all liens through legal proceedings if within four months of the banfcruptcy.^®* Liens continuing valid, it often becomes necessary to destroy their effect on possible after-acquired prop- erty. Hence, the provisions in the State laws, permitting pro- ceedings to compel the cancellation of docketed judgments barred by a discharge.^^® 281. In re Wolpert (Ref., N. Y.), 286. See § 16 of this work. 1 Am. B. R. 436; Bragassa v. St. 287. Compare Bankr. Act, § 67-d; Louis Cycle Co. (C. C. A., 5th Cir.), Paxton v. Scott (Sup. Ct. Nebr.), 10 5 Am. B. R. 700, 107 Fed. 77; In re Am. B. R. 80; Elsbree v. Burt (Sup. Gaylord (D. C, N. Y.), 5 Am. B. R. Ct., R. I.), 9 Am. B. R. 87; Howard 805. V. Cunliff (Ct. App., Mo.), 10 Am. B. In the Eastern District of New R. 71, 69 S. W. 737 ; so held in Illi- Tork a creditor upon filing speciflea- nois in respect to an assignment of tions of objection to the granting of future earnings, Mallin v. Wenham, a bankrupt's discharge, is required, 13 Am. B. R. 210, 200 111. 252; but under Rule 41, to deposit with the see Leitch v. No. Pac. Ry. Co., 14 referee a sum suflScient to guarantee Am. B. R. 409, 103 N. W. 704; In re that the expenses of the reference Home Discount Co. (D. C, Ala.), 17 will be paid. In re Fritz (D. C, N. Am. B. R. 168, 147 Fed. 538; the lien Y.), 23 Am. B. R. 84, 173 Fed. 560. of an execution levied before bank- 282. In re Brundin (D. C, Minn.), ruptcy would not be released by the 7 Am. B R. 296, 112 Fed. 306. bankrupt's discharge. Bassett v. 283. In re Dietz (D. C, N. Y.), 3 Thackara (Sup. Ct., N. J.), 16 Am. B. Am. B. R. 316, 97 Fed. 563. R. 786. 284. See, for a peculiar case. In re 288. See Bankr. Act § 67-f. Claff (D. C, Mass.), 7 Am. B. R. 128, 289, For instance, see § 1,268 of 111 Fed. 506. For instance, a debt the N. Y. Code of Civil Proced- for clothing purchased by the bank- ure; Hussey v. Judson, 11 Am. B. rupt for his children could not be R. 521, 43 N. Y. Misc. 370; Matter sued after his discharge. Sehellenberg of Peterson (Surr. Ct., N. Y.), 22 V. Mullaney, 16 Am. B. R. 542, 112 Am. B. R. 547; only judgments N. Y. App. Div. 384; a Surrogate's entered before discharge are affected court has jurisdiction and it is its by this section. Howe v. Noyes, 15 duty to give effect to a discharge. Am. B. R. 103, 47 N. Y. Misc. 338, 93 Matter of Peterson (Surr. Ct, N. N. Y. Supp. 841. In Georgia the lien Y.), 22 Am. B. R. 547. of a judgment obtained within four 285. See pp. 110, 125, ante. 294 The Law and Peactice in Bankeupcty. Effect of Composition. [§ 14-c. c. Discharge must be pleaded. — Being a bar to the remedy it must be pleaded.^*" The better practice is to procure a stay of all pending suits and to stay those that may be brought while the proceeding is pending, and then, when the discharge is granted, to plead it.^** It seems, however, that a judgment entered after a petition is filed, but before the discharge, is a mere debt, and the discharge can be used as a bar to proceedings to enforce it. A judg- ment entered after the discharge, no matter when the suit was begun, is valid even as to the discharge; by not pleading it, the defendant has waived its benefits. These wellnrecognized prin- ciples are also considered elsewhere.^^^ XIV. BFFECT OF COMPOSITION. This subject has already been discussed in another plaee.^'* A composition in bankruptcy may be pleaded in bar of an action upon a debt discharged, and in order to be available it must be so pleaded.^^* So long as an order confirming a composition stands, it must have the effect given it by this section, viz., the discharge of the bankrupt from his debts, " other than those agreed to be paid by the terms of the composition and those not affected by a dischange," and the order of confirmation can only be set aside within the time limited by section 13.^*^ months of filing the petition in bank- 21 Am. B. E. 278, 127 App. Div. 163, ruptcy is not barred by the defendant's 111 N. Y. Supp. 465. discharge. McKenney v. Cheney, 11 292. See under § 17, post. Am. B. K. 54, 118 Ga. 387; In re 293. See under § 12, p. 232, ante. Weaver (D. C, Ga.), 16 Am. B. R. 294. Consolidated Rubber Tire Co. 265, 144 Fed. 229. v. Equipment Co., 19 Am. B. R. 862, 290. In re Rhutassel (D. C, 864, 121 N. Y. App. Div. 764. Iowa), 2 Am. B. R. 697, 96 Fed. 597. 295. In re Jersey Island Packing 291. See, generally § 11 of this Co. (D. C, Cal.), 18 Am. B. R. 417, work. As to effect of § 1268 of N. Y. 152 Fed. 839. Code of Civ. Pro., see Walker v. Muir, SECTION FIFTEEN. DISCHARGES, WHEN REVOKED. § 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. Analogons provisions: In V. S.: Act of 1867, § 34, R. S., § 5120; Act of 1841, § 4; Act of 1800, § 34. In Eng.: Act of 1890, § 8(8). Cross references: To the law: §§ 2(12), 13, 14, 21-f, 2g-b, 64-C. To tbe General Orders: None. To the Forms: None. SYlfOPSIS OF SECTION. DISCHARGES, WUBSt REVOKED. I. Comparative Legislation. a. Revocation under English act. b. Under our former laws. II. Jurisdiction to Revoke Discharge. a. Collateral attach. b. Jurisdiction to revoke is exclusive, III. Meaning of Section. a. In general. h. Parties in interest. c. Undue laches. d. Within one year. e. Upon a trial. f. Obtained through the fraud of the bankrupt. g. Facts did not warrant discharge. IV. Grounds for Revocation. a. Fraud as only ground. b. What constitutes fraud for such purpose. c. Knowledge of fraud. 295 296 The Law and Pkaotice in Bankeupcty. Jurisdiction to Revoke Discharge. [§ 15. V. Practice. VI. Effect of Revocation of Discharge. a. In general. b. Meaning of § 64-c. I. COMPARATIVE LEGISULTION. a. Revocation under English act — There is no equivalent sec- tion in the English law, though a bankrupt's discharge may be revoked in certain cases as a penalty.^ b. Under our former laws — Our law of 1800, in effect, per- mitted the impeachment of a discharge when or where pleaded on any grounds which might have been urged against it in the court of bankruptcy. The act of 3 841 provided for a like impeachment on a showing of " some fraud or a wilful concealment by him of his property, . . . contrary to the provisions of this act." The law of 1867, for the first time, provided for a direct proceeding to revoke. The sole ground of revocation, as under the present law, was that the discharge " was fraudulently obtained." The prac- tice on such applications was also provided for; and the limitation was two years, instead of one.^ II. JintlSSICTION TO REVOKE DISCHARGE. a. Collateral attack — The decisions under the law of 1867 on the question as to whether a discharge could be collaterally at- tacked were not entirely uniform, though the weight of authority was that a discharge once granted was not subject to attack else- where.^ There can be little doubt that this is the rule under the present law.* The very nature of the proceeding results in the doctrine that the granting of a discharge is an adjudication be- tween the bankrupt and all parties duly scheduled or with notice, amounting to res adjudicata that no other court will allow to be impeached.^ Besides, the present law, like its predecessor, declares 1. Eng. Act of Bankruptcy § 8(8) ; 772; Beardsley v. Hall, 36 Conn 270 General Rules, 240(3), 244-a. 4. In re Shaffer (DC N Car ^ 2. § 34, Act of 1867, R. S., § 5,120. 4 Am. B. R. 728, 104 Fed.' 982; Cus- 3. Dusenberry v. Hoyt, 53 N. Y. tard v. Wigderson, 17 Am B R 337 521; Black v. Blazo, 117 Mass. 17; 130 Wis. 412. Corey v. Ripley, 57 Me. 69; Comraer- 5. Hudson v. Bingham, 8 N B R oial Bank v. Buokner, 20 How. 108; 494, and cases there cited; Reed v In re Witkowski, Fed. Cas. 17.920; Bullington, 49 Miss. 223 and cases Stevens V. Brown, 11 N. B. R. 568. cited. ' f'ont^-a: Perkins v. Gay, 3 N. B. R. DlSCHAKGES, WHEN REVOKED. 297 § 15.] Meaning of Section. that such discharge, " not revoked, shall he evidence of the juris- diction of the court, the regularity of the proceedings, and of the fact that the order waa made."® b. Jurisdiction to revoke is exclusive. — It follows, also, under well-known canons of interpretation, that, this method of revoca- tion being pirescribed, it excludes all other methods in other courts,'' provided the invalidity of the discharge is based on one or more of the grounds specified in the act.* It also excludes any other method amounting to an actual revocation, even in the court of bankruptcy. It seems, however, that such a court has still the usual jurisdiction, where there is no other remedy, to vary, recall, or annul its orders, including, of course, a discharge, if application is seasonably made and justice requires it.* In actual practice, the only difference between such an annulment and a revocation proper is that, in the former, a valid discharge may subsequently be granted; while, in the latter, the determination is finaJ, subject, of course, to appeal. m. MEANING OF SECTION. a. In general. — The striking similarity between this section and § 13, relative to the setting aside of a composition, both in phras- ing and in purpose, should be noted. So also should the fact that the revocation of a discharge lifts the bar as to all debts, while § 17 chiefly has to do with those debts to which a discharge is never a bar.^" This section does not apply where the discharge results by operation of law fo-om the confirmation of the bank- rupt's offer of composition." The meaning of the various words and clauses is briefly discussed below. b. " Parties in interest."— This phrase is used elsewhere in the statute. It may mean more than " creditor," but usually is an 6. Bankr. Act, § 21-f. Custard v. C, N. Y.), 9 Am. B. R. 601, 121 Fed. Wigderson, 17 Am. B. R. 337, 130 942. But compare In re Rudwiek (D. Wis. 412. C, Mass.), 2 Am. B. R. 114, 93 Fed. 7. Corey v. Ripley, 57 Me. 69; 787. See, also, for time limitation, Commercial Bank V. Buckner, 20 How. In re Hawk (C. C. A., 8th Cir.), 8 108; Nicholas v. Murray, Fed. Cas. Am. B. R. 71, 114 Fed. 916. 10,223; Way v. Howe, 4 N. B. R. 677, 10. See § 17, post; In re Mussey 108 Mass. 502. (D. C, Mass.), 3 Am. B. R. 592, 99 8. Poillon V. Lawrence, 77 N. Y. Fed. 71; In re Rhutassel (D. C, 207. Iowa), 2 Am. B. R. 697, 97 Fed. 957. 9. In re Dupee, Fed. Cas. 4,183; In 11. In re Jersey Island Packing Co. re Buchstein, Fed. Cas. 2,076; In re (D. C, Cal.), 18 Am. B. R. 417 152 Dietz (D. C, N. Y.), 3 Am. B. R. Fed. 839. 316, 97 Fed. 563; In re Bimberg (D. 298 The Law and Peactice in Bankkupcty. Undue Laches; Within One Year. equivailent. It includes only those peirsons whose rights would be barred by the discharge.^^ Only such persons can apply for a revocation.'^ A creditor is not prevented from being a party in interest because his claim is barred for failure to prove it within a year from the adjudication as required by § 57-n.'* It must appear that the creditor was such at the time of the bank- ruptcy.*" A bankrupt cannot surrender or vacate his discharge.*'* He may revive a discharged debt by a new promise, or waive his discharge by failing to plead it when sued, but he cannot vacate the order of discharge.*® c. " Undue laches." — The meaning of this phrase, which, how- ever, did not occur in the former law, is indicated by the cases decided under it, some of which are cited in the foot-notes.*'^ Each case turns on its own facts.*® It will at once be seen that these words are a limitation on those discussed in the next paragraph. Laches may prove a bar inside the year. A failure to prove a provable claim by a creditor who had notice of the proceedings ma'^ constitute laches.*® d. "Within one year." — This is a limitation and is strictly construed.^" The year undoubtedly begins to run from the date 12. Compare Bankr. Act, § 17; In 'parties in interest,' within the mean- re Fowler, Fed. Gas. 4,999. ing of the statute." 13. In re Monroe (D. C, Wash.), 15a. Compare In re McKee (D. C, 7 Am. B. R. 706, 114 Fed. 398; Ar- N. Y.), 21 Am. B. R. 306, 165 Fed. rington v. Arrington (D. C, N. Car.), 269, where the court re-opened a dis- 13 Am. B. R. 89, 132 Fed. 200; In re charge upon the petition of the bank- Chandler (C. C. A., 7th Cir.), 14 Am. rupt. B. E. 512, 138 Fed. 637. 16. In re ShaflFer (D. C, No. Car.), 14. In re Bimberg (D. C, N. Y.), 4 Am. B. R. 728, 104 Fed. 982. 9 Am. B. R. 601, 121 Fed. 942. But 17. In re Buchstein, Fed. Cas. see Arrington v. Arrington (D. C, 2,076; In re Murray et al.. Fed. Cas. No. Car.), 13 Am. B. R. 89, 132 Fed. 9,953; In re Mclntire, Fed. Cas. 200, holding that where a wife failed 8,823; In re Beck, 31 Fed. 554. See, to prove her claim for alimony in the also, under the present law. In re bankruptcy proceedings of which she Hawk (C. C. A., 8th Cir.), 8 Am. B. had notice, her petition to have her R. 71, 114 Fed. 916; In re Upson (D. husband's discharge set aside must be C, N. Y.), 10 Am. B. R. 758, 124 Fed. dismissed. 980; In re Griffin Bros. (D. C, Ala.), 15. In re Chandler (C. C. A., 7th 19 Am. B. R. 78, 154 Fed. 537. Cir.), 14 Am. B. R. 512, 138 Fed. 637, 18. In re Oleson (D. C, Iowa), 7 in which the court said: "We are of Am. B. R. 22, 110 Fed. 796. the opinion that the petition should 19. Arrington v. Arrington (D. C, have shown that the petitioners had N. Car.), 13 Am. B. R. 89, 132 Fed. at the time provable debts against the 200. bankrupt, which were affected by his 20. Text cited in Matter of Bim- discharge. Otherwise they are not her (D. C, N. Y.), 9 Am. B. R. 601, 121 Fed. 942. Discharges, when Revoked. 299 § 15.] Grounds for Revocation; Fraud. of the order of discharge.^^ While an application for revocation thus cannot be made after the year has elapsed, it is thought that application to the court to vary or annul the order may be made after that time, though a court will properly refuse such an appli- cation when plainly for the purpose of avoiding this limitation.^^ e. " Upon a trial." — The right to a jury trial in bankruptcy cases is fully discussed later.^* It is very doubtful wiiather, undeir the present law, an application for revocation of a discharge can be submitted to a jury.^* As stated elsewhere, a hearing before the judge or a special master is a trial.^® But the referee, as such, can no more hear such an application than he can one for a dis- charge. f. " Obtained through the fraud of the bankrupt." — Tkeee words are not essentially different from those in the former law.*' Fraud is the only ground for revoking a discharge, as will appear hereafter.*^ g. Facts did not warrant discharge. — The section by these words makes it incumbent upon the applicant to plead and prove that the facts did not warrant the discharge.^* These w", and expressly disap- acting as an officer or in any fiduciary f™''"' °^ ^^'^ statement in the text; capacity "^^^ "^^^ affirmed in Harper v. 138 See p. 315, ante. And com- ^'«^" 's^',^; t'/'L^"'^' '' ^"'• pare Qhapman v. Forsyth, 2 How. ?,„ T 'J A ^ S®' ^^ ^- ^- ^• 202; Hennequin v. Clews, 111 V. S. ?t v ^ ,« a ^^°^ Wenman (D. C, 676; In re Brown, Fed. Cas. 1,979; g"/-'' ^^ ^°'- ^- »■ ^90, 153 Fed. In re Basch (D. C, N. Y.), 3 Am. B. ," -, R. 235, 97 Fed. 761; In re Bullis, 7 ,„ ®-.^°'''®, ^- Lowell, 48 Mass. Am. B. R. 238, 68 N. Y. App. Div. \^l' ^'"^^o^^ v. Brown, 66 Me. 373; 608 Johnson v. Auditor, 78 Ky. 282; "A factor or agent who sells the '^°'^'^^W^^^^^' ^4 Va. 692. 133. Richmond v. Brown, 66 Me. 373; Morse v. Lowell, 48 Mass. 152. Debts not Affected by a Disohaege. 329 § 17.] Pleading Discharge. attorneys,"* executors,*^" guardians/** and trustees in gen- eral."' The debt, however, should be due from the trustee, executor, administrator, or guardian in his official capacity.'^* It has been held that the " fiduciary capacity " here referred to re- lates to that of a trustee of an express trust.^** When a partner- ship is dissolved by the death of one of the partners the survivor becomes a trustee and holds the partnership moneys in a " fiduciary capacity " for the representatives of the deceased.^*" But it is well settled that the sureties on the bonds of such trustees are not bound to a fiduciary obligation, and a discharge of the surety will be an available bar.**' On the other hand, partners"^ and bankers,"* like agents, factors,^** and commissionmen, do not usually act in a fiduciary capacity. After a discharge in bank- ruptcy the burden of proving that the debt was created by fraud, or by one acting in a fiduciary capacity, is on the plaintiff.^*® IV. PLEADING DISCHARGE. a. In general. — This subject is discussed elsewhere.^** A dis- charge being only available in bar, it must be regularly pleaded.^*'' Under the former law, the method was prescribed.^** Now, though there is no certificate, any form of plea corresponding to the prac- 134. Flanagan v. Pearson, 42 Tex. Cas. 16,516; Steele v. Graves, 68 Ala. 1; HeflFner v. Jayne, 39 Ind. 463; 21; Reitz v. People, 72 111. 435; Fow- White V. Piatt, 5 Deu. (N. Y.) 274. ler v. Kendall, 44 Me. 448; McMinn Contra: Wolcott v. Hodge, 81 Mass. v. Allen, 67 N. C. 131. 547. 142. Pierce v. Shippee, 90 111. 371; 135. Crisfield v. State, 55 Md. 192; Hill v. Sheibley, 68 Ga. 556; Gee v. Laramore v. McKinzie, 60 Ga. 532. Gee, 84 Minn. 384. And compare Amoskeag Mfg. Co. v. 143. Shaw v. Vaughan, 52 Mich. Barnes, 49 N. H. 312. 405; Maxwell v. Evans, 90 Ind. 596. 136. Carlin v. Carlin, 8 Bush 144. In re Butts (D. C, N. Y.), (Ky.), 141; Halliburton v. Carter, 55 10 Am. B. R. 16, 120 Fed. 966; Har- Mo. 435; Simpson v. Simpson, 80 N. rington & Goodman v. Herman (Mo. C. 332; In re Maybin, Fed. Cas. 9,337. Sup.), 72 S. W. 546. 137. Flagg V. Ely, 1 Edm. Sel. Cas. 145. Sherwood v. Mitchell, 4 Deu. 206; Pinkston v. Brewster, 14 Ala. 435. 315; Kingsland v. Spalding, 3 Barb. 146. See under § 14, ante. Ch. (N. Y.) 341. 147. For general remedies under a 138. Coleman v. Davis, 45 Ga. discharge under present law, see Bank 489; Madison V. Dunkle, 114 Ind. 262; of Commerce v. Elliott (Sup. Ct., Amoskeag Mfg. Co. v. Barnes, 49 N. Wis.), 6 Am. B. R. 409, and compare H. 312. Collins v. Mc Walters, 6 Am. B. R. 130. Matter of Wenman (D. C, N. 593, 35 N. Y., Misc. 648. See, also, Y.), 16 Am. B. R. 690, 153 Fed. 910. Dimock v. Revere Copper Co., 117 U. 140. Haggerty v. Badkin (C. Ch., S. 559; Horner v. Spellman, 78 III. N. J.), 18 Am. B. R. 302. 206, 410; In re Wesson, 88 Fed. 855. 141. Ex parte Taylor, Fed. Cas. 148. See Act of 1867, § 34, R. S., 13,773; U. S. V. Throckmorton, Fed. § 5,119. 330 The Law and Practice in Bankeupctt. Revival of Discharged Debt. [§17 tice of the court in which it is entered will be sufficient. A certi- fied copy of the order of discharge or confirming the composition, with brief allegations identifying it and fixing the time, is the usual method.^^' A reply or replication to an answer setting up a discharge, as that the debt sued on is for fraud, is not necessary in the code States ; proof of that fact may be made without such a plea.^*" It must appear that the liability pleaded against existed at the time of the bankruptcy. A discharge can only be pleaded by the bankrupt or his privies in title.*^' b. As dependent on time. — If the suit is pending at the time of bankruptcy, it may be stayed until the discharge is granted.^^^ If not stayed and a judgment is entered before discharge, the dis- charge may be availed of as a bar to further remedies on the judg- ment.^^^ The same is true if the action is begrm after the bankruptcy. If the suit is commenced after the discharge, a stay cannot be granted, and the discharge itself must be pleaded.^^* Where, however, the cause is on appeal when the discharge becomes available, it usually will not act as a bar, though this depends on the practice and law of each State. ^''^ The usual method of plead- ing where the discharge was not available in time is by motion to open default and for leave to interpose a plea in bar by answer original or supplemental.^^® Such an application is addressed to the discretion of the court and may be denied, if there has been a long delay in making it,^^^ or on jurisdictional grounds. It will not be granted where the judgment antedates the bankruptcy and then resulted in a vested lien.*^® V. REVIVAL OF DISCHARGED DEBT BY JXEW PROMISE. This is the converse of failure to assert a discharge in bar. A debt discharged is not a debt paid. The moral obligation remains, 149. Bryant v. Kingston, 86 N. v. Harding, 130 U. S. 699. W. 531; Morse v. Cloyes, 11 Barb. 154. Dimock v. Revere Copper Co., (N. Y.) 100; Stollv. Wilson, 38 N. J. 117 U. S. 559. 198. For effect of order as evidence, 155. Wolf v. Stix, 99 U. S. 1 ; Cor- see § 21-f, post. nell v. Dakin, 38 N. Y. 253; Bank v. 150. Argall v. Jacobs, 87 N. Y. Onion, 16 Vt. 470; Haggerty v. Morri- 110; but is otherwise in the common- son, 59 Mo. 324. law States, Cutter v. Folsom, 17 N. H. 156. Boynton v. Ball, 121 U. S. 139. 457 ; Holyoke v. Adams, 59 N. Y. 233 ; 151. Upshur V. Briscoe, 138 U. S. Richards v. Nixon, 20 Pa. St. 19; Fel- 365; Fleitas v. Richardson, 147 U. S. lows v. Hall, Fed. Cas. 4,722. 550. See, also, Baer v. Grell (Mun. 157. Mcdbury v. Swan, 46 N. Y. Ct., N. Y.), 6 Am. B. R. 428. 200. 152. See p. 221, ante. 158. Barstow v. Hansen, 2 Hun 153. Wolf V. Stix, 99 U. S. 1; Hill (N. Y.), 333. Debts not Affected by a Discharge. 331 § 17.] Revival of Discharged Debt. and is a sufficient consideration for a new promise to pay.*'" An oral promise will be sufficient, unless a written promise is re- quired by local statute. ■'®° Whether oral or in writing, it must be definite, express, distinct, and unambiguous.-"** It would not be sufficient to make a conditional offer of payment which was not accepted by the creditor.**^ Cases under the former law were numerous and will prove as valuable under this.*®^ 159. Mutual Reserve, etc., v. Beat- v. Winkley, 73 Mass. 460; Thornton ty (C. C. A., 9th Cir.), 2 Am. B. R. v. Nichols and Lemon (Sup. Ct., Ga.), 244, 93 Fed. 747; Dusenberry v. Hoyt, 11 Am. B. R. 304. 53 N. Y. 521; Marshall v. Tracy, 74 162. International Harvester Co. v. 111. 379; Maxim v. Morse, 8 Mas&. Lyman (Sup. Ct., Minn.), 10 Am. B. 127 ; In re Merriman, 44 Conn. 587. R. 450. 160. Smith v. Stanchfield (Sup. 163. See Jersey City Ice Co. v. Ct., Minn.), 7 Am. B. R. 498; Henly Archer, 122 N. t. 376; Otis v. Garlin, v. Lanier, 75 N. C. 172; Apperson v. 31 Me. 567; Wheeler v. Wheeler, 28 Stewart, 27 Ark. 619; Mandell v. 111. App. 385; Willis v. Cushman, 115 Levy (N. Y. App. T.), 14 Am. B. R. Ind. 100; Craig v. Seitz, 63 Mich. 549. 727; Cambridge Institution v. Little- 161. In re Lorillard (C. 0. A., 2d field, 60 Mass. 210; Dusenberry v. Hoyt, Cir.), 5 Am. B. R. 602, 107 Fed. 677; 53 N. Y. 521; Badger v. Gilmore, 33 Tompkins v. Hazen, 5 Am. B. R. 62, N. H. 361; Murphy v. Crawford, 114 165 N. Y. 18; Smith v. Stanchfield Pa. St. 496; Shuman v. Strauss, 52 (Sup. Ct., Minn.), 7 Am. B. R. 498; N. H. 404. See, also, article in the In re Collier, 93 Fed. 191; Al- National Bankruptcy News and Re- len v. Ferguson, 18 Wall. 1; Churcji ports for February 15, 1900. SECTION EIGHTEEN. PROCESS, PLEADINGS, AND ADJUDICATIONS. § 1 8. Process, Pleadings, and Adjudications. — a Upon the filing of a petition for involuntary bankruptcy, service thereof, with a writ of subpoena, 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 tveek for two consecutive weeks, and the return day shall be ten days after the last publication unless the judg& 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 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 juiry trial is given by this act, and make the adjudi- cation 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 1. Here the words "in equity" 2. Here the word "five" was sub- were stricken out by the amendatory stituted for the word " ten " by such act of 1903, and the words in italics amendatory act. substituted. "Amendments of 1903 in italics. 332 Peooess, Pleadings, and Adjudications. 333 § 18.] Synopsis of Section. 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 forth- with 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 dis- trict in which the petition is filed at the time of the filing, the cQerk shall forthwith refer the case to the referee. AnalogouB proTisions: In U. S.: As to service of process, Act of 1867, § 40, R. S., § 5025 (as amended by Act of June 22, 1874) ; Act of 1841, § 1; Act of 1800, § 3f; As to appearances, pleading, trial, and adjudica- tion. Act of 1867, §§ 41, 42, R. S., §§ 5026 (as amended by the Act of June 22, 1874), 5028, 5029, 5030, 5031; Act of 1841, § 1; Act of 1800, § 3. In Eng.: Act of 1883, § 7(1), General Rules 153, 154, 155, 156, 156-A; As to appearances, pleading, and trial, § 7(2) (3) (4) (5), General Rules 157-169; As to receiving order, § 8(1), General Rules 176, 177; As to adjudication, § 20(1), General Rules 190, 192, 192- A, 193. Crou references: To the Law: §§ 1(2) (9) (20), 2(1), 3, 4, 5, 19, 21-b-C, 22, 31, 32, 38, 59, 69. To the General Orders: II, III, IV, V, VI, VII, VIII, IX, XI. To the Forms: Nos. 1, 2, 3, 4, 5, 6, 7, 11, 12, 14, 15, SYNOPSIS OF SECTION. PROCESS, PLEADINGS, AND ADJUDICATIONS. I. Practice in General. II. Scope and Limitation of Section. a. Scope. b. lAmitation of section. III. Petitions. a. In general. b. Framing petitions. IV. Process and Service. a. In general. b. Facts alleged. c. Petitions to be filed. d. Petition confers jurisdiction. e. Amendments of petitions. (1) When allowed. (2) Practice. 334 The Law and Peactice in Uankeupcty. Synopsis of Section. [J 18. f. When returnable. g. Service of process. (1) In geneeal. (2) See VICE by publication. (3) SeBVICE on COEPOEATION8, INFANTS, LUNA- TICS, ETC. (4) Seevice on non-joining paetneb. (5) Seevice on absentees. (6) Effect of seevice on jubisdiction in pee- sonam and in eem. (7) Meaning of amendments of 1903. (8) Effect of delay in seevice. (9) Defects in subpoena oe seevice. (10) Pboof of seevice. V. Appearances and Pleadings. a. Who may appear and plead. b. Ejfect of voluntary appearance by bankrupt. c. When to appear and plead. d. How appearances are made. e. Pleadings which may he entered; answer to demurrer. (1) In geneeal. (2) Amendments. (3) Answee oe demubeee. VI. Verification of Pleadings. a. In general. b. Verification by attorney. VII. Trials in Involuntary Cases. a. Without a jury. b. Trial by jury. c. Trial by referee or special master. VIII. Adjudication or Dismissal. a. In general. h. Adjudication on voluntary appearance. c. Dismissal after trial. d. Dismissal by consent. e. Intervention by other creditors. f. Effect of adjudication generally. g. Effect of adjudication on rights of creditort. h. Vacating of adjudication. Phooess, Pleadings, and Adjudications. 335 § 18.] Scope and Limitation. IX. Defaults. a. Where the judge is in the district or division. b. Where the judge is ahserU. X. Trials in Voluntary Cases. a. In general. b. Voluntary petition while involuntary petition pend- ing. XI. Order of Reference and Effect. I. FKACTICE IN GEKEBAL. The practice under the present law differs so much from that under the law of 1867, that any extended reference to the latter would but confuse. Practice in bankruptcy is regulated largely by the General Orders and Forms,^ supplemented by local rules and sometimes additional forms, and, where none of these apply, by the equity practice in the United States courts.* Throughout this work, an effort is made to explain the practice suggested by each section of the law and the paragraphs on " Practice " found elsewhere should always be consulted. It may be suggested, how- ever, to practitioners in the code States, that the technical observ- ance of rules and formulas, there made so much of by both the bar and the bench, will generally not be necessary in bankruptcy practice. A dear understanding of the remedy desired and a com- mon sense method of seeking it will usually be suflScient, even though there be modal slips or omissions. Numerous forms sup- plementing the official forms will be found in " Supplemental Forms," post. n. SCOPE AND LIMITATION OF SECTION. a. Scope. — This section has only io do with such practice as is incident to a proceeding in bankruptcy from the moment a petition is duly filed to the moment that petition is either dismissed or re- sults in an adjudication coupled with a reference to the referee. In involuntary cases this time is inappreciable. In involuntary cases it may extend through months. Further, though thus limited, § 18 is silent as to certain procedure usually availed of in involun- 1. See cross-references to General circumstances of any particular case. Orders and Forms, just before the 2. See Equity Rules, post; First schedule. See, also. General Order Nat. Banlc of Philadelphia v. Abbott XXXVIII, providing that the forms (C. C. A., 8th Cir.), 21 Am. B. R. annexed to the General Orders shall 436, 165 Fed. 852; Westall v. Avery be observed and used with such altera- (C. C. A., 4th Cir.), 22 Am. B. B. tions as may be necessary to suit the 673, 171 Fed. 626. 336 The Law and Practice in Bankeupcty. Limitation of Section; Petitions. [§ 18. tary cases, as that on stays and seizure of assets ; and the succeed- ing section is controlling on jury trials. b. Limitation of section. — For convenience of reference the limitations of § 18 are here set forth. It does not have to do with: 1. Who may and who may not file a voluntary petition; for that, see §§ 4-a, 59-a; or 2. Who may and who may not file an involuntary petition; for that, see § 59-b; or 3. Against whom and when an involuntary petition may he filed; for that, see §§ 3-b, 4:-b; or 4. In what court a petition must be filed; for that, see § 2(1) ; or 5. Whether and, if so, how petitions may he filed hy or against partners or corporations; for that, see §§ 4-b, 5-a; or 6. The jurisdictional allegations in voluntary petitions; for that, see §§ 2(1), 4-a, 5-a, and, for the schedules to accompany the same, § 7(8) ; or 7. The jurisdictional allegations in involuntary petitions; for that, see §§ 2(1), 3-a-b, 4-b, 5-a, 59-b; or 8. The office for filing and the number of copies to be filed; for that, see § 59-a in voluntary cases, and § 59-c in involuntary cases, and, for schedules, § 7(8) ; or 9. The answer and procedure thereon when less than three cred- itors petition; for that, see § 59-d-e; or 10. The intervention of creditors other than the petitioning creditors; f oir that, see § 59-f ; or 11. The dismissal of petitions other than on the merits; for that, see § 59-g; or 12. The (a) interference with the alleged bankrupt's property pending adjudication; or (h) stays other than against suits; or (c) stays against suits; for these, see §§ 2(7) (15), 11 ; or 13. The appointment of receivers or the custody of the bank- rupt's property before adjudication; for that, see §§ 2(3) (15), 3-e, 69. III. PETITIONS. a. In general. — The allegations in and the manner of drawing petitions is further discussed under sections three, four, five and fifty-nine of this work. The specific allegations to be made to meet the requirements of such sections are there more fully considered. It will only be necessairy at this place to consider those rules which are of general application. Pbocess, Pleadings, and Adjudications. 337 § 18-a.] Process and Service. b. Framing petitions — General Order V provides that " all petitions and the schedules filed therewith shall be printed or writ- ten out plainly, without abbreviation or interlineation, except such abbreviation or interlineation may be for the purpose of refer- ence. IV. PBOCESS AND SERVICE. a. In general. — Theire is no need of process in voluntary cases ; an adjudication usually follows and a reference is forthwith made to the referee. On the filing of an involuntary petition, the clerk must at once issue a subpoena. The official forms should, where possible, be used ; in some districts it is the practice to refuse to consider petitions unless they are on the prescribed printed forms.* The simple forms of bankruptcy practice found in the general orders and forms prescribed by the supreme court should be fol- lowed without unnecessary departure therefrom.* The caption should properly refer to the proceeding, but if the body of the peti- tion is sufficient a defect in the caption is not material.^ Blanks printed without ruling and of such size as to permit use in type- writing machines will be found most convenient. Forms Nos. 1, 2, and 3 are suggestive of the petitions by individuals, by paxtners, and in involuntary oases. That in partnership cases is not entirely reliable f and that for involuntary cases is less so f thus, if a part- ner does not join in a petition for involuntary bankruptcy, that fact should be stated, his address given, and the prayeir of the petition ask for a subpoena to him as though, he Were an alleged involuntary bankrupt.* b. Facts alleged — ^AU facts essential to the exercise of jurisdic- tion should be alleged with definiteness and certainty, as in the case 3. Mahoney v. Ward (D. C, N. 6. See criticisms and suggestions Car.), 3 Am. B. R. 770, 100 Fed. 278. under § 5, p. 124, ante. See, also. Compare In re White (D. C, Penn.), "Supplementary Forms," post. 14 Am. B. R. 241, 135 Fed. 199. 7. Consult § 3, ante, for allegations 4. Gage & Co. v. Bell (D. C, as to acts of bankruptcy; § 4, ante, Tenn.), 10 Am. B. R. 696, 124 Fed. for allegations as to the excepted 371. classes; § 59, post, for allegations as An answer which does not admit to number of petitioning creditors, the or unevasively deny upon oath the amount of their claims, etc. material facts of the petition may be 8. In re Russell (D. C, Iowa), 3 stricken from the files for non-com- Am. B. R. 91, 97 Fed. 32; In re Alt- pliance with the Supreme Court orders man (D. C, N. Y.), 2 Am. B. R. 407, prescribing the form for answers. 95 Fed. 263; In re Murray (D. C., Bradley Timber Co. v. White (C. C. Iowa), 3 Am. B. R. 90; Mahoney v. A., 5th Cir.), 10 Am. B. R. 329, 121 Ward (D. C, N. Car.), 3 Am. B. R. Fed. 779. 770, 100 Fed. 278. 5. Matter of Gorman (D. C, Ha- waii), 15 Am. B. R. 587. 22 338 The Law and Peactioe in Bankeupcty. Petitions to be Filed. [§ 18-a. of other pleadings in law or equity.^ Tlie purpose of a pleading is to advise the opposing parties and the court of the facts constitut- ing the cause of action ; all these facts should be set forth plainly and without equivocation.*" Jurisdictional allegations should not be disjunctive in form.** The allegations should not be made in the language of the statute, without details in respect to the par- ticular act relied upon.** Legal conclusions, as an allegation that the petitioner has a provable claim, will not siiffice.** The petition in involuntary proceedings may set forth several and distinct acts of bankruptcy,** and should set forth the nature of the claims of the petitioning creditors.*® If filed by an agent the authority to act should be set forth.** The necessary allegations in both volun- tary and involuntary petitions are discussed at length in other places.*^ The schedules, and presumably the petition in voluntary cases, must be drawn and verified in triplicate.*® In involuntary cases, in duplicate.*' The failure to file duplicate petitions is waived by answer without presenting the objection.*" c. Petitions to be filed. — Petitions should always be filed with the clerk,** but handing them to him outside of his office has been held sufficient.** They must be accompanied by the fees of the officers, or, in lieu thereof, by a pauper affidavit.*' 9. Clark v. Henne & Meyer (C. C. 329, 121 Fed. 779, afflnning 9 Am. B. A., 5th Cir.), 11 Am. B. R. 583, 594, R. 441. 127 Fed'. 288; In re Plotke (C. C. A., 15. In re White (D. C, Penn.), 14 7th Cir.), 5 Am. B. R. 171, 175, 104 Am. B. R. 241, 135 Fed. 199. Fed. 964, where the court said: "The 16. Matter of Levingston (D. C, essential fact must appear affirma- Hawaii), 13 Am. B. R. 357. tively and distinctly, and it is not 17. See under §§ 2, 3, 4, 5, and 59. sufficient that jurisdiction may be in- For forms suggested as substitutes for ferred argumentatively." Forms Nos. 2 and 3, see " Supplemen- 10. In re First Nat. Bank of Belle tary Forms," post. Fourche (C. C. A., 8th Cir.), 18 Am. 18. Bankr. Act, § 7(8). B. R. 265, 270, 128 Fed. 630. 19. Bankr. Act, § 59-c, and see In 11. In re Laskaris (Ref., N. Y.), re Bellah (B. C, Del.), 8 Am. B. R. 1 Am. B. R. 480. 310, 321, 116 Fed. 69, holding that 12. In re CliflFe (B. C, Penn.), 2 through termed copies they are dupli- Am. B. R. 317, 94 Fed. 354; In re cate originals; In re Stevenson (B. C, Bellah (B. C, Bel.), 8 Am. B. R. 310, Del.), 2 Am. B. R. 66, 94 Fed. 110. 116 Fed. 69. See cases cited under 20. In re Plymouth Cordage Co. § 3, ante, p. 65. (C. C. A., 8th Cir.), 13 Am. B. R. 13. Hoffschlager Co. v. Young Nap 665, 135, Fed. 1,000. (D. C, Hawaii), 12 Am. B. R. 515; 21. See General Order II. Com- In re Nelson (B. C, Wis.), 1 Am. B. pare In re Sykes (B. C, Tenn.), 6 R. 63, 98 Fed. 76, holding that issu- Am. B. R. 264, 106 Fed. 669. able facts and not conclusions should 22. In re Wolf (D. C, N. J.), 2 be alleged. Am. B. R. 322. 14. Bradley Timber Co. v. White 23. Bankr. Act, § 51-a(2). (C. C. A., 5th Cir.), 10 Am. B. R. Process, Pleadings, and Adjudications. -339 § 18-a.] Amendments of Petitions. d. Petition confers jurisdiction. — The moment the petition is filed, jurisdiction begins. This is the commencement of the pro- ceeding, even though the subpoena does not immediately issue,^* or, if issued, is not served within the time limited.'"* As has been stated in a recent case r'"* " 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 bankrupt and all parties interested in the prop- erty throughout all the provisions of the law." So far as the juris- diction of the court is concerned the filing of the petition operates as a lis pendens and is notice to all the world; this is in recognition of the often repeated maxim that "the filing of the petition in bank- ruptcy is a caveat to all the world and in effect an attachment and injunction."^' e. Amendments of petitions — (1) When allowed. — The amendment of a petition in bankruptcy is permissible as in the case of pleadings in other actions and proceedings. The general rules of pleadings and practice relative to amendments apply to petitions in bankruptcy. Whether to permit an amendment of a petition^' is a matter of discretion.''* This general power of amendment was not abrogated or restricted in any sense by the 24. In re Appel (D. C, Neb.), 4 Am. B. R. 722, 103 Fed. 931; In re Stein (C. C. A., 2d Cir.), 5 Am. B. R. 288, 105 Fed. 749; In re Lewis (D. C, N. Y.), 1 Am. B. R. 458, 91 Fed. 632. 25. In re Frischberg (Ref., N. Y.), 8 Am. B. R. 607. 25a. Board of County Commis- sioners V. Hurley (C. C. A., 8th Cir.), 22 Am. B. R. 209, 212, 169 Fed. 92. 26. In re Billing (D. C, Ala.), 17 Am. B. R. 80, 145 Fed. 395; Mueller V Nugent, 184 U S. 1, 7 Am. B. R. 224; State Bank of Chicago v. Cox (C. C. A., 7th Cir.), 16 Am. B. R. 32, 143 Fed. 91 ; York Mfg. Co. v. Cassell, 15 Am. B. R. 638, 201 U. S. 344, in which Mr. Justice Peckham said; " The remark made in Mueller v. Nu- gent, that the tiling of the petition is a caveat to all the world and in fact an attachment and injunction, was made in regard to the particular facts in that case." In re Granite City Bank (C. C. A, 8th Cir.), 14 Am. B. R. 404, 137 Fed. 818; In re Kolin (C. C. A., 7th Cir.), 13 Am. B. R. 531, 134 Fed. 557; In re Smith & Shuck (D. C, Iowa), 13 Am. B. R. 103, 132 Fed. aOl; In re Tweed (D. C, Iowa), 12 Am. B. R. 648, 131 Fed. 355; In re Reynolds (D. C, Mont.), 11 Am. B. R. 758, 760, 127 Fed. 760; In re Chesapeake Shoe Co. (C. C. A., 4th Cir.), 10 Am. B. R. 466, 122 Fed. 593; In re Breslauer (D. C, N. Y.), 10 Am. B. R. 33, 121 Fed. 910; In re Frazier (D. C, Mo.), 9 Am. B. R. 21, 117 Fed. 746; In re Gutman & Wenk (D. C, N. Y.), 8 Am. B. R. 252, 114 Fed. 1,009; In re Pekin Plow Co. (C. C. A., 8th Cir.), 7 Am. B. R. 369, 112 Fed. 308; In re Krinsky Bros. (D. C, N. Y.), 7 Am. B. R. 535, 112 Fed. 972; Matter of Mer- tens (C. C. A., 2d Cir.), 15 Am. B. R. 362, 369, 144 Fed. 818, in which the court said: "While the filing of a petition in bankruptcy is a caveat to all the world, the notice ought not to have the ' euect of paralyzing all business dealings with the debtor, or to prevent the lienors or pledgees from enforcing their contracts." In re Dempster (C. C. A., 8th Cir.), 22 Am. B. R. 751, 172 Fed. 353; Matter of Zotti (Ref., N. Y.), 23 Am. B. R. 601. 27. Consult Bankr. Act, § 7, for amendments of schedules. 28. Armstrong v. Fernandez, 208 U. S. 324, 19 Am. B. R. 746, in which the court held that the power of a court of bankruptcy over amend- ments is undoubted and rests in the sound discretion of the court; Wil- der V. Watts (D. C, S. C), 15 Am. B. R. 57, 138 Fed. 426, to the effect that the amendments are usually al- lowed if the acts of justice will be promoted, but as they are not matters of right the court must exercise its discretion in permitting them. 340 The Law and Pbactice in Bankruptcy. Amendments of Petition. 18-a. provisions of General Order XI which relates to the amendment of petitions and schedules.^" If evidence is adduced without objec- tion the petition, if deemed insufficient, may be amended to con- form thereto, and when so amended it relates to and takes effect as of the date of the filing of the original petition.^" Amendment for the purpose of conforming the pleadings to the facts proven is frequently permitted, even on the coming in of the special master's report.^^ There must be in the record as it stands, the substance of that which is to be supplied by amendment.^^ It will usually be granted to cure an error due to mistake of counsel,^^ or one purely clerical,^* or to supply an omission to specifically allege that the alleged bankrupt is not within one of the excepted classes.^'* If there is an error in the name of the alleged bankrupt the peti- tion may be amended so as to correct it.^" So also the petition may be amended to cure jurisdictional defects, such as those which pertain to averments as to the residence or place of business of the bankrupt,^^ especially where rights of creditors have accrued which 29. Gleason v. Smith (C. C. A., 3d Cir.), 16 Am. B. R. 602, 145 Fed. 895; 111 re Bellah (D. C, Del.), 8 Am. B. R. 310, 116 Fed. 69. 30. Chicago Motor Vehicle Co. v. American Oak Leather Co. (C. C. A., 7th Cir.), 15 Am. B. R. 804, 141 Fed. 518. 31. In re Lange (D. C, N. Y.), 3 Am. B. R. 231, 97 Fed. 196; In re Miller (D. C, N. Y.), 5 Am. B. R. 140; 104 Fed. 764; In re Bininger, Fed. Cas. 1,420; In re Gallinger, Fed. Cas. 5,202 ; Chicago Motor Vehicle Co. V. American Oak Leather Co. (C. C. A., 7th Cir.), 15 Am. B. R. 804, 141 Fed. 518, 72 C. C. A. 576; Hark v. Allen Co. (C. C. A., 3d Cir.), 17 Am. B. R. 3, 146 Fed. 665. 32. In re Mercur (C. C. A., 3d Cir.), 10 Am. B. R. 505, 122 Fed. 384. New acts of bankruptcy. — There is some authority for the propo- sition that, where the amendment of- fered shows acts of bankruptcy of a like character as the one attempted to be shown in the original petition, the amendment will be allowed. White v. Bradley Timber Co. (D. C, Ala.), 8 Am. B. R. 671, 116 Fed. 768. 33. In re Hill, Fed. Cas. 6,485. See, also. In re Freund (Ref., N. Y.), 1 Am. B. R. 25. 34. In re Bellah (D. C, Del.), 8 Am. B. R. 310, 116 Fed. 49; Gleason V. Smith (C. C. A., 3d Cir.), 16 Am. B. R. 602, 145 Fed. 895. 35. Beach v. Macon Grocery Co. (C. C. A., 5th Cir.), 9 Am. B. 762, 120 Fed. 736; In re Brett (D. C. N. J.), 12 Am. B. R. 492, 130 Fed. 981; In re White (D. C, Penn.), 14 Am. B. R. 241, 135 Fed. 199; In re Ply- mouth Cordage Co. (C. C. A., 8th Cir.), 13 Am. B. R. 665, 135 Fed. 1,000. It is no abuse of discretion to permit an involuntary petition to be amended so as to aver that the alleged bankrupt is not " a wage-earner nor a person engaged chiefly in farming or tillage of the soil." Armstrong v. Fernandez, 19 Am. B. R. 746, 208 U- S. 324; In re Crenshaw (D. C, Ala.), 19 Am. B. R. 502, 155 Fed. 271; In re Mero (D. C, Conn.), 12 Am. B. R. 171, 128 Fed. 633; In re Pilger D. C., Wis.), 9 Am. B. R. 244, 118 Fed. 206. 36. Gleason v. Smith (C. C. A., 3d Cir.), 16 Am. B. R. 602, 145 Fed. 895. 37. In re Weinmann, 2 N. B. N. & E. 51. Peocess, Pleadings, and Adjudications. 341 § 18-a.] Amendments of Petitions. ■would be affected by its dismissal.'^'' An amendment is permis- sible by the insertion of an averment that all the bankrupt's cred- itors are less than twelve.'' An insufficiency in the allegations of the petition as to the number of the creditors^' or the nature and j amounts of their claims '°^ is not to be regarded as an incurable juris- dictional defect, and may be supplied by amendment. Amendment of the original petition may be allowed before proceeding to a new trial where it is necessary because of evidence adduced on the former trial.*" A petition may be amended to bring it within the terms of an amend- atory act.*^ Where the defect does not pertain to the jurisdiction of the court, either in respect to the parties or the subject matter, amendment will usually be permitted ; *" but if the allegation is defective in that it shows a want of jurisdiction in the court the amendment will not be permitted.*' The permitting or refusal of 37a. In re Hammond (D. C, N. Y.), 20 Am. B. R. 776, 163 Fed. 548. 38. In re Plymouth Cordage Co. (C. C. A., 8th Cir.), 13 Am. B. R. 665, 135 Fed. 1,000; Matter of Haff (C. C. A., 2d Cir.), 13 Am. B. R. 362, 136 Fed. 78. 39. In re Mackey (D. C, Del.), 6 Am. B. R. 577, 110 Fed. 355; In re Bellah (D. C, Del.), 8 Am. B. R. 310, 110 Fed. 69; Ryan v. Hendricks (C. C. A., 7th Cir.), 21 Am. B. R. 570, 166 Fed. 94, holding that if a petition fails to clearly set forth the number of creditors, the amount of their claims and the occupation of the debtor, it may be amended. 39a. Conway v. German (C. C. A., 4th Cir.), 21 Am. B. R. 577, 166 Fed. 67. 40. Matter of Hark Bros. (D. C, Penn.), 15 Am. B. R. 460, 142 Fed. 179 ; aff'd sui nom., Hark v. Allen Co. 7 Am. B. R. 463, 112 Fed. 7r,2. Am. B. R. 498, 94 Fed '638 ISO. In re Billing (D. C, Ala.), 17 Am. B. R. 80, 145 Fed. 395. Process, Pi.eadings, and Adjudications. 361 § 18-f, g.] Order of Reference and Effect. had resided in the district a sufficient time to give the court jurisdiction.^*' b. Voluntary petition while involuntary petition pending. — There was some doubt under the former law whether a debtor, against whom a creditors' petition was pending, could be adjurli- cated on his voluntary petition subsequently filed;'*" and this, even though under that law, petitions could be dismissed by con- sent and without a general notice to creditors. The opposite now being the rule,*" strictly speaking, such an adjudication is now neither proper nor lawful. The decisions are not uniform, how- ever, and the tendency is to adjudicate on the voluntary petition and, by subsequent steps, protect the rights of the petitioning creditors flowing from their earlier petition.*** XI. ORDER OF REFERENCE AND EFFECT. The order of reference required under subsections / and g, where the judge is absent from the district or division of the district in which the petition is filed or pending should be in the form pre- scribed by Form No. 15."** If made after adjudication, Form No. 14 is applicable;**" it has been held that such an order may be made by the deputy clerk, the act of signing being ministerial and not judicial.*"" This order and a copy of the petition and sched- ules in voluntary cases, and of the petition at least in involuntary cases, must be sent by mail or delivered personally by the clerk to the proper referee. The order fixes a day on which the bank- rupt must appear and after which the referee shall have juris- diction. This should usually be the following day. It is thought, however, that the referee has complete jurisdiction the moment the order is made; Form No. 14, to this extent at least, is not in accord with the law. In effect the referee then becomes, as to that 185. In re Tully (D. C, N. Y.), baum (D. C, N. Y.), 3 Am. B. R. 19 Am. B. R. 604, 156 Fed. 634. 392, 98 Fed. 589. 186. In re Flanagan, Fed. Cas. 188a. Absence of District 4,850; In re Stewart, Fed. Cas. Judge. — That an order of reference 13,419; In re Canfield, Fed. Cas. in -a, voluntary bankruptcy recites the 2,380. Compare In re Mussey (D. C., absence of the district judge from the Mass.), 3 Am. B. R. 592, 99 Fed. 71. district does not affect the jurisdic- 187. See p. 356, ante, and under tion of the bankruptcy court, aequirad § 59, post upon the filing of the petition, to 188. Thus it is still an open ques- adjudge the petitioner a bankrupt; tion whether an adjudication can be such recital relates only to the course made on the voluntary petition at ol procedure within the jurisdiction of once, reserving to the petitioning credi- the court, and is not open to collateral tors the right to bring forward their attack, Gilbertson v. United States proceeding and consolidate as of the (C. C. A., 7th Cir.), 22 Am. B. R. date they filed (see In re Stegar (D. 32, 168 Fed. 672. C, Ala.), 7 Am. B. R. 665, 113 Fed. 189. In re Bellamy, Fed. Cas. 978 ) , or whether adjudication must be 1,268. withheld until the notice is given (In 190. Gilbertson v. United States re Dwyer CD. C, N. Dak.). 7 Am. B. (C. C. A., 7th Cir.), 22 Am. B. R. 32, R. 532, 112 Fed. 777). The former 168 Fed. 672; contra Bray v. Cobb seems the wiser practice. Otherwise (D. C, N. Car.), 1 Am. B. R. 153, 91 great injury to assets may result from Fed. 102. the delay. See, also, In re Waxel- 362 The Law and Peactice in Bankettpcty. Order of Reference and Effect. [§ 18-f-g. proceeding, a court of original jurisdiction,*®* and the judge a court of appeal."^ After reference to the referee, the practice on both voluntary and involuntary proceedings is identical, and is discussed under different sections of this work.**^ 191. General Order XII. See, also, for examination of the bankrupt, sea under §§ 38 and 39. §§ 7(9), 21-a, General Order XXII; 192. See General Order XXVII. for setting aside of exemptions, see 193. For notice of the first meeting § 6, General Order XVII; for duties and how given, see § 58; for proceed- of trustee, see § 47, General Or- ings at first meeting, see §§ 55, 56, der XVII; for appointment of ap- General Orders IV, XXV; for proof praisers, see § 70-b; for sales of of claims, see § 57, General Order assets, see §§ 58-a(4), 70-b, General XXI; for appointment and qualifica- Order XVIII; for stays, see §§ 2(15), tion of trustees, see §§ 45, 46, Gen- 11; for declaration and payment of eral Orders XIII, XIV, XV, XVI ; for dividend's, see § 65 ; for final meetings, bond of trustee and effect when certi- see §§ 57-f, 58-a(6), etc. fied copy recorded, see §§ 21-«, 50; SECTION NINETEEN. JXTBT TRIALS. § 19' Jut Trials. — a 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 his insolvency, except as herein other- wise 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. b 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 the 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 aot, 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. Analogons provisions: In IT. S.: As to jury trials in involuntary pro- ceedings, Act of 1867, §§ 41, 42, R. S., § 5026; Act of 1841, § 1; As to jury trials upon specifications filed against a discharge. Act of 1867, § 31, R. S., I 5111; Act of 1841, § 4; As to trials of issues of fact in the District Court, R. S., § 566; As to trials of issues of fact in the Circuit Court, R. S., §§ 648, 649. In Eng.s Act of 1883, § 102(3), General Rules 94-97. Cross references: To the law: §§ 1(15), 2, 3, 18, 21-b-c, 22, 23, 59, 60-b, 67-e. To the General Orders: None. To the Forms: No. 7. SYNOPSIS OF SECTION. JTTRT TBIAIiS. Jury Trial in Contested Adjudications. a. Comparative legislation. b. Jury trial; when granted. 303 364 The Law and Peactice in Bankeupcty. Jury Trials; When Granted. [§ 19. c. How jury trial demanded. d. Effect of failure to demand. II. How a Jury is Obtained. a. In general. b. The trial. III. Trial by Jury of Offenses or Other Controversies. a. Meaning of the subsection. b. Jury trials on contested discharges. I. JTJRY TRIAL IN CONTESTED ADJUDICATIONS. a. Comparative legislation. — In England, a jury trial in bank- ruptcy proceedings is always discretionary/ but, wbere the facts are disputed, will usually be granted.^ Under the law of 1841, trial by jury could be demanded by the debtor within ten days after a decree adjudging him a bankrupt " to ascertain the facts of such bankruptcy."* By the law of 1867, the demand must have been made in writing on the return day, and then the jury was " to asoen-tain the fact of such alleged bankruptcy."* b. Jury trials; when granted. — The new law clearly limits the issues to be submitted to a jury to two; (a) the ques- tion of insolvency and (h) whether the alleged act of bank- TTiptcy has been committed.'' It is not thought, however, that this precludes the jury from passing on any other pertinent question, as, whether the alleged bankrupt was domiciled within the district the required time, or whether a petitioning creditor has a provable debt, or whether the debtor is in one of the ex- cepted classes not amenable to involuntary bankruptcy, provided the judge submits such an issue to them.® Subsection a merely declares on what issues in a contested adjudication, trial by jury is a matter of right. The right to a jury trial in respect to the questions specified upon application of the person against whom an 1. Eng. Act of Bankruptcy of 1883, 3 Am. B. R. 824, 100 Fed. 426; Ber- § 102(3). nard v. Abel (C. C. A., 9th Cir'.), 19 2. In re Carvill, 1 Morrell, 150. Am. B. R. 383, 389, 156 Fed. 649, cit- 3. Act of 1841, § 1. ing Collier on Bankruptcy (6th ed ) 4. Act of 1867, § 41. 257. 5. Day v. Beck, etc.. Co. (C. C. A., 6. See MeNaughton v. Osgood 114 5th Cir.), 8 Am. B. k. 175, 114 Fed. N. Y. 574; McClure v. Gibbs 157 N 834; In re Christensen (D. C, Iowa), Y. 413; Barton v. Barbour 104 U s' 4 Am. B. R. 99, 101 Fed. 802; Simon- 126. ' son V. Sinsheimer (C. C. A., 7th Cir.), JuET Teials. 365 § 19-a.] Jury Trial; How Demanded. involuntary petition has been filed, as provided in this sec- tion, is absolute and cannot be withreld at the discretion of the court.'' In that respect it differs from the trial of an issue out of chancery, which a court of equity is not bound to grant, nor bound by the verdict if such trial be granted.® Acts of bankruptcy are used in this connection, as they are set forth in a preceding sec- tion of the statute, and are thus given a definite meaning. Whether one be chiefly engaged in fanning or not has no relation, within this meaning, to any act of bankruptcy; and like other jurisdic- tional questions is left for the court.* Subsection a does not confer upon a petitioning or answering creditor the right to a trial by jury of an issue pertaining to alleged acts of bankruptcy or the insolvency of the alleged bankrupt.-''* The right is confined to the debtor; but to permit a debtor to bring in issue before a jury the intention alone, with which the debtor, while insolvent, permits any creditor to have a preference, would be to permit him to present an issue not warranted by the bankruptcy law.^^ Upon motion the issues will be limited to the insolvency of the alleged bankrupt and the act of bankruptcy charged in the petition to have been committed. ^^ The issue of insolvency involves the question of a fair valuation of the bankrupt's property, and the validity and amount of petitioners' claims.^* The question as to whether an alleged bankrupt is a partner, being decisive of the question of his solvency, must be kept open for the jury.^* Where the issue is insolvency, the burden is upon the petitioning creditors. ^^ The question of an alleged bankrupt's insanity may be submitted to the jury as an essential part of the defense.^® c. How jury trial demanded. — The demand must be by a 7. Elliott V. Toeppner, 9 Am. B. R. Cir.), 9 Am. B. R. 745, 121 Fed. 544. 50, 187 U. S. 327; Day v. Beck & 11. In re Harris (D. C, Ala.), 19 Gregg Hardware Co. (C. C. A., 5th Am. B. R. 204, 156 Fed. 875. Cir.), 8 Am. B. R. 175, 114 Fed. 834. 12. Morss v. Franklin Coal Co. (D. 8. Elliott V. Toeppner, 9 Am. B. R. C, Penn.), 11 Am. B. R. 423, 125 50, 187 U. S. 327. But see Oil Well Fed. 998. Supply Co. V. Hall (C. C. A., 4th 13. Sehloss v. Strellow & Co. (C. C. Cir.), 11 Am. B. R. 738, 128 Fed. 875, A., 3d Cir.), 19 Am. B. R. 359, 156 holding that where a district court Fed. 663. certifies a case to the circuit court 14. Buffalo Milling Co. v. Lewis- for trial by jury, after such a trial burg Dairy Co. (D. C, Pa.), 20 Am. had been waived, the verdict is ad- E. R. 279, 159 Fed. 319. visory and may be disregarded. 15. McGowan v. Knittel (C. C. A., 9. Stephens v. Merchants' Bank (C. 3d Cir.), 15 Am. B. R. 1, 137 Fed. C. A., 7th Cir.), 18 Am. B. R. 560, 453, 1,015. 154 Fed. 341. 16. In re Ward (D. C, N. J.), 20 10. In re Herzikopf (C. C. A., 9th Am. B. R. 482, 161 Fed. 755. 366 The Law and Peactice in Bankeupctt. How Jury is Obtained. [§ 19-a-b. written application, l^o form is prescribed/^ but any statement signed by the bankrupt and indicating the demand will be suffi- cient. If the application is granted, an order substantially in Form No. 7 should be entered by the clerk. Such an application can be made only by " a person against whom an involuntary petition has been filed;" thus an answering creditor has not the right to a jury trial, even on the two specified questions.^* The application must be made within five days after the return day. If there has been a general extension of time to plead, it seems that a demand filed after the original day to plead, but before the extension of time expires, will be too late.-'® d. Effect of failure to demand. — It is clear that, if no applica- tion for a jury trial is filed vdthin the time limited, it amounts to a waiver of the right.^" At the same time, it is not doubted that, even after such a waiver, an issue or issues of fact may be framed and sent to the jury, though the court in that event will not be bound by its findings.^ ^ Where, however, the proceeding is only constructively involuntary, as some partnership proceedings, and the case has already been referred to the referee, the time does not expire until the day set for the hearing.^* II. HOW A JTTBT IS OBTAINED. a. In general. — As under the former law, perhaps before and certainly after the amendatory act of 1874,^* the trial may be had at a stated term which has a jury in attendance, or before a special jury called for that purpose.^* But the statute does not specify how such a special jury is to be paid, and this clause, in actual practice, will be found of little avail. The additional clause, permitting the certification of the cause to a circuit court, if such circuit court has or is to have a jury first in attendance, will usually make possible a seasonable jury trial. The requirement that it shall be in the same place as the district court is an unfor- 17. See, however, " Supplementary supra. In such a case the verdict i' Forms," post. advisory only. In re Neasmith (C. C. 18. See Bankr. Act, § 18-b. A., 6th Cir.), 17 Am. B. R. 128, 147 19. Consult Bray v. Cobb (D. C, Fed. 160. N. Car.), 1 Am. B. R. 153, 91 Fed. 22. In re Murray (D. C, Iowa), 3 102. Am. B. R. 601, 96 Fed. 600. 20. In re Neasmith (C. C. A., 6th 23. See § 14 of Act of June 22, Cir.), 17 Am. B. R. 128, 147 Fed. 1874. And consult In re Heydette, 160; Oil Well Supply Co. v. Hall (C. Fed. Cas. 6,444; In re Gebhardt Fed C. A., 4th Cir.), 11 Am. B. R. 738, Cas. 5,294. 128 Fed. 875. 24. See, under the former law, In 21. See cases cited in foot-note 6, re Findlay, Fed. Cas. 4,789. JuKT Trials. 367 § 19-e.] Trial of Oflfenses. tunate limitation in States of scattered population. It is unim- portant in the large commercial centers, where a jury is frequently in attendance in either the district or the circuit court. By consent, however, the case may be certified to a circuit court sitting else- where in the district. b. The trial. — The trial before a jury is conducted and subject to the immemorial rules surrounding a trial at common law.^** The right to introduce evidence by way of depositioQ is unquestioned,^® and the method of taking evidence is further suggested by the equity rules.*^ The judge can take the case from the jury by directing a verdict, if no question of fact develops, or he can set the verdict aiside.*^ If each party asks the court to direct a verdict in his favor, it is equivalent to" a request for a finding of facts, and if the court directs the verdict, both parties are concluded on the findings of fact.''® As has already been suggested, he can submit issues to them, other than those peculiarly theirs to determine.^** The verdict will usually be special,^* and in the form of an answer to one or both the statutory issues raised in the case. The judge is, of course, bound by the jury's determination of questions of fact submitted to them in response to a demand as a matter of right. m. TBIAI. BY JURY OF OFFENSES OB OTH!EB CONTRO- VERSIES. a. Meaning of the subsection — Subsection c unquestion- ably refers to all issues that may arise in bankruptcy pro- ceedings and as a part thereof, other than contested adjudi- cations. The Seventh Amendment to the Constitution gives an absolute right to trial by jury in all actions at law where the amount in question exceeds twenty dollars. It has, therefore, been suggested that other issues which, were they not parts of a proceeding, as for instance, a motion to expunge a daim duly proved, would be mere actions at law, must, 25. Elliott V. Toeppner, 187 U. S. 28. In re Jelsh, Fed. Cas. 7,257; 327, 9 Am. B. E.. 54; Duncan v. Lan- In re Corse, Fed. Cas. 3,254. di3 (C. C. A., 3d Cir.), 5 Am. B. R. 29. Bradley Timber Co. v. White 649, 106 Fed. 839. (C. C. A., 5th Cir.), 10 Am. B. R. 26. See Bankr. Act, § 21-b. See, 329, 121 Fed. 779, affirming 9 Am. B. also, Ex parte Fisk, 113 U. S. 713. R. 441. See Thompson v. Simpson, 27. Equity Rules LXVII-LXXI. As 128 N. Y. 283; Bentell v. Magone, to burden of proof, see Brock v. Hop- 157 U. S. 154. pock. Fed. Cas. 1,912; In re Scudder, 30. In re Rude (D. C, Ky.), 4 Am. Fed. Cas. 12,563; In re Oregon Print- B. R. 319, 101 Fed. 805. ing Co., Fed. Cas. 10,560. 31. Compare In re King, Fed. Cas. 7,782. 368 The Law and Practice in Bankeupctt. Trial of Contested Discharges. [§ 19-e. on demand of either party, be submitted to a jury.*- Barton v. Barhour,^^ decided by the supreme court under the former law, seems, however, to be conclusive ; it holds that trials without a jury in bankruptcy proceedings are not a violation of constitutional right. Nor does the reference to the Revised Statutes^* made by this subsection change the rule. The district court does not try- equity causes by jury; no more does the circuit court, in which, even in actions at law, a jury may be dispensed with by consent. Nor do the words " to submit matters in controversy, or an alleged offense under this act " become meaningless, in this view. Of- fenses, being crimes, must be tried by jury; actions to recover back property are clearly matters in controversy outside bank- ruptcy proceedings proper.*^ The words quoted clearly refer to these and like controversies, which are not strictly " proceedings in bankruptcy."*^ This would seem to be the test. Besides, " hear- ing " and " trial " are not in the present statute set off against each other.*^ The generic word " trial " is used in the present act as indicating a judicial determination of a controverted question, either without or with a jury. If, however, the action is to recover property fraudulently transferred and laid in either Federal court, it is do.ubtful whether a jury trial can be had as matter of right. If not a part of the proceeding in bankruptcy, such a trial is cer- tainly in equity. The judge could, however, frame an issue and submit it to the jury; and in many cases this will be done. Con- tempts are clearly not within this subsection, and they will be heard by the judge.** b. Jury trials on contested discharges. — What has gone before indicates that a bankrupt when petitioning for a discharge has not the right to demand a jury trial. This was othenvise under the former law.*^ The omission of the present law to give this right 32. Compare In re Christensen (D. 37. Compare Act of 1867, § 41, R. C, Iowa), 4 Am. B. R. 99, 101 Fed. S., § 5,026, "upon such hearing or 802. trial," with the use of the word 33. 104 U. S. 126. "trial" alone in cases where a jury 34. See R. S., §§ 566. 648, 649. is clearly not intended, in §§ 13 and 35. Compare In re Baudouine (C. 15, Act of 1898. C. A., 2d Cir.), 3 Am. B, R. 651. 101 38. Ripon Knitting Works v. Fed. 574, reversing a. c, 3 Am. B. R. Schrieber (D. C, Wash.), 4 Am. B. R. 65, 96 Fed. 536. And see In re Rus- 299. 101 Fed. 810. sell (C. C. A.. 2d Cir.), 3 Am. B. R. 39. See Act of 1867, § 31, R. S., 658. 101 Fed. 248. § 5,111; Gordon v. Scott, Fed. Gas. 36. For meaning of the words 5,620; In re Lawson, Fed. Cas. 8,151. quoted, see Bardes v. Bank, 178 U. S. 524, 4 Am. B. R. 163. JuBY Trials. 369 § 19-e.] Trial of Contested Discharges. in very words is significant of an intention to deny it. ITo cases are yet to be found in the books. However, aa previously sug- gested, the judge can, in his discretion, send a specified issue to a jury, and, when the objection to a discharge consists in an offense against the act, will often feel constrained so to do. In such cases he is, of course, not bound by the verdict. SECTION TWENTY. OATHS, AFFIBMATIONS. § 20. Oaths, Affirmations. — a Oaths required by this act, ex- cept upon hearingB in court, may be administered by (1) referees; (2) 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; and (3) diplomatic or consular officers of the United States in any foreign country. i Anj 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. Analogous provisions: In TJ. S.: As to oaths to schedules and inventory, Act of 1867, § II, R. S., § 5017; As to oaths to proofs of debt. Act of 1867, § 22, R. S., §§ 5076, 5077, 5079, also § 5076-A; Act of 1841, §§ 5, 7; As to affirmations. Act of 1867, § 48. In Eng.: None. Cross references: To the law: §§ 1(17), 14-b, 18, 21, 29, 57, 59. To the General Orders: None. To the Forms: Generally, to each form requiring verification. SYNOPSIS OF SECTION. OATHS AND AFFIBMATIONS. I. Oaths. a. Comparison with former acts. b. How oaths are authenticated. c. Oaths before attorneys of record. d. Defects in forms. II. Affirmations. I. OATHS. a. Comparison with former act. — The present act is here much more liberal than its predecessor. Prior to the amendatory act of 1874, even proofs of claim could be sworn to only before a register or circuit court commissioner; if the oath was to the petition or inventory, it could also be sworn to before the judge. Now, an 370 Oaths and Affirmations. 371 § 20.] How Oaths Authenticated. oath to any paper to be used in a bankruptcy proceeding can be taken before any officer authorized to administer oaths in pro- ceedings in either the Federal or State courts of the place where taken. This will in most States include, besides the judge, the referee, and the circuit court commissioners, notaries public, jus- tices of the peace, commissioners of deeds, and civil magistrates in general. An oath taken before a notary public of one State, over his signature and seal, is sufficient for use in proceedings in another State.-' If in foreign countries, it must be before a diplo- matic or consular officer of the United States there resident; an oath before a foreign local magistrate will not be sufficient. b. How oaths are authenticated.— If the officer taking the oath has a seal, he should impress it in the paper.* If not, the better practice is to secure a certificate from some clerk of a court of record, that he is such an officer. It is not thought, however, that such certificates are necessary, other than to the effect that in the State where taken the officer is authorized to administer oaths in proceedings before its courts. 'No certificate is, therefore, neces- sary when the claim is to be filed in the State within which it is verified ; the referee should take judicial cognizance of the fact that the officer was bo authorized.* But powers of attorney can be ac- knowledged only before a referee, a circuit court commissioner, or a notary public* c. Oaths before attorneys of record. — Under the former act, proofs of debt could not properly be taken before the claimant's attorney of record.' This, it seems, is not so now,® unless the attorney has previously filed an appearance. '^ A proof is nothing more than an affidavit, and, while amounting to a prima facie case,* when filed, is not evidence on a motion or petition to ex- punge. The better practice, however, is to see that a petition is sworn to or a claim is verified before some one other than the claimant's attorney.® 1. In the Paneoast (D. C, Pa.), 12 6. In re Kimball (D. C, Mass.), 4 Am. B. B. 275, 129 Fed. 643. Am. B. R. 144, 100 Fed. 177. Z. In re Nebe, Fed. Gas. 10,073. 7. In le Kindt (D. C, Iowa), 3 Compare In re Phillips, Fed. Cas. Am. B. R. 443, 98 Fed. 403. 11.098. 8. In re Sumner (D. C, N. Y.), 4 3. In re Merrick, Fed. Cas. 9,463. Am. B. R. 123, 101 Fed. 224. 4. See General Order XXI (5). 9. Thus, note In re Brumelkemp Compare In re Sugenheimer (D. C, (D. C, N. Y.), 2 Am. B. R 818 95 N. Y.), 1 Am. B. R. 425, 91 Fed'. 744. Fed. 814. 5. In re Keyser, Fed. Cas. 7,748; In re Nebe, Fed. Cas. 10,073. 372 The Law and Peactice in Bankeupcty. Affirmations. [§ 20-b. d. Defects in forms. — The forms are in this particular fre- quently misleading. Several iseem to indicate that they must be sworn to before the referee. The oaths to the schedules^" are either unnecessary, or, if not so, ought to have a jurat similar to the oaths to the petition. But, where possible, the forms of oaths pre- scribed should be followed. ^^ II. AFFIRMATIONS. The words of this subsection require no discussion. The word " oath " includes " affirmation " wherever used in the statute.** 10. See Form No. 1. 12. See Bankr. Act, § 1(17). 11. In re Keeler, Fed. Cos. 7,638. SECTION TWENTY-ONE. EVIDENCE. § 21. Evidence — a A court of baakruptcy may, upon appli- cation of any oificea", bankrupt, or creditor, by order require any designated person, including the bankrupt* and 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 bank- rupt whose estate is in process of administration under this act : Provided, That the wife may be 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 banhrupt.j; 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 opposi- tion to the allowance of a claim 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 dis- trict 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 conclusive 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. • The words " who Is a competent witness under the laws of the State in which the proceedings are pending" which occurred here in the original law, were stricken out by the amendatory act of 1903. t Amendments of 1903 in italics. 373 374 The Law and Peactice in Banketipcty. Synopsis of Section. [§ 21. g A certified copy of an order confirming a compoaition 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. Analogous proTlslonBi In U. S.: As to examinations of third parties, Act of 1867, §§ 22, 26, R. S., §§ 5081, 5087; Act of 1800, §§ 14, 15; As to depositions, etc., Act of 1867, ^ 5, 7, 38, R. S., §§ 5003, 5004, 5005, 5006; Act of 1841, § 7; Act of 1800, §§ 14, 15; As to certified copies as evidence. Act of 1867, § 38, R. S., § 4992; As to effect of and purpose of recording certified copy of bond. Act of 1867, § 14, R. S., §§ 5044, 5054; Act of 1800, § 11; As to certified copy of order of discharge as evidence, etc.. Act of 1867, § 34, R. S., § 5119. In Eng.: As to examination of third parties, Act of 1883, § 27. See, also. General Rules 61-72. Cross references: To the law: §§ 1 (4) (5) (9) (18), 2(15), 7(9), 12, 14-b, 17, 20, 38(2) (4) (5), 39(5) (9), 41, 47-c, 50-b, 58-a(l), 70-a-f. To the General Orders: IV, X, Xn(l), XXII, XXXV. To the Forms: Nos. 26, 28, 29, 30, 59, 62. SYNOPSIS OF SECTION. EviDzarcE. I. Compulsory Examination. a. Comparative legislation. b. Scope of suhsection. c. Who may apply. d. Time of making application, \ e. Persons who may he examined. (1) In genehal. (2) Amendments of 1903. (3) Wife OF the BANKEUPT AS a WITNESS. f. Right to counsel. g. Scope and conduct of examination. h. Production of ioolcs and papers. i. Privileged communications. j. Criminating questions. k. The use of examination in proceedings in other courts. 1. Refusal to appear and testify; contempts. m. Practice. II. Depositions. a. In general. b. Notice to adverse party. c. Practice. Evidence, 375 § 21-a.] Scope of Subsection. III. Certified Copies as Evidence. a. In general. b. Order approving bond of trustee. c. Order on discharge or composition. d. Confirming composiiion as evidence of refacing of iank- rupt's property. I. COMF1TLSORT EXAMINATION. a. Comparative legislation. — The English bankruptcy act is similar to our own in respect to the compulsory examination of third parties;^ in addition to other designated persons, the court may summon for examination any person deemed " capable of giving information respecting the debtor, his dealing or property," and the scope, method, and effect of examinations is prescribed and regulated by the General Rules.* All previous laws in this coun- try have provided for the examination of third parties, in aid of administration.' The law of 1867 did so in different words, but much to the same effect. Cases decided under that act will be found useful precedents, and many of the most important ones are cited hereafter in their appropriate places. b. Scope of subsection. — Subsection a provides for the com- pulsory examination of any person, " including the bankrupt." It should be noted, however, that, while the bankrupt is thus made a compulsory witness as to his own " acts, conduct, or property," by § 7(9), he must also appear and be ready to testify concerning the same things at the first meeting of creditors. His examination at that time is considered elsewhere;* and whatever is there said will apply equally to an examination of a bankrupt under this subsec- tion. In effect, the only difference, so far as the examination of the bankrupt goes, is one of practice. Where fi,rst meetings are kept alive by continuances, as is customary, his examination can be had or resumed so long as the meeting lasts. If the meeting has been adjourned, an examination of the bankrupt can, under § 7(9), still be had " at such times as the court shall order," or it can be required under the subsection now discussed. Clearly, therefore, the main purpose of § 21-a is to authorize and regulate the exam- inations of third parties, rather than of the bankrupt. Without the power so to examine, the remedy of the statute against preferences 1. Eng. Bankr. Act of 1883, § 27. S., 5,081, 5,087; Act of 1800, §§ 14, 15. 2. General Rules 61-72. 4. Bankr. Act, § 7-a(9) and discus- 3. Act of 1867, §§ 22, 26, U. S. R. sion thereunder. 376 The Law and Practice in Bankbupcty. Who May Apply for Examination; Time. [§ 21-a. and fraudulent transfers would often be unavailing. The issuance of an order directing the examination of a third person concerning the bankrupt estate is within the discretion of the court." Much of what has already been said as to the examination of the bank- rupt* applies with equal force here; if the person to be examined appears before a referee, it is the referee's duty to receive the evi- dence offered, note objections, and generally follow the equity prac- tice.'' c. Who may apply. — The application for examination may be made by the bankrupt, a creditor or any officer.* In this respect the present law is somewhat broader than the act of 1867.® " Offi- cer " has been held to include a receiver.** A creditor whose claim has not yet been presented may apply.** When a person listed as a creditor states that he has a claim against the bankrupt's estate, and demands an examination to decide whether he will take an affirmative part in the bankruptcy proceedings the court may direct the examination.*^ Ordinarily the trustee will make the applica- tion and the creditor desiring the examination should appeal to him, and upon his refusal apply directly to the court.** While the present law does not in words authorize the court to proceed propria motu, as did that of 1867, the general powers conferred on it by § 2(15) seem to imply such an authority. d. Time of making application. — Being in aid of administration only,** an examination of third persons should not be asked after the estate is wound up, and, it has been held, a pending accepted composition is a sufficient closing of the estate to warrant a refusal if application is then made;*® in such a case, the witnesses can usually be summoned and examined in the composition proceed- 5. In re Andrews (D. C, Mass.), Fleischer (D. C, N. Y.), 18 Am. B. 12 Am. B. R. 267, 130 Fed. 383. R. 194, 151 Fed. 81. 6. See under Bankr. Act, § 7-a(9), 11. See § 1(9), and consult In re ante, pp. Walker (D. C, N. D.), 3 Am. B. R. 7. General Order, XXII; In re 35, 96 Fed. 550; In re Jehu (D. C, Sturgeon (C. C. A., 2d Cir.), 14 Am. Iowa), 2 Am. B. R. 498, 94 Fed. 638. B. R. 681, 139 Fed. 608. Compare, however, In re Ray, Fed. 8. For statutory definition of "of- Cas. 11,5S9, under former law. fleer," see Bankr. Act, § 1(18). 12. In re Kuffler (D. C, N. Y.), 18 9. Where claims were being investi- Am. B. R. 587, 153 Fed. 667. gated, under the former law only the 13. In re Andrews (D. C, Mass.), bankrupt, a creditor, or the assignee 12 Am. B. R. 267, 130 Fed. 383. could apply ( § 22 ) , though the court could itself require the attendance of 14. In re Cobb (Ref., Mass.), 7 Am. any person (§26). B. R. 104. lO. In re Fixen (D. C, Cal.), 2 15. In re Tifft, Fed. Cas. 14,032. Am. B. R. 822, 96 Fed. 748; In re Evidence. 377 § 21-a.] Time of Making Application. ing.'* But whether or not an examination may be had of the bank- rupt under this subsection, prior to his adjudication is a doubtful question; it has been held that where a receiver has been appointed upon the filing of an involuntary petition, the administration of the alleged bankrupt's estate has begun, and the alleged bankrupt may be required to appear, at the instance of the receiver, and submit to an examination touching his acts, conduct and property.^' Under analogous provisions of former laws such an examination was per- mitted." There is no doubt that such examinations are frequently directed under the present law.^* But a reasonable interpretation of the statute does not justify this practice; it is difficult to con- ceive how an estate can properly be said to be " in process of admin- istration under this act," when the question of bankruptcy remains undetermined and upon a trial of the issues it may follow that the court has no occasion for the exercise of its jurisdiction. The better rule would seem to be that under the present law there can be no examination of the bankrupt under this subsection prior to adjudication.^* 16. See In re Ash, Fed. Cas. 571. And compare In re Summer (D. C, N. Y.), 4 Am. B. R. 123, 101 Fed. 224. 17. United States v. Liberman (D. C, N. Y.), 23 Am. B. R. 734, 176 Fed. 161. Matter of Fleischer (D. C, N. Y.), 18 Am. B. R. 194, 151 Fed. 81, in which the court reasons that the filing of the petition and the appoint- ment of a receiver to protect the estate of the alleged bankrupt brings the estate into the " process of admin- istration " required by this subsection. In speaking of the desirability of per- mitting an examination prior to ad- judication the court said: "The de- sirability and importance of promptly conducting an investigation into the affairs of any person petitioned into the bankruptcy court has been too often shown to be open to doubt. To wait until adjudication to ascertain from the bankrupt's own lips the situs of his property and his own explana- tion of the situation in which the creditors iind themselves is in many eases giving those guilty of fraud just the necessary time to permit ithe fraud to be consummated, and the fruits thereof secured. In my opinion, it is not too much to say that a vigorous and skilful use of early ex- aminations of involuntary bankrupts is the one thing which enables credi- tors to prevent this statute being easily turned into a shield for dis- honesty and a potent aid to fraud." The reasoning in this case is in direct conflict with the prevailing opinion in the ease of Skubinsky v. Bodek (C. C. A., 3d Cir.), 22 Am. B. R. 689, 172 Fed. 332. 18. In re Gilbert, Fed. Cas. 5,410; Ex parte Lee, Fed. Cas. 8,178; In re Salkey, Fed. Cas. 12,252. 19. In re Knopf (D. C, S. Car.), 16 Am. B. R. 432, 144 Fed. 245; In re Fellerman (D. C, N. Y.), 17 Am. B. R. 785, 149 Fed. 244; In re Fixen (D. C, Cal.), 2 Am. B. R. 822, 96 Fed. 748. 20. In re Crenshaw (D. C, Ala.), 19 Am. B. R. 266, 155 Fed. 271; In re Davidson (D. C., Mass.), 19 Am. B. R. 833, 158 Fed. 678; In re Back Bay Automobile Co. (D. C, Mass.), 19 Am. B. R. 835, 158 Fed. 679, rev'g 19 Am. B. R. 835. It is to be noted that all three of these cases arose in the U. S. District Court, District of Massachusetts, Judge Dodge writing the opinion. But see Skubinsky v. Bodek (C. C. A., 3d Cir.), 22 Am. B. R. 689, 172 Fed. 332. 378 The Law and Peactice in Bankettpcty. Persons Who May be Examined. [§ 21-a. e. Persons who may be examined. — (1) In geneeal. — Subject to the limitations on the scope of the examination and the usual privileges of witnesses from answering certain classes of questions, any designated person may be subpoenaed and examined in a bank- ruptcy proceeding.^^ It has even been held that a person liable to suit at the instance of a trustee may be compelled to testify.^^ "Where, however, the purpose is palpable to drag out evidence for use against the third party witness in another court, the exam- ination will be kept within proper bounds. Officers of a bankrupt corporation may be eixamined concerning the acts, conduct or prop- erty of the corporation,^^ and so may the officers of a corporation in respect to the relation which a bankrupt stockholder or officer may bear thereto.^* (2) Amendments of 1903. — The broad terms of the original law have been made even broader by the amendatory act of 1903. Formerly, a witness not competent " under the laws of the State in which the proceedings are pending " could not be compelled to testify in the court of bankruptcy. This limitation has been stricken out;^^ but the change is important only in those States where a wife is not a compellable witness for or against her hus- band. (3) Wife of the bankrupt as a witness. — The change just referred to in effect restores the rule under the law of 1867, which made the wife of a bankrupt a compellable witness in all States f^ but with a proviso which limits such an examination to " business transactions." This limitation is probably operative even in States where a wife may be a witness for or against her husband. Thus while there is no statutory limitation on the examination of the 21. Even a trustee in an insol- directing the production of a book of vency proceeding more than four the corporation, containing required months before the bankruptcy; In re information concerning the question Pursell (D. C, Conn.), 8 Am. B. R. under investigation, and counsel for 96, 114 Fed. 371. See, also, People's the parties will be permitted to ex- Bank V. Brown (C. C. A., 3d Cir.), amine the same. In re United States 7 Am. B. R. 475, 112 Fed. 652. Graphite Co. (D. C, Pa.), 20 Am. B. 22. In re Cliffe (D. C, Pa.), 3 Am. R. 280, 161 Fed. 583. B. R. 257, 97 Fed. 540. 24. In re Fixen & Co. (D. C, 23. In re Alphin & Lake Cotton Cal.), 2 Am. B. R. 822, 96 Fed. 748; Co. (D. C, Ark.), 12 Am. B. R. 653, In re Horgan & Slattery (C. C. A., 131 Fed. 824; In re Horgan & Slat- 2d Cir.), 3 Am. B. R. 253, 98 Fed. tery (C. C. A., 2d Cir.), 3 Am. B. R. 414. 253, 98 Fed. 414. 25. The exact words dropped out Corporation books. — Where the after the words " including the bank- inquiry is concerning an alleged fraud rupt " are indicated in foot-note to between a corporation and the bank- the section, nipt's estate, an order may be made 26. Act of 1867, § 26, R. S., i Evidence. 379 § 21-a.] Eight to Counsel. husband of a bankrupt wife, where the former is the bankrupt the latter can be forced to testify only as to business transactions with the husband, or to determine the fact whether she has' been a party to such transactions.^^ In many cases, the wife is the only witness, the bankrupt being protected by his privilege, who can shed light on the whereabouts of secreted assets. Yet, in some States, as the law was, she, too, could claim a privilege.'^® This is no longer so. Congress has added the words " and his wife " after " bankrupt " in this clause, and supplemented them with the proviso clause above referred to. Thus, most of the cases cited just supra are no longer in point. Whether a creditor^* or not, the wife of the bankrupt may now be asked any questions as to business transactions with her husband which might be put to any other third party witness, and, on refusal,. is liable to the same penalties. A certain degree of latitude in the wife's examination will be allowed so that the court may be sure that she is not, and has not been transacting busi- ness as a mere cover for the bankrupt, or in aid of a scheme to injure his creditore."" f. Right to counsel. — It has been uniformly held under both statutes that the examination referred to here is not of such a char- acter as to entitle the witness, not a bankrupt, to counsel as a matter of right.^^ But the attendance and assistance of counsel will not usually be refused, especially where it appears that the examina- tion tends to show the commission of a crime.^^ Yet, even if in 5,088. See In re Campbell, Fed. Cas. theatre and employed her husband as 2,348; In re Craig, Fed. Cas. 3,323; manager, she may be examined to dis- In re Anderson, 23 Fed. 482. cover what she paid for the lease and 27. In re Worrell (D. C, Penn.), where the money came from and may 10 Am. B. R. 744, 125 Fed. 159, hold- oe asked any other question tending ing that the wife cannot be examined to show whether the enterprise is hers generally, but that her examination or carried on by the bankrupt in her must be confined within the terms name. prescribed in the proviso. 31. In re Cobb (Ref., Mass.), 7 28. In re Fowler (D. C, Wis.), 1 Am. B. R. 104; In re Howard (D. C, Am. B. R. 555, 93 Fed. 417; In re Cal.), 2 Am. B. R. 582, 95 Fed. 415; Jefferson (D. C, Wis.), 3 Am. B. R. In re Comstoek, Fed. Cas. 3,080; In 174, 96 Fed. 826; In re Mayer (D. C, re Fredenberg, Fed. Cas. 5,075; Mat- Wis.), 3 Am. B. R. 222, 97 Fed. 328; ter of Abbey Press (C. C. A., 2d Cir.), In re Cohn (D. C, Mo.), 5 Am. B. R. 13 Am. B. R. 11, 134 Fed. 51. 16, 104 Fed. 328. 32. In re Hark Bros. (D. C, Pa.), 29. Compare In re Richards, Fed. 14 Am. B. R. 624, 136 Fed. 986, in Cas. 11,770. And see In re Post, 1 which the court held that it was to be N. B. N. 527. assumed that the referee will allow a 30. In re Worrell (D. C, Pa.), 10 bankrupt representation by counsel at Am. B. R. 744, 125 Fed. 159, holding any hearings that may take place, that where the day after an adjudica- See Matter of Adler (Ref., La.), 21 tion, the wife bought the lease of a' Am. B. R. 302. 380 The Law and Practice in Bankbupctt. Scope and Conduct of Examination. [§ 21-a. attendance, the right of the witness' pounsel to croas-examine seems in the discretion of the court.*' g. Scope and conduct of examination. — The subsection author- izes examination " concerning the acts, conduct or property of a bankrupt." This indicates the scope of the examination and gen- erally speaking the examination should be limited to the matters specified. Yet as a rule, large latitude will be permitted, especially where the witness is known to have been closely connected with the bankrupt in his business dealings.** The field of inquiry i» broad ; within the limitation prescribed any question is permiseible which seeks to ascertain facts concerning the bankrupt's property and affairs.*' But, when a witness has clearly indicated that the matter inquired into has nothing to do with the bankrupt's acts, conduct, or property, his examination on that matter should be stopped.** If the questions are not relevant to such matters the witness is justified in refusing to answer them.*^ Useless repetition should not be per- mitted,** nor should the examination be needlessly prolonged at the expense of the estate.*' A difficult problem often arises when the questions seem directed to the private affairs or individual property of a third party witness. No rigid rule can be stated. If the acts inquired of are interwoven with those of the bankrupt in such a way as to cause a reasonable suspicion that the witness has been preferred or is colluding with the debtor to secrete prop- erty, the witness will be required to answer and even to produce his own books.*** If, on the other hand, the examination does not develop facts warranting these inferences or seemei without suffi- cient foundation, questions concerning the property or conduct of the witness will be ruled out.*^ There is no backward limit as to 33. In re Cobb (Ref., Mass.), 7 36. In re Carley (D. C, Ky.), 5 Am. B. R. 104, and the cases cited. Am. B. R. 554, 106 Fed. 862. 34. In re Foerst (D. C, N. Y.), 1 37. In re Howard (D. C, Cal.), 2 Am. B. R. 259, 93 Fed. 190; Matter Am. B. R. 582, 95 Fed. 415; In re of Horgan & Slattery (C. C. A., 2d Hayden (D. C, N. Y.), 1 Am. B. R. Cir.), 3 Am. B. R. 253, 98 Fed. 414; 670, 96 Fed. 199. In re Pittner, 2 N. B. N. Rep. 915. 38. In re Romine (D. C, W. Va.), 35. U. S. V. Weohsler (D. C, N. 14 Am. B. R. 785, 789, 138 Fed. 837. Y.), 16 Am. B. R. 1, 5; In re Carley 39. In re Stark (D. C, N. Y.), 18 (D. C, Ky.), 15 Am. B. R. 554, 106 Am. B. R. 467, 155 Fed. 695. Fed. 862, in which the court held that 40. In re Fixen (D. C, Cal.), 2 the witness should fully disclose all Am. B. R. 822, 96 Fed. 748; People's his knowledge relative either to the Bank v. Brown (C. C. A., 3d Cir.), 7 acts, the conduct or the property of Am. B. R. 475, 112 Fed. 652. the bankrupt; In re Williams (D. C, 41. In re Hayden (D. C, N. Y.), Tenn.), 10 Am. B. R. 538, 123 Fed. 1 Am. B. R. 670, 96 Fed. 199; In re 321. Salkey, Fed. Cas. 12,252. Evidence. 381 § 21-a.] Privileged Communications. the time of the acts or the ownership of property under invesitiga- tion ;*' the further hack the questioner goes, however, the narrower should be the limits of the examination. The date the petition was filed is usually the forward limit; what a bankrupt does or earns or has after that date is not the concern of his creditors, so long as the doing, earning, or having is consistent with honest dealing prior to the bankruptcy.** h. Production of books and papers. — The right to the examina- tion of a third person concerning the acts, conduct or property of the bankrupt includes the examination of books, papers and docu- ments in hisi possession or under his control.** The president of a bank may be compelled to produce his private memorandum book containing data in respect to the dealings of the bankrupt with the bank.*® An order directing a person to appear before the referee and testify, bringing with him certain books and papers, does not authorize the receiver of the bankrupt at whose instance the order was issued, to take possession of such books and papers.*® i. Privileged communications. — The statute is silent in respect to privileged communications. There is no indication, however that it is intended that the rule in respect to such communications should be disregarded in bankruptcy proceedings. Where by Stsite statute communications between persons occupying certain rela- tions are privileged, they will be recognized as privileged by the bankruptcy courts in that State,*'' The rule that communications between attorney and client are privileged will be upheld,*® although the witness may be questioned by the 'court to enable it to determine for itself whether the communication is a privileged 42. In re Brundage (D. C, Iowa), C, N. J.), 16 Am. B. R. 486, 144 Fed. 4 Am. B. R. 47, 100 Fed. 613; In re 285. Pursell (D. C, Conn.), 8 Am. B. R. 47. Matter of Eeid (D. C, Mich.), 96, 114 Fed. 371. 17 Am. B. R. 477, 155 Fed. 933, hold- 43. See In re Walton, 1 N. B. N. ing that a sworn statement delivered 533. by a bankrupt to a city assessor is 44. In re Fixen (D. C, Cal.), 2 not admissible in evidence against the Am. B. R. 822, 96 Fed. 748; In re bankrupt, where the statute requiring Hess (D. C, Pa.), 14 Am. B. R. 826, such statement provides that it shall 136 Fed. 988; In re United States not be used for any other purpose Graphite Co. (D. C, Pa.), 20 Am. B. than the making of an assessment of E. 280, 161 Fed. 583. taxes. 45. Matter of Wheeler & Co. (C. 48. People's Bank v. Brown (C. C. C. A., 2d Cir.), 19 Am. B. R. 461, 158 A., 3d Cir.), 7 Am. B. R. 475, 112 Fed. 603, reversing 18 Am. B. R. 421. Fed. 652. 46. In re Davis Tailoring Co. (D. 382 The Law and Peactice in Bankeupcty. Criminating Questions. [§ 21-a. one.*^ An attorney may not refuse to identify papers signed by him on the ground of privilege, and is bound to testify as to any facts which came to his knowledge in any other way than through confidential communications from his client.*^* The elimination of the words " who is a competent witness under the laws of the State in which the proceedings are pending," from subsection a of this section by the amendatory act of 1903 has not affected the privilege in respect to such communications of any witness other than the bankrupt's wife. Prior to the amendment the competency of witnesses before a court of bankruptcy was determinable by the law of the State in which the case was pending.^" As the law now stands this question of competency may be determined by the Federal statutes if any exist which is applicable to the case.^^ Otherwise the State statute will control. Whatever may be the rule in respect to competency of witnesses the State statute in respect to privileged communications will be observed.^^ j. Criminating questions. — It is provided in § 7-a(9) that "no testimony given by him (the bankrupt) shall be offered in evidence against him in any criminal proceeding. "^^ Early in the admin- istration of the law, it was thought that a bankrupt waived his constitutional privilege by filing a voluntary petition, and that the opposite was the rule where the petition was involuntary.^* As has already been stated this doctrine is now rejected.^^ Ifot- withstanding the immunity afforded a bankrupt by the statute he may refuse to answer a question on the ground that it will tend to incriminate him.^® It is not in any sense essential that a trans- action should be pending against the bankrupt to entitle him to 49. People's Bank v. Brown (C. C. 53. See discussion under Bankr. A., 3d Cir.), 7 Am. B. R. 475, 112 Act, § 7-a(9) on p. 190, ante. Fed. 652. 54. Compare In re Sapiro (D. C, 49a. In re Euoa (D. C, Pa.), 20 Wis.), 1 Am. B. R. 296, 92 Fed. 340. Am. B. R. 281, 159 Fed. 252. Contra: In re Hathorn (Ref., La.), 50. In re Josephson (D. C, Ga.), 2 Am. B. R. 298, and In re Scott (D. 9 Am. B. R. 345, 349, 121 Fed. 142. C. Pa.). 1 Am. B. R. 49, 95 Fed. 815. 51. Smith V. Township of An Gres 55. See p. 191, ante, and cases (C. C. A., 6th Cir.), 17 Am. B. R. cited. 745, 150 Fed. 257, holding that the 56. In re Kanter v. Cohen (D. C, competency of a witness to testify in N. Y.), 9 Am. B. R. 104, 117 Fed. a court of bankruptcy as to a trans- 356; U. S. v. Goldstein (D. C, Va.), action between himself and the de- 12 Am. B. E. 755, 132 Fed. 789; In ceased person is to be tested by § 858 re Henschel (Ref., N. Y.), 7 Am. B. of the United States Rev. Stats., and R. 207; Matter of Smith (D. C, N. not by the State statute. Y.), 7 Am. B. R. 213, 112 Fed. 509; 52. In re Aspinwall, Fed. Cas. 591; In re Shera (D. C, N. Y.), 7 Am. B. In re Bellis, 38 How. Pr. (N. Y.), 79. E. 552, 114 Fed. 207; In re Feldstein Evidence. 383 § 21-a.] Criminating Questions. claim this constitutional privilege.''^ If the privilege be thus ac- corded to a bankrupt, a third party witness is much more entitled to it; the law does not even attempt to give such a witness im- munity from punishment. lie may therefore refuse to testify on this ground.^^ The privilege may be claimed in respect to the examination of books, papers and records containing incriminat- ing evidence.^* The plea of the privilege should not be permitted to excuse the production of the books, papers and records. They should be produced and if found by the court to contain incriminat- ing evidence, an order may be made to protect the witness from the discovery of the evidence and if possible otherwise direct in respect to the competency of the necessary information.®" The numerous cases construing the Fifth Amendment will be found valuable precedents.®^ (D. C, N. Y.), 4 Am. B. R. 321, 103 60. Matter of Hark Bros. (D. C, Fed. 269; In re Scott (D. C, Pa.), 1 Pa.), 14 Am. B. R. 624, 136 Fed. 986. Am. B. R. 49, 95 Fed. 815; In re Prodnction of books excnsed. — Nachman (D. C, S. Car.), 8 Am. B. R. In the case of In re Rosenblatt (D. C, 180, 114 Fed. 995; In re Rosser (D. Pa.), 16 Am. B. R. 306, 143 Fed. 663, C., Mo.), 2 Am. B. R. 755, 96 Fed. it was held that unless the court is 305. Contra: In re Franklin Syndi- satisfied that the bankrupt's claim cate (D. C, N. Y.), 4 Am. B. R. 511, that the books contain incriminating 114 Fed. 205; Mackel v. Rochester evidence has some foundotion in fact, (C. C. A., 9th Cir.), 4 Am. B. R. 1, an order may be issued directing the 102 Fed. 314. delivery of the books to the receiver; 57. In re Hess (D. C, Pa.), 14 In re Hess (D. C, Pa.), 14 Am. B. Am. B. R. 559, 134 Fed. 109. R. 559, 134 Fed. 109. 58. Matter of Hooks Smelting Co. Delivery of books; order pro- (D. C, Pa.), 15 Am. B. R. 83, 138 tecting witness.— Where a bank- Fed. 954, where it was held that an rupt declines to deliver his books of officer of a bankrupt corporation who account to the receiver on the ground had been indicted for embezzling its that they contain entries which would funds may refuse to testify whether tend to criminate him, he must pro- he had taken any part of the bank- duee the books before the court or rupt's property upon the ground that referee in order to have the question his answer might incriminate him. determined whether they do in fact Trustee protected. — In the case tend to incriminate him ; and if it ap- of Matter of Smith (D. C, N. Y.), 7 pears that they do contain incriminat- Am. B. R. 213, 112 Fed. 509, it was ing evidence, the court will by order held that a trustee in bankruptcy protect the bankrupt from the use of cannot be compelled to give testimony such evidence for any criminal pro- which may tend to show that he has ceeding and at the same time will misappropriated the funds of the enable the trustee to make such usa bankrupt estate; In re Feldstein (D. of the books as may be necessary to C, N. Y.), 4 Am. B. R. 321, 103 Fed. administer the estate. If the books 269. are delivered to such trustee, or to a 59. Matter of Hark Bros. (D. C, receiver, the order must provide that Pa.), 14 Am. B. R. 624, 136 Fed. 986; the bankrupt be notified of any sub- In re Hess (D. C, Pa.), 14 Am. B. R. poena or other process to secure pos- 559, 134 Fed. 109; In re Kanter * session of the books so that he may Cohen (D. C. N. Y.), 9 Am. B. R. have an opportunity to assert his con- 104, 117 Fed. 350. stitutional privilege. In re Harris 384 The Law and Peaoiioe in Bankeupcty. Refusal to Appear, etc. ; Contempts. [§ 21-a. k. The use of examination in proceedings in other courts. — Whether the exaniination may be used in proceedings in other courts is a mooted question. Such examinations may, of course, be used for the purpose of iinpeachment. If admitted for any other purpose, it should be proven by calling the stenographer or by offering a certified copy of the record.*" The examination is so nearly like an ex parte inquisition, however, that it will often be ruled out, and, if allowed, should be accompanied with permission to the other party to cross-examine. It seems that the exaniination of third party witnesses cannot be introduced on the objections to the bankrupt's discharge, though his examination may be,*' and testimony taken upon such an examination is inadmissible in a proceeding to compel the payment of money alleged to belong to tlie bankrupt estate.®* Some cases on analogous points will be found in the foot-note.*' 1. Refusal to appear and testify; contempts. — Kefusal to ap- pear, under the former statute, made the recusant witness liable in contempt.** The present act does not particularize as to contempts of this character, but a court has power to enforce its commands in the usual way.*^ Where an order for the examination of a party contains a clause ordering him to produce thereon certain books and papers, and he does not produce them upon the exam- ination, the court may punish him as for contempt.** A witness may not be compelled to testify without the payment of his lawful fees.*® The application to submit to an examination involves the duty of answering truthfully, and as intelligently and fully as mental equipment will permit, all material questions, and a failure to perform such duty is punishable as a contempt.'"' (D. C. N. Y.), 20 Am. B. R. 911, Co. (D. C, Ark.), 12 Am. B. R. 653, 164 Fed. 292. 131 Fed. 824; Breckons v. Snyder, 15 61. For instance, Counselman y. Am. B. R. 112, 211 Pa. St. 176. Hitchcock, 142 U. S. 547, and Brown 65. In re Shaw (D. C, Pa.), 6 Am V. Walker, 161 U. S. 591, and the B. R. 499, 109 Fed. 780; In re' Keller cases there cited. (D. C, Iowa), 6 Am. B. R. 334, 109 62. See "Certified Copies as Evi- Fed. 118; In re Alphin & Lake Cot- dence," post; In re Wiesen Bros. (D. ton Co. (D. C, Ark.) 12 Am B R C, Pa.), 14 Am. B. R. 347, 135 Fed. 653, 131 Fed. 824. 442. 66. Act of 1867, § 7. 63. In re Wilcox (C. C. A., 2d 67. Bankr. Act, §§ 1 (13) (16) • 41-b Cir.), 6 Am. B. R. 362, 109 Fed. 628; 68. Matter of Alper (D. C, N. in eflFect reversing In re Cooke (D. C, Y.), 19 Am. B. R. 612, 162 Fed.'207" N. Y.), 5 Am. B. R. 434, 109 Fed. 631. 69. In re Marcus (D. C, Vt.), 20 Consult, as to the bankrupt's exami- Am. B. R. 397, 160 Fed. 229. ration being used, cases cited on pp. 70. In re Fellerman (D. C, N. Y ) 185-191, ante. 17 Am. B. R. 785, 149 Fed. 244. 64. In re Alphin & Lake Cotton Evidence. 385 § 21-a.] Practice on Examination. m. Practice. — The usual practice upon the examination of a bankrupt has already been considered under § 7-a(9). The prac- tice on third party examinations is not essentially different from that on examinations of the bankrupt at first meetings. The application may either be a formal written petition or be a formal motion. ITo particular form for the application is prescribed. Grounds for the order, though not absolutely essential, will usually be required.''^ If the case is pending before a referee, the appli- cation should be made to him; he has the same power as' the judge to require a designated person to appear and testify.'^* The court may appoint special masters or commissioners to conduct the exam- ination and report thereon.''* The person to be examined is not entitled to notice of the application.^* Creditors are entitled to at least ten days' notice by mail of all examinations of the bank- rupt.^® But if the examination be of a third party notice to the creditors is not required.^' It will be frequently advisable, indeed, to have the examination in the absence of the bankrupt and the general creditors.'®* If the witness is present, he may be ordered to testify ; if not present, he should be brought in on a subpoena,'''' and, if books or documents are desired, a subpoena duces tecum can be issued; or, it seems, the witness can be brought in on a simple order.''* The practice on the taking of testimony is regu- lated by General Order XXII. '» 71. In re Howard (D. C, Cal.), 2 76. In re Cobb (Ref., Mass.), 7 Am. B. R. 582, 95 Fed. 415; In re Am. B. R. 104. Compare In re Mac- Earle, Fed. Cas. 4,244; In re Menden- intire. Fed. Cas. 8,821. hall, Fed. Cas. 9,424; In re Lanier, 76a. Matter of Adler (Ref., La.), Fed. Cas. a,070. 21 Am. B. R. 302. 7Z. § 38(2) (4); Matter of Abbey 77. As to the territorial effect of Press (C. C. A., 2d Cir. ), 13 Am. B. a subpoena, see In re Hemstreet (D. R. 11, 134 Fed. 51. See, also. Form C, Iowa), 8 Am. B. R. 760, 117 Fed. No. 28. 568. 73. Matter of Staric (D. C, N. Y.), 78. For form of order, see Form 18 Am. B. R. 467, 155 Fed. 694; In re No. 28, and for subpoena, see Form Herskovitz (D. C, N. Y.), 18 Am. B. No. 30. It is customary for referees R. 247, 152 Fed. 316, holding that to lieep subpoenas signed by the cleric upon an application for an order di- on hand. By analogy to Equity Rule recting a bankrupt to turn over cer- XV, such subpoenas should be served tain specified assets, the matter may either by the marshal, or by some be referred to a special master to person designated by the referee. The take the testimony and report there- witness fee is $1.50 and eight cents a on. In re Fleischer (D. C, N. Y.), mile one way. Proof of service is 18 Am. B. K. 194, 151 Fed. 81. made by a return, if service is by the 74. Matter of Abbey Press (C. C. marshal; by affidavit (Form 30), if A., 2d Cir.), 13 Am. B. R. 11, 134 by a designated person. Fed. 51, 67 C. C. A. 161. 79. See, also, form No 29. 75. Bankr. Act, § 58-a(l). 25 386 The Law and Pbactice in Bankeupcty. Depositions; Certified Copies. [§21-b-c-d. H. DEPOSITIONS. a. In general. — Subsection 6 conforms the praxjtice in respect to the taking of depositions in bankruptcy proceedings to that of United States courts generally. While a subpoena may. within certain territorial limit», be effective outside the district in issue,®" depositions are the usual means of securing testimony at a distance greater than one hundred miles.^* It is customary, and will usually be found desirable, to have the deposition taken before the referee of the domicile of the witness. The method of deposition does not, of course, exclude the more formal method of a commission to take testimony with or without interrogatories, as regulated by Equity Kules LXVII. Cases construing both the Eevised Statutes and the Equity Rules in other courts thaij courts of bankruptcy will be found in point. b. Notice to adverse party.-— Subsection c requires, if the evi- dence is to be taken by deposition, that notice be filed with the referee. If depositions are to be taken in opposition to the allow- ance of a claim notice is also to be served upon the claimant, and when in opposition to a discharge, notice should also be served upon the bankrupt. In the absence of any statutory regulation to the contrary it is therefor provided that no notice need be given the opposing party, unless the evidence is to be offered in opposi- tion to a creditor's claim to the bankrupt's discharge. c. Practice. — The practice on the taking of depositions is con- trolled by the general law. The practice on depositions in ad- miralty will be found a safe guide.*^ III. CERTIFIED COPIES AS EVIDENCE. a. In general. — Subsection d authorizes certified copies of the proceedings before a referee, or the papers when issued by the clerk or referee, to be admitted as evidence with like force and effect as certified copies of the records of the district court. The manifest purpose of this soibsection, and also of e, f, and g, is to give to the records of referees when offered in evidence the force of records of the district court proper. It is thought that the clause " when issued by the clerk or referee " refers to the word " papers " and not to prior words of the clause; the clerk often acts in the 80. See R. S., § 876; In re Wood- state, a writ of habeas corpus under ward, Ted. Gas. 18,000. section 753 of the U. S. Revised 81. See R. S., §i 858-879; Ex parte Statutes, to produce him for examina- Fisk, 113 U. S. 713; In re Hemstreet tion -will be quashed, as his deposition (D. C, Iowa), 8 Am. B. R. 760, 117 may be taken under this section. In Fed. 568; In re Cole (D. C, Me.), 13 re Thaw (D. C, Pa.), 22 Am. B R. Am. B. R. 300, 133 Fed. 414. 687, 166 Fed. 71. ■Writ of Habeas Corpus. — Where 82. See Benedict's Admiralty, and a person while confined in a, state observe the various district court hospital for the criminal insane is rules. See, also, R. S., § 863 et seq. adjudicated a bankrupt in another Evidence. 387 § 21-e.] Order Approving Bond of Trustee. absence of the district judge. The certificate may be signed either by the clerk or the referee; but the safer practice is to secure the signature of the former, which carries with it the seal of the court. In important districts, the referee usually has a clerk, but the latter is not an officer recognized by the law, and a certificate by him would be unavailing,®' b. Order approving bond of trustee. — Under the former law, the register, as soon as the assignee was appointed, by an instru- ment in writing equivalent to both a deed and a bill of sale, trans- ferred all the assets of the bankrupt to the assignee;** this assignment was recorded in the district court clerk's office,*'' and a certified copy could then be recorded in the record office of the State. Under the present law, there is no such instrument, but a certified copy of the order approving the trustee's bond, when recorded in the proper clerk's or registei''s office, becomes construc- tive notice, and operates as would a deed and bill of sale by a bankrupt. It is also made conclusive evidence of the vesting of the title in the trustee. It is wise, therefore, to record such a certified copy in the proper record office where any property of the bankrupt may be situated. Though the trustee is now re- quired to record a certified copy of the adjudication of bankruptcy in each case, its effect as public notice is not fixed. Safe practice will suggest the recording of both in- struments. As title passes to the bankrupt's property at the date of the adjudication as of the date of the petition is filed,*® the order approving the bond should show these dates, to the end that, when the certified copy is recorded, searchers and title com- panies may ascertain therefrom the time of devolution of title and what property passed ; though this is not so necessary since § 47-c was added by the amendatory act of 1903. This may be accom- plished by inserting in Form No. 26, after the word " bankrupt," the words : " who was so adjudged by this court on the .... day of , 190 . . , on a pDtition filed on the day of , 190.. .«^ c. Order on discharge or composition.— Subsection / makes a certified copy of an order confirming or setting aside a composition, or granting or setting aside a discharge, evidence of the jurisdic- 83. Compare Bankr. Act, § 1(5). Youngstrom (C. C. A., 8th Cir.), 18 84. § 14, K. S., §§ 5044, 5054. Am. B. R. 572, 575, 153 Fed. 98. 85. In re Neale, Fed. Cas. 10,066. 87. See form for order approving 86. See Bankr. Act, § 70-a; In re bond in "Supplementary Forms," post. 388 The Law and Peactice in Bankeupcty. Order Confirming Composition. [§ 21-g. tion of the court, the regularity of the proceedings, and of the fact that the order was made. The fact of these certified copies is thus clearly defined. d. Confirming Composition as evidence of refacing of bank- rupt's property. — Subsection g makes a certified copy of an order confirming a composition, evidence of the refacing of the title of his property in the bankrupt. When recorded it imparts the same notice that a de^ from the trustee to the bankrupt, if recorded, would impart. SECTION TWENTY-TWO. REFERENCE OF CASES AFTER ADJUDICATION. § 22. Reference of Cases after Adjudication. — a After a per- son 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. h The judge may, at any time, for the convenience of parties or for cause, transfer a case from one referee to another. Analogons proTlsions: In U. S.: As to one referee acting in the plaxie of another, Act of 1867, § 4, R. S., § 5007. In Eng.: None. Crosa references: To the law: §§ 2(7) (10), /8, 38, 39, 44^ 47, and gen- erally, to all sections of the law regulating the administration of a bankrupt's estate. To the General Orders: XII, XIII, XV, XVII, and generally, to those referring to administration only. To the Forms: Nos. 14, 15, 22, 23, 27, and generally, to those having to do with administration. SYNOPSIS OF SECTION. REFEREiNCE OF CASES AFTER ADJUDICATION. I. References After Adjudication. a. Administration without a reference. b. General references. c. Limited . iferences. d. To any referee of the jurisdiction. II. Transfer of Cases From One Referee to Another. I. REFERENCES AFTER ADJUDICATION. a. Administration without a reference. — By the terms of this section a bankrupt's estate may be administered under the direct 389 390 The Law and Peactice in Bankeuptct. References; to Any Eeferee. [522. supervision of the judge, and without an order of reference. In such a case, a meeting of the creditors would first be called, the clerk giving the notices and, after the election of the trustee, the case would proceed in the usual way. There is, however, no record of a case where the judge has kept an administration in his own control. b. General references. — These are the references familiar to the bar and the courts. They are accomplished by the entry of an order, substantially in the words of Form 14. The portion of the order which requires the bankrupt to attend before the referee on a day certain follows General Order XII (1), and is in accord with the practice under the former law.* Before reference as authorized by this section it is doubtful whether the referee is a court within the definition.* c. Limited references. — These are not the same as the familiar references to the referees as special masters. It is somewhat diffi- cult to conceive of a case where a limited reference would be ordered. d. To any referee of the jurisdiction. — The judge is not bound to refer the case to the referee whose district includes the bank- rupt's domicile. Thus, cases often arise where a majority of cred- itors reside in one referee district and the bankrupt in another. It would then be clearly " for the convenience of parties in interest " to refer the case to the referee where the creditors reside. So, also, when a referee is disqualified,* as by being the attorney for the bankrupt or by relationship, the reference will be ordered else- where " for cause." Likewise, if, in the words of the statute, " the bankrupt does not do business, reside or have his domicile in the district." The only real limitations as to the personnel of the referee then seem to be that he must be (a) a duly appointed referee in bankruptcy, and (b) of the same jurisdiction as the court;'* a district court judge may not refer a case to a referee appointed for and residing in another district.* 1. See General Order IV, Act of 3. See "Supplementary Forms" 1867. As to power of referee to whom for form of certificate of disqualifica- was referred a petition to set aside a tion. composition, as special master, to re- 3a. Text quoted with approval in port the facts, see Matter of Sonna- In re Western Investment Co. (D. C bend (Ref., Mass.), 18 Am. B. R. 117. Okl.), 21 Am. B. R. 367, 370. 2. In re Back Bay Automobile Co. 4. In re Schenectady Eng & Const (D. C, Mass.), 19 Am. B. R. 835, Co. (D. C, N. Y.), 17 Am. B. R 2w" 158 Fed. 679. 147 Fed. 868. ' Repbeencb of Cases Aftek Adjudication. 391 i 22-b.] Transfer of Cases. II. TRANSFER OF CASES FROM ONE REFEREE TO ANOTHER. Transfers are often necessary. The reasons prescribed are (a) for the convenience of parties, and (b) for cause. The death or resignation of the referee would be sufficient cause; so would the appointment of another in his stead ; so also would be official mis- conduct on his part." The power to transfer a case from one referee to another is absolute and discretionary. If exercised, the referee is entitled to a part only of his fees and commissions, the proportion to be fixed by the judge.* 5. See In re Smith, Fed. Cas. 6. Bankr. Act, § 40-b. 12,071. SECTION TWENTY-THREE. JURISDICTION OF UNITED STATES AND STATE COURTS. § 23. Jurisdiction of United States and State Courts. — a The United Statesi circuit courts shall have jurisdiction of all contro- versies at law and in equity, as distinguished from proceedings in bankruptcy, between trustees as such and adverse claimants oonceming 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. h Suits by the trustee shall only be brought or prosecuted in the courts where the bankrupt, whose estate is being administered by such trustee, might have brought or prosecuted them if pro- ceedings in bankruptcy had not been instituted, unless by consent of the proposed defendant, except suits for the recovery of prop- erty under section sixty, subdivision h, and section sixty-seven, subdivision e* and section seventy, subdivision e.f c The United States circuit courts shall have concurrent juris- diction with the courts of bankruptcy, within their respective ter- ritorial limits, of the offenses enumerated in this act. Analogous provisions: In U. S.: Act of 1867, § 1 and § 2 (as amended by Act of June 24, 1874), R. S., §§ 4972, 4979; Act of 1841, § 8. In Eng.: None. Cross references: To the law: §§ 1(8), 2(7) (15), 3-e, 11, 18, 19, 21, 60-b, 67-e, 69. To the General Orders: None. To the Forms: None. SYNOPSIS OF SECTION". JURISDICTION OF UNITED STATES AND STATE COURTS. I. Scope and General Effect of Section. a. In general. b. Comparative legislation and decisions. II. Jurisdiction of Circuit Courts. a. Same as fixed by general law. b. Removal of suits to circuit court. * Amendments of 1903 in italics. * Amendment of 1910 added the words "and section seventy, subdivisons e.' 392 JxiBisDicTiON OF TJnited States AND State Couets. 393 I 23.] Scope and Effect of Section. III. Jurisdiction of District Courts. a. In general, b. Comparative legislation. c. Jurisdiction prior to amendment of 1903; case of Bardes V. Bank. d. Purpose of amendment of 1903. e. Who are adverse claimants. f. When consent of adverse claimant required. g. Suits for the recovery of property. (1) In geneeal. (2) Who may being suit. (3) When suits may be beouqht. h. Summary jurisdiction. (1) In geneeai,. (2) Effect of amendment of 1903. (3) jueisdiction as dependent upon possession. (4) exeecise of summaey jueisdiction. i. Ancillary jurisdiction. j. Auxiliary remedies. IV. Jurisdiction of State Courts. V. Concurrent Jurisdiction of Circuit Court Over Conveyances. I. SCOPE AND GENERAL EFFECT OF SECTION. a. In general. — Ever since Ex parte Christy^ the questions sug- gested by this section have led to discussions in Congress and confusion in the courts. There is, of course, no analogous section in the English law; the anomalous co-ordinate national and State courts theire being impossible. The books are filled with opinions construing the corresponding sections of the law of 1867.^ So many cases have already been decided under the law of 189S, and they are often so antagonistic, that the task of the commentator would be hopeless, had not the supreme court illumined the situa- tion with a few decisions of great importance. Some are, since the amendatory act of 1903, no longer the law ; but even these are at least suggestive of other doctrines as to those provisional and summary remedies which are vital to a due and orderly adminis- tration in bankruptcy. The section, other than its last subsection, 1. 3 How. (U. S.) 314. many of the cases cited are not now 2. See Cent. Dig., Vol. 6, "Bank- in point, ruptcy," §§ 410-417; but observe that 394 The Law and Practice in Bankeuptcy. Comparative Legislation and Decisions. [§ 23. has to do only with suits at law or in equity outside the bankruptcy proceeding proper f subsection b only with suits by, not against, the trustee.* Practice under § 23 is, therefore, regulated, not by the General Orders and Forms, but, if in equity, by the Equity Kules, if in law, by the State procedure as supplemented or modi- fied by Federal rules applicable to such cases. b. Comparative legislation and decisions. — The history of the development of this section has been elaborately considered by Mr. Justice Gray in Bardes v. Bank.^ The former law gave concurrent jurisdiction to the circuit and district courts of both law and equity actions, as distinguisihed from proceedings in bankruptcy per se, where the assignee (ti-ustee) was plaintiff or defendant.® It was also in the end settled that the statute meant that, when the holding of a third party against the assignee (trustee) was adverse, a sum- mary remedy within the bankruptcy proceeding was not proper, but resort must be had to a plenary suit.'' The law of 1898, as originally enacted, evidenced an intention to transfer all contro- versies, other than those strictly within the bankruptcy procedure (as, for inisitance, a contest on a proof of debt), to the State tribunals. Such was the purpose as indicated by the debates in Congress accompanying its passage,* and such seems the literal meaning of the words. The amendatory act of 1903 has, however, re-enacted the^dootrine of concurrent jurisdiction, at least as to all suitsi by the trustee to recover property fraudulently or prefer- entially transferred or incumbered within the four months' period. 3. See Bardes v. Bank,' 178 U. S. site conclusion, in In re Murphy 524, 4 Am. B. R. 163. (Ref., Mass.), 3 Am. B. R. 499. 4. In re McCallum (D. C, Pa.), 7 Jnrisdiction of State courts. — Am. B. R. 596, 113 Fed. 393. In the case of Bush v. Elliott, 202 5. 178 U. S. 524, 4 Am. B. R. 163. U. S. 477, 15 Am. B. R. 656, 658, Mr. An interesting discussion of the de- Justice Day said: "The Bankruptcy velopment of this section is found in Act of 1898, in respect to the matters the case of In re Hammond (D. C, now under consideration, was a radi- Mass.), 3 Am. B. R. 466, 98 Fed. 845. cal departure from the Act of 1867, 6. Lathrop v. Drake, 91 U. S. 516; in the evident purpose of Congress to Claflin V. Houseman, 93 U. S. 130; limit the jurisdiction of United States Olney v. Tanner, 10 Fed. 101. So, courts in respect to controversies also, under the law of 1841, McLean which did not come simply within the v. Lafayette Bank, Fed. Cas. 8,885; jurisdiction of the Federal courts as Hallack v. Triteh, Fed. Cas. 5,956; bankruptcy courts, and to preserve, to Brown v. White, 16 Fed. 900. a greater extent than the former act, 7. Eyster v. Gaff, 91 U. S. 521; the jurisdiction of the State courts Glenny v. Langdon, 98 U. S. 20; over actions which were not distinctly Moyer v. Dewey, 103 U. S. 301. matters and proceedings in bank- 8. See, however, interesting his- ruptcy." torical matter, pointing to the oppo- JuEisDicTiON OF United States AND State Coukts. t395 § 23-a.] Jurisdiction of Circuit Courts. n. JURISDICTION OF CIRCUIT COURTS. a. Same as fixed by general law. — The meaning and purpose of subsection a was douded for some time by the struggle of many courts so to read it into the succeeding subsection as to limit and control the meaning of the latter. But the words speak for themselves. If (a) diverse citizenship or a controversy where the amount in dispute exceeds $2,000® arises, between (b) the trustee and an adverse claimant, concerning (c) property acquired or claimed by the trustee,*" an appropriate suit, (d) either in law or equity, can be laid in the circuit court; but not otherwise.** In the circuit court, the trustee may be either plaintiff or defendant ; while, like the adverse claimant, he has the option of proceeding in the State court, or, if the requisite diversity of citizenship and amount in controversy exists, in the circuit court. *^ The subsec- tion relates only to controversies between trustees and adverse claimants relative to property acquired or claimed by the trustees.*' This subsection clearly recognizes the distinction to be made be- tween trustees and adverse claimants and proceedings in bank- ruptcy ; in the former case the jurisdiction of the circuit court re- maina unaffected by the proceedings in bankruptcy, while the later fall within the jurisdiction of the district court.** The diversity of citizenship which gives jurisdiction to the circuit court is that of the bankrupt and not that of the trustee.*® As appears here- 9. See Act of March 3, 1887, 25 plaintiff, resides in one State and the Stat, at Large 433. See Bush v. El- bankrupt resided in another. liott, 202 U. S. 477, 15 Am. B. R. 656. 13. Viquesney v. Allen (C. C. A., 10. Compare Leroux v. Hudson, 4th Cir.), 12 Am. B. R. 402, 131 Fed. 109 U. S. 468; Schott v. Hudson, 109 21, in which it was held that a Cir- U. S. 477. And see Bachman v. Pack- cuit Court could not entertain a bill ard, Fed. Cas. 709. in equity, in aid of bankruptcy pro- 11. Goodier v. Barnes (D. C, N. eeedings against an alleged fraudulent Y.), 2 Am. B. R. 328, 94 Fed. 798. grantor, to set aside a conveyance and And compare Chattanooga Bank v. for the appointment of a receiver; Rome Iron Co. (C. C, Ga.), 3 Am. Goodier v. Barnes (C. C, N. Y.), 2 B. R. 582, 99 Fed. 82. Observe, also, Am. B. R. 328, 94 Fed. 798. As to for transfer of cases from the district distinction hetween " proceedings in court to the circuit court, thus giving bankruptcy " and " controversies at the latter the former's jurisdiction in law and in equity," see In re Ejiopf certain contingencies, R. S., §§ 601, (D. C, S. Car.), 16 Am. B. R. 432, 637. . 442, 144 Fed. 245. 12. Chattanooga Nat. Bank v. 14. In re Rochford (C. C. A., 8th Rome Iron Works (C. C, Ga.), 3 Am. Cir.), 10 Am. B. R. 608, 124 Fed. 82. B. R. 582, 99 Fed. 82, holding that 15. Bush v. Elliott. 15 Am. B. R. the Circuit Court has jurisdiction in 656, 202 U. S. 477; Hatch v. Curtin a suit against a trustee to determine (D. C, Mass.), 16 Am. B. R. 629, 146 the validity of a pledge given by the Fed. 200, holding that where a Circuit bankrupt where the pledgee, the Court has not jurisdiction of a suit 396 The Law and Pkactice in Bankeuptct. Remoyal of Suits to Circuit Court. [§ 23-a. after only the trustee can sue in the district court, and then only to recover property and annul liens; and suits there need not show diversity of citizenship and $2,000 in dispute.^* Thus, the juris- diction of the circuit court is much more limited than it was under the former law; that of the district court limited, it is true, but not to so marked an extent as is that of the circuit court. The circuit court may not review a judgment of the bankruptcy court.^' It cannot disturb or interfere with the control of a court of bankruptcy over the property in the possession of tho trustees, by injunction or otherwise.'* It has no jurisdiction in an action the object of which is to determine priorities in the distribution of the assets of a bankrupt's estate."* This clause is intended to prevent the ex- tension of the jurisdiction of the circuit court because of the insti- tution of proceedings in bankruptcy. If the suit could have been brought in such court by the bankrupt prior to his bankruptcy, for diverse citizenship, it may be brought there by his trustee, although as between the trustee and the defendant there is no such diversity.^' As for example, it has been held that a trustee in bankruptcy may maintain an action in the circuit court against a national bank to recover usurious interest alleged to have been received by it from the bankrupt, under a statute permitting such banks to be sued in any circuit or district court " within the district in which such association may be established." ^" b. Removal of suits to circuit court. —A suit by a trustee or receiver in bankruptcy cannot be removed from a State court into a circuit court unless the amount involved exceeds $2,000.^°* If a suit be transferred from a State court to the circuit court on the ground of diversity of citizenship it is placed there as if it had been originally commenced there on the ground of jurisdiction, and not as if it had been commenced there by consent of the defend- ant under this section ; the judgment of the circuit court of appeals reversing the judgment of the circuit court is, therefore, final.^' by an adverse claimant against a 19. Bush v. Elliott, 15 Am. B. R. bankrupt it will not have jurisdiction 656, 202 U. S. 477. in a suit against the trustees. 20. Eeed y. American-German Bank 16. Suits laid in the distript court (D. C, Ky.), 19 Am. B. R. 140, 155 by the adverse claimant against tl>e Fed. 233. trustee must be under general law and 20a. Swofford v. Cornucopia Mines not this section of the bankruptcy law. (D. C, Ore.), 15 Am. B. R. 564, 140 Consult In re McCallum (D. C, Pa.), Fed. 957, holding that the amount al- 7 Am. B. R. 596, 113 Fed. 393. lowed as attorney's fees in an action 17. Hatch V. Curtin (D. C, Mass.), to enforce a miner's lien should not 16 Am. B E. 629, 146 Fed. 200. be added to the amount in contro- ls. Treat v. Wooden (D. C, versy so as to permit of its removal; Mass.), 14 Am. B. R. 736, 138 Fed. Henrie v. Henderson (C. C. A., 4th 934. Cir.), 16 Am. B. R. 617, 145 Fed.' 316. 18a. Bray v. United States Fidelity 21. Spencer v. Duplan Silk Co., 11 & Casiialty Co. (C. C. A.. 4th Cir.), Am. B. R. 563, 191 U. S. 526. 22 Am. B! R. 363, 170 Fed. 689. JUEISDICTION OF UnITED StATES AND StATE CoURTS. 397 § 23-b.] Jurisdiction of District Courts. ni. JTTRISBICTION OF illSTBICT COUKTS. a. In general. — ^We have already considered under § 2, ante, the jiiTisdiction of district courts as courts of bankruptcy in pro- ceedings generally pertaining to bankruptcy. What it may do and what it may not do in respect to the person and property of a bankrupt subject to its jurisdiction has been considered in a variety of phases under that section. Subsection & of § 23 relates to suits by the trustee respecting the estate which is being admin- istered by him. It is this eiubsection which has been the cause of the conflict which has arisen among the authorities relative to suits for the recovery of property claimed either by the trustee or a third party. As will be seen hereafter much of the difficulty attending the interpretation and application of this siubsection has been re- moved by the amendment of 1903. Many of the cases which were in point prior to the amendment are now obsolete and it will only be necessary to refer to them when they bear upon the jurisdiction of the district court irrespective of the result of the amendment. b. Comparative legislation. — The district courts have, since the act of 1800** always had exclusive jurisdiction of " proceedings in bankruptcy." Under the act of 1867, their jurisdiction, while not exclusive, also extended " to the marshaling of . . . assets,"** and also to " all suits at law or in equity brought by an assignee in bankruptcy against any person claiming an adverse inteirest, or owing any debt to such bankrupt, or by any such person against an assignee, touching any property or rights of the bankrupt."** The same general jurisdiction to " cause the estate of bankrupts to be collected . . . and determine controversies in relation thereto " is conferred on the district court by the present law.*" But with this difference : it is qualified by the words, " except as herein otherwise provided." There being no other grant of ordinary juris- diction to the district court in the statute, the subsection under discussion seems, and has been authoritatively held, a limitation on that power.*® Hence, the animated controversy over its meaning and the necessity of amendment. The district court is charged with the administration of the law ; yet, as the law was before the amendments, it was often impotent and usually forced to order its 22. Note, also, Act of February 3, Main v. Glen, Fed. Cas. 8,973; In re 1801. Sabin, Fed. Cas. 12,195. 23. Act of 1867, § 1, R. S., § 4972. 25. Bankr. Act, § 2(7). Consult Cook v. Whipple, 55 N. Y. 26. Bardes v. Bank, 178 U. S. 524, 150; Kelly v. Smith, Fed. Cas. 7,675. 4 Am. B. R. 163. 24. Act of 1867, § 2, R. S., 5 4979; 398 The Law and Peactice in Banketjptcy. Jurisdiction Prior to Amendment of 1903. [§ 23-b. officers to resort to otter tribunals for relief, and this though, from its position as a bankruptcy court, it wa^ naturally more convenient to litigants and more conversant with the law. c. Jurisdiction prior to amendment of 1903; case of Bardes v. Bank. — Early in the history of the present statute there was great confusion as to proper forum for suits by or against the truisitee. Not until January, 1900, was there an authoritative decision in the leading case of Bardes v. Banh.^'^ In this case it was held that the district courts as such had no jurisdiction over a suit brought by the trustee to irecover property from a stranger to the bank- ruptcy proceedings, unless by the latter's consent.^* The court said : " Congress, by the second clause of § 23 of the present bank- ruptcy act, appears to this court to have clearly manifested its intention that controversies, not strictly or properly part of the proceedings in bankruptcy, but independent suits brought by the trustee in bankruptcy to assert a title to money or property as assets of the bankrupt against the strangers to those proceedings, should not come vdthin the jurisdiction of the district courts of the United States, unless by consent of the proposed defendant." On the same day this decision was rendered other cases declaring the same doctrine but on different facts were also announced.^^ Later, in Wall V. Cox, the doctrine was reaffirmed.^" Subsequently the broad principle was somewhat modified, when applied to other facts. But, prior to the amendments of 1903, the law remained that, provided always the holding of the proposed defendants was adverse, smeh a suit could be brought only in the State court, or in the circuit court if the usual facts showing Federal jurisdiction appeared.^* V d. Purpose of amendment of 1903. — The direct results of the case of Bardes v. Bank was, as we have seen, to deprive the district court of jurisdiction of a suit brought by the trustee for the re- covery of property in the hands of an adverse claimant. It had an appreciable effect upon analogous provisional and summary 27. 178 U. S. 524, 4 Am. B. R. 539,, affirming s. e., 91 Fed. 621; Hicks 163. V. Knost, 178 U. S. 541, affirming 2 28. The converse was of course true Am. B. R. 153, 94 Fed. 625. where the adverse party had con- 30. 181 U. S. 244, 5 Am. B. E. sented, for instance, in the cases of 727; s. c. below, 4 Am. B. R. 659, 101 In re Durham (D. C, Md.), 8 Am. B. Fed. 403. R. 115, 114 Fed. 750; Philips v. Tur- 31. Ruling held applicable to cir- ner (C. C. A., 5th Cir.), 8 Am. B. E. cuit court, Bush v. Elliott, 15 Am. B. 171, 114 Fed. 726. R. 656, 202 U. S. 477. 29. Mitchell v. McClure, 178 U. S. JlTEISDlOTION OF UnITED StATES AND StATE CoTJETS. 399 5 23-b.] Adverse Claimants. remedies.'^ Amendments restoring concurrent jurisdiction, at least as to suits to recover property, became imperatively necessary and were very generally demanded. This demand v?as met by the changes made in this subsection and in §§ 60-b, 67-e, and 70-e by the act of 1903. The Senate Judiciary Committee struck out the words " and section seventy, subdivision e," v?hich in the Eay bill concluded § 23-b, but failed to strike out the corresponding clause conferring jurisdiction, which the latter bill had added to § 70-e. This at once raises a doubt whether any suit to recover property transferred more than four months before the bankruptcy can be laid other than in the State court. This is discussed later.^* The method adopted by the revisers, of adding the limiting words to the subsection under discussion, makes its phrasing somewhat awkward. There can, however, be no doubt about their intention or the intention of Congress, and little less doubt as to the ultimate construction put on the new wordisi by the courts. The amendment to this section haa not affected the jurisdiction of a district court to re-examine a transfer to an attorney in contemplation of the filing of a petition against a bankrupt, as conferred by § 60-d.** e. Who are adverse claimants. — The term " adverse claimants " is uised only in subsection a of this section, which determines thg jurisdiction of the United States circuit courts of controversies 32. Compare In re Ward (D. C, 541, 153 Fed. 945; Skewis v. Barthell Mass.), 5 Am. B. R. 215, 104 Fed. (D. C, Iowa), 18 Am. B. R. 429, 152 985, and Mueller v. Nugent (C. C. Fed. 534. Contra: Hurley v. Devlin A., 6th Cir.), 5 Am. B. R. 176, 105 (D. C, Kan.), 17 Am. B. R. 793, 149 Fed. 581; s. c, subsequently reversed. Fed. 268. 184 U. S. 1, 7 Am. B. R. 224. And In the case of In re Hutchinson & see "Auxiliary Remedies" in this sec- Wilmoth (C. C. A., 6th Cir.), 19 Am. tion, post. B. R. 313, 158 Fed. 74, the court said: 33. See § 70. '' A court of bankruptcy has no juris- Tbe failure to amend sub-section diction of a suit at law or in equity b of this section so as to include with- brought by a trustee to recover prop- in the exception suits brought under erty or collect debts, or to set aside § 70-e has been commented upon in a transfers of property alleged to be number of cases. All but one of these fraudulent, except by consent of the cases is in favor of the proposition defendant. By the amendment of that the failure to include a reference 1903, such court was given jurisdic- to § 70-e leaves the jurisdiction of tion of suits for the recovery of prop- the bankruptcy court in respect to erty under §§ 60-b, 67-c and 70-e." suits to set aside fraudulent con- The court evidently did not intend by veyances made prior to the four this statement to hold that a suit un- months' period, the same as it was der § 70-e. could be maintained in a before the amendatory act. Gregory bankruptcy court without the consent V. Atkinson (D. C, Mo.), 11 Am. B. of the defendant. R. 495, 127 Fed. 183; Hull v. Burr 34. In re Wood & Henderson, 210 (C. C. A., 5th Cir.), 18 Am. B. R. U. S. 246, 20 Am. B. R. 1. 400 The Law and Peactice in Bankruptcy. Adverse Claimants. [§ 23-b. between trustees as such adverse claimants. It is, however, also important to ascertain whether or not a person proceeded against is an " adverse claimant," in determining the jurisdiction of the district court. If a banknipt shall have given a preference within the meaning of § 60 the person receiving it is an adverse claimant; so also if the bankrupt shall have fraudulently transferred any of his property or shall have created an incumbrance thereon in fraud of his' creditors, the transferee or incumbrancer is an adverse claimant. This follows as a natuiral effect of the amendment of subdivision h of this section. Suits for the recovei-y of property so preferentially disposed of or fraudulently transferred are within the jurisdiction of district courts. The question as to whether a person is an adverse claimant also becomes important in deter- mining the jurisdiction of the court to proceed summarily against him. If the person proce-eded against is in any sense an adverse claimant he is entitled to have the validity of his claim determined by the court in a plenary suit brought for that puTpose. It is difBcult to declare a general rule which will determine in every event the nature of the claim asserted. It is not essential that the adverse claimant should claim to be the absolute ovraer of the property in his possession.^** Where the property, or the proceeds thereof, sought to be recovered by the trustee were in the posses- sion or under the control of a person prior to bankruptcy, hia claim thereto is adverse.^" The converse of this proposition that property and the proceeds coming into possession of a party subse- quent to the bankruptcy does not make such party an adverse claimant, is also true. If the court, through its referee, volun- tarily delivers property to a claimant, the possession of the court its lost, and the claim of the claimant becomes adverse, precluding 34a. Jaequith v. Rowley, 9 Am. B. In the case of In re Horgan (C. C. R. 525, 188 U. S. 620, holding that A., 1st Cir.), 19 Am. B. R. 857, 158 the surety on the bankrupt's bail bond Fed. 774, it appeared that a bankrupt, into whose hands, more than four upon his arrest in a civil action for months before the commencement of deceit, deposited, within the four the bankruptcy proceedings, money months period, a sum of money with had been deposited to indemnify him the sureties on bis bail bond, as secur- for his liability on the bail bond, is an ity against liability, and it was held adverse claimant. In re Briskman thnt the sureties were adverse claim- CD. C, N. Y.), 13 Am. B. R. 57, 132 an's of the money. See, also, In re Fed. 201, holding that where the prop- Horgan (C. C. A., 1st Cir.), 21 Am> erty was taken from the possession of B. R. 31, 164 Fed. 415. the bankrupt after the appointment 35. Matter of Andre (C. C. A., 2ni of a receiver in bankruptcy the claim Cir.), 13 Am. B. R. 132, 145 Fed. 736; of the replevying creditor is not ad- In re Squier (D. C, N. Y.), 21 Am., verse. B. R. 346, 165 Fed. 515. JUEISDICTION OF UbTITED StATES AND StATE CoUETS. 401 § 23-b.] Adverse Claimants. the court from summarily determining the claimant's right to the propeTty without his consent.^* But if the surrender of the prop- erty is unauthorized, the court's jurisdiction is not affected and it may determine all controversies, either by plenary suit or summary action as though such surrender had not been made.^'' The posses- sion by a temporary receiver in bankruptcy of proceeds of the sale of mortgaged chattelsi, pending the determination as to the title to such chattels, does not deprive the claim of its character as ad- verse.** The bankruptcy court has jurisdiction to inquire into the facts for the purpose of determining whether any basis exists for the adverse claim of title,** and according to the conclusion reached the court will retain jurisdiction or decline to adjudicate the merits.*** If it be ascertained by proper inquiry that a real adverse claim existed — no matter how ill-supported it might appear to be — the court cannot summarily decide as to the validity of the 36. Hinds v. Moore (C. C. A., 6th Cir.), 14 Am. B. R. 1, 134 Fed. 221. 37. Whitney v. Wenman, 198 U. S. 539, 14 Am. B. R. 45; In re Sehemer- horn (C. C. A., 8th Cir.), 16 Am. B. R. 507, 145 Fed. 341. 38. Frank v. VoUkommcr, 17 Am. B. R. 806, 205 U. S. 521. 39. In re Ellis Bros. Printing Co. (D. C, N. Y.), 19 Am. B. R. 472, 156 Fed. 430, holding that the mere asser- tion of an adverse claim of title will not preclude the bankruptcy court from exercising its jurisdiction to pro- ceed summarily. Linstroth Wagon Co. V. Ballew (C. C. A., 5th Cir), 18 Am. B. R. 23, 32, 149 Fed. 960, in which the court said : " The district court has power to ascertain in a particular case presented whether the claim as- serted is an adverse claim, within the meaning of the provision of the bank- ruptcy law, existing at the time the petition was filed, and in accordance to the conclusion reached, that court will retain jurisdiction to decline to adju- dicate the merits ; " Mueller v. Nugent, 184 U. S. 17, 7 Am. B. R. 224, in which the Supreme court held that the district court has power to as- certain whether in the particular in- stance the claim asserted is an ad- verse claim existing at the time the petition was filed; Louisville Trust Co. V. Comingor, 184 U. S. 26, 7 Am. B. R. 421. 26 Inquiry as to basis of claim. — Where property, alleged to be part of the bankrupt's estate, is found in the possession of third parties who assert right to possession by reason of a claim adverse to the bankrupt, the bankruptcy court has power to ascer- tain whether any basis for such claim actually existed at the time of the fil- ing of the petition: The court is bound to enter upon that inquiry, and, in doing so, acts within its jurisdic- tion, while its conclusion may be that an adverse claim, not merely colorable, but real, even though fraudulent and voidable, exists in fact, so that it" must decline to finally adjudicate on the merits. If it errs in its ruling either way, its action is subject to re- view. Matter of Friedman (C. C. A., 2nd Cir. ) , 20 Am, B. R. 37, 161 Fed. 260. See also In re Norris (D. C. N. Y.), 24 Am. B. R. 444. 39a. Louisville Trust Co. v. Com- ingor, 7 Am. B. R. 421, 184 U. S. 18; In re Davis (D. C, Tex.), 9 Am. B. R. 670, 119 Fed. 950; In re Scherber (D. C, Mass.), 12 Am. B. R. 616, 131 Fed. 121; Matter of Andre (C. C. A., 2d Cir.), 13 Am. B. R. 132, 68 C. C. A. 374, 135 Fed. 736; In re New York Wheel Works (D. C, N. Y.), 13 Am. B. R. 61, 132 Fed. 203. See In re Baird (D. C, Pa.), 8 Am. B. R. 649, 116 Fed. 765. 402 The Law and Peactice in Bankeuptcy. Consent of Adverse Claimant Required. [§ 33-b. claim.^"'' If it is decided that the claim is without actual merit or legal foundation, the court may order the surrender of the prop- erty.'*'^ Eecent cases construing the meaning of the words "ad- verse claimant " will also be found in the foot-note.*" Many of the eases here referred to will be taken up more in detail here- after, and it will be found as we proceed that the determination of the jurisdiction of the court will depend in many instances upon the question as to whether the defendant is actually an adverse claimant. It is therefore unnecessary under this heading to con- sider in detail the principles which will govern this question. f. When consent of adverse claimant required. — Subsection b of this section confines the trustee in maintaining suits in respect to the estate of the bankrupt to those courts where the bankrupt himself might have appeared to prosecute them if proceedings in bankruptcy had not been instituted against him, unless the pro- posed defendant shall consent to the bringing of such suits in the district court, "except suits for the recovery of property under § 60-a, § 67-e, or 70-e." The result is that if the suit is not one for the recovery of property either preferentially or fraudulently trans- ferred or incumbered, it must be brought in a court other than the bankruptcy court unless the defendant shall express his consent to 39b. In re Teschmacher v. Mrazay 39c. In re Holbroolc Shoe & Leather (D. C, Pa.), 11 Am. B. R. 547, 127 Co. (D. C, Mont.), 21 Am. B. R. 511, Fed. 728; In re Davis (D. C, Tex.), 165 Fed. 973. 9 Am. B. R, 670, 119 Fed. 950; In re 40. In re Waukesha Water Co. (D. Kane (D. C, N. Y.), 12 Am. B. R. C, Wis.), 8 Am. B. R. 715, 116 Fed. 444 131 Fed 386; In re Kessler & Co. 1,009; In re Macon Sash & Door Co. (D. C, N. Y.), 21 Am. B. R. 583, 165 (D. C, Ga.), 7 Am. B. R. 66, 112 Fed. 508; In re Hayden (D. C, Fed. 323, reversed as Carling v. Sey- s.), 22 Am. B. R. 764, 172 Fed. mour Lumber Co. (C. C. A., 5th Cir.), 623; In re Peacock (D. C, No. Car.), 8 Am. B. R. 29, 113 Fed. 483; In re 24 Am. B. R. 159. But see opinion of Young (C. C. A., 8th Cir.), 7 Am. B. Judge Lowell in the ease of In re R. 14, 111 Fed. 158; In re Scherber (D. C, Mass.), 12 Am. B. Green (D. C, Pa.), 6 Am. B. R. R. 616, 131 Fed. 121, where the case 270, 108 Fed. 616; Blumberg v. of In re Steuer (D. C, Mass.), 5 Am. Bryan (C. C. A., 5th Cir.), 6 Am. B. R. 209, 104 Fed. 976, was distin- B. R. 20, 107 Fed. 673; In re Silber- guished, in that jurisdiction of the horn (D. C, 111.), 5 Am. B. R. 568, referee in proceedings to recover a 105 Fed. 809; In re Sheinbaum (D. preference on a summary petition was C, N. Y.), 5 Am. B. R. 187, 107 Fed. not objected to; the judge in effect 247; McFarlan Carriage Co. v. Sola- held that in such a case if objection nas (C. C. A., 5th Cir.), 5 Am. B. R. was duly made to the form of the 442, 106 Fed. 145; In re Adams (D. proceeding the court was without C, R. I.), 12 Am. B. R. 367, jurisdiction, except by plenary suit. 130 Fed. 788 ; In re Waterloo It was held that the amendatory act Organ Co. (D. C, N. Y.), 9 of 1903 gave jurisdiction to the dis- Am. B. R. 427, 118 Fed. 904; In re trict court over such a controversy, Howard (D. C., N. Y.), 10 Am. B. R. but had done nothing to provide that 601, 123 Fed. 991 ; In re Flynn & Co. such jurisdiction should be exercised (D. C, N. Car.), 11 Am. B. R. 318, by summary proceedings on a peti- 126 Fed. 492. tion. Jurisdiction of United States and State Coubts. 403 § 23-b.] When Consent Required. the exercise of jurisdiction by that court.^^ If once the consent to the jurisdiction of the bankruptcy court appears, the jurisdic- tion will be retained for the determination of all the claims of the parties and for the enforcement of all their rights against each other.** The voluntary surrender of the property in controversy to the court or its officers is equivalent to a consent and the bank- ruptcy court may then have jurisdiction of claims in reispect to such property. The possession of the property thus acquired by the court may be protected by it in the exercise of its general juris- diction,** rather than of the juirisdiction conferred by this sub- section. Once the property has been yielded to the jurisdiction of the court the court retains possession thereof for the purpose of settling all controversies which may arise in respect thereto. The consent may be shown by any act indicating a willingness on the part of the defendant that his claim or his rights thereunder should be adjudicated by the court. If a mortgagee petitions for the pay- ment of his mortgaged debt he thereby consents to the jurisdiction of the court.** If the defendants do not object to the jurisdiction of the court at any stage of the proceedings, it is too late to urge 41. Consent of parties.— In the dr.), 17 Am. B. R. 668, 150 Fed. 279, case of In re Blake (C. C. A., 8th Cir.), holding that a court of equity which 17 Am. B. R. 668, 151 Fed. 279, it was has acquired jurisdiction of the sub- held that a court of bankruptcy j^ct matter and of the parties to a may acquire by consent of all the par- controversy may, and it should, grant ties in interest jurisdiction to deter- complete relief, to the end that litiga- mine a controversy between the tion over it may cease, and a multi- trustee and an adverse claimant con- plicity of suits may be avoided, ceming an indebtedness of a third 43. See cases cited under § 2(7). party and the lawful power to adjudi- ** In re Platteville Foundry & cate all the claims of the parties Machine Co. (D. C, Wis.), 17 thereto and to enforce their rights Am. B. R. 291, 149 Fed. 828; against each other by decree and ex- In re Durham (D. C, Md.), 8 ecution. In re Rosenberg (D. C, Am. B. R. 115, 114 Fed. 750, Pa.), 8 Am. B. K. 624, 116 Fed. 402; holding that where a receiver is ap- Bryan t. Bernheimer, 5 Am. B. R. pointed upon the petition of a chattel 623, 181 U. S. 188, holding that where mortgage creditor by a bankruptcy a claimant does not protest against court jurisdiction is thus conferred by the jurisdiction of the court of bank- consent to determine controversies Tuptcy, but submits his claim to that .^j^j^j^ ^^^^^ j^ ^ ^ ^^ tj,g court and asks for sucn orders as may , ,•' . •* iif j * j j. be necessary for his protection, thi "lortgaged property; if the defendant court has jurisdiction of the subject voluntarily appear and proceed to a matter. In re Hadden Rodee Co. (D. hearing upon the merits without ob C, Wis.), 13 Am. B. R. 604, 130 Fed. jection, he consents to the jurisdic- 977 ; Harris v. First Nat. Bank ( Sup. tion of the court. Ryttenberg v. Sche- Ct.), 23 Am. B. R. 632, 216 U. S. 382; fe, (D. C, N. Y.), 11 Am. B. R. 652 Babbitt v. Butcher ( Sup Ct. ), 23 jgi ^ei. 313; Ohauncey v. Dyke Bros ^■*^-^- ^r^'J^^^-r- »°V°4" (C. C. A., 8th Cir.), 9 Am. B. R. 444 B R^m ' "9 P«d. 1; In r^ Steuer (D. C, '42'. In "re Blake (C. C. A., 8th Mass.), 5 Am. B. R. 209, 104 Fed. 976. 404 The Law and Practice in Bankeuptct. Suits for Recovery of Property. [§ 23-b. the objection on appeal.*' But where objection is made to the jurisdiction of the court before proceeding- to a hearing on the merits, and where before a final decision specific objection is made to the jurisdiction of the court, the appearance is not voluntary and is not sufficient to constitute a consent.^" The fact that a claimant proved a judgment secured in a State court in a suit to set aside a trust deed of property does not amount to a consent to the exercise of jurisdiction by the district court in respect to such property.*^ Where an adverse claimant voluntarily siubmits to the jurisdiction of the court the trustee may not be heard in objection thereto.** g. Suits for the recovery of property, — (1) In general. — The exceptions added to subsection b by the amendments of 1903 and 1910 result directly in the clothing of a district court with full jurisdiction to entertain a suit brought by a trustee to recover property prefer- entially transferred within the meaning of § 60-b or fraudulently trans- ferred or incumbered within the meaning of § 67-e, or § 70-6.*° Such 45. Boonville Nat'l Bank v. Blakey (C. C. A., 7th Cir.), 6 Am. B. R. 13, 107 Fed. 891. Objection first railed on ap- peal. — In the case of In re Connolly (D. C, Pa.), 3 Am. B. R. 842, 100 Fed. 620, It was held that the appear- ance of the respondent on a petition of a trustee for an order compelling the delivery of property and proceed- ing upon the hearing before the referee without objection to the jurisdiction, implies consent and precludes the re- spondent from raising the point on lack of jurisdiction for the first time upon exception to an adverse report; In re Emrick (D. C, Pa.), 4 Am. B. R. 89, 101 Fed. 231, holding that while the court has jurisdiction of the sub- lect matter a party submitting there- to cannot for the first time complain of the lack of jurisdiction when the decision is adverse. 46. Louisville Trust Co. v. Comin- gor, 7 Am. B. R. 421, 184 U. S. 18; First Nat'l Bank of Chicago v. Chi- cago Title & Trust Co., 14 Am. B. R. 102, 198 U. S. 280, in which the court said : " Petitioners asserted this ex- press statutory limitation on juris- diction and objected that the district CQurt could not proceed, but their ob- jections were overruled. That they then did not abandon their claims did not amount to a waiver of their objec- tions or to a consent to an exercise of jurisdiction against which they pro- tested." In re Horgan (C. C. A., 1st Cir.), 19 Am. B. R. 857, 158 Fed. 774, holding that where the sureties on the return of a citation served upon them objected to the power of the court to order them to turn over the amount of a deposit for their security, and prior to the entry of the final decree specifically objected to the jurisdiction of the court to proceed summarily, it is sufficiently shown that they did not consent to the jurisdiction of the court. And see In re Hayden (D. C, Mass.), 22 Am. B. R. 764, 172 Fed. 623, holding tnat though a claimant appeared generally and took part in a hearing upon the merits, after his motion to dismiss for want of jurisdic- tion had been denied, he did not con- sent to the exercise of jurisdiction 47. Pickens v. Dent, 9 Am. B. R. 47, 187 U. S. 177. 48. In re Hadden Rodee Co. (D. C, Wis.), 13 Am. B. R. 604, 135 Fed. 886. 49. If preferentially transferred, it must have been within four months of the bankruptcy (§ 60-b); if fraudu- lently, the State statute of limitations controls (§ 70-e). See Gregory v. At- kinson (D. C, Mo.), 11 Am. B. R. 495, 127 Fed. 183, holding that except as to conveyances or preferences made within the four months' period the law remains as it was before the amendment. To a similar effect is the case of Harris v. First Nat. Bank (Sup. Ct.), 23 Am. B. R. 631, 216 U. S. 382; Palmer v. Rosinskv (D. C. N. Y.), 23 Am. B. R. 358, 175 Fedl 883. So far as these cases deny the jurisdiction of the district court to entertain suits by the trustee for the recovery of property fraudulently conveyed under § 70-e. they have been nullified by the amendment of 1910. JUEISDICTION OF UNITED StATES AND StATE OoUETS. 405 § 23-b.] Suits for Recovery of Property. a soiit may be laid either in the proper State court or in a district court even without the consent of the proposed defendant.*" If brought in a State court, a Federal question is presented, which may be certified to the United States supreme court"* If in the district court, it need not be in the district where the bankruptcy proceeding is pending."'* Such a suit can be brought, under certain circumstances, in the circuit court, as has already been shown.** (2) Who may bring suit. — The extension of jurisdiction re- sulting from the amendment of this subsection was probably in- tended only for the benefit of the trustee. The adverse claimant certainly cannot sue under § 23-b in the district court,'* nor can he by consent confer summary jurisdiction upon the court to deter- mine the merits of a real adverse claim in property alleged to belong to the bankrupt but in the claimant's possession.'" There is some doubt as to a receiver's power to sue at all ;"* that he can under § 2(7) has already been held and is probably the law."^ RecoTcry of property. — In the case of Linstroth Wagon Co. v. Ballew 32, 149 Fed. 960, Judge McCormick (C. C. A., 5th Cir.), 18 Am. B. R. 23, 32, 149 Fed. 960, Judge McCormick said: "The amendatory Act of 1903 gave concurrent jurisdiction to the courts of bankruptcy and any State court which would have had juris- diction if bankruptcy had not inter- vened, if suits by a trustee for the purpose of such recoveries as are authorized by § 60 subd. b, and § 67 subd. e, in addition to those which could be entertained by the consent of the proposed defendant." 50. Lawrence v. Lowrie (D. C, Pa.), 13 Am. B. R. 297, 133 Fed. 995; Homer-Gay lord Co. v. Miller (D. C, W. Va.), 17 Am. B. R. 257, 147 Fed. 295; Drew v. Myers, 22 Am. B. R. 656, 81 Neb. 750, 116 N. W. 781. 51. Rector v. City Deposit Bank Co., 15 Am. B. R. 336, 200 U. S. 405, where the court holds that where an action was brought by a trustee to re- cover what is asserted to be an asset of the bankrupt estate, a federal ques- tion is presented, and the denia"! of the asserted right was a denial of a right or title speciallv claimed under a law of the United States. 52. See Lathrop v. Drake. 91 U. S. 516. And compare Sherman v. Bing- ham, Fed. Cas. 12,762, with Sheariiian V. Bingham, Fed. Cas. 12,733. 53. See pp. 395, 396, ante; see Bush V. Elliott, 15 Am. B. R. 656, 202 U. S. 477. 54. Viquesney v. Allen (C. C. A., 4th Cir.), 12 Am. B. R. 402, 131 Fed. 21, in which the court says: "The original act, § 23-a, relates only to controversies between the trustee in bankruptcy and adverse claimants to property acquired or claimed by the trustee. So, also, § 23-b relates only to suits brought by trustees in bank- ruptcy, and the amendments, if ap- plicable here, likewise only apply to suits by trustees in bankruptcy." 55. In re Teschmacher & Mrazay (D. C, Pa.), 11 Am. B. R. 547, 127 Fed. 728. 56. Boonville Bank v. Blakey (C. C. A., 7th Cir.), 6 Am. B. R. 13, 107 Fed. 891. But see In re Fixen & Co. (D. C, Cal.), 2 Am. B. R. 822, 96 Fed. 748. 57. In re McCallum (D. C, Pa.), 7 Am. B. R. 596. 113 Fed. 393. See discussion under §§ 2 and 7, ante. In the following cases the right of a receiver in bankruptcy to sue has been denied. Beach v. Macon Grocery Co. (C. C. A., 5th Cir.), 8 Am. B. R. 751, 116 Fed. 143; Boonville Nat'l v. Blakey fC. C. A., 7th Cir.), 6 Am. B. R. 13, 107 Fed. 891. 406 The Law and Practice in Bankruptcy. Suits for Recovery of Property. [i 23-b. (3) When suits mat be brought. — ^A district court has by subiaection h of this section full jurisdiction to entertain a plenary suit to set aside a preference or a fraudulent conveyance made within the four months prior to bankruptcy. " To recover prop- erty " undoubtedly includes a suit, the real purpose of which is to annul an incumbrance, other than through legal proceedings.®* Thus, practically all suits to set aside preferences or fraudulent transfers,^® and to avoid liens other than those through legal pro- ceedings, may be laid in the district court; with, it is thought, in most instances, a reference by consent to one of the referees in bankruptcy, as special master, to hear and report on the facts as special master. Where the litigants are at a distance from the stated sittings of the district court, resort may still be had to the then more accessible State tribunals. In whichever court the suit is laid, it at once becomes subject to the rules and practice there followed. It has been held that a district court may not entertain a plenary suit in equity to annul a cancellation of a mortgage, made by the bankrupt to himself as executor under a will, brought by beneficiaries, where the general creditors of the bankrupt have no interest.*" Where neither of the parties was a party to the bankruptcy proceeding, this section confers no juris- diction.*^ If the property in controversy is not a part of the bankrupt estate and may not be distributed in the proceeding, the controversy cannot be determined therein.*^ Irrespective of the amendment of 1903, a district court has jurisdiction to determine in a plenary suit, the rights of parties in respect to property which has been surrendered by a receiver without authority.*^ Where property has passed into the actual or constructive possession of the trustee, it has been held that the 58. As indicating this, note the use trustee of the insolvent buyer may re- ef the word " incumbrance " in § 67-e. cover the value of the property. And compare Chapman v. Brewer, 114 60. Brumley v. Jones (C. C. A., 5th U. S. 158. For an interesting case Cir.), 15 Am. B. E. 578, 141 Fed.'siS, where jurisdiction was declined, see 72 C. C. A. 466; compare Horner-Gay- Eeal Estate Trust Co. v. Thompson lord Co. v. Miller (D. C. W Va ) 17 (D. C, Pa.), 7 Am. B. E. 520, 112 Am. B. E. 257, 147 Fed.' 295. Fed. 945. 61. Henrie v. Henderson (C. C. A., 59. See Gregory v. Atkinson (D. 4th Cir.), 16 Am. B. R. 617 145 Fed C, Mo.), 11 Am. B. E. 495, 127 Fed. 316. 183; Lynch v. Bronson (D. C, Conn.), 62. Matter of Girard Glazed Kid 20 Am. B. E. 409, 160 Fed. 139, hold- Co. (2) (D. C, Pa.), 14 Am. B. R. ing that, where an insolvent within 485, 136 Fed. 511. the four months period purchased 63. Whitney v. Wenman 198 U. S merchandise on credit and, with in- 539, 14 Am. B. R. 45, in which it ap- tent to defraud the seller, transferred peared that a temporary receiver in the same for an inadequate price, the bankruptcy had turned over to third JUEISDIOTION OF UkITED StATES AND StATE CoUKTS. 407 § 23-b.] Summary Jurisdiction. district couirt may entertain a plenary suit brought against the trustee to determine the validity of liens claimed against such property;** but in both instances jurisdiction exists under § 2(7) of the act which vests district court with original jurisdiction to determine controversies with relation to estates of bankrupts, rather than under subsection & of § 23.*'* A suit, either at law or in equity, may be brought in the district court to recover a voidable preference ;"* it will become important in determining the question of jurisdiction to ascertain whether the tranBdfer was in fact preferential, and the cases cited under § 60-a-b will be helpful. Where property in the possession of the adverse claimant was sold to him, title thereto may not be tried in a suit brought by the trustee in the district court.®' A plenary suit by the trustee of a bankrupt corporation to recover unpaid siubscriptions is not for the recovery of property under this sub- section and may not be brought in a court of bankruptcy without the consent of the proposed defendants.®^ Suits for the recovery of ordinary contract debts are not within the meaning of this sub- section as amended.®^ h. Summary jurisdiction. — (1) In geneeai,. — The amend- ments have not, it is thought, changed the effect of present prece- dents against the exercise of jurisdiction summarily. If the party proceeded against is " an adverse claimant," in the broad sense of the words, he should not, under the present law, be asked to respond to a petition, order to show cause, or motion, any more than he was imder the law of 1867, as it was interpreted in Eyster v. OajfJ'* parties warehouse receipts belonging the recovery of unpaid stock subscrip- to the bankrupt, and it was held that tiona is not a suit for the recovery of such surrender being unauthorized Property under § 60-b§ 67-c or §70-e. suit might be brought by the trustee Com^pare^SkUhn . Magnus ^(D.^C., in a district court to recover such ggg. ^^^^j, ^_ ^^.^^^ ^^;^ Tobacco property. Co. 22 Am. B. R. 287, 54 Ohio Law 64. Goodnough Mercantile & Stock Bull 732; In re Eureka Furniture Co. Co. V. Galloway (D. C, Or.), 19 Am. (D. C, Pa.), 22 Am. B. R. 395, 170 B R. 244, 156 Fed. 504. Fed. 485. 65. See cases cited under § 2(7), 69. Bush v. Elliott, 15 Am. B. R. „. 565, 202 U. S. 477; Hinds v. Moore 66. Bowman v. Alpha Farms (D. [C. C. A.^|th Cir.), 14 Am. B. R. 1, C, N. Y.), 18 Am. B. R. 700, 153 Fed. .jq q\ u/ s. 521. Compare Bur- 380; Parker v. Black (D. C, N. Y.), bank v. Bigelow, 92 U. S. 179; Smith 16 Am. B. R. 202, 143 Fed. 5fi0. v. Mason, 81 U. S. 419; Marshall v. 67. In re Flynn (D. C, N. Car.), Knox, 83 U. S. 551; also, In re Rock- 11 Am. B. R. 318, 126 Fed. 422. wood (D. C, Iowa), 1 Am. B. R. 272, 68. In re Hutchinson & Wilraoth 91 ^f''-, ^.^3; In re Kelly (D. C., /n n A an. rw \ 10 Am p p ^^^^ Tenn.), 1 Am. B. R. 306, 91 Fed. 504; '^- ^ ^\. u ,.• ' fw' ■',]:. I" ^« l^™ks (D. C, Ala.), 2 Am. B. 158 Fed. 74, holding that a suit for ^ gg^^ gg p^j ggg. j„ re saudouine (C. C, 2d Cir.), 3 Am. B. R. 651, ante. 408 The Law and Pbactioe in Bankbuptct. Summary Jurisdiction. [§ 23-b. If the party is in possession of the property adversely daimed by the bankrupt or hia trustee he cannot be deprived of the right to litigate the disputed right to possession or ownership in a plenary suit brought either in a district court or the proper State court.''* As a matter of right, he should have his day in court in the regular way, i. e., by pleadings, trial, and judgment. On the other hand, if this claim is not sitrictly adverse, summary process is permis- sible even that of contempt.^'' (2) Effect of amendment of 1903. — The aot of 1903 having made Bardes v. Bank no longer the law, it has been suggested that resort may now be had to summary remedies in many cases where it was denied before.''' But the only change accomplished by the amendment is to give jurisdiction of suits at law and in equity to recover property to the district courts, as well as to the courts of the State. (3) JUEISDICTION AS DEPENDENT UPON POSSESSION. The pOwer of the district court to proceed summarily will depend largely upon whether the subject matter is in its possession, either actually or constructively; where such possession is shown the court may proceed summarily to determine controversies! in respect to the property, and the extent and character of liens thereon or rights therein.''* Once acquiring possession, the jurisdiction to determine 101 Fed. 547; In re Cohn (D. C, N. Am. B. R. 132, 68 C. C. A. 374, 135 Y.), 3 Am. B. E. 421, 98 Fed. 75. Fed. 736. Cases contra, like In re Francis-Val- If a person claims property in entine Co. (C. C. A., 9th Cir.), 2 his possession, in good faith, the refe- Am. B. R. 522, 94 Fed. 793, are ree cannot by summary order direct omitted, because, since the amenda- that it be surrendered to the bank- tory act of 1903, the reasoning of rupt's trustee. In re Walsh Bros. (D. Bardes v. Bank and the analogies of C, Iowa), 21 Am. B. E. 14, 163 Fed. the whole statute are against them. 352. But when the claimant also is a bank 72. In re Davis (D. C Tex ) 9 rupt, summary jurisdiction exists; In Am. B. E. 670, 119 Fed. 950 re Rosenberg (D. C, Pa.), 8 Am. B. 73. Lawrence v. Lowrie (D. C. R. 624, 116 Fed. 402. See, also, cases Pa.), 13 Am. B. R. 297, 133 Fed. 995*. decided by the Supreme Court under 74. Whitney v. Wenman, 14 Am. B the present law referred to in the next R. 45, 49, 198 U. S. 555; First Nat! paragraph. The case of In re Tune Bank of Chicago v. Chicago Title ifc (D. C, Ala.), 8 Am. B. R. 285, 115 Trust Co., 14 Am. B. R. 102, 198 U. Fed. 906, is a valuable addition to the S. 280, where the court states that the discussion and points out clearly rule in force under the act of 1867 when summary jurisdiction should he that the bankruptcy court was with- assumed and when not. out jurisdiction to determine adverse 71. In re Knickerbocker (D. C, N. claims in property not in possession Y.), 10 Am. B. R. 381, 121 Fed. 1,004; of the assignee in bankruptcy by sum- In re Rochford (C. C. A., 8th Cir.), mary proceedings, whether absolute 10 Am. B. R. 608, 124 Fed. 182; Mat- title or only a lien was asserted is ter of Andre (C. C. A., 2d Cir.), 13 equally applicable under the present Jurisdiction of United States and State Courts. 409 S 23-b.) Summary Jurisdiction. by plenary suit or summary proceedings all conflicting claims will remain in the court, and there can be no interference with such possession upon the part of any other court, except by way of review or appeal." The jurisdiction to proceed summarily is not lost by the unauthorized surrender of possession by officers of the court or by seizure of the property by an adverse claimant.^* Where- ever a receiver in bankruptcy is directed by the court to sell assets in his possession, the parties concerned in the sale are subject to the summary jurisdiction of the court, and the court may direct the manner of the completion of the contract.'" Property is in possession of the court when an officer of the court is in pos- session, whether such officer be a trustee, a receiver, or any other judicial representative.'* Upon the filing of a petition in bank- ruptcy, followed by adjudication, the property in the possession of the bankrupt of which he claims the ownership passes at once into law; In re McMahon (C. C. A., 6th Cir.), 17 Am. B. R. 530, 147 Fed. 685, holding that when the hankruptey court has actual possession of land as part of the bankrupt's estate it may ascertain the validity of a trust deed thereof which is void under § 67e; O'Dell v. Boyden (C. C. A., 6th Cir.), 17 Am. B. R. 751, 756, 150 Fed. 731; In re Noel (D. C, Md.), 14 Am. B. R. 715, 720, 137 Fed. 694; In re Baudouine (C. C. A., 2d Cir.), 3 Am. B. R. 651, 101 Fed. 574; In re Lemmon & Gale (C. C. A., 6th Cir.), 7 Am. B. E. 291, 112 Fed. 296; Clem- inshaw v. International Shirt & Collar Co. (D. C, N. Y.), 21 Am. B. R. 616, 165 Fed. 797. 75. Murphy v. John Hofman Co. (Sup. Ct.), 21 Am. B. R. 487, 211 U. S. 562, affg. 187 N. Y. 548; Mound Mines Co. v. Hawthorne (C. C. A., 8th Cir.), 23 Am. B. R. 242, 173 Fed. 882. In re Schermerhorn (C. C. A., 8th Cir.), 16 Am. B. R. 507, 145 Fed. 341; In re Moody (D. C, Iowa), li Am. B. R. 718, 724, 131 Fed. 525; In re Rochford (C. C. A., 8th Cir.), 10 Am. B. R. 608, 124 Fed. 187; Croshy V. Spear, 98 Me. 542, 11 Am. B. R. 613; Chauncey v. Dyke Bros. (C. C. A., 8th Cir.), 9 Am. B. E. 444, 119 Fed. 1, holding that where the bank- ruptcy court in the exercise of its cus- tomary jurisdiction obtains the law- ful custody of property to which liens attach, it has the jurisdiction to de- termine the relative priorities of con- flicting claims to the fund realized from the sale of the property; In re Reynolds (D. C, Mont.), 11 Am. B. R. 758, 127 Fed. 760; In re Kellogg (C. C. A., 2d Cir.), 10 Am. B. R. 7, 121 Fed. 333; In re McCallum (D. C, Pa.), 7 Am. B. R. 596, 113 Fed. 393; In re Whitener (C. C. A., 5th Cir.), 5 Am. B. R. 198, 105 Fed. 180; Keegan v. King (D. C, Ind.), 3 Am. B. R. 79, 96 Fed. 758. See, also, cases cited under § 2 (7), ante. 76. In re Schermerhorn (C. C. A., 8th Cir.), 16 Am. B. R. 507, 145 Fed. 341. See, also, Whitney v. Wenman, 198 U. S. 539, 14 Am. B. R. 45; Mueller v. Nugent, 184 U. S. 1, 7 Am. B. R. 224; White v. Schloerb, 178 U. S. 542, 4 Am. B. R. 178; Chauncey v. Dyke Bros. (C. C. A., 8th Cir.), 9 Am. B. R. 444, 119 Fed. 1; In re Corbett (D. C, Wis.), 5 Am. B. R. 224, 104 Fed. 872; In re Rose Shoe Mfg. Co. (C. C. A., 2d Cir.), 21 Am. B. R. 725, 168 Fed. 39, hold- ing that where, under a claim of ownership, there is taken from the possessibn of a receiver property held by him as part of the bankrupt's estate, the court of bankruptcy has jurisdiction to compel its return by summary order, and may adjudicate all claims relating thereto. Frandnlent transfer of assets to corporation, formed by alleged bankrupt, during the four montlis' period, for purpose of avoiding ad- ministration in bankruptcy does not affect summary jurisdiction. Matter of Berkowitz (Ref., N. J.), 22 Am. B. R. 227. 77. Mason v. Wolkowich (C. C. A., 1st Cir.), 17 Am. B. R. 709, 150 Fed. 699. 78. In re Franklin Lumber Co. (D. C, N. J.), 17 Am. B. R. 443, 446, 147 Fed. 852; In re Renda (D. C, Pa.), 17 Am. B. E. 521, 523, 149 Fed. 614; Crosby v. Spear, 11 Am. B. R. 613, 98 Maine 542; McFarland Carriage Co. V. Solanas (D. C, La.), 6 Am. B. R. 221, 106 Fed. 145, holding that a thing is in custodia legis when it is shown that it has been and is subject to the official custody of a judicial executive officer in pursuance of his execution of a legal writ. 410 The Law and Peaotice in Bankeuptct. Summary Jurisdiction. [§ 23-b. the custody of the court of bankruptcy and becomes subject to its jurisdiction.''* It has been expressly stated in a number of cases that the property of the bankrupt, after the filing of the petition against him and before -adjudication thereon, is in custodia lenis; that from that time it becomes subject to the prehensory power of the court and the bankrupt or his creditors cannot take any action in respect to it.®** This principle is based upon the often-repeated statement that the filing of a petition is a caveat to all the world, and is in fact an injunction and attachment.®^ In any event whether the property vests at the time of the filing of the petition or upon the adjudication the possession of the bankrupt becomes that of the court and from either of such times the court may pro- ceed summarily in respect to the property of the bankrupt.** The property need not be in the actual possession of the court in order to justify summary process, as for instance where the bankrupt was possessed of a seat in a stock exchange and according to the rules of which proceedings must be taken to complete a transfer thereof ; in such a case the seat passed to the bankruptcy court subject to the required transfer and the court may summarily direct the necessary action to be taken to complete the transfer.*^ Summary jurisdiction may not be exercised to determine adverse claims to 79. In re Gutman & Wenk (D. C, 81. Mueller v. Nugent, 7 Am. B. R. N. Y.), 8 Am. B. R. 252, 114 Fed. 224, 184 U. S. 1. This declaration has 1,009; In re Granite City Bank (C. C. been repeated in a great number of A., 8th Cir.), 14 Am. B. R. 404, 137 cases with the same effect and pur- Fed. 818; In re Hobbs (D. C, W. pose; these cases are too numerous to Va.), 16 Am. B. R. 544, 145 Fed. 211; cite. See cases cited in note 26 under In re Schermerhorn (C. C. A., 8th section 18. Cir.), 16 Am. B. R. 507, 145 Fed. 341, 82. In re Kleinhans (D. C, N. Y.), where the court said: "Upon the fil- 7 Am. B. R. 605, 113 Fed. 107; Bryan ing of a petition in bankruptcy, fol- v. Bernheimer, 181 U. S. 188, 5 Am. lowed by an adjudication, all property B. R. 623; In re Davis Tailoring Co. in the possession of the bankrupt of (D. C, N. J.), 16 Am. B. R. 486, 144 which he claims the ownership passes Fed. 285, where it appeared that four at once into the custody of the court days prior to the filing of a petition of bankruptcy, and becomes subject to against the bankrupt property was its jurisdiction to determine, by plen- purchased from him and it wag held ary action or summary proceeding, as that the question as to the title of the the nature of the case demands, all property could not be adjudicated adverse or conflicting claims thereto, summarily by the district court, whether of title or of lien; and that 83. O'Dell v. Boyden (C. C. A., 6th court may, by the process of injunc- Cir.), 17 Am. B. R. 751, 150 Fed. 731; tion, protect its jurisdiction against Page v. Edmunds, 187 U. S. 596, 9 interference." Am. B. R. 277. See, also, Sparhawk 80. In re Duncan (D. C, S. Car.), v. Yerks, 142 U. S. 1 ; Hyde v. Woods, 17 Am. B. R. 283, 288, 148 Fed. 464; 94 U. S. 523; In re Ketchum, 1 Fed. In re Granite City Bank (C. C. A., 840. 8th Cir.), 14 Am. B. R. 404, 137 Fed. 818. Jurisdiction of United States and State Courts. 411 § 23-b.] Summary Jurisdiction. property not in the possession of the trustee, whether the adverse claimant asserts absolute tide or merely a lien.** (4) Exercise of summary jurisdiction. — If the property proceeded againisit be not held adversely, that is, if it be either actually or constructively in the possession of the court summary process may issue in the exercise of the court's lawful jurisdiction in respect thereto. It will thus be noticed that the question also hinges upon the nature of the claim as adverse and this in turn is controlled by the determination as to where the possession lies. The case of Bardes v. Bank,^^ effectually limited the exercise of jurisdiction by the district court over plenary suits for the recovery of property adversely held. The amendment of 1903 eliminated this limitation. As we have seen the only change accomplished by this amendment is to give jurisdiction of suits at law and in equity to recover property to the district courts. Beginning with White v. Schloerb,^^ where the property was taken in replevin from the custody of the court after an adjudica- tion, and continuing through Bryan v. Bemheimerf' which held the vendee of a general assignee within four months of the bank- ruptcy, and with knowledge of its existence, amenable to summary process, to Mueller v. Nugent,^^ which declared the bankrupt's son, to whom, just prior to bankruptcy, he had delivered a large amount of property which he refused to irestore to the trustee, not an adverse claimant, the supreme court has already supplied a chain of precedents which limit its broad doctrine in Bardes v. Bank. The case of Louisville Trust Co. v. Comingor,^^ stands by itself, 84. First National Bank v. Chi- 86. 178 U. S. 542, 4 Am. B. E. cago Title & Trust Co., 14 Am. B. R. 178 102, 198 U. S. 280; Morning Tele- 87. 181 U. S. 188. 5 Am. B. E. ?^^Pm-^i,"^ ?7-J- 5"4"''if«''"r^'^"P- "23. Compare Smith v. Belford (C. Ct., Mich.), 17 Am. B. R. 425; Cooney n * oii /-.• \ r a t, ti »«, ,.C^ V. Collins (C. C. A., 9th Cir.)! 23 Am. ^■/•' "f ^"■•'' ^ ^""^ ^- ^- ^^^' ^°^ B. R. 840, 176 Fed. 189. I'''''- »-^^- Property held nnder writ of 88. 184 U. S. 1, 7 Am. B. R. 224, replevin prior to banhrnptcy. — reversing a. c. below (C. C. A., 6th Where the sheriff, in an action pend- Cir.), 5 Am. B. R. 176, 105 Fed. 581, ing in a State court, holds property which reversed In re Nugent (D. C, in replevin taken by him prior to KyO, 4 Am. B. R. 747, 104 Fed. 530. bankruptcy proceedings under claim of For referee's decision in same case, ownership, the bankruptcy court has see 2 N. B. N. Rep. 714. not jurisdiction, by summary order, 89. 184 U. S. 18, 7 Am. B. R. 421, to compel the sheriff to deliver the affirming Sinsheimer v. Simonson (C. property to a receiver in bankruptcy. C. A., 6th Cir.), 5 Am. B. R. 537, 107 Matter of Rudnick & Co. (C. C. A., Fed. 898. As to right of bankruptcy 2d Cir.), 20 Am. B. R. 33, IfiO Fed. <^ourt to require assignee to account 903. for property coming into his hands 85. 178 U. S. 524, 4 Am. 1!. R. under an assignment made within four 163. 412 The Law and Practice in Bankeuptcy. Ancillary Jurisdiction. [i 23-b. and, while seeming to limit Bryan v. Bemheimer, when carefully read, ireaffirms it; the holding of the general assignee there being not strictly as' assignee, in other words, as agent for the bankrupt, but rather as an individual having acquired title lawfully and without notice, and thus constructively, if not actually, adverse. Each of these decisions turns on whether the defendant is " an adverse claimant." Bardes v. Bank wasi a lightning flash, like Eyster v. Oaff under the other law, and cleasred the atmosphere on this puzzling question of summary jurisdiction; but it was not necessary to any of the many recent decisions against summary process, though usually assigned as the reason for the ruling.*" The jurisdiction to proceed summarily doubtless exists as much now as it did before Bryan v. Bemheimer was decided. It is not a question of jurisdiction, but rather of comity and discretion.®^ Tn facts like those in White v. Schloerh, Bryan, v. Bemheimer, and Mueller v. Nugent, it should be exercised. In other facts, amounting to an adverse holding under a legal title before the bankruptcy, it usually will not; as where transfers were made by the bankrupt two years prior to filing the petition in bankruptcy, the court has no jurisdiction of an action to set them aside on the ground of fraud against cred- itors, without the consent of the proposed defendants.®^ Having now clearly the right to try controversies by plenary suit, the district court will be more apt to assume and retain jurisdiction which rests only on petition or order to show cause and appear- ances,®* and, where possible, consider it as a suit between the parties so in court. But the phrasing of any rule generally ap- plicable is impossible. i. Ancillary jurisdiction. — A district court has only such juris- diction as is conferred by the act; this section only confers juris- diction to the extent that suits might have been brought by the bankrupt if proceedings in bankruptcy had not been instituted, and contains no provision for auxiliary or ancillary proceedings in months of the assipnor'a bankruptcy, 91. See In re Tune (D. C, Ala.), 8 see Matter of Thompson fD. C, N. Am. B. R. 285, 115 Fed. 906. y.), 10 Am. B. R. 242, 122 Fed. 174; 92. GreRory v. Atkinson fD. C, affirmed, 11 Am. B. R. 719, 128 Fed. Mo.), 11 Am. B. R. 405, 127 Fed. 575. 183; In re Davis Tailoring Co. (D. 90. See In re San Gabriel Sanito P.. N. J.), 16 Am. B. R. 486, 144 Fed. rium Co. (C. C. A., 9th Cir.), 7 Am. 285. B. R. 206, 111 Fed. 892; also In re 93. In re Steiier (D. C, Mass.), 5 Sheinbanm (D. C, N. Y.), 5 Am. B. Am. B. R. 209, 104 Fed. 976. See In R. 187, 107 Fed. 247; Mueller v. Nu- re Mundle (D. C, N. Y.), 14 Am. B, gent, 184 U. S. 1, 7 Am. B. R. 224. E. 680, 139 Fed. 691. Jurisdiction of United States and State Courts. 413 § 23-b.] Auxiliary Remedies. another court of bankruptcy in aid of the bajikruptcy court that made the adjudication and has charge of the bankrupt's estate.®* This question has been already discussed under § 2, ante, and it will there be noticed that the weight of authority seems to favor the exercise of such ancillary jurisdiction in special cases, when necessary to carry into eifect the full purpose of the bankruptcy act.®' Under the scheme of the bankrupt aot the district court of the domicile of the bankrupt takes exclusive jurisdiction of the bankrupt and his property wherever situated, to administer it and distribute the proceeds among the creditors according to their respective rights and priorities. It thus happens that there is no necessity for the exercise of ancillary jurisdiction by a bank- ruptcy court.®® j. Auxiliary remedies.^A bankruptcy court, as a court of equity, is competent to grant final and auxiliary reliefs adapted to the circumsitances of any case, however peculiar, and, by the bankrupt act, it is charged with the duty to devise such ordetrs and judgments as may be necessary for the enforcement thereof .^'^ The amendment of 1903 has not affected the jurisdiction of the court in respect to the different auxiliary remedies. Where the right to trtay should have been exercised before Bardes v. Bank it should be exercised now,®^ the amendments having accomplished no change here.®* So also of orders to show cause resulting in contempt.^*"* 94. Hull V. Burr (C. C. A., 5th for an examination before a referee of Cir.), 18 Am. B. R. 541, 153 Fed. persons concerning the acts, conduct 945; In re Von Hartz (C. C. A., 2d and property of the bankrupt of which Cir.), 15 Am. B. R. 747, 142 Fed. 726. it is alleged that such persons have A bankruptcy court in a dis- knowledge; such an order should be trict other than that in which the made by the court of bankruptcy hav- bankruptcy proceedings are pending ing charge of the administration of has no jurisdiction to appoint a re- the estate. ceiver of the property of the alleged 95. See, ante, p. 21 ; In re Nelson bankrupt, except upon motion in open & Co. (D. C., N. Y.), 18 Am. B. R. 66, court upon such notice to the persons 149 Fed. 590; Babbitt v. Butcher in the actual possession of property so i,^"?- C*-)' 23 Am. B. R 519, 216 U. located, and to those otherwise inter- fv„ l"!" /^^^ n''°''l^„'"^'i* °\J ^- ll .,'.„.., . , the act of 1910 makes clear the right csted as will m the circumstances con- to exercise concillary jurisdiction, stitute due process of law as required ge. In re Granite City Bank (C. by the Constitution. Ross-Meeham C. A., 8th Cir.), 14 Am. B. R. 404, Foundry Co. v. Southern Car & Foun- 137 Fed. 818. dry Co. (D. C, Tenn.), 10 Am. B. R. 97. In re Coffey (Ref., N. Y.), 19 624, 124 Fed. 403. In the case of In -'^™- ^- ^- ^^^- „ . ,„ > re Williams (D. C, Tenn.), 10 Am. . ^.^' ^^^ 4° «^,!?'"'''*"J^^*-' ^- ^i'' T> T, ano mo 17 J om -i „ \. ^A " -°.m. B. R. 639. And compare, for B. R. 538, 123 Fed. 321, it was held ^„ ^^^reme and, since Bryan v. Bern- that a bankruptcy court in a district heimer, doubtful authority. In re See- other than that in which the bank- bold (C. C. A., 5th Cir.), 5 Am. B. R. ruptey proceedinfrs are pending may 358, 105 Fed. 910. not grant an application for an order 99' As to stays generally, see un- der §§2 and 11 of this work. 100. See under §§2 and 41. il4 The Law and Peactice in Bankeuptct. Auxiliary Remedies. [§ 23-b. The question is not one of jurisdiction, but of comity, of propri- ety. The court can, but often should not.^°^ If the banhrupt had the title at the time of the bankruptcy, it hasi the jurisdiction and may assert it. If the court, through its officers, had acquired peaceable possession of the property, under such conditions as to place it and the proceeds thereof in custodia legis, it may deter- mine the ownership of such property and proceeds,^**^ and the relative priorities of conflicting claims thereto.*"^ Likewise, too, of that much mooted question whether a district court can sum- marily bring in a stranger who has a lien on the bankrupt's' property and determine its validity, against his protest.^"* If the banltrupt had not the title, as in the case of chattel mortgages in l^Tew York,^"^ its jurisdiction is doubtful; and surely not if both title were vested in, and res were in the possession of, the mortgagee. Further, if the court has such jurisdiction, the referee has also.^"* Cases will arise where it should be exercised. But, in the long run, unless it is absolutely essential to preserve assets 101. Thus, compare In re Young ever it is, without its consent, taken (C. C. A., 8th Cir.), 7 Am. B. E. 14, into the possession of another; In re 111 Fed. 158, reviewing and affirming Kellogg (C. C. A., 2d Cir.), 10 Am. In re Bender (D. C, Ark.), 5 Am. B. B. R. 7, 121 Fed. 332; In re Eochford R. 632, 106 Fed. 873; also. In (C. C. A., 8th Cir.), 10 Am. B. R. re Green (D. C, Pa.), 6 Am. 608, 124 Fed. 182. B. R. 270, 108 Fed. 616; In re 103. Chauncey v. Dyke Bros. (C. Sheinbaum (D. C, N. Y.), 5 C. A., 8th Cir.), 9 Am. B. R. 444, 119 Am. B. R. 187, 107 Fed. 247; In re Fed. 1. Moore (D. C, W. Va.), 5 Am. B. R. 104. For one of the earliest and 151, 104 Fed. 869; In re Macon Sash, most vigorous cases in favor of as- etc, Co. (D. C, 6a.), 7 Am. B. R. 66, serting such jurisdiction, see Carter 112 Fed. 323, rev'd 8 Am. B. R. 29, v. Hobbs (D. C, Ind.), 1 Am. B. R. 113 Fed. 483; Beach v. Macon Gro- 215, 92 Fed. 594; also, a chain of eery Co. (C. C. A., 5th Cir.), 8 Am. eases holding the same way, but on B. E. 751, 116 Fed. 143, suggests a differing facts; for one of the latest way to assert a provisional remedy and best reasoned, see In re Kellogg against an adverse claimant indi- (D. C, N. Y.), 7 Am. B. R. 623, 113 rectly. Fed. 120, affirming 6 Am. B. R. 389; 102. In re Rodgers (C. C. A., 7th as to right to determine controversies Cir.), 11 Am. B. R. 79, 125 Fed. 169; between lienors holding mechanics' Haven & Geddes Co. v. Pierek (C. C. liens, see In re Hobbs (D. C, W. Va.), A., 7th Cir.), 9 Am. B. R. 569, 120 16 Am. B. R. 544, 145 Fed. 211. Fed. 244; In re Antigo Screen Door 105. Bank v. Jones, 4 N. Y. 497; Co. (C. C. A., 7th Cir.), 10 Am. B. R. Blake v. Corbett, 120 N. Y. 327. 359, 123 Fed. 249; Crosby v. Spear, 106. See § 38-a(4) and Mueller v. 11 Am. B. E. 613, 98 Me. 542; In re Nugent, 184 IT. S. 1, 7 Am. B. R. 224; Leeds Woolen Mills (D. C, Tenn.), In re Drayton (D. C, Wis.), 13 Am. 12 Am. B. R. 130, 129 Fed. 922, hold- B. R. 602, 135 Fed. 883; In re Platte- ing that the possession once being ob- ville Foundry & Machine Co. (D> C, tained, the court's authority and con- Wis.), 17 Am. B. R. 291, 147 Fed. trol accompanies the property when- 828. JUEISDIOTION OF UnITED StATES AND StATE CoUBTS. 415 § 2S-b.] Jurisdiction of State Courts. or carry out the puTposes of the act, a summary disposition of such controversies in the proceeding, and not by suit, should not be asked.*"^ Even a lienor on property vested in, and in the posses- sion of, the trustee is generally an adverse claimant.'"® The analo- gies of the statute seem to entitle him, if he desires, to a plenary suit ; and the district court will be slow to take it from him. This view is strengthened by the fact that this law, unlike its predeces- sor,'"" contains no clause authorizing the trustee to sell incumbered property free from existing liens. The true test here is the same as that which applies where a stay or order to show cause which may result in contempt is asked ; a test sufficiently indicated in the preceding paragraphs. Of course, what goes before does not in any way limit the right of the court to take possession summarily of the property of an alleged bankrupt which is found in his pos- session or that of his agent.'"* This section does not authorize a Federal court to entertain a bill in equity at the instance of a simple contract creditor to set aside an alleged fraudulent con- veyance.'" But the court may entertain a suit by the trustee to set aside a mortgage on lands in his possession because given within four months prior to bankruptcy."^ Auxiliary proceedings for the protection of the assets of the bankrupt should be brought in the district court of the district in which the proceedings are pending.'" m. JURISDICTION OF STATE COUBTS. By subsection h of this section suit by the trustee must be brought in the courts where the bankrupt might have brought or prosecuted them if proceedings in bankruptcy had not been insti- tuted, unless by the consent of the proposed defendants, except such suits for the recovery of property as are within the pro- visions of § 60-b and 67-e. This provision requires in certain instances suits to be brought by the trustee in respect to the bank- rupt's property in a State court and in other instances confers 107. In re EocTiford (C. C. A., 8th 111. Viquesney v. Allen (C. C. A., Dir.), 10 Am. B. R. 608, 124 Fed. 182; 4th Cir.), 12 Am. B. E. 402, 131 Fed. In re Moody (D. C, Iowa), 12 Am. B. 21. R. 718, 131 Fed. 525. 112. In re McMahon (C. C. A., 6th 108. In re Rochford (C. C. A., 8th Cir.), 17 Am. B. R. 530, 147 Fed. 685. bir.), 10 Am. B. R. 608, 124 Fed. 182. 11,3. In re Williams (D. C, Ark.), Compare Marshall v. Knox, 83 U. S. 9 Am. B. R. 741, 120 Fed. 38; Ross- 551. See, also, Burbank v. Bigelow, Meeham Co. v. Southern Car & F. 92 U. S. 179. Co. (D. C, Tenn.), 10 Am. B. R. 624, 109. R. S., § 5075. 124 Fed. 403. no. Compare under §§ 3 and 69. 416 The Law and Practice in Bankruptcy. Jurisdiction of State Courts. [§ 23-b. concurrent jurisdiction upon such courts. It has been held that " any State court which would have had jurisdiction had not bank- ruptcy intervened" now has concurrent jurisdiction^" of any suit which can be brought by the trustee in the district court."' Thus, such a court has jurisdiction, not only to set aside a preference, to annul a lien other than through legal proceedings, and to re- cover back property fraudulently transferred,"" by the specific words of the act, but it also has, to the same end, such jurisdiction as may be conferred on it by the State law. The jurisdiction con- ferred upon a State court is limited to that conferred upon such court by State statutes; reference must be had to such statutes and the cases thereunder to determine such jurisdiction.""^ It has been held that a State court has jurisdiction of a plenary suit by an adverse claimant to establish a lien on property in the trus- tee's possession."' If, at the time of the bankruptcy, a suit or proceeding is pending in the State court, of which the Federal court might otherwise have jurisdiction, the adjudication does not oust the State court of jurisdiction."' The State court can pro- ceed unless stayed. This is peculiarly true of actions in rem. In respect to such actions the court which first takes the property into its custody retains it."» The rule is that "considering the peculiar character of our government and keeping in view the forbear- ance which courts of co-ordinant jurisdiction exercise towards each other, it follows that the court which first obtains the lawful juris- diction over the subject matter of a controversy must by the other courts be permitted to proceed therein to final 114. This has been doubted. See B. R. 839, 145 Ala. 209, 40 So. 407. Lyon V. Clark, 2 N. B. N. Rep. 792. 117. Skilton v. Codinston, 15 Am. But consult French v. Smith (Sup. B. R. 810, 185 N. Y. 80; Crosby v. Ct., Minn.) 4 Am. B. R. 785; Bind- Miller (Ct. App., Col.), 16 Am. B. R seil V. Smith (Ch. N. J.), 5 Am. B. 805. R. 40; Dcj Moines Sav. Bank v. As to jnrisdiction of State Morgan Jewelry Co., 12 Am. B. R. court to entertain action to set aside 781, 123 Iowa, 432; Breckons v. Sny- alleged voidable transfer, notwith- der, 15 Am. B. R. 112, 211 Pa. St. standing adjudication of bankruptcy. 176; Linstroth Wagon Co. v. Ballew Bryan v. Madden, 15 Am B R 388 (C. C. A., 5th Cir.), 18 Am. B. R. 23, 109 N. Y. App. Div. 876. 32, 149 Fed. 960. 118. In re Girdes (D. C, Ohio) 4 115. Under §§ 60-b, 67-e and 70-e. Am. B. R. 346, 102 Fed. 318; In 're See Drew v. Myers, 22 Am. B. R. 656, English (C. C. A., 2d Cir ), 11 Am 81 Neb. 750, 116 N. W. 781. B. R. 674, 127 Fed. 940: Matter of 116. Robinson v. White (D. C, Bay City Irrigation Co. (D. C. Tex) Ind.), 3 Am. B. R. 88, 97 Fed. 33. 14 Am. B. R. 370, 13.", Fed. 850. 116a. Section 818 of the 119. Compare In re Russell (C C. Georgia Code (1896) while author- A., 2d Cir.), 3 Am. B. R. 658, 101 izing a bill in chancery to subject to Fed. 248; In re Chambers (D. C. R. the payment of his debts property 1), 3 Am. B. R. 537, 98 Fed. 865,' fraudulently conveyed by a debtor. Southern Loan & Trust Co. v. Ben- does not authorize the setting aside of bow (D. C, N. Car.), 3 Am. B. R. ft, a conveyance which operates only as a 96 Fed. 514; Keegan'v. King (D C preference under the Bankruptcy Act, Ind.), 3 Am. B. R. 79, 96 Fed. 758^ 1898, and the remedy given by said In re Lemmon (C. C. A., 6th Cir.) 7 Act authorizing the trustee to pur- Am. B. R. 291, 112 Fed. 296; CrosW sue property conveyed as a preference v. Spear, 11 Am. B. R." 613 ' 98 Me in any State court having jurisdic- 542, holding that an action of reple- tion, in the absence of bankruptcy, vin cannot be commenced and main- affords relief in the Stnte court tained against a trustee to recover against those conveyances only, which property in the possession of the would be invalid under the laws of bankrupt at the time of the adiudiea- the State. Reed v. Wallace, 21 Am. tion. ■" Jurisdiction of United States and State Courts. 417 § 23-b.] Jurisdiction of State Courts. judgment." ^^" "Where the property in controversy is rightfully in possession of a State court or its officers prior to a period of four months before a petition is filed, the adjudication of bank- ruptcy does not deprive the State court of a right to continue in possession of such property, or of its jurisdiction to determine the controversy.i^"^ When the possession of a State court amounts to a fraud on the law, as through a general assignment or a prefer- ence or an attachment, within the four months period, the State court, while not, strictly speaking, ousted, in effect ceases to exer^ cise jurisdiction, the assignee, or sheriff, or parties being per- manently restrained.-*^* I 120. Pickens v. Dent (C. C. A., 4th Cir.), 5 Am. B. R. 644, 106 Fed. 653, affd. 9 Am. B. R. 47, 187 U. S. 177; Metcalf V. Barker, 9 Am. B. R. 36, 187 U. S. 175; Matter of Cameron Currie Co. (Ref., Mich.), 20 Am. B. R. 790; In re English (C. C. A., 2d Cir.), 11 Am. B. R. 674, 127 Fed. 940, in which the court said : " We know of no pro- vision of the bankrupt act, and our attention is called to no authority, which will sustain the proposition that, when a year afterwards one of the parties to an action is adjudi- cated a bankrupt, the State court is shorn of its jurisdiction to determine the controversy, and must turn over the property to the bankruptcy court." In re Seebold (C. C. A., 5th Cir.), 5 Am. B. R. 358, 105 Fed. 910; In re Tune (D. C, Ala.), 8 Am. B. R. 285, 115 Fed. 906; In re Wells (D. C, Mo.), 8 Am. B. R. 75, 114 Fed. 222; Des Moines Savings Bank v. Morgan Jewelry Co., 12 Am. B. R. 781, 123 Iowa, 432, holding that a trustee in bankruptcy, by intervening in an action to enforce a specific lien pending in a State court, cannot thereby oust the court of jurisdic- tion. In re Gerdes (D. C, Ohio), 4 Am. B. R. 346, 102 Fed. 318; In re Price (D. C, N. Y.), 1 Am. B. R. 606, 92 Fed. 987. See, also, under the for- mer act of 1867, Eyster v. Gaff, 91 U. S. 521. 120a. In re English (C. C. A., 2d Cir.), 11 Am. B. R. 674, 127 Fed. 940; In re Heckman (C. C. A., 9th Cir.), 15 Am. B. R. 500, 740 Fed. 859, 72 C. C. A. 8. 2Y Wbere a, -vendor of chattels, upon electing to rescind the sale for fraud, brought an action in a State court to recover the property and im- mediately seized it under a writ of se- questration, the jurisdiction of the btate court is in no way affected be- cause thereafter the buyer was adju- dicated bankrupt and his trustee took possession of the property. Linstroth Wagon Co. v. Ballew (C. C. A., 5th Cir.), 18 Am. B. R. 23, 149 Fed. 960. 1'21-. See pp. 50-52, ante. See Matter of Hornstein (D. C, N. Y.), 10 Am. B. R. 308, 122 Fed. 266. A-ttachment in State court. — In the case of Tennessee Producer Marble Co. v. Grant (C. C. A., 3d Cir.), 14 Am. B. R. 288, 135 Fed. 322, it was held that where, prior to the filing of a petition against an invol- untary oankrupt, to enforce an as- serted right in rem, under the State law, the bankruptcy court is without jurisdiction to stay such suit after the court has acquired jurisdiction of the res. This case was followed in the case of In re Kane (D. C, Pa.), 18 Am. B. R. 654, 152 Fed. 587, where it was held that if, prior to the filing of a petition in bankruptcj', a fund claimed by the bankrupt and others had been attached in a State court by garnishment, that court is the proper tribunal to settle the con- troversy, unless all parties in interest submit to the jurisdiction of the bank- ruptcy court. Neither of these cases properly con- sider the effect of § 67-f of the bank- ruptcy act, nullifying liens obtained 4:18 The Law and Peactice in Bankeuptct. Jurisdiction of State Courts. [§ 23-b. The adjudication vests in the trustee or temporary receiver the title of the bankrupt's property, and stays all seizures made within four months; it has the force and effect of an attachment and an injunction, and is a caveat to all the world. After such adjudication a State court has no jurisdiction to determine any rights affecting the bankrupt's estate, and is powerless to enforce any of its judgments as to such estate.^^^ Where an action is brought by a trustee in a State court to recover an alleged prefer- ence, such court cannot determine the validity of their claims against the bankrupt and whethesr other creditors have not re- ceived voidable preference ; to hold otherwise would be to transfer in a large measure the administration of the bankrupt's estate from the bankruptcy court to the State court. ^^* The possession^ by the bankrupt court of the proceeds of the sale of moirtgaged chattels does not deprive the State court of its conceded juris- diction to set aside the mortgage as fraudulent.^** If an assign- ment oir receivership or trusteeship is made or created under a State law for the benefit of creditors within four months prior to the filing of a petition in bankruptcy, and a State court in the exercifiie of its jurisdiction under such law assumes possession of the property, it may not retain such possession and proceed to a distribution of the property among the creditors, but upon the adjudication the bankruptcy court supersedes the State court and becomes poseeseed of the property for the purpose of administra- tion.^^^ If proceedings are brought in a State court for the disso- by judgment, attachment or other- B. E. 806, 205 U. S. 521. In the case wise within the four months period, of Skilton v. Codington, 185 N. Y. Where a lien is created by attachment 80, 15 Am. B. R. 810, it was held that or levy within four months prior to where a trustee in bankruptcy retains the filing of the petition in bank- out of the proceeds of the sale of the ruptcy, it becomes null and void on bankrupt's property a certain sum for the adjudication of bankruptcy. This the benefit of any liens or claims that being the case, the jurisdiction of the might be established against the State court in respect to the property debtor, the State court has jurisdie- subject to the lien is terminated, tion to hear and determine an action Clarke v. Larremore, 188 U. S. 486, 9 against the trustee to enforce a chat- Am. B. R. 476. tel mortgage executed by the bank- 122. In re Muskoka Lumber Co. rupt. (D. C, N. Y.), 11 Am. B. R. 761, 127 125. Randolph v. Scruggs, 10 Am. Fed. 760; In re Knight (D. C, Ky.), B. R. 1, 190 U. S. 553; Hooks v. Ald- 11 Am. B. E. 1, 125 Fed. 35; In re ridge (C. C. A., 5th Cir.), 16 Am. B. Kaplan (D. C, Ga.), 16 Am. B. R. R. 658, 145 Fed. 865; In re Knight 267, 144 Fed. 159. (D. C, Ky.), 11 Am. B. R. 1, 125 Fed. 123. Eau Claire Nat'l Bank v. 35; In re Watts, 10 Am. B. R. 113, Jackman, 17 Am. B. R. 675, 204 U. S. 190 U. S. 1; Davis v. Bohle (0. C. A., 522. 8th Cir..), 1 Am. B. R. 412, 92 Fed. 124. Frank v. Vollkommer, 17 Am. 325. As to effect of bankruptcy upon Jurisdiction of United States and State Courts. 419 § 23-b.] Jurisdiction of State Courts. lution and winding up of affairs of an insolvent corporation and subsequently and within four months thereafter a petition in bank- ruptcy against such corporation is filed, the jurisdiction of the State court in respect to the property of the corporation termin- ates upon adjudication, and the bankruptcy court will thereupon supersede the State couirt.-'^^ The above doctrines are all that can be safely stated. The whole subject is hopelessly befogged by the fact that each class of courts unconsciously strains for juris- diction in close cases. Some of the more reliable decisions will be found in the foot-note.-'^'' assignments for the benefit of credi- tors under State insolvency acts, see post. A general assignment for the benefit of creditors made within four months prior to the filing of the petition is void as against the trustee in bankruptcy, so far as it interferes with the aaministration of the bank- rupt estate. Randolph v. Scruggs, 190 U. S. 433, 10 Am. B. R. 1. In such case the jurisdiction of the State court in respect to the property as- signed is superseded by that of the bankruptcy court. In re Thompson (C. C. A., 2d Cir.), 11 Am. B. R. 719, 128 Fed. 575; In re Kniglit (D. C, Ky.), 11 Am. B. R. 6, 125 Fed. 35; In re Gray, 3 Am. B. R. 647, 47 App. Div. 554, 62 N. Y. Supp. 618; In re Fellerath (D. C, Ohio), 2 Am. B. R. 40, 95 Fed. 121; In re Gutwillig (C. C. A., 2d Cir.), 1 Am. B. R. 388, 92 Fed. 337; Davis v. Bolile (C. C. A., 8th Cir.), 1 Am. B. R. 412, 92 Fed. 325; In re Sievers (D. C, N. Y.), 1 Am. B. R. 117, 91 Fed. 366. State receivership. — Ordinarily where a State court has obtained ju- risdiction over property this jurisdic- tion is not disturbed by proceedings in bankruptcy, but the exception to tlie rule is, where the property is in the hands of a receiver, held for the benefit of creditors, and a receivership is created within four months prior to adjudication. In re Cameron Cur- rie Co. (Ref., Mich.), 20 Am. B. R. 790. Where a. receiver is appointed in behalf of creditors in a proceeding in a State court, based on the debtor's insolvency, within the four months pe- riod, the subsequent adjudication in a, bankruptcy court supersedes the ju- risdiction of the State court. In re Watts, 190 U. S. 1, 10 Am. B. R. 113. Action by trustee on bond of assignee. — Where the assignee under a general assignment for the benefit of creditors, made within the four months period, gave a bond to duly account for all moneys received by him as such assignee and voluntarily accounted in tlie bankruptcy court but failed to comply with its order to turn over the amount in his hands to the trustee, the latter by leave of the State court may maintain an action against the surety upon the assignee's bond to recover the amount wliich the assignee failed to turn over to the trustee. Cohen v. American Surety Co., 20 Am. B. R. 65, 192 N. Y. 227. 126. Cresson & Clearfield Coal & Coke Co. V. Stauffer (C. C. A., 3d Cir.), 17 Am. B. R. 573, 148 Fed. 981; In re Storck Lumber Co. (D. C, Md.), 8 Am. B. R. 86, 114 Fed. 860; In rfe Kersten (D. C, Wis.), 6 Am. B. R. 519, 110 Fed. 929; Carling v. Seamour Lumber Co. (C. C. A., 5th Cir.), 8 Am. B. R. 29, 113 Fed. 483; Mauran v. Carpet Lining Co., 6 Am. B. R. 734, 50 Atl. 331, 23 R. I. 324; In re Salmon & Sal- mon (D. C, Mo.), 16 Am. B. R. 132, 143 Fed. 395. 137. In re Russell (C. C. A., 2d Cir.), 3 Am. B. R. 658, 101 Fed. 248; In re Woodbury (D. C, N. Dak.), 3 Am. B. R. 457, 98 Fed. 833; Robin- son V. White (D. C, Ind.), 3 Am. B. R. 88, 97 Fed. 33; In re Sievers (D. C, Mo.), 1 Am. B. R. 117, 91 Fed. 420 The Law and Practice in Bankeuptct. Concurrent Jurisdiction of Circuit Courts. {§ 23-c. IV. CONCUBIIBNT JTIBISDICTION OF CIBCUIX COTTRT OVER CONVEYANCES. Subsection c of this section provides that the United States cir- cuit courts shall have concurrent jurisdiction with courts of bank- ruptcy of conveyances enumerated in the act. This subsection has nothing to do with civil actions.^^* It follows the policy of the Federal statutes in giving ciircuit and district courts much the same jurisdiction.-'^® Elsewhere in the law, the district courts are given jurisdiction to arraign, try, and punish those who commit any of the offenses enumerated in the act.^'* Were it not for this subsection, jurisdiction so to do would be exclusive in the dis- trict court. It is now concurrent. The trial of offenses will, how- ever, almost invariably be moved at a stated term of the district court. 366; In re Emslie (C. C. A., 2d Cir.), Supp. 667; In re Spitzer (C. C. A., 4 Am. B. R. 126, 102 Fed. 290; In re 2d Cir.), 12 Am. B. R. 346, 130 Fed. Pittlekow (D. C, Wis.), 1 Am. B. R. 879. 472, 92 Fed. 91; Heath v. Shaffer (D. 128. Goddier v. Barnes (C. C, N. C, Iowa), 2 Am. B. R. 98, 93 Fed. Y.), 2 Am. B. R. 328, 94 Fed. 798. 647; Small v. MuUer, 8 Am. B. R. 129. See R. S., § 629. 448, 67 N. y. App. Div. 143, 73 N. Y. 130. Bankr. Act, § 2(4). SECTION TWENTY-FOUR. JURISDICTION OF AFPEIiI^TZ: COITRTS. § 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 courts of the Territories, in vaca- tion in chambers and during their respective terms, as now or as they may be hereafter held, are hereby invested with appellate jurisdiction of controversies arising in bankruptcy proceedings from the courts of bankruptcy from which they have appellate jurisdiction in other cases. The Supreme Court of the United States shall exercise a like jurisdiction from courts of bankruptcy not within any organized circuit of the United Staitesi and from the supreme court of the District of Columbia. b. The several circuit courts of appeal shall have jurisdiction in equity, either interlocutory 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 exer- cised on due notice and petition by any party aggrieved. Analogous provisions: In IT. S.: As to appellate jurisdiction, Act of 1867, §§ 9, 24, R. S., §§ 4980, 4981, 4982, 4983, 4984, 4985, 4989; Act of 1841, § 4; As to supervisory jurisdiction. Act of 1867, § 2, R. S., §§ 4986, 4987, 4988; Act of 1841, § 6. In Eng.; Act of 1883, § 104; General Rules 129-134A. Cross references: To the law: §§ 1 (3) (8) (24), 25. To the General Orders: XXXYI. SYNOPSIS or SECTION. JUBISDICTION OF AFFELI^TX! COURTS. I. Appellate Jurisdiction in General. a. Appeals under law of 1867. b. Scope and meaning of section. c. Controversies arising in hankruptcy proceedings. II. Appeals to Circuit Court of Appeals and Supreme Court. a. In general. b. Appeals from district or circuit court to supreme court. III. Appeals to Supreme Court from Higher Court of State. IV. Supervisory Jurisdiction. 421 422 The Law and Pkactice in Bankedptcy. Scope and Meaning of Section. [§ 24. I. APPELI^TE JURISDICTION IN GENEKAI,. a. Appeals under law of 1867. — The former law was as simple in respect to appeals as the pre-sent, at first glance, seems compli- cated. Appeals as in equity cases and writs of error in those at law were heard in the circuit courts wherever the amount in con- troversy exceeded $500; the circuit court had supervisory juris- diction of all cases and questions arising in a court of bankniptcy within its jurisdiction; appeals and writs of error could be heard in the supreme court only when the matter in dispute exceeded $5,000.^ There was also the usoaal review by writ of error in the latter court of certain judgments of the highest courts of the States. Since that law was repealed, the circuit courts of appeals have been vested with the appellate jurisdiction of the circuit court; while, that their calendars might not be congested with a multitude of petty questions, the appellate courts no longer " sit at the elbow "^ of the court of bankruptcy, but appeals involving questions of fact are limited to important and vital matters, and superintendence may be asked only of questions" of law.^ Thus, the entire system has been radically changed, and the cases under the foirmer law are of little value. Further differences between the old and the new system are discussed in detail later under this section and under Section Twenty-five, post. b. Scope and meaning of section. — As explained later, this § 24 is here treated as if its subsection h were a part of § 25. It is clear from the caption that the section has to do only with the jurisdiction of appellate courts. Subsection a is general in its terma, and makes applicable the general law so far as it confers appellate jurisdiction of controversies in the district court, by giving the courts named a general appellate jurisdiction over questions arising in that court while sitting in bankruptcy.* This subsection has no reference to appeals to the supreme court from the circuit court of appeals. Except as expressly specified therein the jurisdiction of the supreme court is not broadened in any way.*" Manifestly the jurisdiction conferred by this subsection is, so far as applicable, that conferred on circuit courts of appeals by the 1. See "Analogous Provisions," Am. B. R. 441, 112 Fed. 643; also, ante. Stelling v. Jones Lumber Co. (C. C. 2. In re Adler (D. C, Tenn.), 4 A., 7th Cir.), 8 Am. B. E. 521, 116 Am. B. R. 583, 590, 103 Fed. 444. Fed. 261; Scott & Co. v. Wilson (C. 3. See Bankr. Act, § 25, and read § C. A., 7th Cir.), 8 Am. B. R. 349, 115 24-b. Fed. 284. 4. Thus, see In re Columbia Real 5. Hutchinson v. Otis (C. C. A., Ist Estate Co. (C. C. A., 7th Cir.), 7 Cir.), 10 Am. B. R. 275, 123 Fed. 14. JUEISDICTION OF APPELLATE CoUETS. 423 I 24.] Controversies in Bankruptcy Proceedings. Evarts act.* This act and the limitations suggested by what follows under this section and Section Twenty-five, should be con- sulted for an understanding of the broad scope, yet accurate bound- aries, of appeals in bankruptcy. c. Controversies arising in bankuptcy proceedings. — This section relates to controversies arising in bankruptcy proceedings in the exercise by bankruptcy courts of the jurisdiction vested in them to settle the estates of bankrupts and to determine controversies in relation thereto.^ It has been thought that the words "contro- versies in bankruptcy proceedings " in subsection a of, this section, and the words " in bankruptcy proceedings " in the next section refer to different classes of eases; the suggestion being that the former means only controversies outside of the bankruptcy pro- ceeding proper, as suits between the trustee and adverse claimants.* Nothing can be regarded as a "controversy arising in bankruptcy proceedings" within the purview of subsection a where the subject matter and object of the proceedings are within the power to make a summary order; certainly this is true where plenary action is not sought.** As stated by the supreme court : " Section 25-a relates to appeals from judgments in certain enumerated steps in bankruptcy proceedings, in respect of which special provision thereof was re- quired, while § 24-a relates to controversies arising in bankruptcy proceedings in the exercise of the jurisdiction vested in them at law and in equity by § 2, to settle the estates of bankrupts, and to determine controversies in relation thereto." » Such orders and decrees as are in the nature of independent suits and controversies, arising in the course of bankruptcy proceedings are reviewable on 6. Act of March 3, 1891, § 6. Com- 14 Am. B. R. 204, 135 Fed. 43; pare, also, Duncan v. Landis (C. C. Thomas v. Woods (C. C. A., 8th Cir )' A., 3d Cir.), 5 Am. B. R. 649, 106 Fed. 23 Am. B. R. 132, 173 Fed. 585. 839; Steele v. Buel (C. C. A., 8th 8a. In re Farrell (C. C A 6th Cir.), 5 Am. B. R. 165, 104 Fed. 968; Cir.), 23 Am. B. R. 826, 176 Fed' 505. In re Columbia Real Estate Co. (C. C. 9. Hewit v. Berlin Machine Co 11 A., 7th Cir.), 7 Am. B. R. 441, 112 Am. B. R. 709, 194 U. S. 296, in which Fed. 643; Stelling y. Jones Lumber case it was held that where title was Co. (C. C. A., 7th Cir.), 8 Am. B. R. asserted to property in the possession 521, 116 Fed. 261. of th- trustee by an intervention mis- 7. Hutchinson v. Otis, 190 U. S. ing a distinct an! separate issue, the 552, 10 Am. B. R. 135; Hewit v. Ber- controversy may be treated as one of lin Machine Works, 194 U. S. 300, 11 those " controversies arising in bank- Am. B. R. 709; In re First National ruptcy proceedings," over which the Bank of Canton (C. C. A., 6th Cir.), Circuit Court of Appeals could, under 14 Am. B. R. 180, 135 Fed. 62, hold- § 24-a, exercise appellate jurisdiction ing that an order disallowing the lien as in other cases. See also, In re Na- of a chattel mortgage is in a contro- tional Bank of Canton (CCA 6th Tersy arising out of the settlement of Cir.), 14 Am. B. R. 180, 135 Fed. 62- the bankrupt estate and is appealable. Dodge v. Nor lin (CCA 8th Cir )' Security Warehousing Co. v. Hand 13 Am. B. R. 176, 133 Fed.' 363 ■ In "le (C. C. A., 7th Cir.), 16 Am. B. R. 40, McMahon (C. C. A., 6th Cir ) 17 143 Fed. 32, holding likewise as to a Am. B. R. 530, 147 Fed 685 • Dolle v petition to establish and enforce an al- Cassell (C. C. A 6th Cir)' 14 Am' leged warehouse lien See, also Smith B. R. 52, 135 Fed. 52; MasoA v. Wol- V. Evans (C. C. A., 7th Cir.), 17 Am. kowich (C. C. A., 1st Cir ) 17 Am B.R. 433, 148 Fed. 89. , B. R. 709, 150 Fed 699 ;' O'Delf v! 8. In re Adler (D. C, Tenn.), 4 Boyden (C. C. A., 6th Cir ) 17 Am 424 The Law and Peactice in Bankkuptcy. Appeals in General. [§ 24-a. appeal or writ of error, as the case may be, under subsection a of this section.'" II. APPEALS TO CIRCUIT COURT OF APPEALS AND SUPREME COURT. a. In general. — Subsection a of this section vests the supreme court and the circuit court of appeals with appellate jurisdiction of controversies arising in bankruptcy proceedings from the courts of bankruptcy from which they have appellate jurisdiction in other cases. The only matters which can be reviewed are " controversies arising in bankruptcy proceedings." We have already considered the distinction to be made between such controversies and appeals in bankruptcy proceedings generally as authorized by the next section. The only court which may be appealed from is the court of bankruptcy, which phrase, as here used, does not include the referee.'^ The only courts which can hear such an appeal are the several courts mentioned. So. also, appeals can be taken only to the proper court in whose territorial jurisdiction the court of bank- ruptcy appealed from is located.'^ The appellate courts are given jurisdiction to sit "in vacation in chambers and during their re- spective terms; " which seems to mean that such courts are always in session for the sake of appeals. In conclusion it may be stated that circuit courts of appeals have jurisdiction to review the final decisions of courts of bankruptcy in controversies arising between the trustees in bankruptcy and third parties over the title to, or over liens upon the alleged property of the bankrupt or its pro- ceeds, and that the general appellate jurisdiction vested by sub- section a of § 24 is not affected or impaired by the grant of the Mauzy (C. C. A., 4th Cir.), 23 Am. jurisdiction to superintend and revise B. R. 489, 174 Fed. 611; Morehouse "in matter of law;" the former be- V. Pacific Hardware, etc., Co. (C. C. ing generally held to embrace ques- A., 9th Cir.), 24 Am. B. R. 178. tions between the trustee represent- 10. In re Mueller (C. C. A., 6th ing the bankrupt and his creditors on Cir.), 14 Am. B. E. 256, 135 Fed. 711; the one side, and adverse claimants Dickas v. Barnes (C. C. A., 6th Cir.), on the other, and not directly affect- 15 Am. B. R. 566, 140 Fed. 849 ; In re ing those administrative orders and McKenzie (C. C. A., 8th Cir.), 15 Am. judgments ordinarily known as " pro- B. R. 679, 142 Fed. 383 ; In re Friend ceedings in bankruptcy," and the (C. C. A., 7th Cir.), 13 Am. B. R. latter being confined to those ques- f^\^^M-^^n-'^^'f?'^?'^-^^^^}R- ^^^^ ^""'"^ ''^t^'^^" tlie bankrupt C. A., 7th Cir.), 17 Am. B. R. 433, and his creditors which are the very 148 Fed. 89; In re Doran (C. C. A., subject of such administrative orders 6th Cir.), 18 Am. B. R. 760, 154 Fed. and judgments, from the petition for 467 ; Loeser v. Savings Deposit Bank adjudication to the discharge, and A ^Tt,^«^.*^,-«?-/^' f^ ^n-}' ^^ in-^ludingthe intermediate administra- Am. BR. 845 163 Fed. 212; Coder T. tive steps, and such controversies as ^/qtt'I^Sqq '' ' *"^^ between parties to the bank- i. X. 1. -L X .. ruptcy procedings as are involved in Distinction. _ between con- the allowance of claims, fixing their troversies arising in bankruptcy priorities, sales, allowances, and other proceedings " and "proceedings matters to be disposed of summarily." in bankruptcy."— Judge Keller has Thompson v. Mauzy (CCA 4th summarized the conclusions of the Cir.), 23 Am. B. R. 489 174 'Fed several cases involving such distinc- 611. ' "il^X w^ *^? following language: n. Appeals from the referee are ihat there is a clear distinction be- provided for elsewhere See ? 2 (101 • tween " controversies arising in bank- General Order XXVII \ i > ruptcy proceedings," as mentioned in 12. In re Seebold'fC C A "ith section 24-a, and the "proceedings in Cir.), 5 Am. B. R. 358 105 Fed' QIO bankruptcy," which, by section 24-b, Compare In re Blair fC O a' MM the Circuit Courts of Appeal are given "' Jurisdiction of Appellate Courts. 425 § 24-a.] Appeals to Supreme Court from State Courts. powesT of revision and supervision in matter of law contained in subsection b of that section.** b. Appeals from district or circuit court to supreme court. — The appellate jurisdiction of the supreme court of controversies arising in bankruptcy proceedings from a district court not within any organized circuit of the United States is the same as that of the circuit court of appeals from district courtB included in an organ- ized circuit. As to when and how an appeal may be taken direct to the supreme court from either a district or circuit court is dis- cussed under the next section.** The circuit court of appeals is clothed by subsection a of this section with general appellate juris- diction of controversies arising in bankruptcy proceedings. Sec- tion 25-a provides for appeals in bankruptcy proceedings them- selves in the specific cases sitated. We will consider further the appellate jurisdiction of the circuit court of appeals, exercisable as in equity cases, under the next section.*® By subsection b of this section the several circuit courts of appeals have juris- diction in equity either interlocutory or final, to supervise in matter of law the proceedings of the several inferior courts of bankruptcy within their jurisdiction. A petition to revise is the means by which this jurisdiction is to be exercised. Because of the close relation existing between this method of review and that by appeal it is deemed advisable to consider it in the general discussion of the appellate jurisdiction of circuit courts of appeals under the next section.*® HI. APPEALS TO SUPBEME COTTRT FROM HIGHER COURT OF STATE. The bankruptcy law contains no provisions regulating appeals fipom ithe court of last resort in a State to the supreme court of the United States. Such law does not in any way affect the right to such appeal given by the revised statutes.*^ This method of 13. Dodge v. Norlin (C. C. A., 8th ton Wagon Co., (C. C. A. 8th Cir.), Cir.), 13 Am. B. K. 176, 133 Fed. 22 Am. B. R. 63, 168 Fed. 857. 363; Delta National Bank v. Easter- 14. See Bankr. Act, § 25, post, p. brook (C. C. A., 5th Cir.), 13 Am. 451. See " Review by circuit court of B. E. 338, 133 Fed. 521; In re Muel- appeals." ler (C. C. A., 6th Cir.), 14 Am. B. R. 15. See post, p. 442. 256, 135 Fed. 711; In re Friend (C. 16. See post, pp. 442-451. C. A., 7th Cir.), 13 Am. B. R. 595, 134 17. Appeal to Supreme Court Fed. 778; Smith v. Evans (C. C. A., from State Court.— U. S. R. S„ § 7th Cir.), 17 Am. B. E. 433, 148 Fed. 709, provides as follows: A final judg- 89; In re McMahon (C. C. A., 6th ment or decree in any suit in the Cir.), 17 Am. B. R. 530, 147 Fed. 685; highest court of a State, in which a In re New England Breeders' Club decision in the suit could be had, (C. C. A., 1st Cir.), 22 Am. B. R. where is drawn in question the valid- 124, 165 Fed. 217 ; Franklin v. Stough- 426 The Law and Peactice iw Bankeuptct. Appeals to Supreme Court from State Courts. [§ 24-a. review will be found valuable in proceedings involving bankruptcy questions in the courts of the State®, as, for instance, where a State court has erroneously interpreted a provision in the bank- ruptcy law,^* or refused to recognize the validity of a discharge duly granted.^® Where, in an action by a trustee to recover assets, the State court of laisit resort, in affirming a judgment for the plaintiff, construed some of the provisions of the bankruptcy law, its judgment presents a Federal question reviewable by the supreme court upon a writ of error.^" The limitation of the re- vised statutes ishould always be borne in mind. The cases where a writ of error may be asked for may be summarized as. follows : First, where there has been a decision against the validity of any portion of the bankruptcy act; second, where a decision has been had by the State court sustaining a statute of the State claimed to be repugnant to the bankruptcy act ; or, third, where the right, title, privilege or immunity of any person claimed under the bank- ruptcy statute has been denied by a Stat© court.^^ ity of a treaty or statute of, or an 18. Hill v. Harding, 107 U. S. 631; authority exercised under, the United Williams v. Heard, 140 (J. S. 529. States, and the decision is against 19. Hennequin v. Clews, 111 U. S. their validity; or where is drawn in 677; Strang v. Bradner, 114 U. S. question the validity of a statute of, 555 ; Forsyth v. Vehmeyer, 177 U. S. or an authority exercised under any 177, 3 Am. B. R. 807. State, on the ground of their being 20. Eau Claire Nat'l Bank v. Jack- repugnant to the Constitution, trea- man, 17 Am. B. R. 675, 204 U. S. 522. ties, or laws of the United States, and See, also, Nutt v. Knut, 200 U. S. 12, the decision is in favor of their valid- where the court said : " A party who ity; or where any title, right, privi- insists that a judgment cannot be ren- lege, or immunity is claimed under dered against him consistently with the Constitution, or any treaty or the statutes of the United States may statute of, or commission held or be fairly held, within the meaning of authority exercised under, the United § 709, to assert a right and under States, and the decision is against the such statutes, although the statutes title, right, privilege, or immunity may not give the party himself a per- specially set up or claimed, by either sonal or affirmative right tliat could party, under such Constitution, treaty, be enforced by direct suit against hia statute, commission, or authority, adversary." Rector v. City Deposit may be re-examined and reversed or Bank Co., 15 Am. B. R. 336, 200 U. affirmed in the Supreme Court upon S. 405, in which it was held that a a writ of error. The writ shall have judgment of dismissal entered upon a the same effect as if the judgment or verdict in an action brought by a decree complained of had been ren- trustee in bankruptcy in a State court dered or passed in a court of the '■° recover, as a voidable preference, a United State." payment made to a bank within the "Ihe Supreme Court may reverse, *°"^™o°ths period, presents a federal •j., a- iu ■ J 4. J question, which is reviewable bv the modify, or affirm the judgment or de- sunremp r.ni.v+ „„™ -i. r ^ \ . oi. i. i J i supreme court upon a writ of error ; cree of such State court, and may, at Miller v. New Orleans Acid & Fer- their discretion, award execution, or tilizer Co. (Sup. Ct.), 21 Am. B R. remand the same to the court from 416, 211 U. S. 496, affg. 117 La. 82l' which it was removed by the writ." '*2 S. E. 329. 21. Collier on Bankruptcy, 3d ed., p. Ci'tOt JtTEISDICTION OF APPELLATE CoUETS. 427 § 24-b.] Supervisory Jurisdiction. So where a trustee in bankruptcy asserts a right in a State court arising under the banlcrupt law, a Federal question is presented which gives rise to the jurisdiction of the supreme court under the revised statutes.^^ Where the only question determined in the State court was whether or not the bankrupt was entitled to an exemption under a State statute the judgment of the State court is not reviewable by the supreme court.^* The Federal ques- tion which is made the basis of review must have been raised in the State court ;^* even if passed on there, if the decision may be affirmed for other reasons, it will not be disturbed.^^ The amount in dispute makes no difference; but only questions at law will be reviewed.^* Such a writ of error can be directed only to the highest court of the State in which a decision I'f the matter in controversy could be had.^'^ Appeals of this character being outside of the bankruptcy law, the practice is identical with that on writs of error from the su- preme court to such a State court in cases involving Federal ques- tions other than those growing out of the bankruptcy law.^* While the certification of a record by a State court to the supreme court may not import a Federal question into the record where other- wise such question does not arise, such certificate may serve to elucidate the determination as to whether a Federal question exists; if the certificate does show that rights under the bankrupt law were passed upon by the State court the smpreme court will review the judgment.^* A number of other cases indicating the circumstances under which the appellate jurisdiction to review the judgment of a State court will be exercised are cited in the foot- ttote.'" IV. SUFERVISOBY JUBISDICTIOIT. By subsection b of this section the several circuit courts of ap- peals are given jurisdiction to superintend and revise in matter of law the proceedings of the several infeaior courts of bankruptcy 22. Rector v. City Deposit Bank, 26. Egan v. Hart, 165 U. S. 188. 15 Am. B. R. 336, 200 U. S. 405. 27. U. S. R. S., § 709. 23. Smalley v. Laugenour, 13 Am. 28. See Foster's Federal Practice, B. R. 692, 196 U. S. 93. § 477 et seq. See, also, Desty's Fed- 24. Columbia Water Power Co. v. eral Procedure, 9th ed., § 536, and Street Railway Co., 172 U. S. 475; Form No. 680. Pirn V. St. Louis, 165 U. S. 273. 29. Rector v. City Deposit Bank 25. Bausman v. Dixon, 173 U. S. Co., 15 Am. B. R. 336, 200 U. S. 405. 113. Compare, also, Castillo v. Mc- 30. Linton v. Stanton, 12 How. Connico, 168 U. S. 674, and Briggs v. 423; Scott v. Kelly, 22 Wall. 57; Walker, 171 U. S. 466. Dimock v. Revere Copper Co., 117 U. 428 The Law and Pbactice iit Bankettptct. Supervisory Jurisdiction. [§ 34-b. within their jurisdiction. Such power shall he exercised on due notice and petition by any part aggrieved. When a petition to revise has been duly filed no further relief is necessary to protect the rights of the petitioner.^"* The power to revise and superintend should not be exercised to control the discretion of a court of bank- ruptcy in the matter of the appointment or removal of referees.'"" This method of review of proceedings in courts of bankruptcy should not be separated from the exercise of appellate jurisdiction by circuit courts of appeals under § 35. In so far as the subsection confers jurisdiction it is properly included in this section. But it also in- dictates the classes of questions which may be revised by petition and somewhat of the practice on revision. This question of jurisdiction should be considered and discussed in connection with the appellate jurisdiction conferred under § 35.'^ S. 559; McKenna v. Simpson, 129 U. Electric Light & Power Co. (C. C. A., S. 506; Backus v. Fort Street Co., 169 2d Cir.), 21 Am. B. R. 592. U. S. 557; Bellingham Bay v. New 30b. Birch v. Steele (C. C. A., Whatcom, 172 U. S. 314; MoQuade v. 5th Cir.), 21 Am. B. R. 539, 165 Fed. Trenton, 172 U. S. 636. 577. 30a. Matter of Saratoga Gas, 31. See under § 25, post, p. 432. SECTION TWENTY-FIVE. APPEALS AND WRITS OF ERROR. § 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 follow- ing 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 of vacation, as the case may be. b. From any final decision of a court of appealsi, 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 exeeedsi 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 sihall 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. Analogous provisions: In XT. S.: As to appeals to the circuit courts, Act of 1867, §§ 8, 24, R. S., §§ 4980, 4981, 4982, 4983, 4984, 4985; Act of 1841, § 4; As to appeals to the Supreme Court, Act of 1867, § 9, R. S., § 4989; As to petitions for revision. Act of 1867, § 2, E. S., §§ 4986, 4987; Act of 1841, § 6. In Eng.: Act of 1883, § 104; General Rules 129-134A. Cross references: To the law: §§ 1(3) (8) (24), 24. To the General Orders: XXXVI. 429 430 The Law and Peactice in Bankkuptcy. Scope and Meaning of Section. [ § 25, SYNOPSIS OF SECTION. APPEALS AND VOUTS OF ERBOK. I. Appeals and Writs of Error Generally. a. Scope and meaning of section. b. Methods of appeal in bankruptcy. (1) In the supreme couet of the United States. (a) By appeal or writ of error. (&) by writ of certiorari. (c) By certificate. (2) In a ciecuit couet of appeals (a) By appeal or writ of error. (b) By petition to revise. (3) In the supeeme couet of a Teeeitoey. (a) By appeal or writ of error. II. Petitions to Revise in Matter of Law. a. In general. b. Comparative legislation. c. Distinction between petitions to revise and appeals. d. Petition and appeal; exclusive or cumulative, e. Questions of law only considered. f. What may be reviewed by petition. g. Practice. III. Appeals as in Equity Cases. a. In general. b. As in equity cases. c. From what judgments. d. Appeals in compositions. e. Time of talcing appeal. f. Parties to appeal. g. Practice. IV. Appeals to Supreme Court. a. From a circuit court of appeals. b. Practice. V. No Appeal Bond Required of Trustee Who Appeals. VI. Certificate and Certiorari. a. Certificates to the supreme court. b. Writs of certiorari from the supreme court. I. APPEALS AND WBITS OF ERROR GENERALLY. a. Scope and meaning of section. — The object of § 24-a is, as has already been indicated, to confer jurisdiction upon the supreme court and circuit courts of appeals as to controversies arising in bankruptcy proceedings. The distinction to be made between con- troversies arising in bankruptcy proceedings and the wards " in Appeals and Weits of Ekeoe. 431 § 25.] Methods of Appeal in Bankruptcy. bankruptcy proceedings " as used in § 25-a are commented upon under that section. It was there stated that if an appeal be brought in a suit independent of the proceedings proper or which arise in respect to a right asserted by an adverse claimant it must be under § 24-a rather than under § 25-a. In other respecte, however, § 25 both limits and explains the general appellate juris- diction conferred upon the supreme court and the circuit courts of appeals by § 24-a. The jurisdiction to superintend and revise in matter of law the proceedings of bankruptcy courts is con- ferred by § 24-b; but it is so closely allied with the exercise of jurisdiction under this section that they are more properly treated in the same connection. In practically every case where any question has arisen relative to the review of any matter pertaining to bankruptcy by an appellate court, the court discusses or applies these two sections conjunctively. In any consideration of the subject the sections are necessarily treated in the same connection. b. Methods of appeal in bankruptcy. — The practitioner in State courts, especially in the code states, usually finds the Federal system of appeals complex and difficult to understand. That he may have, as it were, a few landmarks to guide him, the following analysis of methods of appeal in bankruptcy, other than reviews of referees' decisions by the judge, may be found useful. It does not include reviews by the supreme court of bankruptcy decisions in the highest courts of the States.* The cases cited in the foot-note are referred to only for the purpose of calling attention to the cases in which the method specified has been employed under the present law. They are illustrative merely and they are not (referred to for the purpose of substantiating the statements made in the text. (1) In the supeeme couet of the Unied States : (a) By appeal or writ of error, from a circuit court of appeals, or a district court not within any organized circuit, or the supreme court of the District of Columbia, by a party aggrieved by either of the judgments mentioned in § 25-a, but not otherwise.* (h) By writ of certiorari, to a circuit court of appeab, if permitted by general law.' 1. This subject has been considered Am. B. R. 178; Audubon v. Schufeldt, somewhat at length under the preoed- 181 U. S. 575, 5 Am. B. R. 829. ing section. 3. Bryan v. Bernheimer, 181 U S 2. Pirie v. Chicago Title & Trust 188, 5 Am. B. R. 623; Mueller v Co., 182 U. S. 438, 5 Am. B. R. 824; Nugent, 184 U. S. 1, 7 Am. B R 224- White V. Schloerb, 178 U. S. 542, 4 Louisville Trust Co. v. Comingor, 184 U. S. 18, 7 Am. B. R. 421. 432 The Law and Peacticb in Bankruptcy. Petitions to Revise in Matter of Law. [§ 25-a. (c) By certificate, from either a circuit court of appeals or a district court direct, if permitted by general law.* (2) In a ciecuit oouet of appeals: (a) By appeal or writ of error, from a district court in its circuit sitting in bankruptcy; if within the limitations of § 25-a, but not otherwise.^ (6) By petition to revise in matters of law any order of a district court in its circuit sitting in bankruptcy.® (3) In the supeeme couet of a Teeeitoey: (a) By appeal or writ of error, from a district court of the territory sitting in bankruptcy ; if within the limitations of § 25-a, but not otherwise.'^ II. PETITIONS TO REVISE IN MATTER OF LAW. a. In general.— Under § 24-b the several circuit courts of ap- peals have jurisdiction in equity, either interlocutory or final, to superintend and revise in matter of law the proceedings of the several inferior courts of bankruptcy within their jurisdiction. The revisory power here conferred, it will be noticed, extends (1) to matters of law and (2) to proceedings in bankruptcy. This power of revision as so conferred is contrasted with the appellate jurisdiction of the circuit court of appeals to be exercised under § 25-a in the three classes of cases therein specified. This appellate jurisdiction is also to be exercised " in bankruptcy proceedings." b. Comparative legislation. — The act of 1841 imperfectly granted thiig revisory power. It depended for its exercise on the order of certificate of the lower court.* Under the act of 1867 it was often availed of and, because summary in its nature and simple in its application, was the usual method of reviewing questions of c. Distinction between petitions to revise and appeals. — Peti- tions to revise in matter of law divides with appeals in equity cases the great majority of reviews heard by the circuit court of appeals. The petition differs from such appeals in two important 4. Bardes v. Bank, 178 U. S. 524, 6. Id. 4 Am. B. R. 163; Hicks v. Knost, 17S 7. Compare In re Blair (C. C. A., U. S. 541, 4 Am. B. R. 178; Wall v. 8th Cir.), 5 Am. B. R. 793, 106 Fed. Cox, 181 U. S. 244, 5 Am. B. R. 727; 662; In re Stumpff (Supt. Ct., Okla.), Wilson V. Nelson, 183 U. S. 191, 7 4 Am. B. R. 267. Am. B. R. 142. 8. Ex parte Christy, 3 How. 292. 5. Numerous eases are cited, post. Appeals and Wkits of Eeeoe. 433 § 25-a.] Distinction Between Petitions to Revise and Appeals. particulars. (1) Petitions to revise bring up queisitions of law only ; appeals both of law and of facts.* (2) The former calls up any order or judgment or judicial action in bankruptcy proceed- ings; the latter three classes of final judgments only. The pro- visions as to revision in matter of law and appeals were framed and must be construed in view of the distinction between steps in bankruptcy proceedings proper and controversies arising out of the settlement of the estates of bankrupts.^" In other words, if the question arise in an independent suit to determine a claim necessary for the settlement of the estate, or if it arise in one of the cases specified in § 25-a, .review may be had by appeal ; if the question pertain to the bankruptcy proceedings and arise therein review may be had by a petition to revise in matter of law. Con- fusion may' b^ avoided by bearing in mind that under § 24-a a controversy arising between a trustee and a third party in respect to property either in possession of the trustee or a third party the review in the circuit court of appeals is had on appeal in the same manner as in other cases. In the case of such controversies the revisory power is not available; on the review of judgments in independent suits to recover assets or to determine controversies arising relative to the bankrupt'si estate the remedy is by appeal.^ ^ This doctrine does not seem refutable. Whatever conflict there may be among the authorities on this subject pertains to the ques- tion as to whether or not appeals as in equity cases taken in bank- ruptcy proceedings to the circuit court of appeals in the eases specified in § 25-a are exclusive of the right to review under § 24-b. These distinctions are now well settled by the courts. ^^ 9. Elliott V. Toeppner, 9 Am. B. R. lO. First Nat'l Bank of Chicago v. 50, 187 U. S. 327, in which case the Chicago Title & Trust Co., 14 Am. B. court cited §§ 24-b and 25-a so far R. 102, 198 U. S. 280; Holden v. as they applied to the appellate juris- Stratton, 10 Am. B. R. 786, 191 U. S. diction of circuit courts of appeals 115; Elliott v. Toeppner, 9 Am. B. R. and stated that the jurisdiction con- 50, 187 U. S. 327; Denver First Nat'l ferred by the former section was Bank v. Klug, 8 Am. B. R. 12, 186 confined to questions of law and U. S. 202; In re Hecox (C. C. A., 8th did not contemplate a review of Cir. ), 21 Am. B. R. 314, 164 Fed. the facts. The court said: "The dis- 823. tinetion between a writ of error which H. In re Rusch (C. C. A., 7th brings up matters of law only, and an Cir.), 8 Am. B. R. 518, 116 Fed. 270. appeal, which, unless expressly re- See, also, In re Jacobs (C. C. A., 8th stricted brings up both law and fact, Cir.), 3 Am. B. R. 671, 96 Fed. 935; has always been observed by this In re Mertens (C. C. A., 2d Cir.), 15 court and been recognized by the leg- Am. B. R. 701, 142 Fed. 445 (This islation of Congress from the founda- g^se has been affirmed by the Supreme tion of the government. In re Pn,,.* \ Blanehard Shingle Co. (C. C. A., ,"', „ „ ^ ;^ ^ ,r. 9th Cir.), 21 Am! B. R. 142, 164 Fed. „ ^^ ^" "■* ^°"'«' hazard & Co. (C. 311; Ross V. Stroh (C. C. A., 3d C. A., 7th Cir.), 1 Am. B. R. 234, 91 Cir.), 21 Am. B. R. 644, 165 Fed. 628. 28 434 The Law and Peactice in Bankkuptcy. Petition and Appeal; Exclusive or Cumulative. i 25-a. d. Petition and appeal; exclusive or cumulative. — It has been held that the power to review by appeal conferred by § 25-a and that to supervise granted by § 24-b are cumulative; that the two grants of power are not inconsistent and that in a proper case either may be invoked.^* There are a number of other cases in which it has been held that where an appeal might be brought under § 25 a review of petition under § 24-b was not available.^* In many of Fed. 96; In re Purvine (C. C. A., 5th Cir.), 2 Am. B. R. 787, 96 Fed. 192; In re Richards (C. C. A., 7th Cir.), 3 Am. B. R. 145, 96 Fed. 935; In re Jacobs (C. C. A., 8th Cir.), 3 Am. B. R. 671, 99 Fed. 539; Courier-Journal, etc., V. Brewing Co. (C. C. A., 6th Cir.), 4 Am. B. R. 183, 101 Fed. 699; In re Ives (C. C. A., 6th Cir.), 7 Am. B. R. 692, 113 Fed. 911; Hutchinson V. Le Roy (C. C. A., 1st Cir.), 8 Am. B. R. 20, 113 Fed. 200; In re Abra- ham (C. C. A., 5th Cir.), 2 Am. B. R. 266, 93 Fed. 767 (in Supreme Court, Bryan v. Bernheimer, 5 Am. B. R. 623, 181 U. S. 188. 13. Dodge V. Norlin (C. C. A., 8th Cir.), 13 Am. B. R. 176, 133 Fed. 363, in which the court said : " Nor is there anything in the grant by § 24-b of the power to revise and superintend in matter of law the proceedings of the inferior courts of bankruptcy which in any way affects or limits the general appellate jurisdiction vested by the sections of the law which have been considered. The act of 1898 does not grant the appellate and the re- visory jurisdiction in the alternative. It does not give to disappointed liti- gants the right of appeal or the right to revision in matters of law. It grants the right of appeal and the right of superintendence and revision in matters of law only. It gives both rights freely and without limitation. The two grants are not inconsistent, and on familiar principles both must stand, and in a proper case either may be invoked." The following cases are also to the effect that the right to a review by an appeal or upon a peti- tion to revise may be sought at the option of the appellant. In re Holmes (C. C. A., 8th Cir.), 15 Am. B. R. 689, 142 Fed. 392; In re McKenzie (C. C. A., 8th Cir.), 15 Am. B. R. 679, 142 Fed. 383; Taft Co. v. Century Savings Bank (C. C. A., 8th Cir.), 15 Am. B. R. 594, 141 Fed. 369; In re Plymouth Cordage Co. (C. C. A., 8th Cir.), 13 Am. B. R. 665, 135 Fed. 1,000, Ross V. Stroh (C. C. A., 3rd Cir.), 21 Am. B. R. 644, 165 Fed. 628. An order of dismissal of a peti- tion in bankruptcy, on the ground that it does not state facts sufficient to constitute an act of bankruptcy is re- viewable by petition to revise under § 24-b, although it is a "judgment refusing to adjudge the defendant a bankrupt " and appealable under § 25-a. Stevens v. Nave-McCord Co. (C. C. A., 8th Cir.), 17 Am. B. R. 609, 150 Fed. 71. 14. Union Nat'l Bank v. Neill (C. C. A., 5th Cir.), 17 Am. B. R. 853, 149 Fed. 720; O'Dell v. Boyden (C. C. A., 6th Cir.), 17 Am. B. R. 751, 150 Fed'. 731, where the distinction seems to have been made between " a pro- ceeding in bankruptcy " under § 24-b and " a controversy arising in bank- ruptcy proceedings " under § 24-a ; Mason v. Wolkowich (C. C. A., 1st Cir.), 17 Am. B. R. 709, 150 Fed. 699, in which also the distinction is made between an order appealable as a controversy in bankruptcy and one reviewable by petition as in the pro- ceeding itself; In re McMahon (C. C. A., 6th. Cir.), 17 Am. B. R. 530, 147 Fed. 685; Davidson & Co. v. Fried- man (C. C. A., 6th Cir.), 15 Am. B. R. 489, 140 Fed. 853, in which the court held that the remedies of ap- peal and petition for review are ex- clusive of each other and the court will not treat the one as the other to the confusion of pleading; In re Muel- ler (C. C. A., 6th Cir.), 14 Am. B. R. 256, 135 Fed. 711, holding that the supervisory jurisdiction conferred by AiPEAX.B AND WkITS OF ErKOE. 435 § 25-a.] Petition and Appeal; Exclusive or Cumulative. these cases a distinction is made between " proceedings in bank- ruptcy " under § 24-b and " controversies arising in bankruptcy proceedings " which are appealable under the general appellate jurisdiction of the court as conferred by § 24-a. Under the prin- ciples of these cases if the controversy is one arising in bankruptcy proceedings, review by appeal is exclusive.-'® In view of this con- iiict of authority it is difficult to declare a rule which will be a safe guide in every case. As has been stated, this contrariety of decision has resulted in such confusion and uncertainty in the practice that lawyers have thought it necessary in many cases to take an appeal and file a petition for revision in the same case in order to be sure to obtain a review of the ruling challenged.'^ The consensus of opinion seems clearly in favor of the principle that if the suit or proceeding is a controversy arising in bankruptcy pro- ceedings it is appealable under § 25-a and not reviewable under § 24-b; the latter refers only to matters in the bankruptcy pro- ceedings itself, that is, any judicial determination, which may be made by a bankruptcy court from the time of the filing of the peti- tion until the estate is closed, pertaining exclusively to the bank- ruptcy. This distinction is clearly established.'^ As between the power to revise under § 24-b and the exercise of appellate jurisdic- tion under § 25-a, both of which relate to the review of bankruptcy proceedings, the better rule is that in either of the three cases mentioned in § 25-a the review can only be by appeal ;'* but in respect to any other matters in bankruptcy proceedings the review § 24-b does not include orders or de- holding that an order made upon the crees which are appealable and that petition of a trustee for the payment the provisions for appeal and for peti- to him of the proceeds of a sale of tion to revise are mutually exclusive, assets is appealable only to the cir- In re Kuffler (C. C. A., 2d Cir.), 11 cuit court of appeals under § 24-a; Am. B. R. 469, 127 Fed. 125, holding Brady v. Bernard & Kittinger (C. C. that the provisions of § 24-b refer to A., 6th Cir.), 22 Am. B. R. 342, 170 cases not provided for by appeal so Fed. 576. that if § 25-a applies, a petition to re- 16. In ra Holmes (C. C. A:, 8th vise will not lie. First Nat'l Bank of Cir.), 15 Am. B. R. 689, 142 Fed. 391; Miles City v. State Nat'l Bank (C. C. In re Hecox (C. C. A., 8th Cir.), 21 A., 9th Cir.), 12 Am. B. R. 440, 131 Am. B. R. 314, 164 Fed. 823. Fed. 430, to the effect that § 25-a 17, Hewit v. Berlin Machine Co., having provided a means to review by 11 Am. B. R. 709, 194 U. S. 300; appeal three kinds of judgment, every In re Moore & Bridgman ( C. C. A., other means is excluded. In re Good 5th Cir.), 21 Am. B. R. 651, 166 C. C. A., 8th Cir.), 3 Am. B. R. 605, Fed. 689; Moorehouse v. Pacific Hard- 99 Fed. 389, holding that a judgment ware, etc., Co. (C. C. A., 9th Cir.), adjudicating a person bankrupt could 24 Am. B. R. 178. not be reviewed by petition. 18. In re Good (C. C. A., 8th Cir.), 15. In re McMahon (C. C. A., 6th 3 Am. B. R. 605, 99 Fed. 389; In re Cir.), 17 Am. B. R. 530, 147 Fed. Friend (C. C. A., 7th Cir.), 13 Am. 685; O'Dell v. Boyden (C. C. A., 6th B. R. 595, 134 Fed. 778; In re Wor- Cir.), 17 Am. B. R. 751, 150 Fed. 731; cester County (C. C. A., 1st Cir.), 4 Mason r. Wolkowich (C. C. A., 1st Am. B. E. 496, 102 Fed. 808; Smith Cir.), 17 Am. B. R. 709, 150 Fed. 699, v. Mason, 14 Wall. 419. 436 The Law and Peactice in Bankeuptcy. Questions of Law only Considered. [§ 25-a. must be by a petition to revise.^^ Where it ia sought to combine the two remedies by uniting an appeal with a petition to review the two do not neutralize each other, but the court will proceed to adjudicate on the controversy in the proper proceedings.^" So, also, it has been held that in proper cases an appeal may be treated as a petition to revise,^ ^ as where an appeal is talcen from an order disallowing a claim which presents only a question of law.^^ Where questions of fact and law are both involved in the appeal it may not be treated as a petition to revise.^^ e. Questions of law only considered. — The supervisory power to review only extends to questions of law. If the petition does not present a matter of law it will not be entertained.^* As indi- 19. Except where an appeal may be had as provided in § 25-a the proper procedure in the circuit court of appeals seems to be by petition to review. Ohio Valley Bank Co. v. Switzer (C. C. A., 6th Cir.), 18 Am. B. R. 689, 153 Fed. 632. In re Groetzinger (C. C. A., 3d Cir.), 11 Am. B. R. 467, 127 Fed. 124, in which case it was held that an or- der for the distribution of the pro- ceeds of the sale by a trustee of real estate is reviewable only by petition for review; Davidson v. Friedman (C. C. A., 6th Cir.), 15 Am. B. R. 489, 140 Fed. 853, 72 C. C. A. 553, where it was held that an order allowing trustee's expenses is subject to review, but is not appealable; Brady v. Bern- nard & Kittinger (C. C. A., 6th Cir.), 22 Am. B. R. 342, 170 Fed. 576. 20. Fisher v. Cushing (C. C. A., 1st Cir.), 4 Am. B. R. 646, 103 Fed. 860; In re Worcester County (C. C. A., 1st Cir.), 4 Am. B. R. 496, 102 Fed. 808; Lockman v. Lang (C. C. A., 8th Cir.), 12 Am. B. R. 497, 132 Fed. 1, 21. In re Whitener (C. C. A., 5th Cir.), 5 Am. B. R. 198, 108 Fed. 180; In re Blanchard Shingle Co. (C. C. A., 9th Cir.), 21 Am. B. R. 142; 164 Fed. 311. 22. In re Williams' Estate (C. C. A., 9th Cir.), 19 Am. B. R. 389, 156 Fed. 934, in which the court said: " The appellant and petitioner, being uncertain in respect to the proper pro- cedure, sought and are by the court below allowed an appeal from the ruling of that court complained of, and also filed therein a petition for the revision of the same order. The two proceedings were by this court consolidated and were heard and sub- mitted on one record. If it be con- ceded that the petition for revision was filed in the wrong court, the ap- peal, involving as it does only a ques- tion of law, may be treated as a peti- tion for revision." Chesapeake Shoe Co. v. Seldner (C. C. A., 4th Cir.), 10 Am. B. R. 466, 122 Fed. 593; In re Blair (C. C. A., 8th Cir.), 5 Am. B. R. 793, 106 Fed. 662; In re Jacobs (C. C. A., 8th Cir.), 3 Am. B. R. 671, 99 Fed. 539; In re Abraham (C. C. A., 5th Cir.), 2 Am. B. R. 266, 93 Fed. 767. 23. Steiner v. Marshall (C. C. A.^ 4th Cir.), 15 Am. B. R. 486, 140 Fed. 710; In re Whitener (C. C. A., 5th. Cir.), 5 Am. B. R. 198, 105 Fed. 180. 24. In re Carley (C. C. A., 3d Cir.), 8 Am. B. R. 720, 117 Fed. 130; In re Rosser (C. C. A., 8th Cir.), 4 Am. B. R. 153, 101 Fed. 562; In re Lesser (C. C. A., 2d Cir.), 3 Am. B. R. 758, 99 Fed. 913; Mulford v. Fourth St. Na'l Bank (C. C. A., 3d Cir.), 19 Am. B. R. 742, 157 Fed. 897, holding that a petition to review an order of a district judge refusing,, in the exercise of judicial discretion to approve a certain agreement be- tween the trustees and preferred creditors did not present a "matter of law." In re Blanchard Shingle Co. (C. C. A., 9th Cir.), 21 Am. B. R. 142, 164 Fed. 311; Lesaius v. Goodman (C. C. A., 3d Cir.), 21 Am. B. R. 446, 165 Fed. 889; In re Leech i£; ^;,^V, f^ ^"■'>' 22 Am. B. R.. 599, 171 Fed. 622. Appeals and Writs of Eeeoe. 437 i 25-a.] "What Reviewable by Petition. cated above, an appeal which involves only a question of law may be treated as a petition for revision.^" It was intended by conferring this power of revision to provide a summary method for revising orders and decisions of courts of bankruptcy upon questions of law, and the section does not contemplate any review of facts.^° Upon such petitions for revision, only legal questions may be determined.^' Where the facts are not in dispute a petition for revision should be entertained, as the question remaining must be one of law.^' f. What may be reviewed by petition. -Any final or interlocu- tory order in bankruptcy proceedings, in matter of law, may be reviewed by petition.^" This method is that usually adopted when a party claims to be aggrieved because of an injunction'" or summary order ,'^ or where an appeal will not lie under the terms of § 25-a. It will not be possible nor useful to cite all the precedents on this question; they are already so numerous and cover so wide a field as to make the formulation of any number of safe rules impossible. The concensus of opinion is to the effect that the power of the appellate court to review by original petition the rulings of the bankruptcy court extends only to orders made in the bankruptcy proceedings proper and does not embrace proceedings in suits by the trustee in bankruptcy.'^ In determining the question of remedy the appellate court is to be governed by the object and character of the proceed- ijjg_32a jt becomes essential therefor to determine in each individual 25. In re Williams' Estate (C. C. A., 9th Cir.), 19 Am. B. R. 389, 156 Fed. 934. 26. In re Grassier (C. C. A., 9th Cir.), 18 Am. B. R. 694, 154 Fed. 478. In re Eggert (C. C. A., 7th Cir.), 4 Am. B. R. 449, 102 Fed. 735; Ke- nova Loan & Trust Co. v. Graham (C. C. A., 4th Cir.), 14 Am. B. R. 313, 135 Fed. 717. 27. Samel v. Dodd (C. C. A., 5th Cir.), 16 Am. B. R. 163, 142 Fed. 68, and cases cited; Kenova Loan & Trust Co. V. Graham (C. C. A., 4th Cir.), 14 Am. B. R. 313, 135 Fed. 717; Dickas v. Barnes (C. C. A., 6th Cir.), 15 Am. B. R. 566, 140 Fed. 849 ; Ryan V. Hendricks (C. C. A., 7th Cir.), 21 Am. B. R. 570, 166 Fed. 94. 28. Hutchinson v. LeRoy (C. C. A., 1st Cir.), 8 Am. B. R. 20, 113 Fed. 202. 29. Scott & Co. V. Wilson (C. C. A., 7th Cir.), 8 Am. B. R. 349, 115 Fed. 284; Courier-Journal Printing Co. V. Schaefer-Meyer Brewing Co. ( C C. A., 6th Cir.), 4 Am. B. R. 183, 101 Fed. 699. 30. Davis v. Bohle (C. C. A., 8th Cir.), 1 Am. B. R. 412, 92 Fed. 325; In re Kenney (D. C, N. Y.), 3 Am. B. R. 353, 97 Fed. 554. 31. In re Abraham (C. C. A., 5th Cir.), 2 Am. B. R. 266, 93 Fed. 767; In re Purvine (C. C. A., 5th Cir.), 2 Am. B. R. 787, 96 Fed. 192; In re Francis-Valentine Co. (C. C. A., 9th Cir.), 2 Am. B. R. 522, 94 Fed. 793, 98 Fed. 414; Fisher v. Cushman (C. C. A., 1st Cir.), 4 Am. B. R. 646, 103 Fed. 860; In re Seebold (C. C. A., 5th Cir.), 5 Am. B. R. 358, 105 Fed. 910. 32. In re Antigo Screen Door Go. (C. C. A., 7th Cir.), 10 Ara. B. R. 359, 123 Fed. 249; First National Bank v. Chicago Title & Trust Co., 14 Am. B. R. 102, 198 U. S. 280; Thomas v. Wood (C. C. A., 8th Cir.), 23 Am. B. R. 132, 173 Fed. 585. By controversies arising in bankruptcy proceedings is meant those independent or plenary suits which concern the bankrupt's estate and arise by intervention or other- wise between the trustee representing the bankrupt's estate and claimants asserting some right or interest ad- verse to the bankrupt or his general creditors. In re Mueller (C. C. A., 6th Cir.), 14 Am. B. R. 256, 135 Fed. 711; In re Farrcll (C. C. A., 6th Cir.), 23 Am. B. R. 826, 176 Fed. 505; Moorehouse v. Pacific Hardware, etc., Co. (C. C. A., 9th Cir.), 24 Am. B. R. 178. 32a. In re Farrell (C. C. A., 6th Cir.), 23 Am. B. R. 826, 176 Fed. 505; Coder v. Arts (Sup Ct.), 22 Am. B. R. 1, 213 U. S. 223. 438 The Law and Pbactice in Bajstkeuptcy. What Reviewable by Petition. i 35-a. case whether the order or decree sought to be reviewed is in the bankruptcy proceedings and not independent thereof. This distinc- tion and its effect upon the power to review by petition has been fre- quently recognized.'' Orders determining the rights of claimants to a fund in the possession of a bankruptcy court are being administered by it in the course of bankruptcy proceedings and are reviewable by petition,'* and so also as to a decision as to the validity of a trust deed executed by the bankrupt within the four months period/^ and so as to a decision involving a widow's right of dower in the estate of the bankrupt.'^ An order refusing to vacate an adjudication in bankruptcy is reviewable only on petition, as an administrative order.'*® An order confirming an order of a referee denying a claim to certain exemptions asserted by the wife of a bankrupt may be re- viewed upon a petition to revise;" and so also is an order confirm- ing a referee's disallowance of a creditor's claim for attorney's fees and expenses incurred in contesting claims and in proceedings to recover assets.'* An order denying the right of partnership creditors to participate in the assets of an individual partner until his in- dividual creditors had been first paid is reviewable upon a petition." Orders or proceedings for the sale and disposition of the bankrupt's effects, are regular steps or proceedings in bankruptcy and are review- able only on petition. '°® If determination by the court in respect to the bankrupt's claim of an exemption under a State statute is made in the course of the bankruptcy proceedings it is reviewable on petition.*" And so also is any interlocutory order pertaining to 33. Holden v. Stratton, 191 U. S. 115, 10 Am. B. R. 786; Hutchinson v. Otis, 190 U. S. 552, 10 Am. B. R. 135; First Nat'l Bank of Chicago v. Chicago Title & Trust Co., 198 U. S. 280, 14 Am. B. R. 102, holding that a summary proceeding against one in possession of assets alleged to be a part of a bankrupt estate is a proceed- ing in bankruptcy and the jurisdic- tion of the circuit court of appeals is confined to revision of the decree. 34. In re Antigo Screen Door Co. (C. C. A., 7th Cir.), 10 Am. B. R. .359, 123 Fed. 249, and cases cited; Samel v. Dodd (C. C. A., 5th Cir.), 16 Am. B. R. 163, 142 Fed. 68. But see Coder v. Arts (Sup. Ct), 22 Am. B. R. 1, 213 U. S. 223 holding that where a creditor asserts a lien upon property in the possession of a trustee and asks that such lien be declared valid, the decision of the court is appealable. 35. Morgan v. First Nat. Bank (C. C. A., 4th Cir.), 16 Am. B. R. 639, 145 Fed. 466; Moore v. Green (C. C. A., 4th Cir), 16 Am. B. R. 648, 145 Fed. 480; In re MoMahon (C. C. A., 6ih Cir.), 17 Am B. R. 530, 147 Fed. 684. 36. In re McKenzie (C. C. A., 8th Cir.), 15 Am. B. R. 679, 142 Fed. 383. 36a. Brady v. Bernard & Kittin- ger (C. C. A., 6th Cir,), 22 Am. B. R. 342, 170 Fed. 576. 37. In re Youngstrom (C. C. A., 8th Cir.), 18 Am. B. R. 572, 153 Fed. 98. 38. Ohio Valley Bank Co. v. Switzer (C. C. A., 6th Cir.), 18 Am. B. R. 689, 153 Fed. 362. See, also, Davidson & Co. v. Friedman (C. C. A., 6th Cir.), 15 Am. B. R. 489, 140 Fed. 853, holding that an order allowing the expenses incurred by a trustee for counsel fees in realization of assets is reviewable by petition. WHere objections to a trustee's account, seeking to charge him with assets coming into his possession, but not accounted for, raise questions which the bankrupt may summarily determine, its decision thereon is reviewable only upon a petition for review. In re Moore & Bridgman (C. c. A., 5th Cir.), 21 Am. B. R. 651, 166 Fed. 689. 39. Euclid Nat'l Bank v. Union Trust Co., (C. C. A., 4th Cir.), 17 Am. B. R. 834, 149 Fed. 975. 39a. Schuler v. Hassinger (C. C. A., 5th Cir.), 24 Am. B. R. 184. 40. Ingram v. Wilson (C. C. A., 8th Cir.), 11 Am. B. R. 192, 125 Fed. Appeals and Writs of Eeeob. 439 S 25-a.] Practice on Review. the rights of parties in the proceedings, relating to the several pleadings or granting or denying applications made in the due course of the proceedings.*^ A petition- to review will not usually be allowed where the granting of the order was discretionary,''^ or where the rights of the petitioning party were not affected by the order complained of.*' g. Practice. — The General Orders and Forma are silent as to the practice on petitions to review in matter of law.** The petition should be by a party aggrieved,*^ and usually entitled in, addressed to and filed with the clerk of, the proper circuit court of appeals. If more oonvenieait, it may also be addressed to and filed with the clerk of the court appealed from.*® It should recite the proceed- ings below, state specifically the question of law involved and the ruling of the district court thereon, and be accompanied by a certi- fied copy of so much of the record as will show the issue of law and how it arose ;*'' if it does not, the court may dismiss, with leave to 913; Duncan v. Ferguson-McKinney Fourth Circuit, 97 Fed., pp. 3, 4. Co. (C. C. A., 5th Cir.), 18 Am. B. R. See, also, forms within these rules in 155, 150 Fed. 269. " Supplementary Forms," post. If the 41. Clark v. Pideoek (C. C. A., 3d petition is filed in the first instance Cir.), 12 Am. B. R. 309, 129 Fed. 745, in the district court, it is heard by holding that an order refusing an in- the judge ex parte, and is followed by junction restraining the further dis- an order allowing or declining allow- positiou of the bankrupt's assets is ance. If allowed, the clerk prepares, reviewable; In re Groetzinger & Sons at the expense of the petitioner, a (C. C. A., 3d Cir.), 11 Am. B. R. 467, transcript of tlie record and certifies 127 Fed. 124; In re Ives (C. C. A., the same to the proper circuit court 6th Cir.), 7 Am. B. R. 692, 113 Fed. of appeals. Thereafter the practice in 911, holding that an order sustaining that court is the same as tliat out- a demurrer to a petition filed for the lined in the text and the rules in the purpose of vacating an adjudication is First and Fourth Circuits above re- reviewable on petition. ferred to. 42. Mulford v. Fourth St. Nat'l 45. In re Jemison Mercantile Co. Bank (C. C. A., 3d Cir.), 19 Am. B. (C. C. A., 5th Cir.), 7 Am. B. R. 588, R. 742, 157 Fed. 897; In re Les- 112 Fed. 966. ser (C. C. A., 2d Cir.), 3 Am. B. 46. Section 24-b provides that R. 758, 99 Fed. 913; Ex parte " such power shall be exercised on due Perkins, Fed. Cas. 10,982. This is notice and petition by any party ag- not so when the exercise of the dis- grieved." It contemplates that a pe- cretion involves a substantial legal tition shall be filed as in other cases. right. In re Carley (C. C. A., 3d 47. In re Ricliards (C. C. A., 7th Cir.), 8 Am. B. R. 720, 117 Fed. 130. Cir.), 3 Am. B. R. 145, 96 Fed. 935; 43. In re Madden (C. C. A., 2d In re Baker (C. C. A., 1st Cir.), 4 Cir.), 6 Am. B. R. 614, 110 Fed. 348; Am. B. R. 778, 104 Fed. 287; In re Fisher v. Cushman (C. C. A., 1st Reed, Fed. Cas. 11,638; In re Casey, Cir.), 4 Am. B. R. 646, 103 Fed 860; Fed. Cas. 2,495; Steiner v. Marshall In re Rosser (C. C. A., 8th Cir.), 4 (C. C. A., 4th Cir.), 15 Am. B. R. Am. B. R. 153, 101 Fed. 562. ^ 486, 140 Fed. 710, 72 C. C. A. 103; 44. See, however, rules in the First In re O'Connell (C. C. A., 1st Cir.), Circuit, 94 Fed., pp. 3, 4; and in tfie 14 Am. B. R. 237, 137 Fed. 838; In re 440 The Law and Peactice in Bankeuptcy. Practice on Review. [§ 25-a. supplement, or may suspend consideration until the record is com- pleted.*^ If the record does not contain the evidence taken before the referee, it will be presumed that the facts were sufficient to sustain his findings, and only matters of law, apparent upon the face of the record will be considered.**'^ The petition should be accompanied by a certified copy of so much of the record as will exhibit the manner in which the question arose and its determination.*' If the questions to be reviewed are not plainly and concisely set forth the court may, in its discretion, dismiss the petition.^" The opinion of the dis- trict judge on review of an order of the referee,, not specially made a matter of record, does not take the place of a finding of facts, although it may be referred to for the purpose of ascertaining the principles of law governing the court fn making its decision, or for the general purpose of determining whether the case was de- cided on the facts or the law.^^ The statute or the General Orders do not limit the time within which a petition for review should be filed.^^ So long as the delay is not unreasonable the petition may be entertained.^^ The ten day limitation made by § 35-a on the Pettingill & Co. (C. C. A., 1st Cir.), 14 Am. B. R. 757, 137 Fed. 840, hold- ing that the opinion of the district judge does not take the place of a finding of facts. The certified copy can usually be filed within thirty days. In the case of In re Taft (C. C. A., 6th Cir.), 13 Am. B. R. 417, 133 Fed. 511, it was held that a petition for re- views should present the specific deci- sions of law made by the lower court, by which the petitioner deems himself aggrieved, and set forth the facts upon which such order was made. 48. In the case of Steiner v. Mar- shal] (C. C. A., 4th Cir), 15 Am. B. R. 486, 140 Fed. 710, a petition to re- view wa, dismissed because of a fail- ure to set out the finding of facts on which the matters of law sought to be reviewed arose. Devries v. Shanahan (C. C. A., 4th Cir.), 10 Am. B. R. 518, 122 Fed. 629; In re Pettingill & Co. (C. C. A., 1st Cir.), 14 Am. B. R. 757, 137 Fed. 840, in which case the petition was dismissed because the facts were not set forth. 48a. In re Baum (C. C. A., 8th Cir.), 22 Am. B. R. 295, 169 Fed. 410; First State Bank of Corinth v. Haswell (C. C. A., 8th Cir.), 23 Am. B. R. 330, 174 Fed. 209. Only those questions of law that are fairly presented by the petition and record will be considered. Ross v. Stroh (C. C. A., 3rd Cir.), 21 Am. B. R. 644, 165 Fed. 628. 49, In re Richards (C. C. A., 7th Cir.), 3 Am. B. R. 145, 96 Fed. 935. Record. — ^A petition for review must present enough of the record in the district court to enable the cir- suit court of appeals to perceive the issue of law which is sought to be raised. In re Baker (C. C. A., 1st Cir.), 4 Am. B. R. 778, 104 Fed. 287. The record should present clearly and unequivocally the issues of law pre- sented, and in order that it may ap- pear that such issues were presented to the court below, findings of fact which involve distinct propositions of law or something else as a substitute therefore are necessary. In re O'Con- nell (C. C. A., 1st Cir.), 14 Am. B. R. 237, 137 Fed. 838. 50. In re Boston Dry Goods Co. (C. C. A., Ist Cir.), 11 Am. B. R. 97, 125 Fed. 226; Rush v. Lake (C. C. A., 9th Cir.), 10 Am. B. R. 455, 122 Fed. 561 ; Ross V. Stroh (C. C. A., 3d Cir.), 21 Am. B. R. 644, 165 Fed. 628. 51. In re Pettingill & Co. (C. C. A., 1st Cir.), 14 Am. B. R. 757, 137 Fed. 840; Samel v. Dodd (C. C. A., 5th Cir.), 16 Am. B. R. 163, 142 Fed. 68, holding that the opinion of the court below may be looked to for the pur- pose of determining in a general way the questions of law which were passed on. 52. In re N. Y. Economical Print- ing Co. (C. C. A., 2d Cir.), 5 Am. B. R. 697, 106 Fed. 839; In re Worcester County (C. C. A., 1st Cir.), 4 Am. B. R. 496, 102 Fed. 808; In re Good (C. C. A., 8th Cir.), 3 Am. B. R. 605, 99 Fed. 389. 53. In re N. Y. Econ. Pr. Co. (C. Appeals and Wkits of Eekoe. 441 § 25-a.] Practice on Eeview. taking of an appeal does not apply. But the necessity has been asserted of limiting the time within which such petitions may be filed to the end that a speedy determination of the bankruptcy may be brought about.'*'* In recognition of this principle it has been held that a petition to review should be filed within six months after the order or decree appealed from was granted, in analogy to the practice in circuit court of appeals in ordinary actions.^* If not regulated by the rules of the appellate court, the analogies of the statute and general orders suggest that the petition be signed and verified by the party aggrieved, and not by his attorney. On C. A., 2d Cir.), 5 Am. B. E. 697, 106 Fed. 839; In re Foss (D. C, Me.), 17 Am. B. R. 439, 147 Fed. 390. But see In re Worcester Co. (C. C. A., 1st Cir.), 4 Am. B. R. 496, 102 Fed. 808; In re Good (C. C. A., 8th Cir.), 3 Am. B. R. 605, 99 Fed. 389; Little- field V. D., H. & C. Co., Fed. Cas. 8,400. This, or a similar, limitation is, however, usually made by the rules of the circuit court of appeals. As to reasonable excuse for delay, see In re Groetziuger (C. C. A., 3d Cir.), 11 Am. B. R. 467, 127 Fed. 124; Meyer Drug Co. V. Pipkin Drug Co. (0. C. A., 5th Cir.), 14 Am. B. R. 477, 136 Fed. 396; Crim v. Woodford (C. C. A., 4th Cir.), 14 Am. B. R. 302, 136 Fed. 34; In re Holmes (C. C. A., 8th Cir.), 15 Am. B. E. 689, 142 Fed. 391. 53a. Petition dismissed for fail- ure to file order enlarging the time to file the petition within the time limited by Rule 38 of the Circuit Court of Appeals, Second Circuit. In re Brown (C. C. A., 2d Cir.), 23 Am. B. R. 93, 174 Fed. 339. 54. Time within nrhicli peti- tion mnst be flled. — In the case of In re Holmes (C. C. A., 8th Cir.), 15 Am. B. R. 689, 693, 142 Fed. 391, the court said: "One of the main purposes of the law was to provide a speedy method whereby a bankrupt might be finally dis- charged from liability to his creditors and his property might be equitably distributed among them. This object would be entirely defeated if the or- ders and judgments in bankruptcy were forever open, or were open for an uncertain or unknown time to revi- sion and reversal upon petitions under § 24-b, because in that case they would never become or be known to be either final or conclusive. An uncer- tainty relative to the time within which such petitions may be main- tained necessarily leaves the conclu- siveness of the orders of the bank- ruptcy courts in doubt and thus tends to defeat one of the main purposes of the law. There ought, therefore, to be a well known and certain limit to the time within which such judgments and orders may be challenged in mat- ter of law by petition as well as by appeal. A proceeding in bankruptcy is a proceeding in equity. The acts of Congress prescribed no time within which bills of review must be pre- sented in ordinary cases in chancery and yet the rule is well settled that such bills, to correct errors apparent upon the face of the record, may not be successfully maintained unless they are filed within the times limited for the review by appeal of the decrees they question. . . . This rule is just and salutary. It is an estab- lished rule in equity. A petition for revision, like all proceedings in bank- ruptcy, is a proceeding in equity, and it ought to be and is governed by this rule. A petition to revise or superin- tend in matter of law under § 24-b, an appealable order or judgment, may not be maintained after the time for the appeal has expired." See, also, In re Tomlinson Co. (C. C. A., 8th Cir.), 18 Am. B. R. 691, 154 Fed. 834, holding that a petition for review of an order must be filed within six months after the order was made and citing the act of March 3, 1891, ch. 517, § 11; In re Groetzinger & Sons (C. C. A., .3d Cir.), 11 Am. B. R. 467, 127 Fed. 124; In re Worcester County (C. C. A., 1st Cir.), 4' Am. 442 The Law and Peactice in Bankeuptcy. Appeals as in Equity Cases. [§ 25-a. filing, " due notice " to the opposite party is required,^^ and the case is proceeded with in accordance with the rules and practice of the court ;^® the respondent answering, and argument being had with or without briefs. The decision of the circuit court of appeals on such a review is not in turn appealable,^ ^ but can be transferred to the supreme court on certiorari.^® Such a petition for revision does not remove the case or that portion of it on review to the highest court, and if, while there pending, the respondent below dismisses it, he should pay the costs of the review.^' Nor should it be dismissed for lack of parties, where the missing parties were represented below by the trustee who is a party in the appellate court.®" Whether a petition can be filed asking revision of the order of the district court of a territory is yet a question.*^ If the district court is not within the territorial jurisdiction of any circuit court of appeals, it seems that it cannot, though superin- tendence may perhaps be had in another way.®^ A judgment entered upon an a,ppeal from a judgment of a bankruptcy court, which was only reviewable upon a petition to review is not void, but only erroneous, and may not be expunged upon a motion made at a subsequent term of the court. ®^* III. APPEALS AS IN EQUITY CASES. a. In general. — Subsection a of this section specifies the appeals that may be taken, as in equity cases in bankruptcy proceedings from the courts of bankruptcy to the circuit court of appeals. It will be noticed here that the appeals referred to are those " in bankruptcy proceedings " as distinguished from " controversies B. E. 496, 102 Fed. 808, holding that the order appealed from. In re Hen- as there is no statutory limitation fix- schel (D. C, N. Y.), 8 Am. B. E. 201, ing the time for review of matters 114 Fed. 968. arising on the face of the record, a pe- 58. See in this section, post. tition for review is limited by analogy 59. In re Orman (C. C. A., 5th to the six months allowed by statute Cir.), 5 Am. B. E. 698, 107 Fed. 101. for taking appeals generally in the 60. In re Utt (D. C, N. Y.), 5 Am. circuit court of appeals. Kenova Loan B. E. 383, 105 Fed. 754. & Trust Co. V. Graham (C. C. A., 4th 61. In re Stumpff (Sup Ct Cir.), 14 Am. B. E. 313, 135 Fed. 717. Okla.), 4 Am. B. E. 267. 55. § 24-b. This is usually by a 62. In re Blair (C. C. A., 8th Cir.), notice or order to show cause issued 5 Am. B. E. 793, 106 Fed. 662. by the clerk and served by mail or 62a. Loeser v. Savings Dep. Bank otherwise, with a copy of the petition. & Trust Co. (C. C. A., 6th Cir.), 20 56. In re Baker (C. C. A., 1st Cir.), Am. B. R. 845, 163 Fed. 212, in which 4 Am. B. E. 778, 104 Fed. 287. the 'court further held that upon such 57. Hall V. Allen, 12 Wall. 452; a motion every presumption in favor Conro v. Crane, 94 U. S. 441. Nor is of the judgment which does not con- it reviewable on a motion to amend tradict the record must be indulged. Appeals and Writs of Eekok. 443 § 25-a.] Appeals as in Equity Cases. arising in bankruptcy proceedings." If a claimant appears in bank- ruptcy court, recognizes the title and possession of the property by the trustee, asserts his lien upon such property and insists that the validity of such lien be recognized and the assets of the bank- rupt estate be administered accordingly he institutes " a proceeding in bankruptcy," as distinguished from a " controversy arising in the course of bankruptcy proceedings," and, if in other respects within the statute, an appeal will lie from a decision therein. °^* The general jurisdiction over appeals in controversies arising in bankruptcy pro- ceedings is discussed under § 24.°' This subsection supplements and explains such general jurisdiction. As to the three classes of judg- ments mentioned therein it seems now to be well settled that the jurisdiction here conferred is exclusive."* b, Asin equity cases. — Congress by conferring appellate juris- diction upon circuit courts of appeals as in equity cases only intended to provide thereunder for appeals from judgments when trial by jury is not demanded and the court of bankruptcy proceeds on its own findings of fact. In such a case the facts and the law are review- able on appeal, but if the judgment is entered on the verdict of a jury it is conclusive as to facts and the judgment is reviewable for error of law."^ c. From what judgments. — This subsection states clearly the cases in which appeals may be taken in bankruptcy proceedings from the courts of bankruptcy to the circuit court of appeals. It will be noticed that judgments only are appealable. If the judgment finally determines the proceeding it is appealable, although it does not bar another action or proceeding for the same cause.''^ But the order or judgment appealed from must be final ; if it is interlocutory it is not appealable under this subsection.*' The right to an appeal here conferred may not be taken away by the court; the right of appeal as given by the statute can neither be enlarged nor restricted by the district court or the circuit court of appeals."* This subsection contemplates that an appeal may be taken under 62a. Coder v. Arts (Sup. Ct.), 22 worth (C. C. A., 8th Cir.), 15 Am. B Am. B. R. 1, 213 U. S. 223. R. 22, 138 Fed. 28 ; Lenox v. Allen 63. See p. 423, ante, and Duncan v. Lane Co. (C. C. A., 1st Cir.), 21 Am Landis (0. C. A., 3d Cir.), 5 Am. B. B. R. 648, 167 Fed. 114. R. 649, 106 Fed. 839. 66. Stevens v. Nave-McCord Co. 64. See cases cited, ante, p. 434. (C. C. A., 8th Cir.), 17 Am. B. R. 609, Cook Inlet Coal Fields Cti. v. Cald- 150 Fed. 71. well (C. C. A., 4th Cir.), 17 Am. B. 67. Goodman v. Brenner (CCA, R. 135, 147 Fed. 475, holding that if 5th Cir.), 6 Am. B. R. 470, 109 Fed. the case falls within one or more of 481, holding that no right of appeal the three classes specified it can be re- is given under this section from an in- viewed only on appeal. terloeutory order reversing a ruling of Not falling within the specified a referee refusing to compel the hank- classes the final decree, though ren- rupt to produce his books for exami- dered in a proceeding in bankruptcy, nation. the appeal will be dismissed. Bank of 68. In re Abraham (C C. A., 5th Clinton v. Kondert (C. C. A., 5th Cir.), 2 Am. B. R. 266, 292, 93 Fed. Cir.), 20 Am. B. R. 178, 159 Fed. 767; In re Whitener (C. C A., 5th 703. Cir.), 5 Am. B. R. 198, 105 Fed. 180; 65. Elliott V. Toeppner, 187 U. S. Loekman v. Lang (C. C. A., 8th Cir.), 32;, 9 Am. B. R. 50; Bower v. Holz- 12 Am. B. R. 497, 501, 132 Fed. 1. 444 The Law and Peactice in Bankeuptcy. From "What Judgments. [§ 25-a. this subsection only from (a) a judgment granting or refusing an adjudication, (b) granting or denying a discharge, or (c) allowing or rejecting a claim of five hundred dollars or over. It vrill not usually be difficult to determine whether a judgment is one granting or refusing an adjudication. An appeal from such a judgment is permissible, even though the question of jurisdiction was raised."' But an order adjudging a person to be a member of a partnership which has been adjudicated a bankrupt is not appealable."'* An order of dismissal of a petition in bankruptcy on the ground that it does not state facts sufficient to constitute an act of bankruptcy is in effect a judgment refusing an adjudication and is appealable.'" An order sustaining a demurrer to a petition filed for the purpose of vacating an adjudication is not a judgment from which an appeal will lie under this section.'^ An order dismissing an application for a discharge for want of prosecution, is in substance and effect a judgment denying the dis- charge, and can only be reviewed on appeal.''^ A judgment confirming a composition is a judgment granting a discharge, since, under § 14-e a discharge results from the confirmation of a composition, and is therefore reviewable by appeal and not by a petition to revise.''^ Where the claim upon which the judgment is based amounts to five hundred dollars or over an appeal will lie.'* The word 69. Columbia Iron Works v. Na- tional Lead Co. (C. C. A., 6th Cir.), 11 Am. B. R. 340, 127 Fed. 99, hold- ing that a court of bankruptcy has jurisdiction to determine whether a corporation is principally engaged in such a business that it could be ad- judged a bankrupt, and the order of adjudication is appealable to the cir- cuit court of appeals. This case was decided on the authority of First Nat. Bank of Denver v. Klug, 186 U. S. 202, 8 Am. B. R. 12. 69a. Francis v. McNeal (C. C. A., 3d Cir.), 22 Am. B. R. 337, 170 Fed. 445. 70. Stevens v. Nave-McCord Mer- cantile Co. (C. C. A., 8th Cir.), 17 Am. B. R. 609, 150 Fed. 71. As to appeals generally from judgments granting or refusing adjudication, see Taft Co. v. Century Sav. Bank (C. C. A., 8th Cir.), 15 Am. B. R. 594, 141 Fed 369; Cook Inlet Coal Fields Co. v. Caldwell (C. C. A., 4th Cir.), 17 Am. B. R. 135, 147 Fed. 475, holding that the validity of an order of adju- dication entered nunc pro tunc can only be considered on an appeal. Zu- galla V. Mercantile Agency (C. C. A., 3d Cir.), 16 Am. B. R. 67, 142 Fed. 927; Merchant's Nat. Bank of Toledo V. Cole (C. 0. A., 6th Cir.), 18 Am. B. R. 44, 140 Fed. 708; In re Good (C. C. A., 8th Cir.), 3 Am. B. R. 605, 99 Fed. 389. 71. In re Ives (C. C. A., 6th Cir.), 7 Am. B. R. 692, 113 Fed. 911. 72. In re Kuffler (C. C. A., 2d Cir.), 11 Am. B. R. 469, 127 Fed. 125; Matter of Semons (C. C. A., 2d Cir.), 15 Am. R. B. 822, 72 C. C. A., 683, 140 Fed. 989. As to appeal from order dismissing a petition to revoke a discharge, see Thompson v. Mauzy (C. C. A., 4th Cir.), 23 Am. B. R. 489, 174 Fed. 611. 73. In re Friend (C. C. A., 7th Cir.), 13 Am. B. R. 595, 134 Fed. 778. Composition. — An appeal will lie from order refusing confirmation of a composition. Adler v. Hammond (C. C. A., 6th Cir.), 4 Am. B. R. 736, 104 Fed. 862, but not where no one ap- peared in opposition to the comfirma- tion. Ross V. Saunders (C. C. A., 1st Cir.), 5 Am. B. R. 350, 105 Fed. 915. 74. In -re Dickson (C. C. A., 1st Cir.), 7 Am. B. R. 186, HI Fed. 726; In re Jourdan (C. C. A., 1st Cir.), 7 Am. B. R. 186, lU Fed. 726; In re Groetzinger (C. C. A., 3d Cir.), 11 Am. B. R. 467, 127 Fed. 124; Cook, etc., Coal Co. v. Caldwell (C. C. A., 4th Cir.), 17 Am. B. R. 135, 147 Fed. 475 ; Union Nat. Bank of Kansas City V. Neill (C. C. A., 5th Cir.), 17 Am. B. R. 853, 149 Fed. 720; In re Friend (C. C. A., 7th Cir.), 13 Am. B. R. 595, 134 Fed. 778; In re Cosmopolitan Power Co. (C. C. A., 7th Cir.), 14 Am. B. R. 604, 137 Fed. 858. Appeals and Writs or Eeeor. 445 § 25-a.] Prom What Judgments. " claim " has been held limited to a money demand.'" The amount in- volved is that which will be put in controversy by the appeal, and not the amount of the original claim." An appeal may be taken under this subsection from an order allowing or disallowing a claim as from a judgment.'^ An order directing a sale of the bankrupt's alleged homestead to satisfy the claim of a creditor thereon is within sub- division 3, and appealable;'* and so is a judgment of the bankruptcy court that a chattel mortgage is not a valid lien and does not entitle a creditor to preference of payment out of the proceeds of the estate ;'° and so, also, is any decision of a bankruptcy court in a proceeding by a trustee to have certain adverse claims against, and liens upon the bankrupt estate declared void, and for a sale of the property free and clear of such liens."* It seems also that on an appeal the court may consider the priority of the claim under review.'" An appeal will also lie from a judgment fixing the amount due on a secured claim."^ Where a creditor seeks to establish the validity of a lien against property in the hands of the trustee by a proceeding in a court of bankruptcy, and such property exceeds $500 in value, an appeal will lie 'from the decision of the Court.*^* The rule is that where the appeal is from the allowance or disallowance of the claim, the validity of liens or priorities incidental thereto may be considered.*^ 75. In re Whitener (C. C. A., 5th Cir.), 5 Am. B. R. 198, 105 Fed. 180. 76. Gray v. Grand Forks Mercan- title Co. (C. C. A., 8th Cir.), 14 Am. B. R. 780, 138 Fed. 344. 77. Chesapeake Shoe Co. v. Seld- ner (C. C. A., 4th Cir.), 10 Am. B. R. 466, 122 Fed. 593; Rush v. Lake (C. C. A., 9th Cir.), 10 Am. B. R. 455, 122 Fed. S61, reversing 7 Am. B. R. 96; Dickson v. Nyman (C. C. A., 1st Cir.), 7 Am. B. R. 186, 111 Fed. 726; Postlethwaite v. Hicks (C. C. A., 4th Cir.), 21 Am. B. R. 70, 165 Fed. 897. In the case of Hutchinson v. Otis, 10 Am. B. R. 135, 190 U. S. 552, it was held that a decree rendered upon a pe- tition asserting a lien on the proceeds of a seat in a stock exchange which formerly belonged to the bankrupts was not " a judgment allowing or re- jecting a debt or claim of $500 or over," within subdivision 3 of subsec- tion 25-a, In re Mueller ( C. C. A., 6th Cir.), 14 Am. B. R. 256, 135 Fed. 711. 78. Burow v. Grand Lodge (C. C. A., 5th Cir.), 13 Am. B. R. 542, 133 Fed. 708. But see McCarty v. Coffin (C. C. A., 5th Cir.), 18 Am. B. R. 148, 150 Fed. 307. 79. Claim of assets under chat- tel mortgage. — A judgment of a bankruptcy court entered unon a claim of a bank under a chattel mort- gage to assets in possession of a trus- tee in bankruptcy is reviewable by ap- peal. Loeser v. Sivin^g Deposit Bank & Trust Co. (C. C. A., 6th Cir.l, 20 Am. B. R. 845, 163 Fed. 212 ; Dodge v. Norlin (C. C. A., 8th Cir.), 13 Am. B. R. 176. 133 Fed. 363. Where, in an- swer to a trustee's petition for leave to sell the bankrupt's stock in trade, a creditor claimed a lien upon part of the assets under chattel mortgages which were held void, the order for leave to sell is reviewable only by ap- peal. Knapp V. Milwaukee Trust Co. (C. C. A., 7th Cir.), 20 Am. B. R. 671, 162 Fed. 675. 79a. Thomas v. Wood (C. C. A., 8th Cir.), 23 Am. B. R. 132, 173 Fed. 585. Adverse claims. — Decrees of bankruptcy courts in respect to claims against property in the possession of bankrupts at the time of adjudica- tion are appealable. Mound Mines Co. V. Hawthorne (C. C. A., 8th Cir,), 23 Am. B. R. 242, 173 Fed. 882; jf'ranklin v. Stoughton Wagon Co. (C. C. A., 8th Cir.), 22 Am. B. R. 63, 168 Fed. 857. Compare In re Rose Shoe Mfg. Co. (C. C. A., 2d Cir.), 21 Am. B. R. 725, 168 Fed. 39. 80. Cunningham v. Bank (C. C. A., 6th Cir.), 4 Am. B. R. 192, 103 Fed. 932 ; In re Cosmopolitan Power Co. (C. C. A., 7th Cir.), 14 Am. B. R. 604, 137 Fed. 858; In re First Nat. Bank of Canton (C. C. A., 6th Cir.), 14 Am. B. R. 180, 135 Fed. 02. 81. In re Roche (C. C. A., 5th Cir.), 4 Am. B. R. 369, 101 Fed. 956. 81a. Coder v. Arts (Sup. Ct.), 22 Am. B. R. 1, 213 U. S. 223. 82. Cunningham v. Bank (C. C. 446 The Law and Practice in Bankeuptct. Time of Taking Appeal. [§ 25-a. If the question of the lien or priority be involved in the appeal independent of the claim it should not be entertained.*' A claim for attorney's fees and expenses incurred by the trustee in the adminis- tration of the estate,^* or by creditors in contesting claims of others, to the benefit of the estate, is not appealable;*' although it may be otherwise where the claim was for services rendered to the bankrupt either before or after adjudication.*" An order summarily directing a third person to turn over to the trustee money or property in his possession is not appealable.*"^ Cases where appeals have been dis- missed will be found in the foot-notes.*^ d. Appeals in compositions. — This is discussed elsewhere.*' The leading cases are also set out in the foot-note.*" e. Time of taking appeal. — An appeal under this subsection can be taken only from a district court sitting in bankruptcy to the circuit court of appeals of its circuit. It must be taken within ten days.°° But, if the time has expired, the district court may in a meritorious case grant a reargument, that the ten days may run from the second order. ""^ But a rehearing for the purpose of allow- A., 6th Oir.), 4 Am. B. R. 192, 103 Fed. 932; In re Doran (C. C. A., 6th Cir.), 18 Am. B. R. 760, 154 Fed. 467; In re First Nat. Bank of Louisville (C. C. A., 6th Cir.), 18 Am. B. R. 766, 155 Fed. 100; In re Cosmopoli- tan Power Co. (C. C. A., 7th Cir.), 14 Am. B. R. 604, 137 Fed. 858 ; Livings- ton V. Heineman (C. C. A., 6th Cir.), 10 Am. B. R. 39, 120 Fed. 786; In re Mueller (C. C. A., 6th Cir.), 14 Am. B. R. 256, 135 Fed. 711; Hutchinson V. Otis, 190 U. S. 552, 10 Am. B. R. 135. 83. In re Doran (C. C. A.. Cir.), 18 Am. B. R. 760, 154 Fed. 467, where the claim itself was allowed and only the incident remained, and it was held that appeal did not lie under § 25-a. In re Cosmopolitan Power Co. (C. C. A., 7th Cir.), 14 Am. B. R. 604, 137 Fed 858, Hutchinson v. Otis, 190 U. S. 552, 10 Am. B. R. 135; In re Rouse, Hazard & Co. (C. C. A., 7th Cir.), 1 Am. B. R. 234, 91 Fed. 96; in re Richards (C. C. A., 6th Cir.), 3 Am. B. R. 145, 96 Fed. 935 ; Courier- Journal Co. v. Meyer Brewing Co. (C. C. A., 6th Cir.), 4 Am. B. R. 183, 101 Fed. 699. 84. Davidson v. Friedman (C. C. A., 6th Cir.), 15 Am. B. R. 489, 140 Fed. 853 ; In re Blanchard Shingle Co. (C. C. A., 9th Cir.), 21 Am. B. R. 142, 164 Fed. 311. Contra: In re Curtis (C. C. A., 7th Cir.), 4 Am. B. R. 17, 100 Fed. 784. 85. Ohio Valley Bank Co. v. Swit- zer (C. C. A., 6th Cir.), 18 Am. B. R. 689, 153 Fed. 362. 86. Pratt v. Bothe (C. C. A., 6th Cir.), 12 Am. B. R. 529, 130 Fed. 670. 86a. In re Rose Shoe Co. (C. C. A., 2d Cir.), 21 Am. B. E. 725, 168 Fed. 39. 87. Fisher v. Cushman (C. C. A., 1st Cir.), 4 Am. B. R. 646, 103 Fed. 860; Goodman v. Brenner (C. C. A., 5th Cir.), 6 Am. B. R. 470, 109 Fed. 481; Hutchinson v. LeRoy (C. C. A., 1st Cir.), 8 Am. B. R. 20, 113 Fed. 202; In re Alden Elect. Co. (C. C A., 7th Cir.), 10 Am. B. R. 370, 123 Fed. 415; Doroshow v. Ott (C. C. A., 3d Cir.)., 14 Am. B. R. 34, 134 Fed. 740. 88. See under § 12, ante, and also preceding paragraph. 89. In re Adler (D. C, Tenn.), 4 Am. B. R. 583, 103 Fed. 444; U. S. ex rel. Adler v. Hammond (C. C A., 6th Cir.), 4 Am. B. R. 736, 104 Fed. 862; Adler v. Jones (C. C. A., 6th Cir.), 6 Am. B. R. 245, 109 Fed. 967; Ross V. Saunders (C. C. A., 1st Cir.), 5 Am. B. R. 350, 105 Fed. 915. 90. Compare, for time under the former law, Sedgwick v. Fridenberg, Fed. Cas. 12,611; Wood v. Bailey, 21 Wall. 640. 91. In re Wright (D. C, Mass.), 3 Am. B. R. 184, 96 Fed. 820; s. c. on Appeals and Wkits of Eeeoe. 447 § 25-a.] Parties to Appeal. ing an appeal should not be granted unless clearly warranted by the facts,''' nor unless the motion for a rehearing is made within the required time." It has been held that it should not be granted if the sole purpose is to extend the time of taking an appeal. °°* The time may not be extended by the subsequent entry of an alias adjudica- tion;** nor by any other subsequent proceeding in the case."** The time begins from the actual entry of the judgment by delivering the same to the clerk/' or in the case of the denial of a motion for a rehearing from the time of the entry of the order upon the records of the court. °* This limitation does not, however, affect appeals in independent suits to recover assets.''' f. Parties to appeal. — An appeal must be taken by a party aggrieved.'* All the parties interested in the proceeding should be made parties to the appeal and should be given notice of its pend- ency and hearing." Where separate judgments are rendered at the same time an appeal from one of them may be brought without making the persons interested in the other judgments parties to appeal, In re Worcester Co. (C. C. A., 1st Cir.), 4 Am. B. R. 496, 102 Fed. 808; In re MeCall (C. C. A., 6th Cir.), 16 Am. B. E. 670, 145 Fed. 898; Mills V. Fisher & Co. (C. C. A., 6th Cir.), 20 Am. D. R. 237, 159 Fed. 897; Stickney v. Wilt, 23. Wall. 150. 92. In re Hudson Clothing Co. (D. C, Me.), 15 Am. B. R. 254, 140 Fed. 49. It has been held that a rehearing will not be granted upon the pretense of reconsidering the merits for the purpose of reviving the petitioners' right of appeal. In re Girard Glazed Kid Co. (D. C, Pa.), 12 Am. B. R. 295, 129 Fed. 841. 93. Conboy v. Nat. Bank, 203 U. S. 141, 16 Am. B. R. 775; In re Alden Elec. Co. (C. C. A., 7th Cir), 10 Am. B. R. 370, 123 Fed. 415. In the case of Morgan v. Benedum (C. C. A., 4th Cir.), 19 Am. B. R. 601, 157 Fed. 232, the time for taking on appeal had ex- pired and it wae htld that such time could not be extended by a petition for a rehearing filed a month later; Mills v. Fisher & Co. (C. C. A, 6th Cir.), 20 Am. B. R. 237, 159 Fed. 897, holding that the time to appeal from an order sustaining a demurrer to a petition for an involuntary adjudica- tion does not begin to run until the determination of a petition for a re- hearing, filed in time, which makes the judgment dismissing the bank- ruptcy proceeding final. 93a. West v. McLaughlin Co. (C. C. A., 6th Cir.), 20 Am. B. R. 654, 162 Fed. 124. 94. In re Berkebile (C. C. A., 2d Cir.), 16 Am. B. R. 277, 144 Fed. 577. 94a. Brady v. Bernard & Kit- inger (C. C. A., 6th Cir.), 22 Am. B. R. 342, 17o Fed. 576. Motion to vacate. — The time to appeal from an order of adjudication may not be indirectly extended by a motion to vacate the adjudication. In re Goldberg (C. C. A., 2d Cir.), 21 Am. B. R. 828, 167 Fed. 808. 95. Peterson v. Nash Bros. (C. C. A., 8th Cir.), 7 Am. B. R. 181, 112 Fed. 311. 96. In re McCall (C. C. A., 6th Cir.), 16 Am. B. R. 670, 145 Fed. 898. 97. Boonville, etc., v. Blakey (C. C. A., 7th Cir.), 6 Am. B. R. 13, 107 Fed. 891; Steele v. Buel (C. C. A., (4:h Cir), 5 Am. B. R. 165, 104 Fed. 968. Consult, also, Stelling v. Jones Lumber Co. (C. C. A., 7th Cir.), 8 Am. B. R. 521, 116 Fed. 261. 98. In re Roche (C. C. A., 5th Cir.), 4 Am. B. R. 369, 101 Fed. 956. 99. Stevens v. Nave-McCord Co. (C. C. A., 8th Cir.), 17 Am. B. R. 609, 150 Fed. 71, holding that all parties aggrieved by a final decision, whereby a petition in bankruptcy ig dismissed, may join in an appeal al- though some complain of one alleged error and some of another, because on such an appeal all prior rulings are reviewable. 448 The Law and Peau/ice in Bankrtjptct. Practice on Appeals. [§ 25-a. the appeal.-^'"' Where the creditors as a body are aggrieved, the trustee only should appeal.^"^ But this right is not, strictly speak- ing, limited to him. It §eems that a creditor may appeal,^"^ and, if the trustee refuses to do so, the district court has the power, on a proper application, either to order him to take the appeal, or to direct that a creditor be permitted to do so.^"* g. Practice. — The practice on appeals under subsection a con- forms in all respects to other appeals in equity to a circuit court of appeals.^"* General Order XXXVI should be consulted ; also the rules of each circuit.-"'® The appeal is instituted by a petition, accompanied by an asisignment of errors, presented to and allowed " by a judge of the court appealed from or the court appealed to." Section 997 of the Revised Statutes makes an assignment of errors, a prayer for reversal, and a citation to the adverse party essential parts of the record upon which the rulings of a trial court may be invoked in the appellate courts of the United States. The filing of an assignment of errors is indispensable to the perfection of the appeal.^"® If the assignment of errors is so defective as not to indicate the error complained of, the court may not take cogniz- ance of them.^"^ An amendment will be allowed when the special 100. Love V. Export Storage Co. A., 6th Cir.), 20 Am. B. E. 40, 163 (C. C. A., 6th Cir.), 16 Am. B. R. Fed. 155. 171, 143 Fed. 1. 104. Gen. Order XXXVI(l) pro- 101. Foreman v. Burleigh (C. C. vides that "Appeals from a court of A., 1 Cir.), 6 Am. B. R. 230, 109 Fed. bankruptcy to a circuit court of ap- 313. peals shall be allowed by a judge of 102. In re Roche (C. C. A., 5th the court appealed from or of the Cir.), 4 Am. B. R. 369, 101 Fed. 95(5. court appealed to, and shall be regu- Compare Chatfield v. O'Dwyer (C. C. lated, except as otherwise provided by A., 8th Cir.), 4 Am. B. R. 313, 101 the act, by the rules governing ap- Fed. 797. peals in equity in the courts of tin- 103. McDaniel v. Stroud (C. C. A., United States." See, also. In re Baker 4th Cir.), 5 Am. B. R. 685, 106 Fed. (C. C. A., 1st Cir.), 4 Am. B. R. 778, 486; Foreman v. Burleigh (C. C. A., 104 Fed. 287; In re Robertshaw Co. 1st Cir.), 6 Am. B. R. 230, 109 Fed (D. C, Pa.), 14 Am. B. R. 341, 135 313. Fed. 220; Board of Commissioners v. ■Where a trustee though re- Hurley (C. C. A., 8th Cir.), 22 Am. quested, refuses to appeal from an ^•,^- ^9^' ^^^ ^^^- ^'^- . , . J X.- -v. i^ J J t 105. No forms are suggested m order which affirmed an order of a « Supplementary Forms," post, for the referee allowing a contested claim, the ^.^^^^^ ^^^^^^ ^j^g customary forms on court m its discretion may allow a appeals and writs of error under the disfatisfled creditor to appeal, though federal practice are available and the better practice would be to order should be used. the trustee to appeal or to allow the 106. Lockman v. Lang (C. C. A., dissatisfied creditor to appeal in his 8th Cir.), 11 Am. B. R. 597, 128 Fed. name being indemnified in either case |J^' ^- ''•' ^^ ■'^™- ^- ^- *^^' ^^^ against costs, by such creditor. Ohio '\g^ ^^^^ „ „j, ^^^ ^j^^^j^ Valley Bank Co. v. Mack et al. (C. C. e„„rt of appeals provides that "the Appeals and Weits of Eeeok. 449 § 25-a.] Parties on Appeal. circumstances justify it, and the application is promptly made ou discovery of the mistake.^'* If the appellant is not the trustee/"" an appeal bond must, either then or on the perfection of the appeal in the appellate court, be approved by the judge and filed."" A bond on appeal from an order of involuntary adjudication is suffi- cient although it does not run to all the petitioning creditors.^" Where an appeal is allowed within the prescribed time, it will not be dismissed because of a delay of a few days in filing the bond."^ When the appeal is allowed, a citation is issued to and served on the opposite party."' It has been held that the citation may be waived."* The citation should give the names of all the applicants for the writ."** The appeal is perfected by the giving and approval of the bond, and the issue of citation; and, it seems, all this must be done within the ten days, ^" although it has been held that the failure to perfect the bond and issue citation within the time pre- scribed for the appeal does not furnish ground for a dismissal of the appeal.^^" The time to appeal begins to run from the date of the entry of the order upon the records of the court."' After the filing of the bond and issue of citation the record is certified to plaintiff in error or appellant shall file with the clerk of the court below, with his petition for the writ of error or appeal, an assignment of errors which shall set out separately and particularly each error asserted and intended to be urged. No writ of er- ror or appeal shall be allowed until such assignment of errors shall have been filed." Flickinger v. First Nat. Bank (C. C. A., 6th Cir.), 16 Am. B. R. 678, 145 Fed. 162, holding that in special circumstances an amendment will be allowed. A defective writ or error is amendable. Long v. Farmer's State Bank (C. C. A., 8th Cir.), 17 Am. B. R. 103, 147 Fed. 360. 108. Flickinger v. First Nat. Bank (C. C A., 6th Cir.), 16 Am. B. R. 678, 145 Fed. 162. 109. Bankr. Act, § 25-c. 110. R. . §§ 1000, 1001; Peugh V. Davis, 110 U. S. 227; Dodge V. Kjiowles, 114 U. S. 430. See Wil- liams Bros. V. Savage (C. C. A., 4th Cir.), 9 Am. B. R. 720, 120 Fed. 497. 111. Flickinger v. First Nat. Bank (C. C. A., 6th Cir.), 16 Am. B. R. 678, 145 Fed. 162. 112. Columbia Iron Works v. Na- tional Lead Co. (C. C. A., 6th Cir.), 11 Am. B. R. 340, 127 Fed. 99. 113. R. S. §§ 998, 999. Compare, also, Jacobs v. George, 150 U. S. 415. 114. Lockman v. Lang (C. C. A., 8th Cir.), 11 Am. B. R. 597, 128 Fed. 279. 114a. Kerrch v. United States (C C. A., 1st Cir.), 22 Am. B. R. 544, 171 Fed. 366. 115. Norcross v. Nave (C. C. A., 8th Cir.), 4 Am. B. R. 317, 101 Fed. 796; Kenova Loan & Trust Co. v. Gra- ham (C. C. A., 4th Cir.), 14 Am. B. R. 313, 135 Fed. 717; In re Mueller (C. C. A., 6th Cir.), 14 Am. B. R. 256, 135 Fed. 711; In re McCall (C. C. A.. 6th Cir.), 16 Am. B. R. 670, 145 Fed. 898. 116. Lockman v. Lang (C. C. A., 8th Cir.), 12 Am. B. R. 497, 132 Fed. 1; In re Hill Co. (C. C. A., 7th Cir.), 17 Am. B. R. 517, 148 Fed. 832, hold- ing that a citation and bond are not jurisdictional requisites, and defects therein may be cured after the time limited for taking an appeal ; Gray v. Mercantile Co. (C. C. A., 8th Cir.), 14 Am. B. R. 780, 138 Fed. 344. 117. So held in respect to an ap- peal from an order confirmini; a com- position. In re MeCall (C. C'. A., fith Cir.), 16 Am. B. R. 670, 145 Fed. 898. 450 The Law and Pbactice in Bankeuptcy. Practice on Appeals. [§ 25-a. the court and printed; the case is then brought on and argued in the usual way.^^^ The rules of the circuit court of appeals pro- vides that " no case will be heard until a complete record, contain- ing in itself and not by reference, all the papers, exhibits, deposi- tions, and other proceedings, which are necessary to the hearing in this court, shall be filed."^^^ There should be a substantial com- pliance with this requirement.*^" The whole record should be certi- fied, unless otherwise stipulated ;*^* but the record need not include findings of fact by the court below.*^^ It is' sufficient if all the evidence on which the district court determined the question is 'Contained in the record.*^* iJ^or need the appellate court consider errors not specifically assigned,*^* though this is, of course, disi- cretionary. The record should show when the appeal was per- fected.*^'' Where the record is incomplete, it may not be stricken out but the remedy is by certiorari to send up the missing parts.*^* The certification must be made by the clerk of the district court and not by the referee.*^'' Costs follow the practice and rules of the court, but where, in an appeal against a trustee, the order below is reversed on a proposition brought forward by the appellate court itself, no costs will be allowed.*^* Whether an appeal acts as a stay on proceedings in the court below is a question not often im- portant. It may be obviated by an application to the judge below for a supersedeas.^^'-' In conformity with the rule in equity the 118. As to practice on certification C. A., 7th Cir.), 6 Am. B. E. 13, of record, see Matter of Kobertshaw 107 Fed. 891; In re Gutterson (D. C, Mfg. Co. (D. C, Pa.), 14 Am. B. R. Mass.), 14 Am. B. R. 495, 136 Fed. 341, 135 Fed. 220; Cook, etc., Coal 698. Co V. Caldwell (C. C. A., 4tli Cir.), Necessity of special findings. — 17 Am. B. R. 135, 147 Fed. 475. Tlie circuit court of appeals in the 119. Rules of circuit court of ap- second circuit has pointed out that in peals, No. 14. the absence of special findings the 120. Cook, etc., Coal Co. v. Cald- court cannot tell, except by inference ■well (C. C. A., 4th Cir.), 17 Am. B. what facts were or were not found, B. 135, 147 Fed. 475; Matter of Rob- but must examine all the evidence and ertshaw Mfg. Co. (D. C, Pa.), 14 determine whether the decree of the Am. B. E. 341, 135 Fed. 220; Flick- court below was light. Van Iders- inger v. First Nat. Bank (C. C. A., tine v. Nat. Discount Co. (C. C. A., 6th Cir.), 16 Am. B. R. 678, 145 Fed. 2d Cir.), 23 Am. B. R. 345, 174 Fed. 162; Devries t. Shanahan (C. C. A., 518. 4th Cir.), 10 Am. B. R. 518, 122 Fed. 125. Williams Bros. v. Savage (C. 629; In re Richards (C. C. A., 7th C. A., 4th Cir.), 9 Am. B. R. 720, 120 Cir.), 3 Am. B. R. 145, 96 Fed. 935. Fed. 497. 121. In re Robertshaw Mfg. Co. 126. Flickinger v. First Nat. Bank (D. C, Pa.), 14 Am. B. E. 341, 135 (C. C. A., 6th Cir.), 16 Am. B. E. Fed. 220; Cunningham v. Bank (C. 678. 145 Fed. 162. C. A., 6th Cir.), 4 Am. B. E. 192, 103 127. Cook, etc.. Coal Co. v. Cald- Fed. 832. well (C. C. A., 4th Cir.), 17 Am. B. 122. In re Meyers (D. C, N. Y.), E. 135, 147 Fed. 475. 5 Am. B. E. 4, 105 Fed. 353. 128. In re Jourdan (C. C. A., 1st 123. Cunningham v. Bank (C. C. Cir.), 7 Am. B. R. 186, 111 Fed. 726. A., 6th Cir.), 4 Am. B. R. 192, 103 129. See R. S., § 1007; Covington Fed. 932. Stock Yards v. Keith, 121 U. S. 248; 124. Boonville, etc., v. Blakey (C. Adams v. Lane, 10 How. 148; French Appeals and Weits of Ebrob. 451 § 25-1).] Appeals to Supreme Court. circuit court of appeals will not interfere with findings of facts by the district judge, or by a referee, affirmed by a district court, unless the findings are clearly erroneous, or, as it is sometimes expressed, manifestly against the weight of evidence."* When the court has considered conflicting evidence and made a finding or decree it is presumptively correct and unless some obvious error of law has intervened or some serious mistake of fact has been made the finding or decree must be permitted to stand.^'^ TV. APFEAI.S TO SUPBEMX! COURT. a. From a circuit court of appeals. — Appeals to the supreme court of the United States are, in bankruptcy, limited to controversies on claims of over $3,000,^^^ where a Federal question, so-called, is involved, or, if no such question is involved, where a justice of that court has certified that the decision of the question in contro- versy " is essential to the uniform construction of the act through- out the United States/'^'^^ Section 6 of the act of March 3, 1891, establishing the circuit court of appeals, has no relation to the revisory power conferred by § 34-b of the bankruptcy act, and parties having elected to litigate in such court under that section, the proceedings terminate there, unless the case is one arising under § 25-b, and is properly certified to the supreme court as therein required.^'* An order of the district court allowing an V. Shoemaker, 12 Wall. 86; Hunt v. Oliver, 109 U. S. 177 ; Texas, etc., Co. T. Murphy, 111 U. S. 488. Witbont a supersedeas an ap- peal never suspends the execution of an order nor stops its enforcements. Matter of Brady (D. C, Ky.), 21 Am. B. R. 364. 130. In re Noyes (C. C. A., 1st Cir.), 11 Am. B. E. 506, 127 Fed. 286; Burleigh v. Foreman (C. C. A., 1st Cir.), 12 Am. B. R. 88, 139 Fed. 13; Barton Bros. v. Texas Produce Co. (C. C. A., 8th Cir.), 14 Am. B. R. 502, 136 Fed. 355; In re Cole (C. C. A., 1st Cir.), 16 Am. B. R. 302, 144 Fed. 392; In re Lawrence (C. C. A., 2d Cir.), 13 Am. B. R. 798, 134 Fed. 843; Edinburg Coal Co. v. Humphreys (C. C. A., 7th Cir.), 13 Am. B. R. 593, 134 Fed. 839; Dodge v. Norlin (C. C. A., 8th Cir.), 13 Am. B. R. 176, 133 Fed. 363; Canner v. Webster Tapper Co. (C. C. A, 1st Cir.), 21 Am. B. R. 872, 168 Fed. 519; In re Sweeney (C. C. A., 6th Cir.), 21 Am. B. R. 866, 168 Fed. 612. 131. Coder v. Arts (C. C. A., 8th Cir.), 18 Am. B. E. 513, 152 Fed. 943, affd. 22 Am. B. R. 1, 213 U. S. 223; Houck v. Christy (C. C. A., 8th Cir.), 18 Am. B. R. 330, 152 Fed. 612; Merchant's Nat. Bank v. Cole (C. C. A., 6th Cir.), 18 Am. B. R. 44, 149 Fed. 708; Hussey v. Richardson- Roberts Dry Goods Co. (C. C. A., 8th Cir.), 17 Am. B. R. 511, 148 Fed. 598; Brady v. Bernard & Kittinger (C. C. A., 6th Cir.), 22 Am. B. R. 342, 170 Fed. 576. 132. The plain purport of the act seems to limit an appeal by a certifi- cate of a justice of the supreme court to a claim in controversy which ex- ceeds the sum of $2,000. See Hutch- inson V. Otis (C. C. A., 1st Cir.), 10 Am. B. R. 275, 123 Fed. 14; Barrie v. Barrie, 5 How. (U. S.) 103; Gordon v. Ogden, 3 Pet. (U. S.) 33. 132a. Federal question in- volved. — Where the appellant insisted upon a construction of the Bank- ruptcy Act which would defeat the lien, and the construction contended for by appellee would give it validity, a construction of the Bankruptcy Act was directly involved in the deter- mination of the question as to the validity of said lien, and the judg- ment of the Circuit Court of Appeals was appealable to this court under section 25b. Coder v. Arts ( Sup. Ct. ) , 22 Am. B. R. 1, 213 U. S. 223. 133. Hutchinson v. Otis (C. C. A.^ 1st Cir.), 10 Am. B. R. 275, 123 Fed. 14; Western Tie & Timber Co. v. Brown, 13 Am. B. R. 447, 196 U. S. 502; Lucius v. Cawthorn-Coleman Co., 13 Am. B. R. 696, 196 U. S. 149. 452 The Law and Peactice in Bankruptct. Appeal Bond. [§ 25-c. exemption in bankruptcy proceedings is not " a final decision allow- ing or rejecting a claim," within the meaning of subsection b, and an appeal from a decision of the circuit court of appeals in respect thereto does not lie to the supreme court. ^** An objection to the want of proof of an act of bankruptcy which was not raised in the court below may not be raised for the first time on appeal. ^'° b. Practice.— The practice on appeal to the supreme court is regulated by General Order XXXVI (3) (3), "« and after the case is in the supreme court, by the rules of that court. Cases interpreting these rules should also be consulted. An appeal from a final order of the circuit court of appeals affirming an order allowing a claim must be taken within 30 days after the making of the order, as required by General Order XXXVI, and such time cannot be ex- tended by filing a petition for a rehearing.^'^ The record must eon- tain the findings of fact and conclusions of law of the court below as required by General Order XXXVI (3), otherwise the appeal will be dismissed; the omission may not be supplied by reference to the opinion of the court below."^ The rule that where two courts have concurred in findings of fact the supreme court will accept those find- ings unless clear error is shown, will always be applied.^'^^ A judg- ment that a person is not a bankrupt on a verdict by the jury in the trial of the cause, is reviewable in the supreme court only by writ of error.^'* This method of reviewing the judgment of a circuit court of appeals is, because of the limitations hedging it in, very rare- V. NO APPEAL BOND REQUIRED OF TRUSTEE WHO APPEALS. The words of the statute are clear. Appeal bonds are required from all appellants save trustees. Appeal bonds are not required ou petitions to revise. It would seem that this subsection applies, also to writs of error from the highest courts of the States. 134. Holden v. Stratton, 10 Am. B. v. Vollkommer, 205 U. S. 521, IT E 786, 191 U. S. 115; Smalley v. Am. B. R. 806. Langemour, 13 Am. B. E. 692, 196 U. 136. See Mueller v. Nugent, 184 U. g. 9a. S. 1, 7 Am. B. E. 224, for meaning of 135. Armstrong v. Fernandez, 208 this general order. For forms, see U. S. 324, 19 Am. B. R. 746, holding any of works on federal practice, for that where the only question contested instance, Desty's Federal Procedure, below was whether or not the alleged 9th ed.. Vol. IV. bankrupt was a person engaged chiefly 137. Conboy v. First Nat. Bank,, in agriculture, ana the opposing credi- 16 Am. B. E. 773, 203 U. S. 141. tors make no objection to the want of 138. Chapman v. Bowen, 207 U. S. nroof of the act of bankruptcy alleged 89, 18 Am. B. R. 844. an objection first raised on appeal 138a. Page v. Rogers, 21 Am. B. R. that other findings should have been 496, 211 U. S. 575. made in respect to the act of bank- 139. Grant Shoe Co. v. Laird Co., ruptcy, comes too late. As to objec- 203 U. S. 502, 17 Am. B. R. 1 ; El- tions first raised on appeal, see Frank liott v. Toeppner, 187 U. S. 327, 334,. 9 Am. B. R. 50. Appeals and Weits of Eeeoe. 453 § 25-d.] Writ of Certiorari from Supreme Court. VI. CERTIFICATE AND CKRTIORARI. a. Certificates to the supreme court. — The reference as to cer- tification to the supreme court is clearly to the Evarts act.^** This power may be exercised by either a circuit count of appeals or a i. district court. If from the district court, the question certified must be after final judgment/*^ and one of jurisdiction.^^^ The certificate is a matter of right, provided a jurisdictional question has been decided. If from the circuit court of appeals, any ques- tion on "which the court desires instruction may be certified up; but the certificate is discretionary. It seems also that here a final judgment is not necessary.^** Such certificates bring up only questions of law.^** The practice and precedents are already numerous,^** though there are few cases which originated in bank- ruptcy. b. Writs of certiorari from the supreme court. — ^Here again the reference is to the Evarts act. Such a writ (a) can be directed to the circuit court of appeals only, and (b) may be asked only in those cases where the ultimate decision of that court is final. While the supreme court has often disclaimed an intention to use this writ,*** it has giown quite common. The statute gives the court a wide discretion as to time,**'' but, as a rule, such a writ should not be asked until a final decision is had below. The application is by petition to the supreme court, accompanied by a printed record of the case, and'the question on which the writ is desired is, after due notice, moved on a motion day and submitted by written briefs. The effect of the writ, if granted, is to remove the quei9- tion to the supreme court; and it is thereafter proceeded with there, as if brought up on an appeal.*** The precedents on cer- tiorari under the Evarts act are already numerous and may be consulted with profit.*** Where a mandate has issued from the 140. Act of March 3, 1891. U. S. 467; Cross v. Evans, 167 U. S. 141. Bardes v. Bank, 3 Am. B. R. 60. 680, 175 U. S. 526. 145. For instance, Columbus Watch 14a. First Nat. Bank v. Klug, 186 Co. v. Robbins, 148 U. S. 266. For U. S. 203, 8 Am. B. R. 12; Columbia forms, see Desty's Federal Procedure, Iron Works v. National Lead Co. (C. 9th ed.. Vol. IV. C. A., 6th Cir.), 11 Am. B. R. 340, 146. See Forsyth v. Hammond', 166 127 Fed. 99. See, also. Van Wagenen U. S. 506. V. Sewall, 160 U. S. 369; Maynard v. 147. Compare The Conqueror, 166 Hecht, 151 U. S. 324; McLish v. Roff, U. S. 110. 141 U. S. 661. 148. Hubbard v. Todd, 171 U. S. 143. DufiF V. Carrier, 55 Fed. 433. 474. 144. Warner v. New Orleans, 167 149. American Const. Oo. v. Jack- 454 The Law and Peactice in Bankeuptcy. Certiorari from Supreme Court. [§ 25-d. supreme court directing the district court to modify its decree in accordance with the supreme court's opinion, a peremptory man- damus may issue from the circuit court of appeals enforcing obed- % ience of such mandate."" But a writ of mandamus is no proper sub- ! stitute for a writ of error, and mandamus will not lie to compel a court of bankruptcy to dismiss proceedings in bankruptcy against an alleged bankrupt on the ground that the petition in bankruptcy failed to show that the alleged bankrupt was subject to the juris- diction of the court.."""* sonville, etc., 148 U. S. 372; Lav Ow 150. Eon parte Chicago Title & Bew V. U. S., 144 U. S. 47; Cliicago, Trust Co. (C. C. A., 7th Cir.), 16 Am, etc., V. Osborne 146 U. S. 354. For B. R. 848, 146 Fed. 742. forms see Desty's Federal Procedure, 150a. Matter of Riggs (Sup. Ct.), 9th ed., Vol. IV. 22 Am. B. R. 720, 214 U. S. 9. SECTION TWENTY-SIX. ARBITRATION OF CONTROVXmSIES. § 26. Arbitration of Controversies. — a. The trustee may, pur- suant to the direction of the court, submit to arbitration any con- troversy arising in the settlement of the estate. b. 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 llieir appointment the court shall appoint the third arbitrator. c. The written finding of the arbitrators, or a majority of them, as to the issues presented, may be filed in court and shall have like force and effect as the verdict of a jury. AaologoQS proTisionsi In U. S.: Act of 1867, § 17, R. S., § 5061 ; Act of 1800, ! 43. In Eng.: Act of 1883, § 57(6). Crou refarenoest To the law: §§ 2(7), 27. To t^e General OTden: XXXIII. SYNOPSIS OF SECTION. ARBITRATION OF GONTROVmtSIES. I. Arbitration. a. In general. b. Scope and practice. II. Arbitrators, How Chosen. III. Effect of Arbitration. I. ARBITRATION. a. In general. — ^Under subsection a of this section, " any con- TTOversy arising in the settlement of the estate," may be submitted to arbitration. General Order XXXIII controls as to the appli- cation for the submission of such a controversy to arbitration. b. Scope and practice. — This section provides a meaim to judg- ment by lay judges. It resembles a similar practice in moat of the 415 456 The Law and Peactice in Bankettptcy. Arbitrators, How Chosen; Effect of Arbitration. [§26. States; and is availed of aa rarely. Under the English law, no application to court is necessary; the trustee may submit to arbi- tration, if the committee of inspection consent.^ With us, the direction of the court must first be obtained. The proceeding is initiated by a petition, which should specify " the subject matter of the controversy and the reasons why the trustee thinks it proper and most for the interest of the estate that the controversy should be settled by arbitration or otherwise."^ Both the law and general orders are silent as to what notice is required ; the analogiesi of the statute suggest the same notice as that required on the settlement of controversies.* The notice should, however, take the form of an order to show cause. The granting of the order is discretionary. Under the former law, it could not be addressed to the register.* Now it can, and almost invariably will be, to the referee.® II. ARBITRATORS, HOW CHOSEN. Subsection b provides the method of choosing arbitrators. The statute requires no elucidation. It is construed strictly. The arbitrators must be chosen in one of the ways indicated, or their finding will be set aside.* Once chosen, the practice thereafter should conform to that on arbitrations in the State courts. The inquiry is necessarily somewhat informal, but the findings must be reduced to writing and signed by the arbitrators, or a majority of them.^ It should be filed, not with the referee, but in the dis- trict court clerk's ofiice. m. EFFECT OF ARBITRATION. The findings when filed become in effect the verdict of a jury. They need not be formally approved by the court. But they may be set aside by the district judge ;^ they are also subject to review in the same way a verdict is. If not set aside by the judge or on appeal, the findings are res adjudicata on all parties to the pro- ceeding, even in a collateral action.* 1. Eng. Act of 1883, § 57(6). B. E. 245, 97 Fed. 922. See, also. In 3. General Order XXXIII. re Dibblee, Fed. Caa. 3,885. 3. See Bankr. Act, § 58-a(7). Note, 7. Bankr. Act, § 26-c. also. In re Hoole, 3 Fed. 496. 8. In re McLam (D. C, Vt.), 3 Ara. 4. In re Graves, Fed. Cas. 5,709. B. R. 245, 97 Fed. 922. 5. Bankr. Act, § 38-a(4). 9. Johnson v. Worden, 13 N. B. R. 6. In re MoLam (D. C, Vt.), 3 Am. 355. SECTION TWENTY-SEVEN. COMPROMISES. § 27. Compromises. — a. The trustee may, with the approval of the court, compromise any controversy arising in the administra- tion of the estate upon such terms as he may deem for the best interests of the estate. Analogons provisioiu: In U. S.: Act of 1867, § 14, R. S., § 5061; Act of 1841, § 11. In Bng.: Act of 1883, § 57(7). Cross references: To tbe law: §§ 2(7), 26, 58-a(7). To the General Orders: XXVIII, XXXIII. SYNOPSIS OF SECTION. I. Compromises. a. Scope of section. b. Practice. COMPROMISES. a. Scope of section. — This section should not be confused with § 12 on compositions. It is intended to supply a summary and inexpensive way of settling questions arising in the administra- tion of bankruptcy estates. It is most often used in connection with contests on claims filed against the estate, or the contested coMections' of claims due the estate. It cannot, of course, be re- sorted to where the matter in controversy is the right to a dis- charge. But any controversy ajising in the administration of the estate may be compromised. b. Practice. — Here also the proceeding is initiated by a peti- tion, which may be made by the trustee, the bankrupt, or a cred- itor.* It should be filed with the referee, if the case has been referred. The subject matter of the controversy and the reasons why there should be a compromise must be clearly and distinctly set forth.* The referee, on the filing of such a petition, sets a day and place for the hearing and gives notice to all creditors and 1. General Order XXVIII. 2. Compare General Order XXXIII. 457 458 The Law and Peactice in Bankruptcy. Practice on Compromises. [§27. persons interested, in the usual way.* The notice should also contain a direction to show cause why the proposed compromise should not be allowed. The hearing is before the referee, not the judge, and conforms to like hearings on similar notice or order. The compromise must be " with the approval of the court," which means that even the action of the creditors on the proposition is not final.* The referee may disapprove their action. His decision may be reviewed by the district judge, on proper and timely appli- cation.* Compromises are often agreed to informally at meetings of creditors where more than a majority in number and amount are present. This practice is, however, unsafe, as the section is construed strictly." The reported cases are few and, other than those previously referred to, are set out in the foot-note.'' 3. Though the general order seems to leave the kind and duration of the notice to the referee, it should be by publication and mailing and a ten days' notice. See Bankr. Act, § 58-a(7)-b-c. 4. Note the reasons for this in In re Heyman (D. C, N. Y.), 5 Am. B. K. 808, 104 Fed. 677; In re Kranich (D. C„ Pa.), 23 Am. B. K. 550, 553, 174 Fed. 908. 5. See General Order XXVn. 6. Compare In re Dibblee, Fed. Cas. 3,885; Duflf v. Hopkins, 33 Fed. 599. 7. In re Phelps (Ref., N. Y.), 3 Am. B. R. 396; Blight v. Ashley, Fed. Cas. 1,541; In re Franklin Fund, etc.. Fed. Cas. 5,058 ; In re Rowe, Fed. Cas. 12,092; In re Firemen's Ins. Co., Fed. Cas. 4,796; In re Furbish, Fed. Cas. 5,159; In re Hoole, 3 Fed. 496; In re Linderman (D. C, Pa.), 22 Am. B. R. 131, 166 Fed. 593. SECTION TWENTY-EIGHT. DESIGNATION OF NEWSPAPERS. § 28. Designation of Newspapers — a Courts of bankruptcy shall by order designate a newspaper published within their respec- tive 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 published 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. Analogona proTisioiu: In. U. S.s Act of 1867, § 11, as amended, R. S., § 5019; Act of 1841, § 7. In Eng.: K'one. Crois references: To the law: § 58-b. SYNOPSIS OF SECTION. I. Newspapers. a. Comparative legislation. b. Result of section. I. NEWSPAPERS. a. Comparative legislation — All bankruptcy notices in Eng- land are officially gazetted by the Board of Trade, and published, if in London, in the London " Gazette ;" if elsewhere, in a local paper.^ Under our law of 1867, the marshal attended to the pub- lication, the paper being fixed by the judge before the amendment of 1874, and the papers, one or more, being designated by the marshal thereafter.^ The present provision is, therefore, new. It makes for uniformity. b. Result of section, — The result of this section has been a standing order in each district, specifying the newspaper in each 1. Act of 1883, S§ 13, 20, etc. Gen- 2. Act of 1867, § 11, R. S., § 5019. eral Rules 280, 281, etc. 459 460 The Law and Peactice in Bankeuptct. Result of Section. [§ 28. county in which bankruptcy notices are required to be published. This general designation is in practice made by the judge. A referee, being also a court of bankruptcy in each case referred to him, can designate the paper in which the notice in that case shall be published, provided the judge shall not already have designated one for that county. It sometimes becomes wise to designate an additional newspaper in a particular case, as where partnership bankrupts reside in different districts. The judge or the referee is empowered so to do by the statute. The only notice which must be published is that of the first meeting.^ After that, there is no publication, unless " the court shall direct." 3. See Bankr. Act, § 58-b. For ef- law of 1898, see under § 58, post, feet of failure to publish, under the and compare Smith t. Brinkerhoff, 6 old law, see In re Hall, Fed. Cas. N. Y. 306. 5,922. For effect of publication under SECTION TWENTY-NINE. OFFENSES. § 2g. Offenses. — a. A person shall be punished, by imprison- ment 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. h. A person shall be punisihed, by imprisonment for a period not to exceed two years, upon conviction of the offense of having knowingly and fraudulently (1) concealed while a bankrupt, or after his discharge, from his trustee any of the property belonging to his estate in bankruptcy; or (2) made a false oath or account in, or in relation to, any proceeding in bankruptcy; (3) pre- sented 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 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 hun- dred dollars, and forfeit his office, and the same shall thereupon become vacant, upon conviction of the offense of having know- ingly (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 whidi he is referee; or (3) refused, while a referee or trustee, to permit a reasonable opportunity for the inspection of the accounts relat- ing 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 commission of the offense. Analogons provisions: In U. S.: As to offenses by the bankrupt, Act of 1867, § 44, R. S., § 5132; As to offenses by officers or others, Act of 1867, §§ 45, 46, R. S., § 5012. 461 462 The Law and Pjbactice in Bankeuptct. Synopsis of Section. [§ 29. In Emg.; Debtors Act of 1869, Part II. Cross references: To the law: §§ 1(22). 2(4), 7, 14-b, 23-c, 39, 47. SYNOPSIS OF SECTION. OFFENSES. I. Bankruptcy Crimes in General. a. Comparcdive legislation. b. Hoiu section is construed; application, c. Offenses knowingly and fraudulently committed. d. Jurisdiction. e. Indictment or information. (1) In general. (2) False oath; indictment. (3) Concealment of peopeett; indictment. f. Practice in general. II. Offenses by a Trustee and Punishment. a. What constituted the offenses. b. Punishment. III. Offenses by Other Than Officers and Pimishment. a. By a bankrupt. b. Concealment of property. c. False oath. d. Punishment. e. Offenses hy others. (1) In geneeal. (2) Peesentino a false claim. (3) Receiving peopeett with intent to defat THE ACT. (4) Extoeting money. (5) conspieaoy. (6) Punishment. IV. Offenses by a Referee and Punishment. a. In general. h. Punishment. V. No Prosecution After One Year. Offenses. 463 § 29.] Construction and Application. I. BANKBTFTCY CBIBIES IN GENERAL. a. Comparative legislation. — ^An enumeration of ofFeaifles is properly no part of a bankruptcy law. The debtors act of 1869 in England gives a long catalogue of acts or omissions on the part of the bankrupt which constitute crimes punishable by imprison- ment at hard labor for from one to two years.^ Officers and other persons, indeed, even the bankrupt, may also be punished for other offenses, such as malfeasance in office or false swearing, under general statutes or the common law. This seems to have been the rule in this country prior to the act of 1867. That statute^ made many wrongful acts on the part of the bankrupt — some covered and some not by the pxeseait law — misdemeanors punishable by not to exceed three years' imprisonment; while any officer who intentionally took excessive f ees^ was liable to a like imprisonment, as well as a fine and the forfeiture of his office. But offenses against the law by others were not made crimes or misdemeanors by the statute. The present section differs greatly from those in the former law, and the older cases are comparatively of little value. b. How section is construed ; application. — Being highly penal in its effect, the section must be strictly construed.* This is a familiar rule of istatutory interpretation and is specially applic- able to a section like this where new offenses are created and denounced.® This section does not make criminal an act of the bankrupt committed before the bankruptcy;* although the offense may be continued after bankruptcy and thus the bankrupt become amenable to its provisions.'^ c. Offenses knowingly and fraudulently committed. — The offenses, punishable by imprisonment pursuant to this section, all 1. See Baldwin on Bankruptcy, Sth Am. B. R. 270, 129 Fed. 499. See, ed., p. 490, et seq. also, U. S. v. Wiltberger, 5 Wheat. 2. Act of 1867, § 44, E. S., § 5132. 96, 5 L. Ed. 37; U. S. v. Clayton, Fed. ,3. Act of 1867, § 45, R. S., § 5012. Cas. No. 14,814; In re McDonough, 4. Field v. U. S. (C. C. A., 8th 49 Fed. 360. Cir.), 14 Am. B. R. 507, 137 Fed. 6, 6. U. S. v. Cohn (D. C, N. Y.), 15 holding that where a statute is plain Am. B. R. 357, 142 Fed. 983; In re and unambiguous, the courts may not bteed (D. C, N. Car.), 6 Am. B. R. lawfully extend it by interpretation 73, 107 Fed. 682. to a class of persons who are excluded 7. As in the case of a continuing from its effect by its terms for the concealment, see U. S. v. Cohn (D. C, reason that their acts may be more N. Y.), 15 Am. B. R. 357, 142 Fed. mischievous than those of the class 983; U. S. v. Goldstein (D. C, Va.), whose deeds it denounces. 12 Am. B. E. 755, 132 Fed. 789. 5. U. S. V. Lake (D. C, Ark.), 12 464 The Law and Practice in Bankeuptcy. Indictment or Information. [§ 29-d. involve the eJement of conscious fraud, namely, knowingly and fraudulently transferring or embezzling property, or concealing it from the trustee, and committing perjury by taking a false oath during the proceeding.* d. Jurisdiction. — The district court sitting in bankruptcy has jurisdiction to arraign, try, and punish any person who has com- mitted any of the offenses enumerated in this section.® So has the circuit court.'"' So, it seems, have the State courts, under State laws making the same acts crimes.-'^ Likewise, the Federal courts in the exercise of their customary criminal jurisdiction, have power to try and punish for crimes committed in bankruptcy proceedings, other than those enumerated in the law.^* e. Indictment or information. — (1) In geneeal. — The use of word " information " in-§ 29-d seems to indicate that a prosecution under this section can be by information.^* Since In re Wilson/*" and Machin v. U. S./^ however, it may be doubted whether any offense referred to in subsections a and h — each one being a crime, rather than a misdemeanor — can be proceeded on save by indict- ment. The debtor being technically a bankrupt^® from the time even an involuntary petition is filed, an indictment will lie before an adjudication.-'^ Where the indictment has been drawn under U. S. R. S., § 5392, relating to false statements, and a conviction had, the judgment will be reversed and a sentence directed to be rendered under section 29.^* All matters necestsary to constitute 8. In re Gilpin ( D. C, Pa. ) , 20 Am. not involve an entire failure of prose- B. R. 374, 160 Fed. 171. cution, and the judgment of convic- 9. See Bankr. Act, § 2(4). tion might be reversed and the cause 10. See Bankr. Act, § 23-c. remanded to the trial court with in- 11. State V. Thompson, 58 N. H. structions to enter a new judgment 270; Commonwealth v. Walker, 108 imposing such imprisonment as § 29 Mass. 309. of the Bankr. Act permits. 12. U. S. V. Kihols, Fed. Cas. The indictment itself controls. 15,880. Contra: Anon., Fed. Cas. 475. —It is immaterial what statute the 13. U. S. V. Block, Fed. Cas. district attorney had in mind when he 14,609. drew the indictment, if the charges 14. 114 U. S. 422. made are embraced by some statute in 15. 117 U. S. 348. force. The indictment itself must be 16. Bankr. Act, § 1(4). looked to, and if it properly charges 17. U. S. V. Meyers, Fed. Cas. an oflfense under the laws of the 15,848. United States, that is sufficient to sus- 18. Wechsler v. United States (C. tain it, although the representative of C. A., 2d Cir.), 19 Am. B. E. 1, 158 the United States may have supposed Fed. 579, rev'g 16 Am. B. E. 1, hold- that the oflfense charged was covered ing that the imposition of a sentence by a diflferent statute. Williams v. U. under § 5392, though erroneous, did S., 168 U. S. 389. Offenses. 465 § 29-d.] Indictment or Information. the offense must be dearly pleaded.'® It is not sufficient to set forth the offense in the words of the statute, unless these words are sufficient to include all the elements of the offense, without unceirtainty and ambiguity.*" Useful precedents will be found in cases' cited in the foot-note.*' Cases construing those subsections of the law of 1867 which made the obtaining of property on credit on false representation an offense, are no longer in point. Such offenses can, however, sitill be punished by a proper proceeding under the State laws. (2) False oath; indictment. — The indictment need not allege that the oath was corruptly false.** If the alleged false oath pertainsi to a statement of assets in the bankrupt's schedule, the indictment must allege in what respects the statement was deficient, by stating that property was omitted, and describing such property.** (3) Concealment of peopeety; indictment. — The statute referring to the offense of a person having " knowingly and fraudu- lently concealed, while a bankrupt or after his discharge, from his trustee any property belonging to his estate in bankruptcy," sets forth all the elements of the offense, and an indictment which uses the words "unlawfully, knowingly and fraudulently" to characterize the word " conceal " is good, and plainly excludes, unintentional acts. The indictment need not charge that the alleged bankrupt, at the time of the alleged concealment of his. property, knew that a trustee had been appointed or the: name of the trustee. The mode of the concealment is also entirely immaterial and need not be set forth in the indictment^ 19. U. S. V. Prescott, Fed. Cas. false oath to schedules by an officer of 16,084. Thus, an indictment charging a corporation) ; Jacobs v. United perjury for omitting assets from States (C. (J. A., 1st Cir.), 20 Am. B. schedules is defective unless it charges B. 550, 161 Fed. 694. directly that there was other prop- 22. United States v. Hearing, 26 erty. Bartlett v. U. S. (C. C. A., 8th Fed. 744. Cir.), 5 Am. B. E. 678, 106 Fed. 884. 23. Bartlett v. U. S. (C. C. A., 9th 20. McNeil v. U. S. (C. C. A., 5th Cir.), 5 Am. B. E. 678, 106 Fed. 884. Cir.), 18 Am. B. E. 19, 150 Fed. 82; Snfficieii.cy of description. — An U. S. V. Carll, 105 U. S. 611, 26 L. indictment against the president of a Ed. 1135; U. S. v. Hess, 124 U. S. 483, bankrupt corporation for making a 31 L. Ed. 516; Evans v. U. S., 153 false oath to its schedules, may de- U. S. 584, 38 L. Ed. 830; Keck v. U. scribe the assets charged to have been S., 172 U. S. 434, 43 L. Ed. 505. fraudulently and knowingly omitted 21. U. S. v. Chapman, Fed. Cas. from such schedules as "one hundred 14,784; U. S. V. Crane, Fed. Cas. 14,- and fifty thousand dollars in lawful 887 ; U. S. V. Latorre, Fed. Cas. 15,- money of the United States." U. S. v. 567; U. S. V. Jackson, 2 Fed. 502; Lake (D. C, Ark.), 12 Am. B. E. 270, U. S. V. Lake, 12 Am. B. E. 270, 129 129 Fed. 499. Fed. 499 (sustaining allegation as to 30 466 The Law and Pkactice in Bankkuptcy. Offenses by Trustee. [§ 39-a. and no allegation of ownership is made essential by the statute, save that the property was property "belonging to his estate in bankruptcy."^* An indictment, charging that defendant unlawfully, knowingly, wilfully and fraudulently concealed from his trustee cer- tain property, carries with it a sufficient averment that defendant knew that said property belonged to his estate in bankruptcy.^" The omission of the words " knowingly and fraudulently " or any equiva- lent therefor, from an indictment for conspiracy to conceal from the trustee assets of a bankrupt estate, is fatal on demurrer.^* f. Practice in general. — There being no rules or forms pre- scribed for the practice under this section, that practice should con- form to criminal proceedings other than in bankruptcy in the court where the trial is had. n. OFFENSES BY A TRUSTEE AND PUNISHMENT. a. What constitutes the offense. — Subsection a is new. Its purpose is plain, and the words used are of such simple yet com- prehensive meaning as to cover every intentional withholding of or parting with the property of the estate, or the concealment or de- struction of a document, by a trustee. The words "transfer,""' " document,""* and "trustee ""* have enlarged meanings in this law. An allegation that the person named in the indictment was "duly appointed trustee," is sufficient f » although it is better practice to give details as to his appointment and qualification. That the act was " knowingly and fraudulently " done must be distinctly charged and clearly proven. It seems also that a trustee may commit the offense specified in § 29 b (2).'" A trustee cannot be compelled to give testi- mony which may tend to show that he has misappropriated the funds of the bankrupt's estate.*^ b. Punishment. — The penalty under subsection a is imprison- ment and the only limitation is that the time shall not be more than five years. HI. OFFENSES BY OTHER THAN OFFICERS AND PUNISHMENT. a. By a bankrupt. — This subject has already been discussed elsewhere.'" Any offense which, if committed by a bankrupt, can 24. United States v. ComBtoek 29. Bankr. Act, § 1 (26). (Cir. Ct., Mass.), 20 Am. B. R. 520. 29a. Kerrch r. United States (C. 25. McNiel v. United States (C. C. C. A., 1st Cir.), 22 Am. B. R. 544, 171 A., 5th Cir.), 18 Am. B. R. 18, 150 Fed. 366. Fed. 82. 30. See in this section, post. 26. United States v. Comstock 31. In re Smit„ (D. C, N. Y.), 7 (Cir. Ct., R. I.), 20 Am. B. R. 525, Am. B. R. 213, 112 Fed. 509. 162 Fed. 416. 32. See generally under § 14 of this 27. Bankr. Act, § 1 (25). work. 28. Bankr. Act, § 1 (13). Offenses. 467 § 29-b ( 1 ) .] Concealment of Property. be punished under this subsection is also an objection to his dis- charge. Under the rule that a penal statute must be strictly con- strued, the word " person " as used in clause b of this section does not include an officer of a corporation which is declared a bank- rupt.^' b. Concealment of property. — The somewhat elastic meaning of " conceal " should be borne in mind.** So also should the well- recognized doctrine of " continuing concealment."*^ Likewise, the necessity of charging and proving that the act was " knowingly and fraudulently " done.** Concealment of property was also an offense under the former law, and the cases then decided will be found valuable.*^ Those under the present law are already numerous, and are cited under section fourteen, Not every con- cealment which is sufficient to bar a discharge will, however, result in an indictment and conviction. Pleading and proof must, as a rule, be more strict where the bankrupt is put on trial for a crime. The offense of fraudulently concealing assets is committed where the bankrupt dishonestly applies money or property to his own use or purposes so that he himself or some other person whom he may desire to benefit receives advantage and profit by the conceal- ment ; the application of money in good faith to the payment of a debt after a petition in voluntary bankruptcy is filed does not necessarily constitute a fraudulent conceailment, although as a result of the payment the creditor receives an undue advantage.** .33. United States t. Lake (D. C, authority to use and appropriate sub- Ark.), 12 Am. B. R. 270, 129 Fed. sequently, there is a continuing eon- 499. ceahnent, for which he is amenable to 34. Bankr. Act, § 1(22). the law, although the fact of con- A criminal concealment of cealment by intent and purpose took property by a bankrupt is the continu- place while he was not a bankrupt. In ous concealment of the property from re Jacobs & Verstandig (D. C, Ore.), the trustee during the whole course 17 Am. B. R. 470, 147 Fed. 797. of the bankruptcy proceedings or be- 36. See pp. 272-275, ante. yond, but to prove such concealment 37. Consult Vol. 6, Am. Dig., Cen- it is not necessary to take up each tury Ed., " Bankruptcy," § 735. moment of the bankrupt's life while " The term ' conocialed ' used in the proceedings last and to prove this section [in § 68 of the Act of what he did as a means of proving 1799] is one of plain interpretation what he did not. Johnson v. U. S. (C. and obviously applies to articles in- C. A., 1st Cir.), 20 Am. B. R. 724, tended to be secreted and withdrawn 163 Fed. 30. from public view on account of their 35. See p. 276, wnte. being so subject to duties, or from Continning concealment. — Thus some fraudulent motive." U. S. v. if a bankrupt has disposed of prop- 350 Chests of Tea, 12 Wheat. 493, 6 erty belonging to him, prior to the L. Fd. 702. adjudication, and has the proceeds 38. U. S. v. Lowenstein (D. C, thereof in his possession or within his Pa.), 11 Am. B. R. 134, 126 Fed. 884. 468 The Law and Pbactice in Bankkuptcy. False Oath. [§ 29-b (3). The doing of an act "knowingly and fraudulently" is an essential element of the offense.'* But a concealment of property by a voluntary bankrupt after he has filed his petition and before the appointment of a trustee is an offense under this section.*" The con- cealment must be by the bankrupt to constitute an offense ; an officer of a bankrupt corporation is not liable to punishment therefor.*^ There - can be no conviction unless it is shown that the defendant had been adjudicated a bankrupt.*^* A continuance of a concealment by a bankrupt after bankruptcy may constitute the offense,*^'' and evidence of his acts of concealment prior to bankruptcy is admissible as part of the res gestae.*^ The court may exclude evidence of facts, which, though relevant, is too remote to be material in the circumstances.*^* But it is not an offense under this section to omit to name property in the schedule by accident or mistake,*' or worthless claims upon which an action could not be maintained,** or property which the debtor did not know that he owned,*° or property which the bankrupt honestly thought did not pass to the trustee,*" or where the evidence does not show that a legally consummated gift or transfer has been made.*' The offense may not be retrieved by the subsequent good conduct of the defendant, although the court may consider such con- duet in imposing sentence.*'^ The advice of counsel has been held , to be no defense.** The books of the bankrupt are admissible in 1 evidence upon a trial of the indictment although he claims his privi- lege.*** c. False oath. — The insertion of this common law offense in the statute is new, and simply creates a different penalty for a crime already defined.*" The false oath must have been "knowingly and fraudulently " made.^" What is a " false oath " in bank- 39. In re Taplin (D. C, Iowa), 14 45, In re Parker, Fed. Caa. 10,720, Am. B. R. 360, 135 Fed. 861; U. S. 4 Bias. 501. v. Cohn (C. C, N. Y.), 15 Am. B. R. 46. In re Adama (D. C, N. Y.), 4 357, 142 Fed. 983; U. S. v. Levinaon Am. B. R. 696, 104 Fed. 72; Rugely v. (D. C, S. Car.), 13 Am. B. R. 29; In Robinaon, 19 Ala. 404. re Griffin Broa. (D. C, Ala.), 19 Am. 47. In re Leeuw (D. C, N. Y.), 3. B. R. 78, 154 Fed. 537; Klein v. Am. B. R. 418. Powell (C. C. A., 3d Cir.), 23 Am. 47a. Kern v. United Statea (C. C B. R. 494, 174 Fed. 640. A., 6th Cir.), 22 Am. B. R. 223, 169 40. U. S. V. Goldatein (D. C, Va.), Fed. 617. 12 Am. B. R. 755, 132 Fed. 789. 48. McNiel v. United States (C. C 41. Field v. U. S. (C. C. A., 8th A., 5th Cir.), 18 Am. B. R. 18, Cir.), 14 Am. B. R. 507, 137 Fed. 6; 150 Fed. 82, holding that evidence United Statea v. Lake (D. C, Ark.), that counael adviaed the bankrupt 12 Am. B. R. 270, 129 Fed. 499. to keep hia busineas open up to the- 41a. Gilbertson v. United Statea, uaual closing time of the day of his. (C. C. A., 7th Cir.), 22 Am. B. R. adjudication is not admiaaible to re- , 32, 168 Fed. 672. lieve the bankrupt from liability for 41b. In re Jacob & Vestandig (D. keeping the funda received on sucK C), 17 Am. B. R. 470, 147 Fed. 797; day. In re James (D. C, No. Car.), 23 48a. Kerrch v. United States (C.^ ■ Am. B. R. 703, 175 Fed. 894. C. A., lat Cir.), 22 Am. B. R. 544, 42. U. S. V. Cohn (C. C, N. Y.), 15 171 Fed. 366 distinguishing Johnson Am. B. R. 357, 142 Fed. 983. Com- v. United States, (C. C. A., 1st Cir.),, pare Matter of Gilroy (D. C, N. Y.), 20 Am. B. R. 724, 163 Fed. 30. 14 Am. B. R. 627, 633, 140 Fed. 733, 49. Wechsler v. United Statea (C. where Judge Holt aaya: "It is a se- C. A., 2d Cir.), 19 Am. B. R. 1, 158- rioua defect in the bankrupt law that Fed. 579. it eontaina no adequate proviaions for 50. National Bank of Louisville v.- criminal punishment for the fraudu- Carley (C. C. A., 3d Cir.), 12 Am. B. lent concealment of property in con- A. 119, 127 Fed. 686. templation of bankruptcy." Knowingly and fraudulently. 42a. Johnson v. United States —When a person states matter which (C. C. A., 1st Cir.), 22 Am. B. R. he does not believe to be true wil- 359, 170 Fed. 581. fully and contrary to his oath, he- 43. See p. 273, ante. may certainly be said to make a 44. In re Pearce, 21 Vt. 611. false oath "knowingly and fraudu- Offenses. 469 §29-b(2).] False Oath; Punishment. ruptcy is considered elsewhere."* The words " false oath," as employed in this section, oomprehemd false swearing by the bank- rupt in a proceeding to investigate the truth of specifications filed against his discharg'e.''^ The naaking of a false oath is a crime, whether in or out of a bankrupcty proceeding ;'* the making of a ' *' false account " is not. These latter words when applied to a debtor are not important, as an unverified account by the bankrupt is practically unknoAvn. Not so where the false account is filed by the trustee or .receiver; it is often not verified, but this would not save the guilty ofiicer from the penalty of the statute. This sub- section then refers to the perjury of, or the making of a false account in the proceeding by, any person. In a trial of an indict- ment under this clause, it must be shown that the oath was ad- ministered by an officer authorized to administer it."* A referee may administer such an oath."" Evidence should be dear and satisfactory."* Proof that the defendant took the oath either be- fore he began to testify or when he finished and signed the testi- mony is sufficient to support the charge of perjury."'^ The precedents thus far are numerous and have already been collated and discussed."* d. Punishment. — ^Here, too, the only punishment is by im- prisonment ; but the maximum is two, not five, years. If perjury is charged and the indictment is laid under the general law, the punishment prescribed by that law will, of course, follow a con- viction. « e. Offenses by others. — (1) In geneeal. — ^Whife the word person ""^ includes the officers*"* named in the law, and thus any lently." Wechsler v. United States spect to a conveyance of real prop- (C. C. A., 2d Cir.), 19 Am. B. R. 1, erty owned by him, at any time, he is 158 Fed. 579, rev'g 16 Am. B. R. 1. guilty of this offense. 51. See pp. , ante. 55. United States v. Simon (D. C, 52. Edelstein v. United States (C. Wash.), 17 Am. B. R. 41, 146 Fed. C. A., 8th Cir.), 17 Am. B. R. 649, 89, holding that an indictment of a 159 Fed. 636. bankrupt for perjury is not de- A false oath is evidently a cor- murrable upon the ground that the ruptly false oath, such as will sub- referee was not authorized to admin- ject the afSant to a prosecution for ister an oath to the defendant, perjury. In re Gilpin (D. C, Pa.), 56. In re Troeder (C. C. A., 1st 20 Am. B. R. 374, 389, 160 Fed. 171. Cir.), 17 Am. B. R. 723, 150 Fed. 710. 53. U. S. V. Wechsler (D. C, N. 57. United States v. Wechsler (D. Y.), 16 Am. B. R. 1, rev'd on other C, N. Y.), 16 Am. B. R. 1, rev'd on ground-s, 19 Am. B. R. 1, 158 Fed. 579. other grounds, 19 Am. B. R. 1, 158 54. In re Conroy (D. C, Pa.), 14 Fed. 579. Am. B. R. 249, 134 Fed. 764, holding 58. See under S 14 of this work. that if the bankrupt knowingly and 59. Bankr. Act, § 1(19). j fraudulently made a false oath in re- 60. Bankr. Act, § 1(18), 470 The Law and Peactioe in Bankruptcy. False Claims; Receiving Property; Extortion. [§29-b(3) (4) (5). of the offenses enumerated in subsection b may be chargeable to an officer, yet the last three subdivisions of subsection b are mani- festly intended to meet acts or omissions by others than the bank- rupt or such oflScers. These subdivisions are new, and have as yet received little attention from the courts. (2) Peesenting a false claim. — The presenting of a false claim under oath against a bankrupt's estate is a crime. Though the clause is phrased somewhat awkwardly, it is thought that it applies to an attorney who presents such a claim in an ordinary proceeding, as well as in one for a composition. The intention clearly is to penalize the filing of false claims, and to make both the claimant and any one who acts in his stead in presenting the claim liable therefor. The words " used any such claim in com- position" enlarge the scope of the clause in such proceedings!; it may have been presented without knowledge of its falsity, but acted on, as by a^enting to the offer of composition, after that fact became known. Knowledge of falsity isi essential, but that the presentation or use was fraudulemt does not seem a necessary ele- ment. (3) Keceiving peopeety with intent to defeat the act. — The elements of pleading and proof here are: (a) The receipt of a material amount of property belonging to the bankrupt, (b) after the filing of the petition,*^ and (c) with intent to defeat the act.®^ This offense can, therefore, not be committed by one who is the con&cious beneficiary of a fraudulent transfer or preference before bankruptcy,*^ though intent to defeat the act is palpable. On the other hand, only intent, not also the result, need be shown. But intent will never be presumed where the acts complained of are made the foundation of an indictment ; it must be proved. This offense will, in the nature of things, be rare, and occur only in involuntary cases' before actual adjudication. (4) ExTOETiNG MONEY. — The fifth subdivision is clearly aimed at those creditors who seek an advantage as a consideration for consenting to a proposed composition. It may, of course, be availed of where pressure, including a money payment, is exerted, resulting in the withdrawal of objections to a discharge. Whether it is available where a debt is not proven in consideration of a new promise may be doubted ; such a new promise is neither money nor 61. See U. S. v. Latorre, Fed. Cas. Nugent (D. C, Ky.), 4 Am. B. R. 15,567, 8 Blatch. 134. 747, 104 Fed. 530. Compare, also, s. 62. In re Luftig (D. C, Mass.), 15 c, in supreme court, Mueller v. Nu- Am. B. R. 773, 162 Fed. 322. gent, 181 U. S. 1, 7 Am. B. R. 224. 68. See Wayne Knitting Mills v. Offenses. 471 § 29-c.] Offenses by Referee. property. Cases are conceivable, too, where the bankrupt may com- mit this offense. The broad meaning of " person " should be re- membered.'* The mere attempt to extort is enough. There are no cases as yet under this subdivision. Its meaning and value do not seem to be appreciated by crditors or by the courts. (5) Conspiracy.— Under § 5440 of the TJ. S. E. S., it has been held that a person who conspires with another to commit an offense against the bankruptcy act is liable to prosecution.*" But section 29-d providing that "a person shall not be prosecuted for any offense arising under this act unless the indictment is found or the informa- tion filed in court within one year after the commission of the offense," is inapplicable to an indictment under section 5440 of the TJ. S. R. S. for conspiracy to commit an offense arising under the bankruptcy act.°° An indictment for conspiracy to violate section 29-b is not in- sufficient, because it appears that the defendants were not bank- rupts." If the act of conspiracy was committed prior to bankruptcy it must be alleged that it was in contemplation of such bankruptcy.** Individuals may be guilty of the offense of conspiring to conceal the assets of a corporation, although the corporation as such, was not a party to the conspiracy.*'* (6) Punishment. — The punishment for either of these offenses, like those committed by the bankrupt, is imprisonment for not more than two years. IV. OFFENSES BT A REFEREE AND PUNISHMENT. a. In general.— The former law penalized the taking of unlaw- ful fees. This subsection is, therefore, new. There are no cases yet reported under it. For what will make a referee " directly or in- directly interested," see under section thirty-nine, post; also for what constitutes his du^ as to giving information. But the offense defined in subdivision 3 cannot be committed until the referee has been directed by the court, which here means the judge, to permit the in- spection. b. Punishment. — Here the punishment does not involve im- prisonment; but ousts the guilty officer from office and makes him liable to a fine of not more than $500. This offense is, therefore, not an infamous crime.*" 64. Bankr. Act, § 1 (19). is not demurrable on the ground that 65. U. S. V. Bayer, Fed. Cas. 14,547, there was no existing bankruptcy 4 Dill. 407. when the conspiracy originated. 66. United States v. Comstock 68. United States v. Grodson (D. (Cir. Ct., R. I.), 20 Am. B. R. 526, C, 111.), 21 Am. B. R. 68, 164 Fed. 162 Fed. 416. 157. As to suflSciency of indictment, 67. Cohen v. United States (C. C. see Alkon v. United States, (C. C. A., A., 2d Cir.) 19 Am. B. R. 8, 157 Fed. 1st Cir.), 22 Am. B. R. 489, 163 651, aff'g 15 Am. B. R. 357; United Fed. 810. States V. Young and Holland Co. 68a. United States v. Young and (Cir. a. R. I.), 22 Am. B. R. 484, Holland Co. (Cir. Ct., E. I.), 22 170 Fed. 110, holding that an indict- Am. B. R. 484, 170 Fed. 110. ment for conspiracy to conceal the 69. Compare U. S. v. Block, Fed. assets of a corporation in anticipation Cas. 14, 609. 472 The Law and Peactice in Bankeuptct. No Prosecution After One Year. [§29-(i. V. NO PBOSECTTTION AFTER ONE TEAR. The limitation oontained in subsection d is absolute. The in- dictment must be found or the information filed within one year after the commission of the offense. This subdivision has no appli- cation to an indictment under section 5440 of the U. S'. R. S. for conspiracy to commit an offense arising under the bankruptcy act^» TO. United States v. Comstock (Cir. Ct., R. I.), 20 Am. B. R. 526, 162 Fed. 416. SECTION THIRTY. RULES, FORMS, AND ORDERS. § 30. Rules, Forms, and Orders. — a. All necessary rules, forms, and orders as to procedure 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. Analogoiu preTiilonat In XT. S.: Act of 1868, S 10. la Bug.: Act of 1883, S 127. SYIfOPSIS OF SECTION". I. Rules, Forms, and Orders. a. Comparative legislation and meaning of seetiotit b. Those prescribed should he followed. 0. Supplemental rules and forms. I. RULES, FORBIS, AND ORDERS. a. Compariative legislation and meaning of section. — The English bankruptcy authorizes the lord chancellor, with the con- currence of the president of the board of trade, to make, revoke, and alter general rules in bankruptcy, which, when laid before parliament, have the same effect as if previously enacted by that body.* The general rules in England are, therefore, as much law as the statute. Our system does not permit judicial legislation of this character. The former act gave the justices of the supreme court power to frame general orders' for a variety of purpoees.^ The orders then framed and the forms prescribed for carrying them out have been used aa models for those now in vogue.' The purpose is, of course, to accomplish uniformity in practice through- out the States.* 1. Eng. Act of 1883, § 127. ed., and General OrderB and Forms 2. Act of 1867, § 10. therein. 9. See Bump on Bankruptcy, 9th 4. Savings Bank t. Bank, Fed. Cas. 12,919. 473 474 The Law and Peacticb in Bankeuptct. Supplemental Rules and Forms. [} 80. b. Those prescribed should be followed. — It has been distinctly held that the general orders promulgated by the supreme court in accordance with this section are binding upon courts of bank- ruptcy.^ Filing has been refused to papers not in accordance with the official forms.* But the general orders are not always in tune with the law; and the forms show a want of harmony at times both with the law and the general orders. In such cases, the law,, of course, controls;'' our general orders and forms have not the full force and effect of law,* much less the abrogation of law. The statute and the rules and orders should be read together. The orders being simply an amplification of the law with respect to procedure, but they should not be construed as extending the powers granted to the court by virtue of the law itself.* Rules may not enlarge the statute, but are merely prescribed to carry the act into effect.-"* c. Supplemental rules and forms. — The general orders are in- tended only to confine the practice in bankruptcy within certain broad limits. They are not exclusive, and most of the district courts have prescribed supplemental rules; these should always 5. In re Scott (D. C, N. Car.), 3 statute, see In re Isaacson (D. C, N. Am. B. R. 625, 99 Fed. 404. See In Y.), 20 Am. B. R. 430, 161 Fed. 779. re Johnson (D. C, Ark.), 19 Am. B. 8. West Co. v. Lea, 174 U. S. 590, R. 814, 158 Fed. 342; Faulk and Co. 2 Am. B. R. 463, where the court said-' V. Steiner, (C. C. A., 5th Oir.), 21 "These rules were but intended to ex- ^S-Mahone/'rWafd^D. C, N. ^^"tUn f' ^\' "^W^'^ 1° '^' Car.), 3 Am. B. R. 770, 100 Fed. 278. P-^^^sions by making that which tlie Forms prescribed are not intended s'a™te treats in some cases as im- to effect any change in the law, Burke material a material fact in every V. Guarantee & Trust Co. (C. C. A., case." Compare In re Baxter, Fed. 3d Cir.), 14 Am. B. R. 31, 134 Fed. Cas. 1,121. 562. They are to be "observed and 9. Orcutt Co. v. Green 204 U S used with such alterations as may be ge, n Am. B. R. 72, in which the" necessarv to suit the circumstances of ^^^^t ;„ eonsidering the effect of Gen any particular case. ' Gen. Ord. 38. ^^^ , „, . , ,. _t '="<'i-i' "i y^u. The fact that the official form for in- ?^^: ^L ^^\^-- '.'There is nothing in voluntary petitions contains an allega- ^'^^^ provision inconsistent with, or tion of insolvency, does not make such opposed to, anything stated in the an allegation material where the bankruptcy law upon the subject, and statute provides that other facts alone we must therefore take the statute constitute a sufficient cause for adju- and read them together, the order be- dication. West Co. v. Lea, 174 U. S. ing simply somewhat of an amplifiea- ®^T Qoo"?;^' «• "^^V-p f w v^ 1 *•"" °f ^^^ ''^^ ^'t'' 'aspect to proce- 7. See In re Soper (Ref., N. Y.), 1 j„t.o K„t ^„+>,i-~ i.- t, t Am. B. R. 193. See, also, commeAts ^"'^«- ''"* nothing which can be con- and discussions of rules and forms at !*"^"f ^^ ^^^"""^ ^^^ ?"«'«" granted the various conventions of referees in *° *"^ '"'"" °J virtue of the law it- bankruptcy, 1 N. B. N. 435-438; also self." 2 N. B. N. Rep., Number for Oct. 1, 10. Weidenfeld v. Tillinghast (City 1900, pp. 29-32. As to case where C, N. Y.), 18 Am. B. R. 531, 104 N. there was conflict between rule and Y. Supp. 712. Rules, Foems and Orders. 475 § 30.] Supplemental Rules and Forms. be consulted. Even these have not always been found sufficient, and local rules are sometimes promulgated by the referees." Rules of the district courts may not confliot with the rules and forms promulgated by the supreme court. '^ Likewise of the forms. Some of the more valuable, as well as many new ones suggested- by experience, will be found under " Supplementary Forms," post. Where there is no rule to the contrary, or official form which is applicable, they may be used. Existing forms, too, may often be modified to fit a particular case; so, also, two or more prescribed forms may be combined.^ ^ The goal to be reached is the important consideration. If without much violence done to prescribed rules and forms, the practitioner does so, he need concern himself as little about a technical observance of them as the court will with a captious objection on the other side.^* 11. For those in force in the west- gated by the supreme court under this ern district of New York, see 1 N. B. section, must be complied with by a N. 112-116. See, also, Samson v. Bur- creditor desiring to oppose an applica- ton. Fed. Cas. 12,285. tion for a discharge. 12. In re Johnson (D. C, Ark.), 19 13. Mather v. Coe (D. C, Ohio), 1 Am. B. E. 814, 158 Fed. 342. Thus, Am. B. R. 504, 92 Fed. 333. in Matter of Nathanson (D. C, N. 14. Compare In re Paige (D. C, Y.), 19 Am. B. R. 56, 152 Fed. 585, Ohio), 3 Am. B. R. 679, 99 Fed. 538. it was held that Form 58, promul- SECTION THIRTY-ONE. COMF1TTATION OF TIME. § 31. Computation of Time. — a. Whenever time is enumerated by days in this act, or in any proceeding in bankruptcy, the num- ber of days shall be computed by excluding the first and including the last, unless the last fall on a Smday or holiday, in which event the day last included shall be the next day thereafter which is not a Sunday or a legal holiday. Analogous proviaioiu: In V. S.: Act of 1867, I 48, E. S., § 5013. In Eng.! Act of 1883, § 141, General Rule 4. CroM reference!: To the law: §§ 3-a(3)-b{l), 7(8), 13, U-a, 16, 18, 25-a, 57-n, 58, 60, 64-b(4), 65, 66, 67, 70. To the General Orders: Generally to all that prescribe a time limita- tion. SYNOPSIS OF SECTION". I. Computation of Time. a. In general. b. By months and years. c. By days. d. By fractions of a day. I. COMPUTATION OF TIME. a. In general. — The rule stated in this section is familiar. The English law is similar.^ The law of 1867 differed only in the words preadribing what days were holidays.^ This the present statute does elsewhere.' But the rule does not permit the exclu- sion of Sundays or holidays, save those coincident with the " day last included."* b. By months and years. — The phrases " four montha " and " one year " are frequent in the act. The present section speaks only of " time enumerated by days." Under the former statute, 1. Eng. Act of 1883, I 141. 4. Compare In re York, Fed. 0>s. 2. Act of 1867, § 48, R. S., § 6013. 18,139. 3. Bankr. Act, S 1(14). 476 I Computation of Time. 47T § 31.] Days and Fractions of Days, however, it was held that the same rule applied when the time was emimerated by months and years." So, also, under the law of 1898.« c. By aays. — Here the statute is self-explanatory. Time lim- itations, based on days, are found in many sections f also in some of the general orders.* Cases on the timely filing of petitions will be found in the foot-note.® d. By fractions of a day. — ^Here the rule seems to be that frac- tions of a day will be disregarded. This doctrine is the composite of an ancient controversy. Cases under the present law and its predecessor are cited in the foot-note.^" There can now, however, be no question about the rule being as stated.^ ^ 5. In re Lang, Fed. Cas. 8,056; 10. In re Stevenson (D. C, Del.), Cooley v. Cook, 125 Mass. 406. 2 Am. B. R. 66, 94 Fed'. 110; In re 6. Compare In re Stevenson (D. C, Dupree (D. C, N. Car.), 8 Am. B. Del.), 2 Am. B. K. 66, 94 Fed. 110; R. 321, 97 Fed. 28; Leidigh Carriage In re Holmes (D. C, Vt.), 21 Am. B. Co. v. Stengel (C. C. A., 6tli Cir.), 2 R. 339, 165 Fed. 225. Am. B. R. 383, 95 Fed. 637; In re 7. Thus, see In re Wolf (D. C, N. Stoner (D. C, Pa.), 5 Am. B. R. 402, J.), 2 Am. B. R. 322, 94 Fed'. 382. 105 Fed. 752; Jones v. Stevens, 5 Am. Where a bankrupt has to vacate or B. R. 571, 94 Me. 582, disapproving discharge a preference five days before of Westbrook Mfg. Co. v. Grant, 60 the 22d of a certain month it has been Me. 88 ; In re Tonawanda St. Planing held that he has all of the 17th day Mill Co. (Spec. M., N. Y.), 6 Am. B. of such month. Pittsburgh Laundry R. 38. And under the law of 1867, V. Imperial Laundry (C. C. A., 3d Dutcher v. Wright, 94 U. S. 553. Cir.), 18 Am. B. R. 756, 154 Fed. 662. H. In re Warner (D. C, Ct.), 16 8. See In re Scott (D. C, N. Car.), Am. B. R. 519, 144 Fed. 987, holding 3 Am. B. R. 625, 99 Fed. 404. that an attachment made on February 9. In re Rogers, Fed. Cas. 12,003; 5, 1905, in the forenoon, is within four In re Lang, Fed. Cas. 8,056. Excep- months prior to June 8, 1905, at 5 tions to a trustee's report, filed one p. m., the time of the filing of the day late, that is, more than twenty petition in bankruptcy and adjudica- daya thereafter, will be dismissed, tion thereon, and is thereby dissolved. Matter of Amos (Ref., Ga,), 19 Am. B. R. 804. SECTION THIRTY-TWO. TRANSFER OF CASES. § 32. Transfer of Cases. — a. In the event petitions are filed against ithe same person, or against different members of a part- nership, in different courts of bankruptcy each of which haa juris- diction, 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 the same for the greatest con- venience of parties in interest. Analogous provisions: In IT. S.: None, save in General Order XVI, under the Act of 1867. See, also, E. S., § 5121. In Eng.: Act of 1883, § 97; General Rules, 18-26. Cross references: To the law: §§ 2(19), 5. To the General Orders: VI, VIII. SYl^OPSIS OF SECTION. I. Transfer of Cases. a. Meaning and scope, b. Illustrative cases. I. TRANSFER OF CASES. a. Meaning and scope. — This section is intended to avoid cmi- flicts of jurisdiction between the courts of different districts. Three different district courts might have jurisdiction, i. e., where the bankrupt resides, where he has his domicile, and where he has his principal place of business.^ Three petitions even might be fiied, were the case involuntary. The possible complications in- crease when partnerships are considered. Therefore, the supreme court, under the former law, influenced doubtless by the analogy of the last clause of § 36 of that law prescribed by rule* that the court first acquiring juirisdiction should keep it. This rule is now General Order VI, but with a sentence added to make it conform to the section under discussion. The latter is new. It seems in- tended to modify the hard and fast rule of seniority formerly applied, by permitting one of the courts having jurisdiction to relinquish it and to order a consolidation, if " for the convenience 1. Baakr. Act, \ 2. 2. See Act of 1867, General Order XVI. 478 TaANSFEB OF Oases. 479 § 32.] Meaning and Scope. of parties in interest."' Juriadiotion so to do is conferred by § 2(19). The expressed preference of a majority of the creditors for a transfer, while worthy of careful consideration, is not con- clusive upon the question of convenience; the buirden of proving greater convenience is upon those seeking the transfer.* Save as modified by this section, however, the practice in vogue under the former law is continued under the present, and the court first acquiring jurisdiction will usually retain it and may stay the other court or oouirts from further proceeding until an adjudication is made or refvraed. The petitioners in the preferred district must proceed with diligence to secure their rights, for if there be an adjudication in another district, jurisdiction therein to administer the estate is obtained.^ b. Illustrative cases. — Where it is clearly not for the conven- ience of parties in interest, the couirt applied to should not relin- quish jurisdiction.* Otherwise, the court first obtaining jurisdic- tion will proceed to adjudication and administraton.'' 3. Compare In re Waxelbaum (D. 4. Matter of United Button Co. (D. C, N. Y.), 3 Am. B. K. 392, 98 Fed. C, Del.), 13 Am. B. R. 454, 137 Fed. 589; In re Elmira Steel Co. (D. C, 668, which construes generally the N. Y.), 5 Am. B. R. 484, 109 Fed. provisions of this section. 456; In re Globe Security Co. (D. C, 5. Matter of United Button Co. (D. N. Y.), 12 Am. B. R. 764, note, 132 C, N. Y.), 12 Am. B. R. 261, 132 Fed. 709. Fed. 378. In re Tybo Mining & Reduction Co. 6. In re Sears (D. C, N. Y.), 7 (D. C, Me.), 13 Am. B. R. 68, 132 Am. B. R. 279, 112 Fed'. 58, as modi- Fed. 697; Kyle Lumber Co. v. Bush fied on another point by s. c, 8 Am. (C. C. A., 5th Cir.), 13 Am. B. R. B. R. 713, 117 Fed. 294. 335, 133 Fed. 688. 7. Matter of United Button Co. (D. A motion to traasfer a proceed- C, N. Y.), 12 Am. B. R. 761, 132 ing against a domestic corporation Fed. 378; In re Greenfield, 42 How. commenced in the Southern District of Pr. (N. Y.) 469; In re Penn, Fed. New York three days prior to the Cas. 10,927; In re Boylan, Fed. Cas. filing of a petition against it in Col- 1,757; In re Boston, H. & E., etc., orado, will be granted, and the pro- Fed. Cas. 1,678; In re Leland, Fed. ceedings consolidated. Matter of The Cas. 8,228; Shearman v. Bingham, General Metals Co. (D. C, N. Y.), 12 Fed. Cas. 12,733. Am. B. R. 770, 133 Fed. 84. Bankrupt corporations. — Where General Order No. 6 as to the the business transactions of two al- jurisdiction of the court where two or leged bankrupt corporations organized more petitions are filed in different in different jurisdictions are so inter- districts against the same debtor is mingled as to be impossible of sep- subject to the provisions of this sec- aration, the court which first acquires tion (I 32) relating to the transfer jurisdiction may proceed. In re South- and' consolidation of petitions for the western Bridge & Iron Co. (D. C, convenience of parties in interest. In Kaa.), 13 Am. R. R. 304, 133 Fed. 568. re Isaacson (D. C, N. Y.), 20 Am. B. R. 430 161 Fed. 779. SECTION THIRTY-THREE. CREATION OF TWO OFFICES. § 33. Creation of Two Offices. — a. The offices of referee and trustee are hereby created. Analogons proTisiona: In TT. S.: Act of 1867, § 3 R. S., § 4943. In Eng,: None. Cross references: To the law: §§ 1(7) (18) (21) (26), 18, 29, 34 to 43, 44 to 50, 58, 72. SYNOPSIS OF SECTION". I. Creation of Offices of Referee and Trustee. a. Comparative legislation. b. Referee and trustee. I. CBXJATION OF OFFICES OF REFEiREE AND TRTTSTEE. a. Comparative legislation. — The correspondiiig officers under the English system are registrars and trustees ; under the law of 1867, regiBifcers and assignees.^ No statute heretofore, however, has formally created the offices. b. Referee and trustee — The statute elsewhere prescribes that the word " officer " shall include dark, marshal, receiver, referee, and trustee.^ The two former existed before the law was passed ; the third comes into being only in those cases where the court finds him necessary and appoints him.^ It is a little difficult to understand why this section was necessary; § 34 provides for the appointment of referees, § 44 of trustees. Each, though thus an of- ficer, has but intermittent functions. The effect of this doctrine on the limitations of § 72 is considered later.* The referee is formally designated for a specified term,' and is vested with powers only as to such cases as have been referred to him. The trustee is, save for this section, not an officer at all, but a liquidator, ap- pointed by the creditoirs.® Eor the jurisdiction, duties, and com- pensation of these officers, and the like, reference should be had to the succeeding sections.'' 1. Act of 1867, § 3, R. S., § 4993. 5. Bankr. Act, § 34(1). 2. Bankr. Act, § 1(18). 6. Bankr. Act, § 44. 3. Bankr. Act, § 2(3) (15). 7. Bankr. Act, §§ 34-50. 4. See § 72 of this work. 480 SECTION THIRTY-FOUR. AFPOINTMOTT, REMOVAL, AND DISTRICTS OF REFBREES. § 34. Appointment, Removal, and Districts of Referees. — a. Courts of bankruptcy shall, within the territorial limits of which they reiapectively 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 (2) 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. Analogona proviaioiu: In TT. S.: As to appointment, Act of 1867, § 3, K. S., § 4993; Act of 1841, § 5; Act of 1800, § 2; As to removal. Act of 1867, § 5, E. S., § 4997. In Eng.: None. Cross references: To the law: §§ 1(7) (21) (26), 18, 29, 34 to 43. 44 to 50, 58, 72. SYNOPSIS OF SECTIOlf. I. Appointment, Removal, and Districts of Referees. a. Appointment. b. Removal. c. Term. d. Limits of district. I. APPOINTMENT, REMOVAL, AND DISTRICTS OF REFEREES. a. Appointment — Under the present law, the judge of each district appoints the referees. By the former law, the registers were appointed by him, but on the nomination of the chief justice.^ The power to appoint is limited within the territorial limits of the court; a judge of one district while holding court in another district cannot appoint a referee for the latter district." A district judge holding a court of bankruptcy, may appoint or remove a referee, though there is another district judge in the district having equal and concurrent authority."* The appointment is usually in the form of a court order, designating the limits of the referee's district and his term of office. From that time and during such term 1. Act of 1867, 5 3, R. S., § 4993. 2a. Birch v. Steele (C. C. A., 5th 2. in re Steele (D. C, Ala.), 20 Cir.), 21 Am. B. R. 539, 165 Fed. 577. Am. B. R. 446, 162 Fed. 694. 481 482 The Law and Pkactice in Bankruptct. Removal; Term; District. [§34. all bankruptcy cases arising in his district are usually referred to him, unless he is absent, disqualified, or removed;' they may, how- ever, for the convenience of parties be referred to any referee within the territorial jurisdiction of the court.* If there is more than one Teferee in the referee district, the cases are distributed in such manner as the court directs. b. Removal. — This is, like the appointment, discretionary. But it must be either because the services of a referee are not needed, or for other cause. The cause should be stated in the order of removal. It is not thought that the words "for cause" here give "the right to notice and a hearing. As long as the judge finds the ■cause sufficient, it is enough." The circuit court of appeals may not control the discretion of a district court in the matter of the appoint- ment or removal of a referee."* c. Term. — The register held office until the judge deemed his assistance unnecessary. The term of the referee is, however, fixed at two years. There is nothing in the statute which invalidates the acts of a referee after the expiration of his term. He continues a Teferee in each unclosed case previously referred. If removed, the order of removal will doubtless remove him as to such cases. With- out any standing order of appointment, the court can continue to refer cases in his district to him, provided there is no other regu- larly appointed referee in his district, and the order of reference ■will in itself confer jurisdiction and be deemed an appointment to that extent. d. Limits of district. — Under the former law, at least one reg- ister was appointed in each congressional district. This seems to have been dropped out when that law was fused into the Revised Statutes.' Now the referee district is fixed by the judge, but should he so that each county " may constitute at least one district." This seems to mean that referee districts cannot be larger than a single county, a provision apparently ignored in many jurisdictions.'' There is warrant, however, for the practice, for the judge may conclude that the services of a referee are not needed in a particular county and combine it with another county or counties into a single referee district. 3. Compare Bankr. Act, § 43. 7. It is well known that referee dis- 4. See under § 22 of this work, tricts of two or three counties, or 5. Compare State v. Doherty, 25 even of a score of counties, and in Xa. Ann. 119. one case, the Southern District of Illi- 5a. Birch t. Steele (C. C. A., 5th nois, of a whole district, have been Cir.), 21 Am. B. R. 539, 165 Fed. created under this seemingly inelastic C77. clause. 6. Act of 1867, § 3, R. S., § 4993. SECTION THIRTY-FIVE. QVAUFICATIONS OF REFEItEES. § 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 office; (2) not hold- ing 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 bankruptcy 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) residentsi of, or have their offices in, the territorial districts for which they are to be appointed. Analogona provisloiu: In V. S.: Act of 1867, § 3, B. S., §§ 4994, 4995. In Hng: None. CroM reference*: To the law: §§ 1(7) (21), 18-f-g, 33, 34, 36, 43, 50. SYNOPSIS OF SECTION. I. Qualifications of Referees. a. In general. b. disqualification. I. QXTALinCATIONS OF REFEREES. a. In general. — ^A referee is a judicial officer ;^ and this section sets proper limits on nepotism in his appointment or the enjoyment by him of more than one office." The former law contained no 1. Compare White v. Sehloerb, 178 tion), provided it is one of profit or U. S. 542, 4 Am. B. E. 178; Mueller emolument. The restriction is, how- V. Nugent, 181 U. S. 1, 7 Am. B. R. ever, on the whole, a wise one. It is 224; Clendening v. Bed Biver Valley sufficiently unfortunate that referees Nat. Bank (Sup. Ct., N. Dak.), 11 must practice their profession as a Am. B. B. 245. means of livelihood, thus, one day sit- Z. In unpopulous districts, this is ting in judgment, the next perhaps, often a hardship, as a referee by this pleading in another court against him section is clearly disqualified from who was a pleader in the referee court holding any other office, either legis- but yesterday. They certainly should lative, executive, or municipal (with not exercise other functions of a polit- the exceptions specified in this sec- ieal or public character. 483 484 The Law and Practice in Bankeuptct. Disqualification. [§35. restriction, save that the .register must be a counselor-at-law of the district or the State courts.* Further restrictions were pre- scribed in his oath of office, and he was prohibited from acting as attorney or counselor in any bankruptcy case in his district, especially aftear the amendment of 1874.* Now a referee must be (a) a resident of, or have offices in the district for which he is appointed,* and (b) competent to serve ; (c) provided he does not hold any other office of profit or emolument (except certain offices here enumerated) or (d) is related to certain judicial officers of the United States by consanguinity or affinity within the third degree. b. Disqualification. — Referees, although duly appointed, if not strictly within the terms of this section, would probably be dis- qualified to act at all. Disqualification often occurs in specific cases.* Whether he is disqualified is usually a matter either of discretion on the part of the judge or of conscience on the part of the referee. This matter is discussed elsewhere.^ 3. Act of 1867, § 3, R. S., § 4994. residing without its territorial juris- 4. E. S., §§ 4995, 4995-A. diction. 5. In re Schenectady Engineering & 6. Compare Bray v. Cobb (D. C, Construction Co. (D. C, N. Y.), 17 N. Car.), 1 Am. B. R. 153, 91 Fed. jVm. B. R. 279, 147 Fed. 868, holding 102. that a court of bankruptcy of one dis- 7. See under §§ 39 and 43. trict has no power to appoint a referee SECTION THIRTY-SIX. OATHS OF OFFICE OF BEFEBEES. § 36. Oaths of Office of Referees. — a. Keferees shall take the ' same oath of office as that prescribed for judges of United States courts. Analogona provisions: In U. S.: Act of 1867, § 3, B. S., § 4995. In Eng: None. Cross references: To the Forms: No. 16. I. OATH OF OFFICE OF BEFEiREES. This provision emphasizes the difference between the register under the former law and the referee under the. present. The register was merely an assistant to the judge, his functions largely clerical ;• the referee is, in effect, in all cases referred to him, save in name and conoeruing a few matters reserved to the judge by the statute, a court of original jurisdiction.* Therefore, this section requires him to take the same oath as that taken by other Federal judges.^ It sihould be taken before the district judge.* 1. Act of 1867, § 3, R. S., § 4993. in § 712 of the Revised Statutes, and 2. For cases holding this, see under from it incorporated into Form No. § 39. 16. 3. This is the historic oath found 4. Form No 16. 485 SECTION THIRTY-SEVEN. ' NUMBER OF RISFEKEES. § 37. Number of Referees. — a. Such number of referees shall be appointed as may be necessary to assist in expeditiously trans- acting the bankruptcy business pending in the various courts of bankruptcy. Analogous proTisionsi In IT. S.: Act of 1867, § 3, R. S., { 4993. In Eng: None. CroM references: To the law: § 34. I. mnOBEB OF REFEREES. This section should be read with § 34. The former act gave a like discretion.* The only limit on the number of referees in any given district is that only so many shall be appointed as may be necesaary " to assist in expeditiously transacting the bankruptcy business " pending in such district.^ The authority of the court of bankruptcy to appoint referees is confined in number only within the discretion of the court itself.^ 1. Act of 1867, § 3, R. S., § 4993. Am. B. R. 671, 156 Fed. 853, holding Z. Save in large trade centers like that where there are two district New York, Chicago, Philadelphia, Bos- judges having concurrent jurisdiction, ton, and Baltimore, but one referee one of them may appoint a referee has, as a rule, been appointed for each without the concurrence of the other, referee district. while the other is absent from the 3. In re Steele (B. C, Ala.), 19 district 486 SECTION THIRTY-EIGHT. JURISDICTION OF BEFEIREES. § 38. Jurisdiction 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; (2) exercise the powers vested in courts of bankruptcy for the admin- istering 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 siickness, or inability to act ; (4) perform such part of the duties, except as to questions arising out of the applications of bankrupts for compositions 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 bank- ruptcy 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 sitenographers at the expense of the estates at a compensation not to exceed ten cents per folio for reporting and transcribing the proceedings. Analogons provisions: In TJ. S.: Act of 1867, § 4; R. S., S§ 4998, 4999, 5002, 5009. In Eng.: § 99; General Rule 7. Cross references: To the law: §§ 1(7) (21), 2, 7(9), 9-a, 11, 12, 14-a, 18, 20-a(l), 21, 22, 29-c, 34 to 43, 50, 55, 57, 58-c, 62, 64, 65. To the General Orders: IX, XII, XXII. To the Forms: Nos. 29, 56. SYNOPSIS OF SECTION. JURISDICTION OF XUBFEREES. I. Jurisdiction of Referees in General. a. Comparative legislation. b. Scope and meaning of section. 487 488 The Law and Peactice in Bankeitptcy. Scope and Mea.ning of Section. [§ 38. II. Express Powers. a. To make adjudications or dismiss petitions. (1) In general. (2) General Oedee XII. (3) Peactice aftee eefeeence in involuntaey CASES. b. Power to administer oaths, conduct examinations, etc. c. Power to seize and release property. d. Power to exercise generally the statutory jurisdiction of the judge, except in certain matters. (1) In geneeal. (2) jueisdiction ovee dischaeges and composi- TIONS. (3) POWEE OF EEFEEEE TO GEANT INJUNCTIONS. e. Power to authorize the employment of stenographers. I. JUBISDICTION OF REFSREES IN GENERAL. a. Comparative legislation. — The English act of 1883 has a similar section.^ The jurisdiction of registrars in bankruptcy is, However, both larger and smaller than that of our referees. They, as a rule, cannot act save on applications unopposed, yet they have the very important power of making interim orders in eases of urgency and, if of the high court, may grant discharges and con- firm compositions. Under our law of 1867, the registers had power to transact administrative or ex parte business,^ but issues of law or fact were always heard by the judge.* A comparison of the two sections will indicate the great difference between their functions and those of the present referees. b. Scope and meaning of section. — Manifestly this section is one of limitation. Unless jurisdiction is given or can reasonably be inferred from its words, it cannot, as a nile, be exercised by the referee.* However, the broad terms of subdivision 4 coupled with, in many districts, rules conferring on them all the powers and functions of the judge that are not by the statute or the general orders specifically reserved to the court proper, malce the section almost unlimited in its scope, and read into it the numerous other 1. Eng. Act r,f 1883. § no. the referees, as, for instance, Bankr 2. Act of 1867, § 4, R. S., § 4998. Act, § 39. But the intention seems to 3. Act of 1867, §§ 4 and 6, R. S., have been to summarize all general §§ 5009, 5010. grants of jurisdiction here. 4. Other sections confer powers on JuEisDiOTioN OF Eefeeees. 489 § 38-a(l).] To Make Adjudication or Dismiss Petition. sections oonferring jurisdiction on the court itself. The breadth and importance of these functions are discussed later." It should be noted, however, that (a) this jurisdiction is territorial, i. e., it must be exercised " within the limits of their districts;^ and (h) it is always subject " to a review by the judge."'' A referee is a judicial officer, and all his acts are presumed to be legal within the scope of his authority.® The findings of referees acting within their jurisdiction are entitled to the respect and Ciredit given to officers acting judicially,* and such findings are conclusive upon State courts.^" It is especially provided in this section that all the referee's acts are subject to review by the judge.*^ The prac- tice on re^view is considered hereafter under the next section.-'* Some of the illustrative cases are collated in the foot-note.^* II. EXPRESS POWERS. a. To make adjudications or dismiss petitions. — (1) In gen- EEAL. — Subdivision 1 confers upon referees the power to consider petitions in bankruptcy referred to them by the clerk and to make adjudications or dismiss the petitionsi. This clause has reference to petitions in bankruptcy which have been referred by the clerk to a referee when the judge is absent from the judicial district, or division of the district in which the petition is pending, as provided by section 18-f of the act.^* In such cases the referee has jurisdiction to make the adjudication or dismiss the petition. This refers to involuntary as well as voluntary cases, and charges the referee with a distinct duty, which, where a petition doesi not show the jurisdictional facts, should result in a dismissal. A 5. See under § 39, as well as this Nat. Bank (Sup. Ct., N. Dak.), 11 section. Am. B. R. 245. 6. In re Schenectady Eng. & Const. 11. In re Hanson (D. C, Minn.), Co. (D. C. N. Y.), 17 Am. B. R. 279, 19 Am. B. R. 235, 156 Fed. 717. 147 Fed. 868. 12. See pom, p. 502. 7. For reviews by the judge and 13. Mueller v. Nugent, 184 U. S. 1, practice thereon, see § 39 of this work. 7 Am. B. R. 224; White v. Schloerb, By this section every act of a referee 178 U. S. 542, 3 Am. B. R. 178; In re in bankruptcy is subject to review by Steuer (D. C, Mass.), 5 Am. B. R. a judge of the United States district 209, 104 Fed. 976; In re Scott (Ref.. court. Ellis V. Krulewitch (C. C. A., Mass.), 7 Am. B. R. 35; affirmed on 8th Cir.), 15 Am. B. R. 615, 141 Fed. review, s. c, 7 Am. B. R. 39; In re 954. Huddleston (Ref., Ala.), 1 Am. B. R. 8. Conti V. Sunseri (C. C. P., Pa.), 572. Compare, also, Geirveiter v. 18 Am. B. R. 891. Sevier, 33 Ark. 522. 9. In re Covington (D. C, N. Car.), 14. In re Elby (D. C, Iowa), 19 6 Am. B. R. S73, 110 Fed. 143; In re Am. B. R. 734, 157 Fed. 935, holding Eagles (D. C, N. Oar.), 3 Am. B. R. that the referee has no jurisdiction to 733. 99 Fed. 695. dismiss a bankruptcy proceeding after 10. Clendening v. Red River Valley the adjudication. 490 The Law and Practice in Bankeuptct. Practice After Reference. [38-a(l). referee cannot, however, grant an adjudication in any other case.** The form used should be an adaptation of Forms Nos. 11 and 12. (2) GEi. C, Col.), 6 and reporting evidence, and includes Am. B. R. 747, 111 Fed. 516. making findings and recommendations 20. U. S. V. Simon (D. C, Wash.), thereon. 17 Am. B. R. 41, 146 Fed. 89. 22. Rule 22, Western District of 21. Matter of Wilde's Sons (D. C, New York, quoted in full in note on N. y.), 11 Am. B. R. 714, 131 Fed. page 188, note 115. 492 The Law and Peactice in Bankkuptcy. Statutory Jurisdiction of Judge. [§ 38-a (3) (4). evidence.''* But this is subject to the exception that evidence should not be permitted to be introduced, or its production compelled, where it is so clearly and affirmatively incompetent, irrelevant and im- material that such introduction or production would be an abuse of the process of the court.^^* If a referee fails to include rejected evi- dence with objections noted, the remedy is an application to the district court, or failing there, to the circuit court of appeals for an order that such evidence be taken and preserved.''*'' Documents may be ordered in the usual way. When the bankrupt is present, the direction is often verbal. If he is not present, or the document is in the possession of a third person, a subpoena duces tecum, or an order to the same effect, is customary .''*« The concluding clause of this subdivision reserves to the judges the right to commit, and doubt- less, therefore, to attach a balky witness.''* c. Power to seize and release property. — Subdivision 3 seems to refer to a power to seize and hold property conferred upon the judge by § 69. A like power is suggested by § 3-e; and it seems, given by § 2(15). This subdivision will, however, probably be con- strued as such a limitation on the general words of the two sections last mentioned as to prohibit the referee from exercising this juris- diction, save in cases where the clerk has issued a certificate showing the inability of the judge to act for one of the reasons specified. The power is an important one in involuntary cases.^' It is apparently the only instance where the referee as such has jurisdiction before an order of reference. Perhaps the clerk's certificate has the effect of such an order. , d. Power to exercise generally the statutory jurisdiction of the judge, except in certain matters.— (1) In general.— The referee is given, by subdivision 4, power "to perform such duties, except, etc. as shall be prescribed by the rules and orders of the courts of bankruptcy in their respective districts, except as herein otherwise provided." The exact effect of the words " and as shall be prescribed," etc., has not yet been authoritatively declared. "Jurisdiction" and "duties" are, of course, widely different 23. Bank of Ravenswood v. John- Co. (C. C. A., 8th Cir ) 21 Am B son (C. C. A., 4thCir.), 16 Am. B. R. E. 270, 272, 165 Fed. '283- First 206, 143 Fed. 463; In re Eomine (D. National Bank of Philadelphia v C., W. Va.), 14 Am. B. R. 785, 138 Abbott, (C. C. A., 8th Cir.), 21 Am" Fed. 837; In re Sturgeon (C. C. A., B. R. 436, 165 Fed 852 2d Cin), 14 Am. B. R. 681, 139 Fed. 23b. First National Bank of Phila- 608; Dressel v. North State Lumber delphia v. Abbott, (CCA Rtb ^?^ ^J^-A'.f- Car.), 9 Am. B. R. 541, Cir.), 21 Am. B. R.' 436,' 165' Fed. 119 Fed. 531; In re Lipset (D. C, N. 852. Y.), 9 Am. B. R. 32, 119 Fed. 379; In 23c. Matter of Clark (Ref Cal ) re Covington (D. C, N. Car.), 6 Am. 21 Am. B R 776 »^«i- *-»■'• ^ B. R. 373, 110 Fed. 143; In re De Got- 24. See Banicr Act « 41 tardi (D. C, Cal.), 7 Am. B. R. 723, 25. In re Knopf, le'im B R 4'12 ^l^J^Aft' Fi'l National Bank 144 Fed. 245 holding thaTtt rrferee »th Lir.), 21 Am. B. R. 436, 165 Fed. ine the aei/urp of r.rnTK.vf-.r ,■« +1.= (d'c^?? 'y )X'lm\''^'^Vr^^ S-'J-f aHLgldTa^^dSenT Fed 142'itw»A^l^+W? '/^^ •*'"' ^^"« " i« necessary for the Fnla^S^ptrwh'etLtt^n'LTn^^hi: ^XS^lrof ^^"^f^" T. character as referee or as special com- istC fh^rfM! "' .'.«»««*''"»— « missioner, has a right to exclude referTto ^o •^1^'"'/'".°^ ^''.^ ^''^ evidence which he deems inadmissible, or releasing ^.P^'"*"'"* °^ receivers. 23a. Matter of Clark (Ref. Cal.), cases anT?» PtnT'*^' i" '"^°l™tary 21 Am B R. 776, 782, citing Mis^ wTth'section 18 f 'mI"" Connection «oun Electric Co. V. Hamilton %rown S Re ."mIs's ) I^'a^ S^^^^S" JUEISDICTION OF KeFBEEES. 493 §38-a(3)(4).] Statutory Jurisdiction of Judge. things. While a court of bankruptcy may direct referees to perform " duties " not enumerated in § 39, it cannot by rule confer a " jurisdiction " it does not itself have. Further, this clause occurs in a section devoted to the " jurisdiction of ref- ereea" It seems to fallow that " duties " is here used in the sense of jurisdiction; and, therefore,- that to be vested v^ith juris- diction other than that expressly conferred by this section or charged with duties other than those set out in § 39, refeirees must be given such jurisdiction by a standing or special rule of the district court.** The question is not without difficulty and the opposite view seems sometimes to be taken for granted. It is not, however, often important. The district courts have quite generally supplied the necessary rule.*'' It seems that the word " herein " refers to the whole statute.** Under this clause, it has been held that the referee may grant stays,*' appoint receivers,^* issue summary orders to compel restitution of property,^ ^ deter- mine the ownership of property in the possession of a receiver 26. General Order XII(l), and see In re Sabine (Ref., N. Y.), 1 Am. B. R. 315, for a ease where jurisdiction to stay was exercised before there was any rule giving it. 27. Thus, the following rule was early promulgated in the Northern District of New York, and adopted by the Western District of the same State: XXVI. Powers delegated to referees. — The referees heretofore or hereafter appointed for the Northern District of New York are hereby, respectively, vested with the jurisdiction which, by the bankruptcy act of July 1, 1898, and the general orders of the supreme court, promulgated at the October term of 1898, the court or judge may delegate to or confer upon said refe- rees; and they are, respectively, em- powered and authorized to do all acts, take all proceedings, make all orders and decrees, and perform all duties so authorized to be delegated by said act, and said general orders, without spe- cial authority in each case and under the general authority conferred by this order. 28. In re Berkowitz (D. C, Pa.), 16 Am. B. R. 251, 143 Fed. 598. 29. See footnote 16, ante. ' ao. That the referee has jurisdic- tion to appoint receivers after the ref- erence under his general powers, con- ferred upon him by § 38(4), and Gen- eral Order XII (I), has often been de- cided. Matter of Sonnabend (Ref., Mass.), 18 Am. B. R. 117. ,31. Mueller v. Nugent, 184 U. S. 1, 7 Am. B. R. 224; Knapp & Spencer Co. V. Drew (C. C. A., 8th Cir.), 20 Am. B. R. 355, 160 Fed. 413. Surrender of property. — ^To jus- tify an order that a bankrupt pay over money or deliver property to his trustee, the referee should find as a fact that the bankrupt, since filing his petition, had concealed and withheld from the trustee property belonging to- the bankrupt estate. In re Felson (D. C, N. Y.), 10 Am. B. R. 716, 124 Fed. 288. The referee or the district court may compel bailees or agents of the bankrupts to surrender property. Matter of Cohn (Ref., Cal.), 18 Am. B. R. 786. A referee may not deter- mine the ownership of property in the possession of an adverse claimant who asserts his claim in good faith in an answer to the trustee's petition for a summary order that the property be turned over to him. In re Walsh Bros. (D. C, Iowa), 21 Am. B. R. 14, 163 Fed. 352. 494 The Law and Peactice in Bankkuptct. Jurisdiction of a Judge. [§ 88-a (3) (4). where a third party files an intervening petition claiming the owner- ship of such property,"^ adjudicate claims of third persons in property in the possession of a bankrupt at the time of his bankruptcy '^* and dismiss a petition on which an adjudication has already been had.^'' A referee may order a sale of the bankrupt's real estate, discharged of liens, and may hear and determine the validity and priority of claims upon the proceeds of the sale.'* It has also been held that the referee may grant an order authorizing the trustee to intervene in an attachment suit for the purpose of maintaining it for the benefit of the bankrupt estate. ''' There may be some doubt as to the right of a referee, in the exercise of functions pertaining to a court of bank- ruptcy, to entertain plenary jurisdiction over suits or proceedings for the setting aside of preferences, or the recovery of property fraudu- lently transferred."'* There are instances where such jurisdiction has been asserted and fully sustained by the district courts."°'> It must be conceded that where the property in question has been taken from lawful possession of the bankruptcy court,*'*'= or where the pre- ferred creditor voluntarily submits a claim secured by the prefer- ence to the court,^'*' the jurisdiction of the referee to determine as to the validity of the preference is absolute. The numerous where the preferred creditor voluntarily submits a claim secured by the preference to the court,^°^ the jurisdiction of the referee to de- termine as to the validity of the preference is absolute The numerous functions of a court of bankruptcy which, through this subdivision, may be performed by the referee are pointed out in the "cross- references." For the law and practice in the exercise of them, refer- ence should be had to the appropriate sections of this work. (3) Jurisdiction over discharges and compositions. — The referee is denied jurisdiction of these important matters, as he is of adjudications save in the absence of the judge.'* All questions, at every step, arising out of applications for discharges are original questions for the court" and the referee has no jurisdiction to decide any question unless it has been referred to him.'' The words 32. In re Scrinopskie (Ref., Kan.), 35c. Knapp & Spencer v. Drew 10 Am. B. E. 221; In re Holbrook (C. C. A., 8th Cir.), 20 Am. B. E. Shoe & Leather Co. (D. C, Mon.), 21 355, 160 Fed. 413. Am. B. E. 511, 165 Fed. 973. 35d. In re EUetson Co. (D. C, W. 32a. Mound Mines Co. v. Haw- Va.), 23 Am. B. E. 530, 174 Fed. thorne (C. C. A., 8th Cir.), 23 Am. 859. B. R. 242, 173 Fed. 882. 36. Bankr. Act, § 18-e-f-g. It is 33. In re Scott (Ref., Mass.), 7 elementary law that the referee has Am. B. E. 35. no jurisdiction to confirm or reject a 34. In re Miner's Brewing Co. (D. composition. Matter of Sonnabend C, Pa.), 20 Am. B. E. 717, 162 Fed. (Eef., Mass.), 18 Am. B. E. 117. 327. 37. In re Johnson (D. C, Ark.), 19 35. Conti V. Sunseri (C. C. P., Am. B. E. 814, 158 Fed. 342. Pa.), 18 Am. B. E. 891. 38. In re Eandall (D. C, Pa.), 20 35a. See able opinions of Referee Am. B. E. 305, 159 Fed. 298, holding Olmstead in In re Murphy, 3 Am. B. that a certificate of conformity E. 499, 505, and In re O'Brien, 21 granted by the referee is void, where Am. B. E. 11. the specification of objections have not 35b. In re Kearney (D. C, Pa.), been disposed of. 21 Am. B. E. 721, 167 Fed. 995; In A referee, as a special master, re O'Brien, 21 Am. B. E. 11, affd. by upon the hearinp of specifications of Judge Dodge. objections to a discharge, should not Jurisdiction of Refeeees. 495 § 38-a(5).] Employment of Stenographers. of the subdivision extend such limitation not only to applications for discharge or composition, but " to questions growing out of " the two specified proceedings. Thus, a referee has no jurisdiction over a proceeding for the revocation of a discharge or for setting aside a composition.^' This limitation in actual practice is often one of nomenclature rather than fact. As previously observed, save when a jury trial is had, on objections to a discharge the referee usually sits on the case as a special master in chancery, and reports the facts and his opinion to the court for its guidance.*' The practice on such references is discussed elsewhere.** (3) Power of referee to grant injunctions. — The third paragraph of General Order XII supplements subdivision 4 of this section and withdraws jurisdiction from referees to grant injunctions to stay proceedings of a court or officer of the United States or of a State.*'' Where the rules adopted by the district court negative the right of a referee to issue injunction orders, such power does not exist.** But the referee may have jurisdiction to issue injunctions, directed to any party not an officer of the United States or of a State, unless the injunction stays the proceedings of the court.** In some districts it is the custom for referees to grant temporary injunctions returnable before the judge.*' The meaning of subdivision 5 of this section would seem to be that a referee in bankruptcy may make use of the services of a stenographer, when the trustee considers that the testimony should be taken, and that in such case the rate is fixed, but this rate has nothing to do with the employment of a stenographer on isolated and unusual occasions, where, at the request of the creditors or of the receiver, a special hearing is had before a special commis- sioner.** The purpose of this subdivision is clear — to permit the use of modern methods in preserving testimony. But, strictly, a stenographer will not be employed save "upon the application" of the trustee,*' or there has been a stipulation of the parties or money has been deposited for the expense as provided by General Order X;*' though, it seems, the necessary expenses of a referee in perpetuating testimony may be called for in advance, and is probably an expense of administration.*' In a proper case,°" base a finding upon the original exam- them. In re Benjamin (D. C, Pa.), ination of the bankrupt before him as 15 Am. B. E. 351, 140 Fed. 320. referee. In re Murray (D. C, Conn.), 45. See In re Sabine (Eef., N. Y.), 20 Am. B. R. 700, 162 Fed. 983. 1 Am. B. R. 315; In re Rogers (Ref., 39. Consult §§ 13 and 15. Ky.), 1 Am. B. R. 541; In re Mussey, 40. See under § 14. 2 N. B. N. Rep. 113. 41. Id. 46. Matter of Stark (D. C, N. 42. In re Berkowitz (D. C, Pa.), Y.), 18 Am. B. R. 467, 155 Fed. 694. 16 Am. B. R. 251, 143 Fed. 598. Com- 47. In re Carolina Cooperage Co. pare In re Cobb (D. C, N. Car.), 7 (D. C, N. Car.), 3 Am. B. R. 154, 96 Am. B. R. 202, 112 Fed. 655. Fed. 950; In re Mammoth Pine Lum- 43. In re Siebert (D. C, N. J.), 13 ber Co. (D. C, Ark.), 8 Am. B. R. Am. B. R. 348, 133 Fed. 781. 651, 116 Fed. 731. 44. In re Steuer (D. C, Mass.), 5 48. In re Mammoth Pine Lumber Am. B. R. 209, 214, 104 Fed. 976, 980, Co. (D. C, Ark.), 8 Am. B. R. 651, approved In re Berkowitz (D. C, 16 Fed. 731. Pa.), 16 Am. B. R. 251, 143 Fed. 598. 49. See General Orders X and An injunction granted by the ref- XXXV ( 2 ) ; § 64-b ( 3 ) . eree will be sustained where the par- 50. Compare In re Todd (D. C, N. ties have submitted to him for dispo- Y.), 6 Am. B. R. 88, 109 Fed. 26g. sition the question at issue between 496 The Law and Peactice in Bankeuptcy, Employment of Stenographers. [§38-a(S). the referee will doubtless direct the trustee to make such an appli- cation. Where the taking of the testimony was necessary to the estate or resulted to its advanta^, such an order can, it is thought, be made nu7ic pro tunc. The subdivision is also often supple- mented by district or referee district duies.** The exigencies of speedy administration and the multitude of cases which have arisen in important jurisdictions early made the employment of regular stenographers imperative. It is thought that the very liberal interpretation of this subdivision thus far prevailing will continue. The method of taking testimony is prescribed by General Order XXII. See, also. In re Gerson (Ref., Pa.), 1 by the creditor or party in interest Am. B. R. 251; In re Rozinsky (D. C, for whose benefit or at whose request N. Y. ), 3 Am. B. R. 830, 101 Fed. such examination is had; where there 229. are assets, as may be ordered by the 51. Thus, in the Western District referee in each particular case, of New York: (2). After the testimony has been Rule II. Perpetuation of testimony, transcribed, the attorney in charge of — ( 1 ) . The examination of the bank- the case will produce each witness rupt and any witnesses at meetings of before the referee, that such testi- creditors or otherwise, and all testi- mony may be signed, as provided in mony offered on contested claims, or General Order XXII. for any other purpose, will be taken (3). If indemnity is not demanded, down by the official stenographer in all moneys advanced by the referee the form of question and answer, and in publishing or mailing notices, or transcribed. One copy thereof will be for traveling expenses, or for procur- inserted in the record book of the ref- ing the attendance of witnesses, or eree and the other copy will be deliv- in perpetuating testimony, or other- ered to the trustee. The expense of wise, shall be paid to the referee prior thus perpetuating testimony will be to, or at the time, application is made at the rate of ten cents (10c.) a folio to him for the report or certificate for both copies, and shall be paid as called for by District Rule X (that follows: Where there are no assets, on the bankrupt's application for a for one reasonable examination on one discharge), day, by the bankrupt, and thereaftar SECTION THIRTY-NINE. DUTIES OF REFEItEES. § 39. Duties of Referees. — a. Eeferees ahall (1) dedame divi- dends and prepare and deliver to trustees dividend sheets shov^ing the dividends declared and to whom payable; (2) examine all schedules of property and lists of creditors filed by bankrupts and cause such as are incomplete or defective to be amended; (3) furnish such information concerning 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 irequired 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 proceedings in courts, and in like 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 appli- cation of any party in interest, preserve the evidence taken or the substance thereof as agreed upon by the parties before them when a stenographer is not in aAtendance; 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. h. Referees shall not (1) act in cases in which they aire di- rectly or indirectly interested; (2) practice as attorneys and coimsellors at law in any bankruptcy proceedings; or (3) pur- chase, directly or indirectly, any propeirty of an estate in bank- mptcy. Analogous provisions: In IT. S.: Act of 1867, §§ 4, 5; §§ 4998, 5000, 5001. 497 32 498 The Law and Practice in Bankruptcy. Miacellaneoua Duties. [§ 39-a. Cross references: To the lair: As to the declaration and payment of dividends, § 65; As to the filing of schedules, § 7(8) ; As to furnishing information, § 29-c ( 3 ) ; As to the giving of notices, § S8 ; As to mak- ing up and transmitting records, §§ 2(10), 42; As to the perpetuation, of testimony, § 38; As to the employment of a stenographer, § 38(5) ; As to offenses by and disqualifications of referees, §§ 29-b, 35. To the General Orders: IX, X, XII, XV, XVI, XX, XXI, XXII, XXIII, XXIV, XXVI, XXVII, XXXV. To the Forms: Nos. 18, 28, 30, 40, 56. . SYNOPSIS OF SECTION. DUn£S OF BEFEBEES. I. Miscellaneous Duties of Referees. a. In general. b. To declare dividends and prepare dividend sheets. c To examine and amend schedules and lists of creditors. d. To furnish information. e. To give notices to creditors. f. To make up records and transmit them or copies to the clerks. g. To prepare and file schedules in certain cases. h. To preserve evidence when no stenographer is present. i. To call for papers at the clerk's office. II. Prohibitions on Referees. a. Cannot act in cases where interested. b. Cannot practice in bankruptcy proceedings. c. Cannot purchase property of a bankrupt estate. III. Reviews by the Judge. a. In general. b. When review should be asked. c. Order only reviewable. d. Contents of petition. e. Effect of referee's decision on facts. f. What must be certified for review. g. Hearing of reviews. I. BnSCELIJ\.NEOVS DUTIES OF REFEKEES. a. In general. — Subsection a of this section prescribes the gen- eral duties of referees. There is nothing exactly similar to this section in previous statutes. Manifestly, it is in the nature of Duties of Eefebees. 499 § 39-a ( 1 ) ( 2 ) ( 3 ) .] Dividends ; Schedules ; Information. an appendix to § 38. Though captioned " Duties of Eeferees," some of its dauses confer jurisdiction. The more important duties of refeirees are here enumerajted. But the section is not exclusive,* even in its prohibitions stated in subsection b. The referee has many other duties. The only distinction between them and those her© specified seems to be that, as to the former, he has some discretion; as to the latter, little, perhaps none. b. To declare dividends and prepare dividend sheets. — This duty is required by subdivision 1 of subsection a. The general subject of dividends is discussed under Section Sixty-five. In actual practice, dividend sheets aire prepared by the trustee or his attorney, and checked over and verified by the referee. Form No. 40 may be used, or, better, a schedule somewhat like it, the same to be attached to and made a part of the formal order of distribution. By General Ordeir XXIX, the referee is also required to counter- sign all dividend checks drawn by the trustee. Since the amend- atory act of 1903, there must always be two dividends, if any. c. To examine and amend schedules and lists of creditors. — This duty is an important one. It seems that the schedules are not a part of the petition.^ They must, however, conform substan- tially to the law^ and the forms.* Thuis, the count proper is not callted upon to investigate the sufiiciency of the schedules. The refeiree must. If they seem incomplete or defective, he should suspend further proceedings until they are amended. An opinion by the author of the first and second editions of this work in the case of In re Machey^ is illuminating both as to tbe duties of the referee in such cases and concerning what are defects or omissions. d. To furnish information — Subdivision 3 of this subsection should be read in conntction with § 29-c(3), though mere failure to furnish information other than as there specified is not an offense. This duty clearly refers to replies to letters of inquiry, as well as to answers to oral questions and permission to inpect papers on file. Keplies to letters may be franked. But it has been held that a referee is not required to furnish copies of papers.* The duty here enjoined is often a burden. Some referees have adopted forms for answers, especially where in- 1. See, for instance, Bankr. Act, §§ 4. Forms Nos. 1 and 2. 55-b and 58-o. 5. (Ref., N. Y.) 1 Am. B. R. 593. 2. In re Patterson, Fed. Cas. 10,815. 6. In re Lewin (D. C, Vt.), 4 Am. 3. See Bankr. Act, § 7(8). B. R. 632, 103 Fed. 850. 500 The Law and Peactice in Bankeuptct. Notice to Creditors; Records and Copies. [§ 39-a(4) (5) (7) (8). formation is sought conceming the total of claima shown and assets scheduled. e. To give notices to creditors, — There is an unimportant con- flict between subdivision 4 and § 58-c. The referee should give all notices. Some of the more common notices are specified in § 58-a, which see. General Order XVI prescribes another notice that the referee is supposed to gi^e, but which in actual practice is rarely found necessary.''' As a anile, while the original notice must be signed by the referee, the clerical work of preparing and posting is done by the attorney in charge. In districts where no allowance was made for the giving of notices, such a practice has been necessary; if done by the referee, indemnity for the ex- pense incuirred can be demanded.^ Whatever the method, the " official business " envelope can be used. This subject is also considered under Section Fifty-eight. f. To make up records and transmit them or copies to the clerk. — Subdivisions 5, 7 and 8 relating to records and papers are largely supplemented by § 42, which see. The size and com- pleteness of the record book there prescribed varies in the different districts ; in some it is a mere docket, with brief entries indicat- ing the meetings held and orders granted; in others a detailed running account of the whole proceeding from day to day. Sub- divisiion 7 requires the referee to keep records and to transmit them to the olerk when the case is concluded.® Subdivision 8 pro- vides for the transmission to the clerk of such papers on file with the referee, or copies thereof, as shall be needed in the court proper before the whole case is sent up as provided in the previous subsection. By General Order XXIV, referees are also required to transmit forthwith to the clerk a list of claims piroven. This is an inheritance from the law of 1867,*" does not fit into the present system of administration, serves no useful purpose, and is rarely observed.* * The referee is also required to file monthly statements of disbursements with the judge.*^ g. To prepare and file schedules in certain cases. — Section 7(8) makes it the duty of the bankrupt to prepare, verify and file 7. See Form No. 24. York, a district rule makes the certifi- 8. General Order X. cation of the whole record, including- 9. Compare Bankr. Act, § 42-c. the list of claims, addresses, etc., 10. General Order XI, under Act ot proven, a sufficient observance of this 1867. general order. 11. In the Western District of New 12. General Order XXVI. Duties of Eefebees. 501 § 30-b.] Prohibitions on Referees. schedules of his property.^* If the bankrupt fails in this duty, subdivision 6 of this section requires the referee to prepare and file schedules of property and lists of creditors, or cause the same to be filed. We have already considered this duty of the referee under the preceding section.^* h. To preserve evidence when no stenographer is present. — The referee may determine whether testimony shall be heard orally, taken in longhand, or written out in the form of stenog- rapher's minutes. If the bankrupt desires the testimony to be per- petuated, the obligation would seem to be on him to provide the means therefor.*" As indicated elsewhere,*® a referee has ample power to secure the attendance and assistance of a stenographer. This subdivision is, therefore, unimportant. i. To Cjall for papers at the clerk's office. — Subdivision 10 of this section is supplemented by section 51(3), which should be read in this connection. Even in the same town or city, papers are transmitted by the clerk to the referee by mail. II. PROHIBITIONS ON BEFBRXXS. a. Cannot act in cases where interested. — The general dis- quaJifioation of persons who might otherwise be referees is men- tioned elsewhere. *'' A referee duly appointed cannot, however, act in all cases. What amounts to disqualification must be de- termined in each case.** Relationship by blood or affinity, even though remote, is usually enough. But owing a debt to the bankrupt,*® or, perhaps, being a scheduled creditor of the bank- rupt, at least in a no-asset case, does not disqualify. A prior relation of attorney to the debtor, likewise, does not.^** Pending litigation with the bankrupt, it is thought, will. If disqualified, the referee should immediately file a certificate to that effect, stating the reasons for disqualification, with the clerk; and a reference will then be made to another referee. Disqualification sometimes does not appear until the case is far along, and then only in some single matter. In such cases, that matter may be oon- 13. See discussion under Bankr. 18. See learned foot-note of a for- Act, § 7(8), ante. mer editor of this work, in In re 14. See discussion under "Practice Gardner (D. C, Va.), 4 Am. B. R. after reference in involuntary cases," 420, 103 Fed. 922. See form in " Sup- ante, p. 490. plementary Forms," post. 15. Matter of Goldstein (D. C, N. 19. Bray v. Cobb (D. C, N. Car.), Y.), 19 Am. B. R. 96, 155 Fed. 695. 1 Am. B. R. 153, 91 Fed. 102. 16. See under § 38. 20. Carr v. Fife, 156 U. S. 494. 17. Bankr. Act, § 35, ante. 502 The Law and Peactice in Bankeuptct. Reviews by Judge. [§39-a(5). sidered by the judge, on receipt of this certificate, or he may refer it specially to another referee. A referee who acts in a case where he is interested commits an offense under the law, and forfeits his ofiice.^* b. Cannot practice in bankruptcy proceedings. — There was a similar prohibition under the law of 1867.^^ The limitation here seems to be on practice " in any bankruptcy proceedings." Under the former law, a register could not practice " in or out of court " in any suit or matter pending in his own district or circuit. The difference between the statutes in literal significance is great ; in effect, there should be none. The propriety of giving counsel in pending bankruptcy questions, even in another district, may be doubted. General counsel to clients or other attorneys concerning questions not yet in court seems, howecer, not to be prohibited and may not be thought improper. 'There are as* yet no cases con- struing this clause. A violation of this prohibition is not an offense. c. Cannot purchase property of a bankrupt estate. — This pro- vision is new, and requires no comment. The purchase of the property of a bankrupt estate, either directly or indirectly, by a referee is an offense whereby he forfeits his office and becomes liable to a fine of not to exceed five hundred dollars.** in. BEVTEWS BT THE JUDGE. a. In general. — Subdivision 5 of this section relating to rec- ords embodying the evidence seems to refer to such records asi are needed on reviews, and should be read with General Order XXVII. Thus, a party to an order made by the referee, after hearing on the merits, cannot have a review of it, unless he pursues the mode prescribed by this general order.''* A review should be asked by petition ; if from an order, this is the only way.^"^ In the absence of a petition the court is not authorized to review the action of the referee.^' b. When review should be asked.— There is no time limit set by the statute, but a review should be asked for within a reasonable 21. Bankr. Act, § 29-c(l). ZS. Compare Gen. Order XXVII 22. Act of 1867, § 4. See the same 26. In re Russell (D. C, Cal ) 5 as amended, R. S., § 4fl96. Am. B. R. 566, 105 Fed 501. Co'm- 23. Bankr. Act, § 29-c(2). pare In re Hawley (D. C, Iowa) 8 24. In re Home Discount Co. (D. Am. B. R. 632, 116 Fed. 428; Crad- C, Ala.), 17 Am. B. R. 168, 147 Fed. ^""^ & Terry Co. v. Kaufman (D. 538. 363 '' ^- ^- ^- ^^^' ^^5 ^^' Duties of Kefekees. 503 §39-a(5).] Reviews by the Judge. time f this is usually fixed by a standing rule.^' In the absence of a rule the application should be made within a reasonable time. The cases are not uniform as to what constitutes a reasonable time; the time within which the petition is to be filed is discretionary with the court and will not be disturbed unless such discretion is abused;"" it has been held that a petition for review should be filed within the time fixed for an appeal from the same class of orders.""* The right to file such petition may not be so exercised as to unreasonably and unnecessarily delay the distribution of the assets of the bankrupt.'* c. Order only reviewable. — It seems that a review can be asked only after the granting of an order/^ though it would seem that the referee may certify a specific question also.'" A petition for a review of the " decision " of the referee would be defective.'* d. Contents of petition. — The petition should clearly point out the error complained of, and ask a review.'* The matters of law sought to be reviewed should be set out fully.''' New facts may not be set up unless by express leave of the court, and this will not be granted unless the evidence is material and likely to produce a dif- ferent result." 27. In re Chambers (Ref., R. I.), 22 Am. B. R. 216, 166 Fed. 603. 6 Am. B. R. 709; In re Russell (D. 30. In re Grant (D. C, R. I.), 16 C, Cal.), 5 Am. B. R. 566, 105 Fed. Am. B. R. 256, 143 Fed. 661. 501; In re Schiller (D. C, Va.), 2 31. In re Schiller (D. C, Tex.), 2 Am. B. R. 704, 96 Fed. 400; In re Am. B. R. 190, 96 Fed. 400; In re Grant, 16 Am. B. R. 256, 143 Fed. Chambers (Ref., R. I.), 6 Am. B. R. 661; Crim v. Woodford (C. C. A., 4th 709. See, also. In re Hawley (D. C, Cir.), 14 Am. B. R. 302, 136 Fed. 34; Iowa), 8 Am. B. R. 632, 116 Fed. 428. In re Milgraum (D. C, Pa.), 13 Am. 32. In re Kelly Dry Goods Co. (D. B. R. 337, 133 Fed. 802. C, Wis.), 4 Am. B. R. 528, 102 Fed. 28. In some districts a review must 747. Compare, also. Form No. 56, In be asked within ten days. See Erie the case of In re Reukauff (D. C, County (N. Y.), Rule 16, 1 N. B. N. Pa.), 14 Am. B. R. 344, 135 Fed. 251, 115. the court held that the act did not 29. Bacon v. Roberts (C. C. A., 3d authorize the referee of his own mo- Cir.), 17 Am. B. R. 421, 146 Fed. 729, tion to certify a question on which he holding that a dismissal of a petition wishes to be advised and which may filed 50 days after the order should arise in the proceeding. be sustained; In re N. Y. Economical 33. In re Chambers (Ref., R. I.), Printing Co. (C. C. A., 2d Cir.), 5 6 Am. B. R. 709; In re Boston Dry Am. B. R. 697, 106 Fed. 839; In re Goods Co. (D. C, Mass.), 11 Am. B. Milgraum (D. C, Pa.), 13 Am. B. R. R. 97, 125 Fed. 226. 337, 133 Fed. 802, holding that three 34. In re Milgraum (D. C, Pa.), months was not a reasonable time; 13 Am. B. R. 337, 133 Fed. 802; In re Crim V. Woodford (C. C. A., 4th Cir.), Schiller (D. C, Va.), 2 Am. B. R. 14 Am. B. R. 302, 136 Fed. 34; In re 704, 96 Fed. 400. Foss (D. C, Me.), 17 Am. B. R. 439, 35. In re Taft (C. C. A., 6th Cir.), 147 Fed. 790, holding that 30 days is 13 Am. B. R. 41V, 133 Fed. 511. a reasonable time. 36. In re Mclntire (D. C, W. 29a. In re Nichols (D. C, N. Y.), Va.), 16 Am. B. R. 85, 142 Fed. 593. 504 The Law and Pkactice in Bankeuptcy. Effect of Decision on Facts. [§ 39-a (5). e. Effect of referee's decision on facts. —The referee's decisions on questions of fact or involving discretion will not ordinarily be interfered with.'^ They are entitled to the same consideration as those of a district judge upon conflicting evidence.^' Findings of fact by the referee are presumed to be correct until the contrary is shown, and the burden of proof rests with the persons objecting thereto.'" If the findings are manifestly erroneous, they may be set aside.*" Such findings should not be reversed unless it clearly appears that the referee has fallen into some error of law or has made some serious mistake of fact.*"*' If based on conflicting testimony they will be given more weight than where based upon established facts.*"** The bearing of the witness, his appearance, his general intelligence and deportment are, in many cases, as important in determining the truth of evidence as the words he uses, and therefore the court should not al ways set aside findings which do not conform to the written evidenee.*"'^ The court will not ordinarily consider for the first time questions not 37. In re Rider (D. C, N. Y.), 3 Am. B. R. 192, 96 Fed. 811; In re Waxelbaum (D. C, Ga.), 4 Am. B. R. 120, 101 Fed. 2^8; In re Stout (D. C, Mo.), 6 Am. B. R. 505, 109 Fed. /94; In re Carver & Co. (D. C, N. Car.), 7 Am. B. R. 539, 113 Fed. 138; In re Royal (D. C, N. Car.), 7 Am. B. R. 636, 113 Fed. 140; In re Doug- lass, etc., Co. (D. C, Ct.), 8 Am. B. R. 113, 114 Fed. 772; In re West (D. C, Ga.), 8 Am. B. R. 564, 116 Fed. 767; In re Shriver (D. C, Pa.), 10 ^.m. B. R. 746, 125 Fed. 511 ; South- ern Pine Co. v. Savannah Trust Co. (C. C. A., 5th Cir.), 15 Am. B. R. 618, 141 Fed. 802; Love v. Export Storage Co. (C. C. A., 6th Cir.), 16 Am. B. R. 171, 143 Fed. 1 ; In re Harr iD. C, Mo.), 16 Am. B. R. 213, 143 Fed. 421; In re Shults (D. C, N. Y.), 14 Am. B. R. 378, 135 Fed. 623; In re Royce Dry Goods Co. (D. C, Mo.), 13 Am. B. R. 257, 133 Fed. 100; In re Braselton (D. C, Ga.), 22 Am. B. R. 419, 169 Fed. 960; In re McCrary Bros. (D. C. Ala.), 22 Am. B. R. 161, 169 Fed. 485; In re MacKissie (D. C, Pa.), 22 Am. B. R. 817, 171 Fed. 259. A referee's findings of fact will not be disturbed unless manifestly against the weight of evidence. In re Kenyon (D. C, Ohio), 19 Am. B. R. 194, 156 Fed. 863. Thus, the findings of a referee, upon conflicting evidence, thr.t sppcificatiom of objections to a discharge have not been sustained can- not be disregarded where there is sufficient testimony to support them. In re Forth (D. C., N. Y.), 18 Am. B. R. 186, 151 Fed. 951. And a find- ing of a referee, upon conflicting testi- mony, affirmed by the district court, that an alleged bankrupt was not chiefly engaged in farming, and there- fore, amenable to bankruptcy, will not be disturbed on appeal. Stephens v. Merchants' National Bank (C. C. A., 7th Cir.), 18 Am. B. R. 560, 154 Fed. 341. The finding of a referee in favor of the allowance of a claim, approved by the district judge, will not be dis- turbed on appeal, in the absence of demonstration of plain mistake. Ohio Valley Bank Co. v. Mack (C. C. A., 6th Cir.), 20 Am. B. R. 40, 163 Fed. 155; Canner v. Webster Tapper Co. (C. C. A., 1st Cir.), 21 Am. B. R. 872, 168 Fed. 519. Such a finding will not be overruled except upon convincing proof that he was wrong. In re Hatem (D. C, N. Car.), 20 Am. B. R. 470, 161 Fed. 895. Filing of exceptions. — A ref- eree's findings of fact may be re- viewed, though no formal exceptions to his decision are filed where such filing is not required by a rule or order of the court. In re People's De- partment Store Co. (D. C, N. Y.), 20 Am. B. R. 244, 159 Fed. 286. 38. In re Simon & Sternberg (D. C, Ga.), 18 Am. B. R. 204, 153 Fed. 507. 39. In re Williams (D. C, Ga.), 9 Am. B..R. 731, 120 Fed. 542. 40. In re Miner (D. C, Ore.), 9 Am. B. R. 100, 117 Fed. 953. In the case of In re Swift (D. C, Mass.), 9 Am. B. R. 237, 114 Fed. 947, Judge Lowell discusses the weight to be given to findings of fact made by a referee and intimates that where they depend upon inferences to be drawn from admitted facts, the court will exercise its own judgment as to whether such findings should be re- versed. As to such findings he ob- serves that the court may interfere, although they are not " clearly er- roneous." Wliere the evidence is not in Duties of Eefebees. 505 § 89-a (5).] What Certified for Review. raised below, or issues not presented by the record;*^ if a point is presented by the record the district court may consider it although it was not discussed before or by the referee.*^ The court may review findings where certain testimony in the case appears to have been overlooked or ignored.*^ The same rules apply on appeal in consider- ing findings of referees which have been approved by district courts; unless clearly erroneous they will be undisturbed.*"^ f. What must be certified for review, — The record usually con- sists of a certificate/* prepared and signed by the referee, which should state the question*^ on which the review has been asked and the ruling of the referee, and, either in the certificate or in a schedule annexed to it, give the evidence or a summary of it,*® and a copy of the order,*^ if any. He is not required to certify objections made to his rulings upon the admissibility of evidence.*' serious conflict, and the inferences drawn by the referee from a peculiar state of facts are not sufficiently sup- ported by the evidence, the court on review of the referee's order is not bound by his conclusions. In re Peo- ple's Department Store Co. (D. C, N. Y.), 20 Am. B. R. 244, 159 Fed. 286. 40a. First National Bank of Phila- delphia V. Abbott (C. C. A., 8th Cir.), 21 Am. B. E. 436, 165 Fed. 852; Id re McCann Bros. Ice Co. (D. C. Pa.), 22 Am. B. R. 555, 171 Fed. 265; Fouehe v. Shearer (D. C, Ga.), 22 Am. B. R. 828, 172 Fed. 592; In re Hoffman (D. C, Wis.), 23 Am. B. E. 19, 173 Fed. 234. 40b. In re McCrary Bros. (D. C, Ala.), 22 Am. B. E. 161, 169 Fed. 485; Ohio Valley Bank v. Mack (C. C. A., 6th Cir.), 20 Am. B. E. 919, 163 Fed. 155. 40c. In re Schwartz (D. C, N. Y.), 23 Am. B. E. 37. 41. In re Richard (D. C, N. Car.), 2 Am. B. R. 506, 94 Fed. 633. But compare In re Woodard (D. C, N. Car.), 2 Am. B. R. 692, 95 Fed. 955. See, also, In re Sturgeon, Fed. Cas. 13,564; In re McCann Bros. Ice Co. (D. C, Pa.), 22 Am. B. E. 555, 171 Fed. 265. 42. In re Wilde's Sons (C. C. A., 2d Cir.), 16 Am. B. E. 386, 144 Fed. 972. Upon the revienr of an order aflBrming the findings of a referee, the court may rely on any ground disclosed by the record even though it be not the ground upon which the decision was made. Davis v. Cromp- ton (C. C. A., 3d Cir.), 20 Am. B. E. 53, 158 Fed. 735. 43. In re Grant Bros. (D. C, N. Y.), 9 Am. B. E. 93, 118 Fed. 73. 43a. In re Sweeney (C. C. A., 6th Cir.), 21 Am. B. E. 866, 168 Fed. 612; Canner v. Webster Tapper Co. (C. C. A., 1st Cir.), 21 Am. B. R. 872, 168 Fed. 519. 44. See Form No. 56. 45. The precise question ruled upon must be certified; this require- ment is not complied with by a mere transmission to the clerk of the notes of testimony, the referee's opinion and the creditor's petition for review. In re Kurtz (D. C, Pa.), 11 Am. B. R. 129, 125 Fed. 992. 46. General Order XXVII re- quires the referee to certify the question presented, " a summary of the evidence relating thereto, and the finding and order of the referee thereon." It has been held that the plain meaning of this order is to require the referee to make a summary of the evidence in order to save the judge " the labor of examining what is often a mass of testimony on many different questions, and of extracting so much as may be relevant to the point immediately in hand." In re Kurtz (D. C, Pa.), 11 Am. B. R. 129, 125 Fed. 992; Matter of Hooks Smelting Co. (D. C, Pa.), 15 Am. B. E. 83, 138 Fed. 954. Peti- tioners should not be deprived of the opportunity to be heard upon ques- tions of substantial right because the referee omitted to summarize the evi- dence. Crim. V. Woodford (C. C. A., 4th Cir.), 14 Am. B. E. 302, 136 Fed. 34. The evidence tahen before a ref- eree should be taken and recorded, and in ease of an appeal, returned to the reviewing court; it should include that deemed irrelevant as well as that deemed competent, so that the appel- late court may determine whether the evidence rejected should have been re- ceived. From this rule evidence clearly privileged or incompetent may be excepted. Missouri Elec. Co. v. Hamilton Brown Co. (C. C. A., 8th Cir.), 21 Am. B. E. 270, 165 Fed. 283. 47. For the necessary recitals in referees' orders, see General Order XXIII. 48. In re Eomine (D. C, W. Va.), 14 Am. B. E. 785, 138 Fed. 837. 506 The Law and Peactice in Bankeuptct, Reviews by Judge. [§39-a(5). The practice in the several districts necessarily varies as to the formalities to be observed in seeking a review by the judge of the orders or other proceedings of a referee ; in some districts it is held siiflScient to set out "the substance of the matter in dispute without requiring the filing of formal exceptions to the referee's findings or rules.** Documents also may be handed up ; if so, they should be numbered and either referred to or summarized in the certifi- cate. This subdivision implies that the evidence must be agreed upon by the parties to the review. It is presumable that, if they do not agree, the referee will either settle the record as justice requires or send up the whole case. He must make up this record himself. It seems he is entitled to no additional compensation for so doing. By analogy with other clauses of the law and the general orders, however, he is entitled to his expenses in preparing the same and to an indemnity therefor.®" g. Hearing of reviews — The referee must certify up a review " forthwith." It is usually brought on for hearing on notice of motion, and heard on any rule day, or, by consent of the judge, at any time.®' The practice here is often fixed by district rules. Jurisdiction " to consider, confirm, modify, or overrule or return, with instructions for further proceedii^s," is conferred on the district court by § 2(10). The order then made is entered in such court and a copy of it, with the papers on review, transmitted to the referee.®^ 49. In re Swift (D. C, Mass.), 9 53. For the use of this record on Am. B. R. 237, 114 Fed. 947. a petition or appeal from the judge to 50. See General Order X. the circuit court of appeals, see Cun- 51. For an interesting case on prac- ningham v. Bank (C. C. A., 6th Cir. ), tice, see In re De Gottardi (D. C, 4 Am. B. R. 192, 103 Fed. 932. Cal.), 7 Am. B. R. 723, 114 Fed. 328. SECTION FORTY. COMPENSATION OF BEFEIR£ES. § 40. Compensation of Referees — a. Referees shall receive as full compensation for their services, payable after they are ren- dered, a fee of^ fifteen* dollars de.poisited 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 he paid from the estate, if any, as a part of the cost of administration,* and from estates which have been administered before them one per centum com- missions 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. b. "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 ia concluded, and when the case is specially referred, the judge shall determine what part of the fee and commissions shall be paid to the referee. Analogons provisions: In V. S.i Act of 1867, §§ 4, 5, 10, 47, E. S., §§ 4990, 5008, 5124, 5125; General Order XXX; Act of 1841, §§ 6, 13; Act of 1800, § 47. . In Eng.: § 129. Cross references: To the law: §§ 12, 51(2) (4), 62, 64-b(3), 72. To the General Orders: X, XXVI, XXIX, XXXV (2). SYNOPSIS OF SECTION. COMPENSATION OF REFXHtEES. I. Compensation of Referees in General. a. Comparative legislation, b. Under the original law. c. In pauper cases. d. While sitting as special master. e. In compositions. 1. Here the word " fifteen " was 2'. Here the words in italics were substituted for the word " ten " by substituted for the words " sums to the amendatory act of 1903. be paid as dividends and commis- sions " by such amendatory act. •Amendments of 1903 in italics. 507 508 The Law and Peactice in Banketjptcy. Compensation of Referees in General. [§ 40. II. Compensation for Specified Services. a. Amendment of 1903. b. The filing fee. c. The claim fee. d. Commissions on disbursements to creditors. e. " Full compensation." f. Allowance for expenses. III. Compensation on Reference to Two or More Referees. I. COMPENSATION OF BEFBREES IN GENEBAI.. a. Comparative legislation. — In England, the registrars receive salaries, not fees.* Under previous laws in this country, the offi- cers corresponding to the present referees, have always been paid by fees, fixed sometimes by rules, sometimes by the statute, som.e- times by both.* The fee bills under the law of 1867 grew so long and proved so onerous that they were largely responsible for the repeal of that law.^ The difference between the two laws in this respect is marked ; precedents' will be found of little value. Then compensation depended largely on the number of hearings had and papers drawn; now, besides the fixed filing fee, the compensation of referees is determined by the number of claims proven and the amount of assets administered. b. Under the original law. — Prior to the amendatx>ry act of 1903, the inadequacy of the referee's compensation was conceded. Indeed, this condition was met in some districts by rules that went outside the law and authorized the collection of fees for filing and allowing claimis and a per diem for hearings, or the like.* The amendments of 1903 have made this practice no longer possible, whether or not previously excusable; and such rules, where in force, will doubtless be revoked. As the law stood originally, in- deed, as it was interpreted and emphasized by General Order 1. Eng. Act of 1883, § 129(1). 1 Am. B. R. 419, 91 Fed. 635; In re Z. Consult "Analogous Provisions," Todd (D. C, N. Y.), 6 Am. B. R. 88, ante. See, also, Owen on Bankruptcy 109 Fed. 265. But compare In re (1842), Appendix, p. 22. Pierce (D. C, Col.), 6 Am. B. R. 747, 3. Thus, see in the Congressional 111 Fed. 516; In re Barker (D. C, debates, on the pending bankruptcy Iowa), 7 Am. B. R. 132, 111 Fed. 501. bill in February, 1898, lurid phrases For another means to increase com- like: "the pillage of the fee-fiend," pensation, based doubtless on the prac- and " the rodents who burrow around tice under the law of 1867, see In re the places of justice." Dixon (D. C, Cal.), 8 Am. B. R. 145, 4. See In re Price (D. C, N. Y.), 114 Fed. 675. Compensation of Eefeeeea. 509 § 40.] Compensation as Special Master. XXXV, a referee was entitled to compensation in the fallowing ways and amounts only :* (a) a filing fee of $10 in all cases save those in which a pauper oath accompanied the petition, and (b) one per cent. commis8.ions on all s:ums paid " as dividends and commissions."® It was held that the term " dividends " did not include commissions on maneyia paid secured creditors.'' The reasons behind these — in our jurisprudence — rather novel ways of compensating Federal judicial ofiicers were apparent: the filing fee was intended to cover ordinary services in no-asset cases, the commission on dividends was a pro rata reward dependent, not, as in 1867, on work done, but on the results of that work. The amendments of 1903 are merely an extension of this general policy. c. In pauper cases — By analogy with the State laws' applicable to pauper litigants, the statute permiits the indigent bankrupt to secure the services of clerk, referee, and trustee without the pay- ment of the filing fee. This subject and the cases considering it are discussed elsewhere.* d. While sitting as special master. — Under this section it was formerly held that the referee was entitled to extra compensation where he acted as a special master.® The contrary was also held.^* But since the amendment of § 72 in 1903, increasing the compen- siation of the referee, and adding the stringent prohibition against the receipt or allowance of " any other or further compensation for their services than that expressly authorized and prescribed in the act," extra compefnsation will not be allowed.^ ^ Where, however, a referee performs services, not within his statutory 5. See in particular General Order A., Tth Cir.), 4 Am. B. R. 490, 102 XXXV(2). Fed'. 731; In re Grossman (D. C, 6. The purpose of the law-making Mich.), 6 Am. B. R. 510, 111 Fed. 507. power is indicated by the following See Bragassa v. St. Louis Cvcle (C. quotation from the analysis of the bill C. A., 5th Cir. ) , 5 Am. B. R. 700, 107 in its last form : Fed. 77. "Referees will receive a petty filing 10. In re Troth (D. C, Ohio), 4 fee and a small commission on the Am. B. R. 780, 104 Fed. 291. net amount realized by estates admin- 11. In re Wilcox (D. C, Mich.) istered before them. This arrange- 19 Am. B. R. 241, 156 Fed. 685- In re inent will interest them in securing Sweeney (C. C. A., 6th Cir!), 21 prompt and economical administra- ■^- ^- ^' ^^^> 168 Fed. 612. tions" ^ ^'^^ ''^^^ °^ ^° '■e Goldville Manu- 7. In re Utt (C. C. A., 7th Cir.), 5 ^^'^^%l % ^^^a^^'/^-^' '? .^T." Am R R ^M in'5 T?oH 7>;d x ll' ' . ^^°- ^'^' ^°^^ not hold Am. B. R 383, 105 Fed. 754. to the contrary of this view. There 8. See Bankr. Act, § 52. the compensation was allowed because 9. Fellows V. Freudenthal (C. C. the service had been rendered before the Act of 1903. 510 The Law and Peactice in Bankeuptcy. Filing and Claim Fees. [§ 40-a. duties, but of value to the bankrupt estate as a going concern, he may receive compensation therefor.*^ e. In compositions. — The referee receives one-half of one per cent. " on the amount to be paid to creditors " upon the confirma- tion of a composition.^^ This sitandard of compensation has not been modified by the act of 1903. Whether " creditors " includes priority claimants is, perhapsi, debatable.^* n. COMPENSATION FOR SPECIFIED SERVICES. a. Amendment of 1903 — As is indicated in the notes to this section, it was materially modified in respect to the compensation for certain services by the amendatory act of 1903. They have already been indicated. The reasons for them are clear. In brief, (a) the filing fee is increased, (b) commissions are reckoned on all moneys disbursed to creditors, not merely on dividends paid them, and (c) a small fee is allowed out of each estate for the filing and allowing of claims. These different kinds of compensation will be considered separately. b. The filing fee. — The filing fee under this section as it now stands is $15, and is paid to the clerk at the time a petition is filed.^** The clerk pays it to the referee within ten days after the case is closed. The word " closed " has been liberally construed in some districts, and the filing fee has been paid the referee at the end of one or two months, even if the case is not technically at an end.^® c. The cliaim fee. — This fee is already familiar in several im- portant districts, where its collection has been authorized by rules. Its origin is doubtless in the commissioner's fee under the law of 1841.^' That officer's duty was " to take the proof of debts and 12. Matter of Hart & Co. (D. C, paid under the statute, his fees Hawaii), 18 Am. B. E. 137. In this amounting to forty dollars. In re case the referee advised the trustee in Talton (D. C, N. C), 14 Am. B. R. regard to the finances of the bankrupt 617, 137 Fed. 178. estate, examined the results of each 14. See Bankr. Act, § 64, generally, day's work, and examined the weekly Compare " Commissions on Disburse- reports, auditing the same. ments to Creditors," in this section, 13. For changes as to the trustee's post. fee in composition cases, see § 48, 15. See Bankr. Act, § 51(2) (4). post. 16. See Bankr. Act, § 51, post. In oomposltion proceedings it. 17. See § 6 and § 13 of that act, referee is not entitled to compensa- and consult Owen on Bankruptcy tion, as a special master, where he has (1842), Appendix, pp. 8, 22. held two meetings, and has been well Compensation of Kefebees. 511 § 40-a.] Commissions on Disbursements. to take testimony to be used in the circuit or district court," and, for performing the former duty, something similar to the taking of a deposition, he was entitled to $1. Clearly, however, the referee, to earn this fee now, is not required or expected to draft or supervisie the preparation of the proof of debt. The fee is in- tended merely to cover the extra time required in filing, allowing, and investigating claims.^* The words " to be paid from the estate, if any, as a part of the cost of administration " are im- portant. Thus, this fee is not chargeable to the creditor who files, and cannot be demanded in advance.^* Nor is it payable where there are no assets. It is simply one part of " the cost of admin- istration,"^** and had priority with other disbursements within that phrase. The amount, twenty-five cents, is half the filing fee previously fixed by rule in a few important districts, and but a fourth of that allowed in still others. The words " every proof of claim " seem to mean that the fee will be earned even if the proof is on a debt entitled to priority or secured. It is equally clear that the charge is against the whole estate and not on the dividend of each claimant. d. Commissions on disbursements to creditors, — The rate on disbursements to the creditors by the trustee is one per cent. The basis of the percentage is " all moneysi disbursed to creditors by the trustee."^^ This means all sums which should be paid to cred- itors through the trustee, notwithstanding an outside agreement between the parties and attorneys.^'' The language covers, and evidently was intended to include, all moneys, lawfully disbursed 18. Thus, in the Analysis of the densome, while removing the chief ob- Amendatory Bill of 1903 (Report No. jection to it — ^the requirement that 1698, 57th Congress, 1st Session, p. 8 ) the fee be paid as a condition of filing it is said: a claim at all — by requiring that such " The other changes are in the line fee be paid as a cost of administra- of increasing eflBeiency and the secur- tion." mg of the best talent for the impor- 20. See sub nom. " Cost of Admin- tant work committed to these officers ; istration " under § 64, post. thus ... the fifty-cent filing fee 21. In re Erie Lumber Co. (D. C, for referees, as probably the fairest Ga.), 17 Am. B. R. 689, 701, 150 Fed. way properly to compensate them for 817. the great amoimt of extra work in 22. In re Sandford Furniture Mfg. hearing contests on claims," etc. Co. (D. C, N. C), 11 Am. B. R. 414, 19. The same Report says: 126 Fed. 888, holding that when prop- " The collection of this filing fee in erty subject to liens is sold by consent advance seems to be permitted by the of parties holding such liens, the rules in many districts, though with- referee and trustee are entitled to out apparent sanction of law. The commissions under the act, on the pur- suggested amendment ratifies this chase price in full, practice, which has not proven bur- 512 The Law and Peactice in Bankeuptcy. Commissiona on Disbursements. [§ 40-a. by the trustee, and held by him as such, whether to creditors, secured or unsecured or having priority, or to other persons. If to creditors it is immaterial whether the amounts lawfully paid them from the funds in court are paid as dividends or in satisfac- tion of a lien or liens on the fund.^' No commissions are to be paid on moneys disbursed for other purposes than to creditors;^* conversely the dividend basis being now eliminated such commis- sions should, it would seem, be paid on all moneys disbursed to secured and priority creditors as well as to those not in such classes. The referee is not entitled to commissions on sums paid by the trustee in the conduct or administration of the business of the bankrupt continued for the purpose of completing contracts partly executed by the bankrupt.^*^ The omission of the words " to creditors " in a similar provision of § 48 is significant. At any rate, the numerous cases defining the meaning of the word " divi- dends,"^^ which occurred here in the original law,^^ are no longer valuable. e. " Full compensation." — The significance of these words is apparent. They have been- dropped out of § 48.^'^ Not so here. They are emphasized by § 72, considered later. A referee in bank- 23. In re Cramond (D. C, N. Y.), Brewing Co. (D. C, N. Y.), 10 Am. 17 Am. B. R. 22, 30, 145 Fed. 966. B. R. 692, 124 Fed. 702. Wliere a Becnred creditor en- 24. In re Iowa Falls Mfg. Co. (D. forces his security in a State court C, la.), 15 Am. B. R. 384, 140 Fed. and the proceeds do not come into the 527. bankruptcy court, the referee is not 24a. Bray v. Johnson (C. C. A., entitled to commissions on sums paid 4th Cir.), 21 Am. B. R. 383, 165 Fed. to such creditor. In re Iowa Falls 57. Mfg. Co. (D. C. la.), 15 Am. B. R. 25. In re Sabine (Ref., N. Y.), 1 384, 140 Fed. 527. But it has been Am. B. R. 322; In re Fort Wayne held that a secured creditor, whose Corporation (D. C, Ind. ) 1 Am. B. lien, created more than four months R. 706, 94 Fed. 109; In re CoflBn before the bankruptcy, has been satia- (Ref., Tex.), 2 Am. B. R. 344; In re lied in full, will be compelled to pay Gerson (Ref., Pa.), 2 Am. B. R. 352; commissions on the amount received In re Fielding (D. C, Mo.), 3 Am. B. by him. Matter of Andters Push But- R. 135, 96 Fed. 800; In re Barber (D. ton Telephone Co. (D. C, N. Y.), 13 C, Minn.), 3 Am. B. R. 306, 97 Fed Am. B. R. 643, 136 Fed. 995. 547; In re Utt (C. C. A., 7th Cir.). ITnder the law, prior to the 5 Am. B. R. 383, 105 Fed. 754; In re a,mendm.ent of 1903, commissions Barker (D. C, la.), 7 Am. B. R. 132, were based upon the sums "to be paid 111 Fed. 501. See, also In re Smith as dividends and commissions." This (D. C, N. C), 5 Am. B. R. 559, 108 was held not to include sums paid to Fed. 39; In re Mammoth Pine Lum- satisfy fixed liens on real estate sold ber Co. (D. C, Ark.), 8 Am. B. R. by the trustee, even when sold free 651, 116 Fed. 731. and clear of all incumbrances, and 26. See foot-notes to text of § 40-a, when such liens were satisfied from showing words omitted, the proceeds of sale. In re Hinckel 27. For reason, see § 48. Compensation of Kefeeees. 513 § 40-b.] Compensation on Reference to Two or More Referees. ruptcy, acting as such, is entitled to no fee, oompensatioa, or emolument for any service performed in that capacity, unless such fee is within the intendment of the section.** f. Allowance for expenses. — Under General Order XXXV ex- penses necessarily incurred by referees in publishing or mailing notices, in traveling, or in perpetuating testimony, or other ex- penses necessarily incurred in the performance of their duties under the act, when allowed by special order of the judge, are not included in the full compensation allowed to referees under this section. In some jurisdictions this has been held to authorize a charge for office expenses at a specified amount in each proceed- ing.*^ Hotel bills and amounts paid stenographers may be allowed as expenses, when a detailed account thereof verified by the oath of the referee that they were necessarily and actually incurred, and showing the amount paid therefor, is returned to the bank- ruptcy court.*" in. COMPENSATION ON BEFEItENCE TO TWO OB MORE REFEREES. ' The statute here needs no elucidation. When a case is trans- ferred from one referee to another, or the order of reference is revoked before the case is concluded, or the proceeding has ~ been specially referred, the judge is required to pro-rate " the l fee and commissions." The words of these subsections have not*" been changed to fit the amendments to subsection a. The court has, however, ample power to pro-rate the new claim fee, without statutory authority, and, in given cases, will doubtless allow each referee twenty-five cents on each claim actuailly allowed by him. 28. In re Mammoth Pine Lumber allowed for service outside the ordi- Co (D C, Ark.), 8 Am. B. R. 651, nary scope of the referee's duties. In 116 Fed 731 re Todd (D. C, N. Y.), 6 Am. B. R. A special allowance to a referee 88, 109 Fed. 265. An allowance of jt ■ ^,t„ A „„^<.- *-v,o =tQf fees by a referee to himself is review- for services performed under the stat ^^^^ y ^^^ ^.^^^.^^ ^^ ^^ ute cannot be made, even with the ^jj^^^. Jj^ ^^ N. Y.), 23 Am. B. R. consent of attorneys. Dressel v. jqj^ jyg p.gj ggj Contra: In re North State Lumber Co. (D. C, N. Troth (D. C, Ohio), 4 Am. B. R. 780, C), 9 Am. B. R. 541, 119 Fed. 531. 104 Fed. 291. Thus, a referee is not entitled to com- 29. In re Tebo (D. C, W. Va.), 4 pensation for his own services in mak- Am. B. R. 235, 101 Fed. 419; In re ing copies of a petition for discharge. Carolina Cooperage Co. (D C, N. C. 1^ ^. /T. ri n„i \ a i«, Tt 3 Am. B. R. 154, 96 Fed. 950. Contra. In re Dixon (D.C Cal.) 8 Am^ B. j^ ^^ j^^^.^j^ ^ j2 ^^_ ^ R. 145, 114 Fed. 675. But it was held ^ ^^g^ jgj, p^^ ggg^ prior to the amendment of 1903 that 30. General Order XXVI. In re a reasonable compensation would be Daniels (D. C, la.), 12 Am. B. R. 446, 130 Fed. 597. 33 SECTION FORTY-ONE. CONTEMPTS BEFORE REFEREES. § 41. Contempts Before Referees. — a. 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 docxunent; or (4) refuse to appear after having been subpoenaed, or, upon ap- pearing, 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 tundred miles from such place of residence, and only in case his lawful mileage and fee for one day's attendance shall be first paid ' R. R. 123, 101 Fed. 224; In re Malino (D. C, N. Y.), 8 Am. B. R. 205, 118 Fed. 368. The referee should proceed with the election where those who object to claims presented fail to file objections, or to ofi'er evidence in support of those made orally. In re Syracuse Paper & Pulp Co. (D. C, N. Y.), 21 Am. B. R. 174, 164 Fed. 275. 15. See under § 56. 16. A form will be found in " Sup- plementary Forms," post. 17. See Bankr. Act, § 56. ■When to appoint. — Where the bankrupt's former attorney had a ma- jority in number of the creditors, while his opponent had a majority in amount, and no request was made for a second ballot, the referee may ap- point the trustee. In re Machin . ( D. C, Pa.), 11 Am. B. R. 449, 128 Fed. 315. Unless it appears that the elec- tion has been so conducted as to jeopardize the interests of the credi- tors, the choice of a majority of the creditors in number and amount should be permitted to stand. In re Eastlack (D. C, N. J.), 16 Am. B. R. 529, 145 Fed. 68. The referee may appoint a trustee upon the failure of the creditors to obtain a majority vote for any one approved. In re 528 The Law and Peactioe in Bankeuptct. Approval or Disapproyal. [§44. referee appoint. On this proposition there is. already considerable law.** But, when the creditors " neglect to recommend the ap- pointment " of a trustee, the judge or referee may do so.** This power corresponds to that in the English law, and is given to pre- vent deadlocks. If at the first meeting all claims offered for proof are in dispute, and it is impracticable at that time to settle the dispute, it appears to be within the discretion of the referee to appoint a trustee.^** Where there is a sharp conflict or a close vote, resulting in a majority in amount one way and in number the other, the choice of one not a candidate and, if possible, who hais had experience in the management of estates, is thought the part of wisdom. But there can be under the present law no official or general trustee,^* as seems to have been the practice under the law of 1841.^^ In making the appointment the court is governed by the limitations contained in § 45.^* d. Approval or disapproval. — General Order XIII seeks to graft on the law a provision of the statute of lfiL67,^* to the effect that the appointment of the trustee is " subject to be approved or disapproved by the referee or by the judge." The courts have quite generally recognized this rule^* as a quasi-judicial interpre- tation of the statute by the supreme court. In view of the plain words of the law, discussed in a previous paragraph,^* it may be doubted whether this General Order will stand the scrutiny of the court that promulgated it, provided the question should be brought up in a case involving substantial rights. Meanwhile, judges and referees, being bound by the General Order, will doubtless con- Kenney & Co. (D. C, Ind.), 14 Am. 21. General Order XIV. B. R. 611, 136 Fed. 451. 22. CJompare Rule 51, Southern 18. In re Lewensohn (D. C, N. District of New York, under Act of Y.), 3 Am. B. R. 299, 98 Fed. 576; 1841, Owen on Bankruptcy, Appendix, In re Brooke (D. C, Pa.), 4 Am. B. p. 11. R. 50, 100 Fed. 432; In re Richards 23. In re Seider (D. C. N. ¥.), 20 (D. C, N. Y.), 4 Am. B. R. 631, 103 Am. B. R. 708, 163 Fed. 139. Fed.. 849; In ra Henschel (D. C, N. 24. Act of 1867, § 13, R. S., § 5034. Y.), 6 Am. B. R. 305, 109 Fed. 861, as 25. In re Lewensohn (D. C, N. reversed in s. c, 7 Am. B. R. 662, Y.), 3 Am. B. R. 299, 98 Fed. 576; In 113 Fed. 443. Compare, under former re Rekersdres (D. C, N. Y.), 5 Am. law, In re Pearson, Fed. Cas. 10,878. B. R. 811, 108 Fed. 206; Falter v. 19. In re.Kuffler (D. C, N. Y.), 3 Reinhard (D. C, Ohio), 4 Am. B. R. Am. B. R. 162, 97 Fed. 187; In re 782, 104 Fed. 292. On review in C. Brooke (D. C, Pa.), 4 Am. B. R. 50, C. A., In re MoGill (C. C. A., 6th 100 Fed. 432. Cir.), 5 Am. B. R. 155, 106 Fed. 57. 20. Matter of Cohen (D. C, 26. See p. 526, ante. Mass.), 11 Am. B, R. 439, 131 Fed, 391. Appointment of Teustees. 529 § 44.] Approval or Disapproval. tinue to exercise the power to approve or disapprove. It is thought that these officers, in the event of an ultimate decision denying them this jurisdiction, have anaple power to prevent the appointment of in- competent or improper trustees by the discretion given them to de- termine who are creditors,"^ coupled with their power to continue meetings and notify and bring in absent claimants.'"* But if the choice of the creditors is disapproved, neither the judge nor the referee can appoint; another meeting or vote should be ordered.^^^ 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 interests.^^ If the trustee is otherwise competent it does not follow that his election should be disapproved by the referee because of his friendliness to the debtor."' The creditors of a bankrupt corporation should be permitted to vote for a trustee without interference from its officers."'* An appoint- ment of a trustee by the creditors should not be disapproved by the referee solely upon the ground that he is a non-resident of the county in which the bankrupt's estate is located.'" Tlie question as to whether there is collusion with the bankrupt should be definitely disposed of before the appointment, and if there is reasonable grounds for the be- lief that such collusion exists the referee may decline to approve the election.'^ A referee cannot ignore the appointment of a trustee by creditors and proceed summarily to appoint without holding another election. If he disapproves of the appointment it is his duty to make an order in writing Jo that effect, and the parties interested may apply to a district judge, who may remove the trustee appointed by the creditors and order another appointment by them.'^ 27. See Bankr. Act, §§ 56, 57 and 148 Fed. 92; In re Hanson (D. C, 63; General Order XXI. Minn.), 19 Am. B. R. 235, 156 Fed. S7a. The election will be set 417. aside and a new election ordered 29. Matter of Turner & Co. (Ref., where a creditor has not heen notified Mass.), 20 Am. B. R. 646. of the meeting, although the court had 29a. In re Day & Co. (D. C, N. determined that he was entitled to Y.), 23 Am. B. R. 56, 174 Fed. 164. participate in the proceedings. In re 30. Matter of Jacobs and Roth (D. Evening Standard Pub. Co. (D. C, N. C, Pa.), 18 Am. B. R. 728, 157 Fed. Y.), 21 Am. B. R. 156, 164 Fed. 517. 988. 27b. In re Mackellar (D. C, Pa.), 31. In re Dayville Woolen Co. (D. 8 Am. B. R. 669, 116 Fed. 547; In re C, Conn.), 8 Am. B. R. 85, 114 Fed. Mangan (D. C, Pa.), 13 Am. B. R. 674; In re Rekersdres (D. C, N. Y.), 303, 133 Fed. 1,000; In re Hare (D. 5 Am. B. R. 811, 108 Fed. 206; In re C, N. Y.), 9 Am. B. R. 520, 119 Fed. Henschel (D. C, N. Y.), 6 Am. B. R. 246; In re Van De Mark (D. C, N. 305, 109 Fed. 861. Y), 23 Am. B. R. 760, 175 Fed. 287. 32. In re Hare (D. C, N. Y.), 9 28. In re Eastlack (D. C, N. J.), Am. B. R. 520, 119 Fed. 246; In re 16 Am. B. R. 529, 145 Fed. 68; In re Van De Mark (D. C, N. Y.), 23 Am. Lloyd (D. C, Wis.), 17 Am. B. R. 96, B. R. 760, 175 Fed. 287. 530 The Law and Praotioe in BANKBtrPTOY. Appointments to Fill Vacancies. [§ 44. e. Appointment to fill vacancies. — (1) In general. — Here again the policy of the law is different from its predecessor. Im- mediately a vacancy occurs either, (1) in the oflSce of trustee, or (2) after an estate has been reopened, or (3) a composition has been set aside, or (4) a discharge has been revoked, or (5) "if there is a vacancy in the office of trustee," the creditors must be summoned in the usual way; and they appoint the trustee." The value of the words just quoted, unless they refer to a case where at the first meet- ing no trustee was appointed,'* does not seem clear. The purport of the clauses on vacancies is, however, beyond the domain of discussion. All vacancies must be filled as if at a first meeting. It is thought, however, that, when a trustee duly appointed fails to qualify or dies before he can do so, on motion or consent of all the creditors who voted at the meeting when he was chosen, they may appoint a sub- stitute trustee, without calling another meeting for that purpose.'' If a trustee embezzles the funds of the estate and absconds, his action amounts to an abandonment of his office and a new trustee may be appointed without proceedings for removal or notice to the absconding trustee.'"* (2) Aftpr an estate has been reopened. — ^Where an estate is reopened the office of trustee is vacant and the court cannot appoint unless the creditors have failed to do so;'* but the appoint- ment of a trustee being vested in the court upon certain conditions, a failure to comply with such conditions does not deprive the court of its jurisdiction, and the validity of the appointment of a trustee after an estate is reopened cannot be attacked in a collateral action.'^ f. Number of trustees. — Under the former law, the creditors chose " one or more assignees."" Now, there can be but one or three trustees. Votes for two trustees should, therefore, be refused." It seems also that where one of three trustees dies, a meeting should be called to fill the vacancy.*" At such a meeting the creditors may of course vote to continue the survivor alone, or elect him as a single trustee. g. When no trustee. — By General Order XV, in no-asset cases, provided there are no appearances by or for creditors, the judge 33. See General Order XXV, and 399, 107 Fed. 429. compare In re Lewensohn (D. C, N. 37. Fowler v. Jenks "(Sup. Ct., Y.), 3 Am. B. R. 299, 98 Fed. 576. Minn.), 11 Am. B. R. 256; Harvey v. 34. See General Order XV. Tyler, 2 Wall. (U. S.), 328, 17 L. Ed. 35. In re Wright (Ref., N. Y.), 2 871; Lamprey v. Nudd, 29 N. H 299. Am. B. R. 497. 38. Act of 1867. S 13, R. S., § 5034. 35a. Schofipld v. United States ex 39. See In re Fisher (D. C, N. J.), rel. Bond (C. C. A., 6th Cir.), 23 Am. 14 Am. B. R. 366, 135 Fed. 223. !B. R. 259, 174 Fed. 1. 40. See last paragrnph. Compare 36. In re Newton (C. C. A., 8th In re ScheiiTer Fed. Cas. 12,445. Cir.), 6 Am. B. R. 52, 46 C. C. A., Appointment of Teusteks. 631 § 44.] Removal of Trustees. or referee may " direct that no trustee be appointed." This prac- tice is new; it is a boon to bankrupts and referees. Its validity may, however, be doubted.*^ If the creditors do not appoint, " the court shall do so." If there is no trustee, the difficulty of setting off exempt piroperty is apparent.*^ Efforts . have been made to overcome this difficulty by local rules,*^ but their validity is also doubtful. If no trustee is appointed at such a first meeting a trustee may still be appointed later, " if the court shall deem it desirable."** In cases covered by this General Order, further meetings may by order be dispensed with. Form No. 27 should be used, with such additions*' as to the setting apart of exemptions as the court feels it has power to grant. h. Notification, bond, qualification, etc. — The referee must im- mediately notify the trustee of his appointment.*® Form No. 24 indicates the method. The notice is, however, often given orally, and should be, if the trustee-elect is present at the meeting. The trustee should notify the referee of his acceptance or declination. He rarely does. The presentation of the bond, or a failure to present within the required time is thought sufficient. The re- quirements as to trustees's bondis*^ and duties** are discussed else- where. in. REMOVAL OF TRUSTEES. a. For cause. — The creditors have, however, no control over the removal of trustees, other than to initiate proceedings to that end. The former law*' gave them such control " with consent of the court." Now, the court is given sole power to remove,^" but this must be done by the judge, .not the referee.^' The district rules which confer on the referees jurisdiction to perform all the func- tions of the judge usually except such powers as have been with- drawn from them by the General Orders. Numerous cases on the 41. Thus, see, under the former In this case a trustee was appointed law, In re Cogswell, Fed. Cas. 2,959; more than a year after the creditors' In re Graves, Fed. Cas. 5,709. meeting. 42. This must he done hy "a trustee, 45. See, also, "Supplementary Bankr. Act, § 47-a(ll). Exempt Forms," post. property does not pass directly to the 46. G«neral Order XVI. claimant. See under § 6. 47. See under § 50 of this work. 43. Thus, see rule in jurisdiction of 48. See § 47. Referee Hotchkiss (Erie Co., N. Y.), 49. Act of 1867, § 18, R. R., | 1 N. B. N. 115. 5039. 44. Clark v. Pideock (C. C. A., 3d 50. Bankr. Act, § 2(17). Cir), 12 Am. B. R. 309, 129 Fed. 745. 51. General Order XIII. 532 The Law and Peactiob in Bankbdptct. Bemoval or Resignation. [5 44. removal of trustees under the former law will be found in point.** The practice on removals is suggested by Forms Nos. 52, 53, 54, and 55. Removal is a matter of discretion and is, therefore, not reviewable;** but, being a judicial discretion, should be exercised only when there is sufficient cause.** Where a trustee, by conceal- ment or false representation, induces creditors to agree to a compo- sition contrary to their interests, he should be removed.** The fact that a trustee has changed his legal residence to another dis- trict is not ground for his removal, where the change neither makes it impossible for him to perform his duties as trustee, nor difficult for the creditors to locate and communicate with him.** b. By resignation. — The statute does not, as did its predeces- sor,*^ provide for suah a contingency. A trustee can unquestion- ably resign, but, it is thought, his resignation is still ineffectual, Biave " with the consent of the judge " or referee. 52. In re Saechi, 43 How. Pr. (N. In re Adler, Fed. Cas. 82. Y.) 250; In re Mallory, Fed. Cas. 54. In re Mallory, Fed. Cas. 8,990. 8,990; Ex parte Perkins, Fed. Cas. 55. In re Wrisley (C. C. A., 7th 10,982; In re Blodgett, Fed. Cas. Cir.), 13 Am. B. E. 193, 133 Fed. 388. 1,552; In re Price, Fed. Cas. 11,409; 56. In re Seider (D. C, N. Y.), 20 In re Perry, Fed. Cas. 10,998; In re Am. B. R. 708, 163 Fed. 139. Grant, Fed. Cas. 5,692. 57. Act of 1867, § 18, R. S., § 5038. 53. In re Dewey, Fed. Cas. 3,849; SECTION FORTY-FIVE. QUALIFICATIONS OF TBTJSTEES. § 45. Qualifications of Trustees. — a. Trustees may be (1) in- dividuals who are respectively competent to perform the duties of that office, and reside or have an office in the judicial district •within which they are appointed, or (2) 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. Analogous proTiaioiu: In V. S.: Act of 1867, § 18, B. S., § 5035. InEng.: Act of 1883, §21 (1) (2). CroBi references: To the law: §§ 44, 55-b, 66. SYITOPSIS OF SECTION. Qualifications of Trustees. a. In general. b. Statutory qualifications. c. Disqualifications. I. QUAUFICATIONS OF TRUSTEES. a. In general. — The only statutory disqualification under the formen law seems to have been that the proposed trustee had re- ceived a preference. At the same time, the action of the creditors being subject to the approval of the judge, many disqualifications were in effect recognized by the courts. Since only those qualified may be appointed, votes should not be received for any nominees not clearly within the terms of this section. When the objection is that the proposed trustee is not competent^ to perform the duties of the office, however, votes should be received, and, if they result in his appointment, his ability to perform such duties should be investigated before he is allowed to qualify. b. Statutory qualifications. — Trustees may be either individ- uals or corporations. In either case, they muist have offices within the judicial district. Under the former law, it was held that they must reside in such district.^ It is evident that actual presence 1 Compare, under former law, § 18, 2. In re Havens, Fed. Caa. 6,231; R. S., S 5035. In re Loder, Fed. Caa. 8,459. 533 534 The Law and Peactice in Bankruptcy. Disqualifications. [J 46. is intended by the phrase " reside or have an office," rather than a legal or voting residence. The having of a fixed place of abode would seem to be what is intended by the statute.' This restriction seems to make it necessary to appoint a difFerent trustee in an ancillary proceeding in another disitrict.* If a corporation is chosen, orfly those authorized by charter or by law " to act in such capacity " can be appointed trustee. This manifestly applies to trust companies and other corporations which are permitted by law to do a trustee business. An alien may be chosen aa a trustee if he resides or has an office in the district.® c. Disqualifications. — So long as General Order XIII con- tinues in force,' certain disqualifications, based on precedent and common sense, rather than the statute, will also be recognized by the courts. Thus, under the present law, it is thought, one who is palpably the bankrupt's choice will be held disqualified, or, more correctly, his appointment will not be approved;^ although there is no statute against the election of a trustee merely because he is , acceptable to the bankrupt.* Mere hostile animus against the bankrupt is not a sufficient disqualification,* nor that he has busi- 3. In re Seider (D. C, N. Y.), 20 the term "individuals" ia very broad Am. B. E. 708, 163 Fed. 139. In and includes aliens as well as corpora- this case Judge Chatfield said : " A tions. person might be domiciled or reside a 6. See p. 528, ante. greater portion of the year, and per- 7. Falter v. Reinhard (D. C, Ohio), haps pay taxes in the county of Kings 4 Am. B. R. 782, 104 Fed. 292. On and in the eastern district of New review in C. C. A., In re McGill (C. York, and vote at a legal residence in C. A., 6th Cir.), 5 Am. B. R. 165, 106 another portion of the State, or even Fed. 57. in a diflferent State altogether. So 8. In re Eastlack (D. C, N. J.), 16 with reference to the question of an Am. B. R. 629, 145 Fed. 68, approv- office. A lawyer might have an office ing an election where it appeared that at his home in Brooklyn, and an office the name of the trustee was suggested in one of the down town buildings in to one of the creditors by the bank- the Borough of Manhattan, and a rupt's attorney, and such creditor third office in Jersey City, in the State sent letters to all the other creditors of New Jersey, and any one of the recommending the election of the per- three might be sufficient to meet the son so suggested. requirements of § 45." Bnt the active interference of It seems that a person having a the bankrupt in favor of the appoint- plaee of Husiness within the judicial ment of a trustee will render such district may bo appointed a trustee trustee ineligible to appointment. In although he resides without such dis- re Hanson (D. C. Minn.), 19 Am. B. trict. In re Loder, Fed. Cas. 8,459. R. 235, 156 Fed. 417. 4. Compare In re Boston H. & E. 9. In re Lewensohn (D. C, N. Y.), R. R. Co., Fed. Cas. 1,678. 3 Am. B. R. 299, 98 Fed. 676; In re 5. In ro Coe (D. C, N. Y.), 18 Am. Mangan (D. C, Pa.), 13 Am. B. R. B. R. 715, 154 Fed. 162, holding that 303, 133 Fed. 1,000. Qualifications of Trustees. 535 § 45.] Disqualifications. ness relations with the referee," though this doctrine may be ques- tioned. A stockholder of a bankrupt corporation who had been intimately associated as legal adviser with those formerly in con- trol will be deemed disqualified and his appointment should be set aside.^^ But the fact that the proposed trustee is a stockholder in a corporation appearing as a creditor is not a disqualification.^' It has also been held that the fact that the trustee advised an as- signment for the benefit of creditors, constituting the act of bank- ruptcy complained of, and was himself the assignee, does not dis- qualify him from acting as trustee.^' Under the former law, that the assignee-elect was the bankrupt's choice warranted a refusal to confirm;^* so also where the candidate made it a regular business to solicit creditors' votes,^° or was a near relative,*^* or a bookkeeper of one of the bankrupts,^' or had a direct adverse interest to the creditors,^* or where the choice was secured by an agreement to pay certain voting creditors in full. But, it seems, a general creditor was eligible,^" and that the bankrupt's attorney was not positively disqualified, if he at once severed his relations as such.'" The fact that a person appointed trustee was formerly a receiver of the bank- rupt estate, designated by the court, is evidence of his fitness and competency.'"* A bankrupt who has not been discharged is not a proper person to act as trustee of another bankrupt.'^ 10. In re Brown, 2 B. N. Rep. 19. Id. 590. 20. In re Barrett, Fed. Cas. 1,043; 11. In re Gordon, etc., Co. (D. C, In re Lawson, Fed. Cas. 8,150; In re Pa.), 12 Am. B. K. 94, 129 Fed. 622. Clairmont, Fed. Cas. 2,781. See, also, 12. In re Lazoris (D. C, Wis.), 10 cases cited In re Rung (Ref., N. Y.), Am. B. R. 31, 120 Fed. 716. 2 Am. B. R. 620. Tiie uninfluenced 13. In re Blue Ridge Packing Co. votes of creditors in favor of one for (D. C, Pa), 11 Am. B. R. 36, 125 trustee who liad formerly been the at- Fed. 619. torney for the bankrupt are not a 14. In re Bliss, Fed. Cas. 1,543; nullity so that the opposing candidate In re Wetmore, Fed. Cas 17,466. for trustee must be declared elected. 15. In re Doe, Fed. Cas. 3,957; In In re Machin (D. C, Pa.), 11 Am. B. re Smith, Fed. Cas. 12,971; In re R. 449, 128 Fed. 315. Haas, Fed. Cas. 5,884. 20a. In re Huddleston (D. C, 16. In re Bogert, Fed. Cas. 1,600; Ga.), 21 Am. B. R. 669, 167 Fed. In re Zinn, Fed. Cas. 18,216. 428. 17. In re Powell, Fed. Cas. 11,354. 21. In re Smith (Ref., N. Y.), 1 18. In re Clairmont, Fed. Cas. Am. B. R. 37. 2,781. SECTION FORTY-SIX. DEATH OR REMOVAL OF TRUSTEES. § 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 by his joint trustee or successor in the same manner as though the same had been com- menced or was being defended by such joint trustee alone or bv such successor. Analogous provlalona: In V. S.: Act of 1867, !§ 13, 14, 16, 18, R. 8., §§ 5036, 5039, 5042, 6048. CroM referenoea: To the law: §§ 8, 23, 44, 47. I. NO ABATEMENT ON DEATH OR REMOVAL OF TRUSTEE. This is but a re-enactment of provisions found in the former law.^ Prior to that law, it had been held that such cause of action vested in his personal representatives;* also that, if the assignee was defendant, the right of action abated.* It was to meet these rulings that the section was inserted in the present law. It applies to all suits or proceedings, and as well if the trustee is a defendant as if a plaintiff. It applies also no matter how the trustee's re- moval is brought about, though it is a question whether it would if he resigned. In that case, the court could doubtless order a resigning trustee to continue such a suit. Removals of trustees are discussed elsewhere;* likewise the effect of the death of one of three trustees.' 1. Act of 1867, i 16, R. S., § 5048. 3. Hall v. Gushing, 8 Mms. 521. 2. Richards v. Maryland Ins. Co., 4. See under § 44. 8 Cranch, 84. 5. Id.j also Bankr. Act, § 47-b. 686 SECTION FORTY-SEVEN. DUTIES OF TRUSTEES. § 47. Duties of Trustees. — 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) col- lect 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 bankruptcy court, shall he deemed vested with all the rights, remedies, and powers of a creditor holding a lien hy legal or equitable proceedings thereon; and also, as to all property not in the custody of the bankruptcy court, shall be deemed vested with all the rights, remedies and powers of a judgment creditor holding an execution duly returned unsatisfied.* (3) Deposit all money received by them in one of the designated depositories; (4) disburse money only by check or draft on the depositories in which it has been deposited; (5) furnish such information concerning the estates of which they are trustees and their administration as may be requested by parties in interest; (6) keep regular accounts showing all amounts received and from what sources and all amounts expended and on what accounts; (7) lay before the final meeting of the creditors detailed statements of the administration of the estates; (8) make final reports and file final accounts with the courts fifteen days before the days fixed for the final meetings of the creditors; (9) pay divi- dends within ten days after they are declared by the referees; (10) report to the courts, in writing, the condition of the estates and the amounts of money on hand, and such other details as may be required by the courts, within the first month after their appoint- ment and every two months thereafter, unless otherwise ordered by the courts; and (11) set apart the bankrupt's exemptions and report the items and estimated value thereof to the court as soon as practicable after their appointment. b. Whenever three trustees have been appointed for an estate, the concurrence of at least two of them shall be necessary to the validity of their every act concerning the administration of the estate. c. The trustee shall, within thirty days after the adjudication, file a certified copy of the decree of adjudication in the office where conveyances of real estates are recorded in every county where the bankrupt owns real estate not exempt from execution, and pay the fee for such filing, and he shall receive a compensation of fifty cents for each copy so filed, which, together with the filing fee, shall be paid out of the estate of the bankrupt as a part of the cost and disbursements of the proceedings.! * Amendments of 1910 in italics. f Amendatory act of 1908 added subsection c. 537 538 The Law and Peactioe in Bankeuptct, SynopBis of Section. [§ 47. AnalOKons pTovialoiu: In U. S.: As to deposits of money, Act of 1867, § 17, R. S., § 6059; Act of 1841, § 9; Act of 1800, § 54; As to account- ing for interest, R. S., § 5062B; As to submission of accounts. Act of 1867, § 28, R. S., § 5062B; As to setting apart exemptions. Act of 1867, General Order XIX; Also generally to many sections, prescribing other duties. In Eng.: Generally to different sections prescribing duties. Cross references: Tothelaw: §§ 1(26), 2(7) (8) (11), 6, U-b-c-d, 21-e, 23-a-b, 26, 27, 29-a, 38(5), 39-a(l), 49, 55-f, 57-i-m, 60-d, 61, 62, 64, 65, 66, 67, 68, 70. To the General Orders: XVII, XVIII, XXI, XXVIII. To the Forms: Nos. 40-51. SYNOPSIS OF SECTION. DUTIES OF TRUSTEES. I. Scope of Section. a. In general. II. Collection of Assets. a. In general. b. Suits by trustees. c. Property vested in trustees. d. Sales by tnistees. e. Employment of attorneys. f. Rapidity in administration, g. Accounting for interest. h. Deposits. III. Accounts and Reports. a. In general. b. Practice. IV. Distribution. a. In general. b. Expenses of administration. c. Payment of priorities. d. Dividends. e. Method of payment. f. Trustee's supplemental report. V. Miscellaneous Duties. a. Setting apart exemptions. b. Furnishing information. c. Other duties. VI. Concurrence of Two of Three Trustees Necessary. VII. Trustee to Record Certified Copy of Adjudication. Duties of Trustees. 539 § 47-a ( 2 ) ( 3 ) .] Collection of Assets. I. SCOPE OF SECTION. a. In general. — The duties of the trustee enumerated in this sec- tion are not exclusive. Other duties are put on the trustee in many sections scattered through the law.* Further additional duties are prescribed in General Order XVII, Besides, the judge or referee, or the creditors by resolution, may direct still other things' to be done by the trustee, provided they are within the customary func- tions of such officers. While the trustee is technically at aiU times under the direction of the court, he should be ready to act upon his own responsibility and intelligence in the administration of the esitate, resorting to -the court for advice and instructions where matters of a complicated nature and of great importance have arisen.* II. COI.LECTION OT ASSETS. a. In general.— Subdivisions 3 and 3 of this section make it the duty of the trustee to collect the assets of the bankrupt, reduce them to money, and deposit the proceeds in designated depositories. The amendatory act of 1910 amended subdivision 2 by conferring upon the trustee certain rights of creditors in respect to property belonging to the bankrupt estate, and making him more distinctively the representa- tive of the creditor as to assets within and without the custody of the court. By subdivision 1 he must pay over and account for interest on the assets. Vested with the title of the bankrupt,' he is also the repre- sentative of the creditors,*" and should deal fairly between them and the bankrupt.* He is, further, a quasi oflScer of the court." As in the case of other court officers, payments made to him under a mistake of law are recoverable.*" He must proceed to " collect and reduce to money the 1. See " CrosB-References," ante. matters between creditors and bank- 2. In re Baber (D. C, Tenn.), 9 rupt he should stand indiflFerent. His Am. B. R. 406, 119 Fed. 520; In re sole care should be to make the moat Baird (D. C, Pa.), 7 Am. B. R. 448, out of the estate, and that primarily 112 Fed. 960. in the interest of the creditors. When 3. Compare Bankr. Act, § 70-a. he goes beyond that, and seeks to aid 3a. In re Gray, 3 Am. B. R. 647, the bankrupt at the expense of the 47 N. Y. App. Div. 554; In re Grif- creditors, and by concealment or by fith, I N. B. N. 546; In re Kindt, 2 false representations induces creditors N. B. N. Rep. 369. Compare Barker to act contrary to their interest, he V. Bankers' Ass'n, Fed. Cas. 986; In violates his duty, and should be re- re Rockford, R. I. & St. L. R. Co., Fed. moved." Cas. 11,978; Crooks v. Stuart, 7 Fed. Representative of creditors. — 800; also Eysier v. Gaff, 91 U. S. "By the clearest implication," says 521; Glenny v. Langdon, 98 U. S. 20; Judge MeCormick, "he represents all Dudley v. Easton, 104 U. S. 99; the creditors, and as such representa- Batchelder & Lincoln Co. v. Whit- tive has an interest in the just ad- more (C. C. A., Ist Cir.), 10 Am. B. ministration of the estate which be- R. 641, 122 Fed. 355, where it was longs to the creditors." Atkins v. held that the trustee represents those Wilcox (C. C. A., 5th Cir.), 5 Am. B. who were creditors at the time the R. 313, 316, 105 Fed. 595. petition was filed. 5. In re Ryan, Fed. Cas. 12,182; 4. In re Wrisley Co. (C. C. A., 7th United States v. Dewey, 39 Fed. 251; Cir ) 13 Am. B. R. 193, 196, 133 Fed. McLean v. Mayo (D. C, N. Car.), 7 388, 390, the court said: "In all Am. B. R. 115, U3 Fed 106 ' ' 5a. Carpenter v. Southworth (C. C. A., 2d Cir.), 21 Am. B. R. 390, 165 Fed. 428. 540 The Law and Practice in Bankeuptcy. Suits by Trustees. [§ 47 -a (2) (8) property . . . under the direction of the court, and close up the estate as expeditiously as is compatible with the best interests of the parties." ° This he may do by, for instance, collecting accounts, even by suit or securing the necessary orders to compel the bankrupt to deliver over property belonging to the bankrupt estate,'" or selling goods or lands,' or proceeding to set aside fraudulent transfers * or preferential liens." He does not act judicially, but only admin- istratively, and if he refuses to oppose a claim or to move for its re- consideration when he ought to do so, he may be compelled to act or to i permit the objecting creditors to act in his name." As a rule, however, save in the common and simpler steps of administration, he should consult the wishes of the creditors; in many matters the law requires him to do this.*' The creditors usually decide. First meetings should be continued and kept alive for this purpose. The referee in charge may, in extreme cases disapprove. Such action is, however, not usual. b. Suits by trustees — A trustee's duty as to suits already pend- ing in the name of or against the bankrupt has already been con- sidered.'^ So has the time limitation on suits brought by or against him.'' The trustee only should sue." Before doing so, he ought to submit the reasons lor the suit to the creditors and secure an order, based on their action, from the referee.'" Such consent seems not to be necessary when a suit is brought against him.'* How 6. In re Stein (D. C, Ind.), 1 Am. 9 Am. B. R. 406, 119 Fed. 620. B. R. 662, 94 Fed. 124; In re Howard 12. See under § 11. (D. C, Cal.), 12 Am. B. R. 462, 130 13. Id. I'ed. 1,004. 14. Id. Compare, also, for when Trustees in bankruptcy, like suit should not be brought, Reade v. executors and administrators, are Waterhouse, 52 N. Y. 587; Dulcher bound to use due diligence to get in v. Bank, Fed. Cas. 4,203. See, also, the assets of the estate — to secure. In re Baird (D. C, Pa.), 7 Am. B. possession of the tangible property | R. 448, 112 Fed. 960, where referee and collect the debts. If they fail in i erroneously refused to direct trustee their duty they may be charged in I to sue until the moving creditor their accounts with the value of assets I should indemnify the estate against thereby lost. If they take no steps \expense of a possibly unsuccessful to secure property or collect debts, of controversy. which they have 'knowledge, they are The rlgkt to sue for property presumptively negligent. Matter of fraudulently transferred is vested Reinboth (C. C. A., 2d Cir.), 19 Am. alone in the trustee, and the failure B. R. 15, 157 Fed. 672. of the trustee to bring such suit does 6a. In re Baum (C. C. A., 8th not transfer the right to sue to a Cir.), 22 Am. B. R. 295, 169 Fed. creditor. Ruhl-Koblegard Co. v. 410. Gillespie, 22 Am. B. R. 643, 61 W. 7. Compare Bankr. Act, | 70-b; Va. 554, 56 S. E. 898. General Order XVIII. 15. In re Mersman (Ref., N. Y.), 8. See, also, for instance, Barker 7 Am. B. R. 46. But compare Chism V. Franklin, 8 Am. B. R. 468, 37 v. Bank (Sup. Ct., Miss.), 5 Am. B. Misc. 292, 75 N. Y. Supp. 305, and R. 56. See, also, In re McCallum (D. under § 60. C, Pa.), 7 Am. B. R. 696, 113 Fed. 9. See under § 67. 393; In re Mallory, Fed. Cas. 8,990; 10. In re Stern (C. C. A., 8th Traders' Bank v. Campbell, 14 Wall. Cir.), 16 Am. B. R. 510, 144 Fed. 87. 956. 16. Compare In re Kelly Dry 11. Compare Bankr. Act, §f 11-b-c, Goods Co. (D. C, Wis,), 4 Am. B. R. 26, etc.; In re Baber (D. C, Tenn.), 528, 102 Fed. 747. Duties of Tkustees. 541 § 47-a (3) (8).] Sales by Trustees. far the question at issue shall be gone into on such a preliminaiy' hearing is discretionary with the referee. He should at least be sure that there is a probable cause of action.^^ It would seem also that the proposed defendant, if a creditor and interested in the fund,\ may appear in opposition to a motion for permission to sue.^* The trustee being required to collect and reduce to money the property of the estate would seem sufficient to justify a suit by the trustee, even without the order or leave of the court or referee ; ^* although as above indicated the better practice is to secure an order granting the desired leave. If a suit is ordered, it should be in the name of " * John Doe,' as trustee of ' Richard Roe,' a bankrupt." Whether in no-asset cases security may be demanded by the proposed defendant is for the court in which the suit is brought to determine.^" If an agreement be made between a party and a receiver of the bankrupt's property appointed in a State court, the trustee may not sue on such agree- ment.^^ Costs may be allowed defendants payable out of the funds in the hands of the trustee, where the conditions warrant.^^^ Where suits by a trustee shall be brought has already been considered.^^ Section sixty should be consulted for suits to avoid preferences; section sixty-seven for suits to annul preferential or fraudulent liens ; and section seventy for suits under State laws to avoid fraudulent transfers. The diverse character of the suits which may be brought by trustees is suggested by the eases in the foot-note."' c. Property vested in trustees. -The property which constitutes the estate of the bankrupt, and vests in the trustee, is considered fully in the discussion under section seventy. The amendatory act of 1910 amended subdivision 3 of subdivision a by providing in effect that the trustee should have the same title to property in the custody of the court that a creditor, holding an execution or other lien by legal or equitable proceedings levied against that property, would have under a state law ; and, as to property not in the custody of the court, that the trustee should stand in the position of a judgment creditor holding an execution returned unsatisfied, thus entitling him to proceed 17. In re Phelps (Ref., N. Y. ), 3 21. Love v. Export Storage Co. (C. Am. B. R. 396. C. A., 6th Cir.), 16 Am. B. R. 171, 18. In re Mersman (Ref., N. Y.), 197, 143 Fed. 1. 7 Am. B. R. 46, in which Referee 21a. Caten v. Eagle B. & L. Assn. Hotchkiss held that a secured credi- (D. C., Pa.), 23 Am. B. R. 130, 177 tor whose security is the proposed Fed. 996. object of attack, but who is also an 22. Bankr. Act, § 23. unsecured creditor, may object to the 23. Mather v. Coe (D. C, Ohio), granting of the trustee's application; 1 Am. B. R. 504, 92 Fed. 333; In re but his objection should be given Brodbine (D. C., Mass.), 2 Am. B. R. little weight unless clearly for the 53, 93 Fed. 643; In re Baudouine (D. benefit of all the creditors. C, N. Y.), 3 Am. B. R. 55, 96 Fed. 19. Traders Ins. Co. v. Mann, 11 536; In re Cohn (D. C, N. Y.), 3 Am. B. R. 269, 118 Ga. 381; Chism Am. B. R. 421, 98 Fed. 75; In re V. Friars Point Bank, 5 Am. B. R. Crystal Springs Water Co. (D. C, 56, 27 So. 610; Callahan v. Israel, Vt.), 3 Am. B. R. 194, 96 Fed. 945' 186 Mass. 383, 71 N. E. 812. In re Gerdes (D. C, Ohio), 4 Am. B. 20. Where the suit is on a cause R 346, 102 Fed. 318 ; Barker v. of action antedating the adjudication, Franklin 8 Am. B. R. 468, 37 Misc. security for costs will be required in 292, 75 N. Y. Supp. 305; Munroe v. New York. Joseph v. Makley, 8 Am. Bushnell (Sup. Ct, Mich.), 22 Am B. R. 18, 73 N. Y. App. Div. 156. B. R. 587, 122 N. W. 508. 542 The Law and Peactice in Bankruptcy. Accounts and Reports. [§ 48-a (6) (7) (8). against the assets in the same manner as a judgment creditor.^"* There can be no doubt as to the beneficial effect of this amendment. The formers of the amendatory act could more logically have added this provsion to section seventy. d. Sales by trustees. — The duty of trustees concerning, and the practice on, sales of assets of the estate is also considered under section seventy. In the appointment of an autcioneer the trustee is to be guided by the court; the court may disapprove the selection of an auctioneer made by the trustee, and direct him to select another designated by the court. ^* e. Employment of attorneys, — This, too, is considered else- virhere.^° An attorney may be needed to aid the trustee in the col- lection of the property of the estate. It would be the trustee's duty in such a case to employ such attorney. f. Rapidity in administration. — This is required not only by subdivision 2 of this subsection, but by other provisions found in the law and the General Orders.^" g. Accounting for interest.— Subdivision 1 seems unnecessary. The former statute permitted a temporary investment of the funds where it appeared that distribution might be delayed by litiga- tion.^' The court or referee could doubtless order this now. Thus, til ere might be some interest earned. The frequency with whirl i dividends must be paid,''" however, makes any accumulation of in- terest unlikely. The trustee should, if possible, arrange with the official depository for interest. In any event, all interest received by a trustee must be accounted for. h. Deposits. — Subdivision 3 of this section makes it the duty of the trustee to deposit all the money received by him in one of the designated depositories and General Order XXIX prescribes the method of withdrawal. These provisions of the act and the General Order are mandatory in form and were designed to insure the safety of the funds, rather than an increment by way of interest while they were idle. But it seems that the consent of all the parties interested may justify a departure from the prescribed rules.'"' III. ACCOUNTS AND BEPOBXS. a. In general. — Subdivision 6, 7, 8 and 10 relate to accounts and reports which the trustee is required to keep and submit. These subdivisions seem redundant. If a trustee follows them literally, he will spend much of his time in keeping accounts and making reports. Stripped of surplusage and read in with General 23a. See House Committee Report 27. R. S., § 5060. on Amendatory Act of 1910. 28. Bankr. Act, § 65-b, as amended, 24. In re Beiijamin (C. C. A., 2d seems a partial reversal of this policy Cir.), 14 Am. B. R. 481, 136 Fed. of the original law. 175. 29- See Bankr. Act, S 63. Huttig 25. See under § 62. Mdg. Co. v. Edwards (C. C. A., 8th 26. Compare Bankr. Act, §§ 47-a Cir.), 20 Am. B. R. 349, 354, 160 Fed. (10), 57-n, 65-b. 619. Duties of Teustees. 543 i47-a(4).] Disbursements by Trustee. Order XVII, the trustee is required (1) generally, to keep regular accounts of receipts and disbursements, and, specially (2) to pre- pare and file an inventory of the estate " immediately upon enter- ing upon his duties," (3) to report the condition of the estate within the first month after his appointment, and every two months thereafter, unless excused by the referee, and (4) to make and file a final report and account at least fifteen days before the final meeting. All thia in addition to the twenty-day report on exemp- tions.^** But, in effect, the " inventory " may be but a summary of the appraisers' report ;** and the bi-monthly reports required by subdivision (10) are rarely made. The purpose — that the trustee shall be always under the eye of the creditors and the referee — is apparent. So long as this is recognized, a trustee will, it is thought, perform his duty satisfactorily, even though he does not always have an accountant at his elbow. b. Practice. — The difference between an account and a report should be noted; an account should deal only in dollars and cents;** a report should be a running summary of the details of administration. The trustee'^ report that there are no assets seems also to be called a " return."®' The word " statement " is also used of a report where there are no assets. Whatever these papers be called, they should conform as far as possible to the official forms, should always be verified by the trustee, and, if reciting disbursements, usually be accompanied by vouchers. They should be filed with the referee, if the case has been referred. They should also be audited by the referee.'* This seems, how- ever, a precautionary provision, rather than a requirement. Ac- counts are usually submitted to creditors at meetings cailled for that purpose,'® and, if passed by them, are approved. rv. DISTRIBUTION. a. In general. — Disbursements must be made by check or draft as directed in subdivision 4. Dividends are to be paid within ten days after they are deolared as directed in subdivision 9. Some authority must be shown for aJl disbursements, whether in divi- dends or otherwise.'* 30. General Order XVII. Baginsky (Kef., La.), 2 Am. B. R. 31. Bankr. Act, see § 70-b, Form 243. No. 13. 35- See Bankr. Act, § 58-a(6). 32. Forms Nos. 49 and 50. 36. In " Supplementary Forms," 33. Form No. 48. post, will be found a final order of 34. General Order XVII; In re distribution, including a dividend 544 The Law and Peactioe in Bankruptcy. Dividends; Method of Payment. [S47-a(4). b. Expenses of administration. — What a trustee may be allowed for expenses of administration is considered elsewhere.*^ c. Payment of priorities. — So also of his duty as to those per- sons entitled by the law to priority of payment.** d. Dividends. — Likewise of dividends to creditors who have proved their claims.*® The only provision here is that dividends must be paid within ten days after they are declared. e. Method of payment. — Subdivision 4 and General Order XXIX should be read together. No moneys can be properly dia- bursed by a trustee save " by check or draft on the depository." The provisions of the statute and general order should be strictly followed,*" and where payments have been made without com- pliance therewith they have been disallowed.*^ Thus, if deposited in the district court, money can be withdrawn only by a check or warrant, signed by the clerk and oounteraigned by the judge, or by " a referee designated for that purpose."** The quoted words are usually availed of in composition cases.** While, if the money is deposited by the trus.tee, the referee must countersign each check. Payments should not be made upon orders drawn by the referee.** The requirements of the General Order as to stub entries, numbering and the like, should be observed. Checks should always run to and be by the trustee mailed or delivered to the creditors, unless the power of attorney specifically authorizes the attorneys to receive and receipt therefor.*^ In disbursing divi- dends, a combination check and receipt, the latter attached to the check but marked off from it by a perforated line, and containing a statement that the check will not be paid on presentation unless the receipt is filled out and signed, has been found convenient.** Trustees will also find it time saving to recite on the face of the check the name and number of the estate, whether it is a first, second, or final dividend, and the rate per cent.*^ To this end, sheet, the use of which, instead of N. Car.), 11 Am. B. R. 784, 127 Fed. Form No. 51 is suggested. In re 968. And see In re Hoyt {D. C, N. Rude (U C, Ky.), 4 Am. B. R. C), 9 Am. B. R. 574, 119 Fed. 987. 319, 101 Fed. 805; In re Hoyt & Mit- 42. General Order XXIX. chell (D. C, N. Car.), 11 Am. B. R. 43. Compare under Section Twelve. 784, 127 Fed. 968. 44. In re Cobb (D. C, N. C), 7 37. Section Sixty- two. Am. B. R. 202, 112 Fed. 655. 38. Section Sixty-four. 45. See Form No. 20; Form No. 39. Section Sixty-five. 21 is not enough. 40. In re Cobb (D. C, N. Car.), 7 4&. See " Supplemenitary Forms," Am. B. R. 202, 112 Fed. 655. post. 41. In re Hoyt &, Mitchell (D. C, 47. See Rule 14(10) in the dis- Duties of Trustees. 545 § 47-a(ll).] Setting Apart Exemptions ; Information. dividend checks, if numerous, should be specially printed; if not, the use of rubber stamps containing the suggested information will be found inexpensive and effective. But checks should not be signed or countersigned by such a stamp. f. Trustee's supplemental report.— Though not required, safety seems to suggest that the trustee file a supplemental report after the distribution is complete. This should show every allowance or expense paid and every individual disbursed; and vouchers, signed by the creditors and others and numbered, if possible, to corre- spond to the check numbers, or attached to the returned checks, should be filed at the same time. Not until such report is filed should the trustee be discharged.*' V. MISCEI.I.ANEOVS DUTIES. a. Setting apart exemptions.— Subdivision 11 of this section requires the trustee to set apart and report the value of the bank- rupt's exemptions. In this connection section six should also be consulted. Courts of bankruptcy have power to " determine all claims of bankrupts to their exemptions." *® Preliminary to this, the trustee must "set apart the bankrupt's exemptions and report on the items and estimated value thereof." He should thereupon surrender possession of such property to the bankrupt.*'^ This should be done within twenty days after the trustee receives notice of his appointment.^" Thus, the trustee acts in a quasi-judicial capacity in the first instance, and, if there is no exception taken, the referee usually approves. But any creditor — it seems not the bankrupt — may take exception to the trustee's action.'' If exception is taken, the practice is defined in General Order XVII. This whole subject was also regulated by a general order under the former law.""" b. furnishing information. — The trustee's duty here is similar to the referee's.^' He is also liable to the same penalties.^* This duty is akin to that of frequent accountings, the latter seeming for the whole body of creditors, the former for any individual who may request. Any person interested in the bankrupt estate has a right trict of Western New York, 1 N. B. Forms,'' post. As to the right of a N. 115. trustee to except to his own formal 48. Compare, however, to the con- administrative act setting apart an trary, Form No. 51. exemption claimed by the bankrupt, 49. Bankr. Act, § 2(11). see In re Rice (D. C, Pa.), 21 Am. 49a. In re Soper (D. C, Neb.), B. R. 202, 164 Fed. 514. 22 Am. B. R. 868, 173 Fed. 116. In 52. Act of 1867, General Order re Goodman (C. C. A., 5th Cir.), 23 XIX. Am. B. E. 504, 174 Fed. 644. 53. Bankr. Act, § 39-a(3). 50. General Order XVII, Form 54. Bankr. Act, § 29-c(3). See No. 47. also § 29-a. 51. For forms, see " Supplementary S4B The Law and Pbacttoe in E>Ankedptcy. Two or Three Trustees; Certified Ctfpy of Adjudication. [§ 47-b-o. to an inspection of the accounts and papers of the trustee,®" and to any information in respect to the as.tate which the trustee can impart.^® It is not thought, however, that, in answering inquiries by mail, the trustee can use the " official business " envelope, as can the referee. Cases under the former law are still in point.'*'' c. Other duties.- — The trustee also has other miscellaneous duties, as, for instance, the examination and correction of proofs of debt,^* attendance on examinations of the bankrupt, and to aslsist the creditors and the referee generally in the reialization and distribution of assets. VI. CONCURRENCE OF TWO OF THREE TRUSTEES NECES- SARY. Three trustees are rarely appointed. If they are, a majority must always concur. This seems a variance from the rule that a trust to two or more is vested in all and that all must, therefore, join in exercising it. The law being mandatory in requiring either one or three trustees,^* it seems doubtful whether, on the death of one, the su-rvivors can do anything until the vacancy is filled in the regular way.®" Vn. TRUSTEE TO RECORD CERTIFIED COPY OF ADJUDICA- TION. This subsection was added in 1903. Section 21-e seems to have been overlooked. There can be no doubt, however, as to the mean- ing of the new subsection. The trustee is bound within the time limited to file, which doubtless means also to record, in all counties where the bankrupt has real estate, a certified copy of the decree of adjudication. It is unfortunate that this filing is not in words given the effect of actual notice. Thus the recording of the certi- fied copy of the order approving the trustee's bond is still essen- tial.®^ Careful trustees will see that both these copies are recorded. This new duty is put only on trustees in proceedings begun after February 5, 1903.®^ 55. Bankr. Act, § 49, post. 59. Bankr. Act, § 44. 56. Matter of Peterson (D. C, 60. Id. But see Bankr. Act, § 46. Minn.), 10 Am. B. K. 355. 61. See in Section Twenty-one of 57. In re Perkins, Fed. Caa. 10,982 ; this work. In re Blaisd'ell, . Fed. Cas. 1,488. 62. See "Supplementary Section to 58. Compare Section Fifty-seven. Amendatory Act," post. SECTION FOTRTY-EIGHT. COMPENSATION OF TRUSTEES, RECEIVERS AND MARSHALS. § 48. Compensation of Trustees. — a. Trustees shall receive for their services, payable after they are rendered, a fee of five 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 such commissions on all moneys disbursed or turned over to any person, including lienholders,* by them* as may be alllowed by the courts, not to exceed six* per centum on the first five hundred* dollars or less, four* per centum on moneys in excess of five hundred dollars and less than fifteen hundred dollars, two per centum on moneys in excess of fifteen hundred dollars and less than ten thou- sand dollars,* and one per centum on moneys in excess of ten thousand dollars. And in case of the confirmation of a composition after the trustee has qualified the court may allow him, as com- pensation, not to exceed one-half of one per centum of the amount to be paid the creditors on such composition. &. In the event of an estate being administered by three trustees instead of one trustee or by successive trustees, the court shall apportion the fees and commissions between them according to the services actually rendered, so that there shall not be paid to trus- tees for the administering of any estate a greater amount than one trustee would be entitled to. c. The court may, in its discretion, withhold all compensation from any trustee who has been removed for cause. d. Receivers or marshals appointed pursuant to section two, sub- division three, of this Act shall receive for their services, payable after they are rendered compensation by way of commissions upon the moneys disbursed or turned over to any person, including lienholders, by them, and also upon the moneys turned over by them or afterwards realized by the trustees from, property turned over in hirid by them to the trustees, as the court may allow, not to exceed six per centum on the first five hundred dollars or less,' four per centum on moneys in excess of five hundred dollars and less than one thousand five hundred dollars, two per centum on moneys in excess of one thbus(irtd''fi'Oe hundred dollars and less than ten thousand dollars, and one per centum on moneys in excess of ten thousand dollars: Provided, That in case of the confirmation of a composition such commissions shall 547 Compensation of Trustees. 547a 48.] Compensation of Trustees. not exceed one-half of one per centum of the amount to be paid creditors on such composition: Provided further. That when the receiver or marshal acts as a mere custodian and does not carry on the business of the bankrupt as provided in clause five of section two of this Act, he shall not receive nor be allowed in any form or guise more than two per centum on the first thousand dollars or less, and one-half of one per centum on all above one thousand dollars on moneys dis- bursed by him or turned over by him to the trustee and on moneys subsequently realized from property turned over by him in hind to the trustee: Provided further, That before the allowance of compensa- tion notice of application therefor, specifying the amount asked, shall be given to creditors in the manner indicated in section fifty-eight of this Act. e. Where the business is conducted by trustees, marshals, or receivers, as provided in clause five of section two of this Act, the court may allow such officers additional compensation for such services by way of commissions upon the moneys disbursed or turned over to any person, including lienholders, by them, and, in cases of receivers or marshals, also upon the moneys turned over by them or afterwards realised by the trustees from property turned over in kind by them to the trustees; such commissions not to exceed six per centum on the first five hundred dollars or less, four per centum on moneys in excess of five hundred dollars and less than one thousand five hundred dollars, two per centum on moneys in excess of one thousand five hundred dollars and less than ten thousand dollars, and one per centum on moneys in excess of ten thousand dollars: Provided, That in case of the confirmation of a composition such commissions shall not exceed one-half of one per centum of the amount to be paid creditors on such composition: Provided further. That before the allowance of com- pensation notice of application therefor, specifying the amount asked, shall be given to creditors in the manner indicated in section fifty- eight of this Act. Analogous proTiaioss: Ib U. S.: Act of 1867, §§ 28, 47, R. S., §§ 6099, 5124, 5127, 5127A; Act of 1841, § 6; Act of 1800, § 29. In Eng.! Act Of 1883, § 72; Act of 1890, § 15; General Rules 125, 305, 306. Cross references: To the laiw: §§ 2(5), 40, 51(2), 72. To the General Orders: XXXV(3). * Amendment of 1910 in italics. 548 The Law and Pbactioe in Bankhuptct. Amount of Compensation. [§ 48-a SYNOPSIS OF SECTION COMPENSATION OF TRUSTEES. I. Compensation of Trustees. a. Comparative legislation. b. Amount of compensation. c. Amount under original act. d. Pauper cases. e. Effect of amendaiory act of 190S and 1910. (1) In genekal. (2) Commissions on disbuesements. (3) Hate of commission. (4) Commission in case of composition. (5) Additional compensation. (6) Allowance bt court. II. Apportioning Compensation Between Several Trustees. III. Withholding Compensation When Trustee Removed. I. COMPENSATION OF TRUSTEES. a. Comparative legislation. — In England, the fees of tnisteea are fixed by resolution of the creditors, subject to a review, under certain conditions, by the board of trade.^ Prior to the pa-esent law, assignees' fees in this country have been " in the discretion of the court."^ The amendatory act of 1874 reduced the customary fees then paid by one-half.^ The present method is doubtless an adaptation of the State siystems for compensating executors, ad- ministrators, receivers, and the like. The changes made by the amendatory act of 1903 are thought to strike a fair mean between the loose methods of the old law and the niggardly rigidity of the present statute as originally passed.* b. Amount of compensation. — Three general considerations as to trustees' compensation should be noted: (1) that fixed by this section is " full compensation for their services," [save that which may be allowed under § 2(5)]," as now amended; (2) the exact 1. English Act of 1883, § 72; Gen- 4. Comjpare ipp. 23-25, Report of eral Rules 305, 306. Ex. Com. of Nat. Assn. of Referees in 2. See "Analogous Provisions,'' Bankruptcy, March, 1900. antt. 5. See pp. 36, 37, ante, and G«n- 3. R. S., ! 5127-A. eral Order XXXV (3). COMPEJNSATION OF TBTJgTEJESI. 5,49 S48-a.] Amount Un^ejr, Q»gina4 4vet(; Pauper Cases. percentage, not greater than the prescribed upward limit, is fixed by the court, there being in this a difference between the fees of referees and tho^Q^ of: tru^tees^® and (3) no compensation is pay- able until after the services are rendered, i &•, when the. adminiej tion is closed. The compensation is of two kinds, a filing fee and certain commissions, fixed and determined by the amounts which pass through the hands of the trustee. c. Amount luider original act. — Before the amendatory act of 1903 the commissions to be paid to trustees could only be reckoned on " sums to be paid as dividends and commissions,'" and the rate was but about half that customarily allowed corresponding ofiicers even fifty years ago.* The result was that few competent men would serve as trustee the second time, thus crippling the adminis- tration of the law. Efforts, were made to meet th$. difficulty in various ways, as by appointing attorneys to be trustees and allow- ing them compensation for legal services as an expense of admin- istration,* by appointing attorneys for trustees- in asset cases, with a tacit understanding that the attorneys' allowance should be shared with the trustee, or by allowing trustees extra compensation as agents of the creditors when they did more than perform the regular duties required by the law.^" Each of these methods was o£ doubtful, legality and subject to abuse. Since § 72, ad.ded by the ajnendatory act, they are no longer possible, d. Pauper cases. — In certain cases, the trustee, may serve with- out pay.^^ It has been thought, however, that, unlike the referee, 6. See Bankr. Act, § 40-a. 8. Compare Kule 59, So. District 7. In re Utt (C. C. A., 7th Cir.), of N. Y., under law of 1841, Owen on 5 Am. B. K 383, 105 Fed. 754; In re. Bankruptcy, Appendix, p. 13. Smith (U. C, N, C), 5 Am. B. R. 9. In re Mitchell (Ref., Pa.), 1 559, 108 Fed. 39; In re Kaiser (D. C, Am. B. R. 687. Contra, In re Mul- Mont), 8 Am. B. R. 108, 112 Fed. daur. Fed. 9,905. 955; In re Mammoth, etc., Co. (D. C, 10. In re Plummer (Ref., N. Y.)., Ark.), 8 Am. B. R. 651, 116 Fed. 3 Am. B. R. 320; In re Dimm 731 ; In re Goldville Mfg. Cp. (D. C, & Co. (D. C, Pa.), 17 Am. S. C), 10 Am. B. R., 552, 123 Fed. B. R. 110, 146 Fed. 731, per- 579. Contra, In re Barber (D. C, mitting an allowance for the trustee's Mirn.), 3 Am. Bi R. 306, 97 Fed. 547. personal services rendered in conneq- Under the. act prior to the, amendjnent tion with sales of the goods belong- it was held that trustees were entitled ing to the estate. Contra, In re Ep- to commissions on funds arising from stein (D. C, Ark.), 6 Am. B. R. 191, sal.es of mortgaged property and dis- 109 Fed. 878. See also In re Mam- tributable to. mortgage creditors. In moth, etc., Co. (D. C, Ark.), 8 Am. re Muhlhauser (Ref,, Ohio), 9 Am. B. R. 651, 116 Fed. 731. n. R. 80. !!• See Bankr. Act, § 51-a(2)k 5&P The Law and Peactic in Bankrtiptcy. Effect of Amendatory Act of 1903 and 1910. [§ 48-a. a, trustee cannot, be compelled to serve^ in a pauper, cas^, bu,t. i|^ th,e crediiors desire him to do^so, they must furnish his fee."^^ e. Effe<-t of amendatory acts of 1903 and 1910.— (1) In gbn- EEAj,. — The amendatory act of 1903 has modi'^ed'tKe original law as to trustees' fees in four particulars, all iniendeii to make then; more adequate." The charges, of course, affect oijly cases begun on or after February 5, 1903." ""' (2) Commissions on disbursements.— Commissions are to be computed on " all moneys disbursed or turned over to any person, including, lien holders " by them as may be allowed by the cou.rts." This presupposes th£^t the money disbursed belonged to the estate of tlje bankriipt and was rightfully in the hands of the trustee for disbursement. Such funds may come into the possession of the court for this purpose in two ways: (1) By operation of law, and (2) by the consent or acquiespenep of those interested, therein.^' Tlje words "on ^11 moneys disbursed" are substantially the same as " received. an years after the alleged breach of the bond. m. Suits upon trustees' bonds shall not be brought subsequent to two years after the estate has been closed. Analogons provisions: In U. S.: As to registers' bonds, Act of 1867, § 3, E. S., § 4995; As to assignees' bonds, Act of 1867, § 13, R. S., § 5036; Act of 1841, § 9. In Eug.: As to trustees, § 21(2) ; General Rule 342. Cross references: To the law: §§ 21-e, 25-c. To the General Orders: General Order XVI. To the Forms: Nos. 17, 24, 25, 26. SYNOPSIS OF SEC 1. Bonds of Referees and Trustees. a. b. c. d. e. f. Of referees. Of trustees. Sureties, etc. Where filed. Suits on honds. Effect of failure to give bonds. I. BONDS OF BEFEREES AND TBTJSTEES. a. Of referees. — The referee, though a judicial officer, is re- quired to give a bond. So was the assignee linder the former law.* The amount, the sufficiendy of the sureties, and the time within which the bond must be filed are ustialiy fixed in the order of 1. Act of 1867, § 3, R. S., I 4995. Bonds of Referees and Teustees. ^^ 150.] Of Trustees; Sureties on 'Bond's. appointment. The condition is "the faithful performance 6f their official duties." The amount cannot be larger than five thousand dollars. A referee ciannbt act as such until h'e has filed his bond. Form No. 17 should be used. There are no adjudicated cases under either law. b. Of trustees. — ^A trustee, too, must give a bond. This was not necessarily so under the former law; the judge might 'order the assignee to give a bond and, on the request in writing of a creditor, was required so to order.* Trustees' bonds must be given within ten days after appointment, or within five days additional if per- mitted by the court. This seems mandatory, but the practice of extending the time still further when no objection is made is quite general. Where the question of the trustee's failure to give a bond is raised in a State court, the presumption is that the trustee duly qualified by complying with the provisions of the statute relating to a bond.* The condition is the same as that in referee's bond. But the creditors, not the court, fix the amount of a trustee's bond. This should be done at the first meeting, immediately after the appointment of the trustee. If the creditors fail so to do, the judge or referee fixes it. The amount is specified in the notice of appoint- ment.* c. Sureties on bonds ; forms ^Where bonds are given by indi- viduals, there must be two sureties ; if by a bonding company, there need be but one.° The sureties, if individuals, must he worth " above their liabilities and exemptions," the penal sum mentioned in the bond. As to this, the " court shall require evidence." In actual practice, this is often done by adding affidavits of justifica- tion to the bond.® This is, of course, not required of bonding com- panies in good standing. Joint trustees should give joint and several bonds. The form of the bond is prescribed.'' But, as has been suggested elsewhere, Form No. 26, the order approving the bond, should usually be modified by inserting certain dates, that when a certified copy is recorded in a local registry office parties interested in titles passing from a bankrupt to his trustee, may have the same information that would be given had the bankrupt actually 2. Act of 1867, § 13, R. S., ! 5036. 5. In re Kalter (Ref., Pa.), 2 Am. Compare In re Sands, Fed. Cas. B. R. 590. Compare Act of August 12,301. 13, 1894. 3. Breckons v. Snyder, 15 Am. B. 6. See form ' in " Supplemciitaiy R. 112, 211 Pa. St. 176. Forms," post. 4. See General Order XVI and 7. Form No. 25. Form No. 24. 558 The Law and Peacticb in Bankruptcy. Suits or Bonds ; Failure to Give. [§ 50. executed a deed.* The practice of giving surety company bonds is now quite general. They are sufficient if the company is within the terms of subsection g. The liability of a surety extends to the ex- penditure of such funds of the bankrupt estate as becomes necessary as the immediate result of embezzlement by the trustee, but not in- cluding the premium of the bond of the new trustee.® d. Where filed. — Eeferees' and trustees' bonds must be filed and recorded in the office of the clerk. A trustee's bond is usually approved by the referee, whose duty it is forthwith to transmit the bond and the order of approval to the clerk. e. Suits on bonds.— Though the bond runs to the United States, a suit may be brought thereon "in the name of the United States for the use of any person injured." Leave of court is not necessary for the bringing of such an action in the name of the United States." No order need be made directing an absconding trustee to account, prior to bringing suit on his bond."» Such an action may be brought in a district court of the United States." The limitation on such suits is, however, short: as to referees, two years after the alleged breach; as to trustees, two years after the estate has been closed. The closing of an estate here is probably the date of the order dis- charging the trustee. Subsection i provides, however, that trustees shall not be liable, personally or on their bonds, for any penalties or forfeitures incurred by bankrupts under the act. The bond continues in force notwithstanding a recovery thereon for two years after the estate is closed." f. Effect of failure to give bonds,— Failure to give a bond within the time limited amounts to a declination of office and creates a vacancy. As above suggested, this requirement has not been very strictly construed. The time would probably run from the date of the receipt of the notice, rather than from the date of the order fixing the amount. 8. See § 21, ante. See, also, re- rel. Bond (C. C. A., 6th Cir.) 23 quirement of § 47-c wllicii waa added Am. B. R. 259, 174 Fed. 1. by the amendatory act of 1903. 11. United States ex rel. SchauflBer 9. Matter of Kajita (D. C, Ha- v. Union Surety & Guar. Co (DC waii), 13 Am. B. R. 19. N. Y.), 9 Am. B. R. 114, 118 Fed! 10. Alexander v. Union Surety & 482, containing form of complaint Guar. Co., 11 Am. B. R. 32, 89 N. Y. 12. Matter of Kajita (D. C., Ha- App. Div. 3. waii), 13 Am. B. R. 19. 10a. Scofleld v. United States ex SECTION FIFTY-ONE. DUTIES OF CI.ERKS. § 51. Duties of Clerks — a. Clerks shall reapectively (1) ao- count for, as for other fees received by them, the clerk's fee paid in each case and such other fees as may be received for certified copies of records which may be prepared for persons other than officers; (2) collect the fees of the clerk, referee, and trustee in each case instituted before filing the petition, except the petition of a proposed voluntary bankrupt which is accompanied by an affi- davit stating that the petitioner is without, and cannot obtain, the money with which to pay such fees; (3) deliver to the referees upon application all papers which may be referred to them, or, if the offices of such referees are not in the same cities or towns as the offices of such clerks, transmit such papers by mail, and in like manner return papers which were received from such referees after they have been used ; (4) and within ten days after each case has been closed pay to the referee, if the case was referred, the fee collected for him, and to the trustee the fee collected for him at the time of filing the petition. Analogon* proTlsiona: In V. S.: None. In Eng: None. CroM references: To the law: §S 18-f-g, 38-a(3), 39-a(8){10), 40, 48, 52, 69, 64-b(2), 71. To the General Orders: I, II, III, X, XX, XXIX, XXXV (1). To the Forms: Nos. 12, 14, 15, 57. SYNOPSIS OF SECTION. I. Duties of Clerks. a. Under general orders and forms. b. Account for fees; collection of fees. c. Payment of fees to referee and trustee. d. Pauper affidavits. o. Additional duties. 559 560 The Law and Peactice in Bankbuptct. Account for Fees; Collection of Fees. §51. I. DUTXES OF CIJIRKS. a. Under general orders and forms In addition to the duties prescribed by this section the derk is required to keep a docket in the form specified in General Order I. He is required by General Order II to endorse on each paper filed the day and hour of filing. Under General Order III, he is required to attest each process summons and subpoena issued out of the court. Besides these specific duties the clerk has his usual duties as to the keep- ing of a docket of bankruptcy cases, the filing of papers,^ and the issue of process.^ In the absence of the judge, he refers cases to the referee for adjudication.* It seems also he should give notice to creditors of the order to show cause on discharge,* though, as has been indicated,* this is often done by the referee. For any disbursements he may be called on to make, he, like the referee, can demand indemnity." A deputy clerk cannot make an order of reference in bankruptcy."^' b. Account for fees; collection of fees. — The duty enjoined by subdivision 1 to account for fees received by him is similar to that required of him as to all other fees, and indicates that fees in bankruptcy are not in addition to his salary as fixed by law. By subdivision 2 the clerk is also required " to collect the fees of the clerk, referee, and trustee in each case instituted before filing the petition," except in pauper cases. The amounts of these fees are fixed in other sectionis.'^ Unless the fees are paid, no pauper affi- davit being filed, the petition need not be received. Early in the history of the law, it was a question whether partners who had no assets, and sought bankruptcy merely to secure a discharge, should not be required to deposit separate fees for the individual estates and that of the copartnership.® The better opinion is that they need not;* such a petition is but one proceeding. There is a recorded instance of husband and wife filing a petition together and being permitted to proceed on the deposit of one fee ; but they 1. Compare Bankr. Act, §i 39(5) § 40-a; for the trustee's, 48-a; for the (7) (8) (10), 59-0. clerk's, § 52-a. 2. See Forms Nos. 5, 30. See, also, 8. Compare In re Barden (D. C, N. § 71 of this work. C), 4 Am. B. R. 31, 101 Fed. 553. 3. Bankr. Act, § 18-f-g. See, also. See, also, Mahoney v. Ward (D. C, § 38-a(3). N. C), 3 Am. B. R. 770, 100 Fed. 278. 4. Form No. 57. 9. In re Langslow (D. C, N. Y.), 5. See pp. 260, 261, ante. 1 Am. B. R. 258, 98 Fed. 869; In re 6. General Order X. Gay (D. C, N. H.), 3 Am. B. R. 529. 6a. Bray v. Cobb (D. C, N. C), 1 98 Fed. 870. Contra, however, is the Am. B. R. 153, 91 Fed. 102. late case of In re Farley (D. C, Va.), 7. For the referee's, see Bankr. Act, 8 Am. B. R. 266, 115 Fed. 359, whict Duties of Oleeks. 561 § 51.] Payment of Fees ; Pauper Affidavits. were to an extent partners in business as well. The rule is indi- cated in the words " in each case." If a single adjudication can be made affecting all petitions, one fee is sufficient ; but not other- wise.** c. Pajrment of fees to referee and trustee. — The clerk's fee seems to be earned on the filing of the petition ; the referee's and the trustee's when the case is closed. As to trustees, an estate is closed when the trustee is discharged; as to the referee, when he has transmitted his records. These restrictions on payment, how- ever, are not always strictly observed.** Payments are made by check or order in accordance with General Order XXIX. In the larger districts, the referees often certify each week or month for iees due the trustees and themselves. Provision is elsewhere made for the return out of the estate of fees deposited by petitioning creditors in involuntary cases.*^ There is, however, no provision for the repayment of the trustee's fee when no trustee is appointed. This is usually done by a check to the banltrupt or his attorney, after the case is closed. d. Pauper affidavits — A " poor person " may avail himself of the bankruptcy law, by filing with his petition a pauper affidavit. Contrary to the usual practice, he may get into court and become entitled to adjudication and, it seems, protection, without the usual preliminary inquiry as to his alleged property. Before the adop- tion of the General Orders, this provision was much abused,** and various means were devised to check the practice of filing pauper affidavits in unworthy cases. It is not thought, however, that a refusal to discharge until the fees are paid** is any more defensible than would be a refusal to file for the same reason. Ample power is now given to investigate the truth of the pauper affidavit,*® and to report that it is not true, if it appears that a fraud on the court follows In re Barden (D. C, N. C), "It (the pauper petition clause) has 4 Am. B. R. 31, 101 Fed. 553. induced much perjury in this district. 10. In re Langslow (D. C, N. Y.), One lawyer has been disbarred be- 1 Am. B. K. 258, 98 Fed. 869. cause of it, and several others have 11. In the Western District of N. been led into unprofessional con- Y., the word " closed " is liberally in- duct." terpreted by rule. See 1 N. B. N. 110. 14. See rule in District of Wash- 13. Bankr. Act, § 64-b(2). See, ington, 1 N. B. N. 376, 95 Fed. 120. also. In re Matthews (D. C, Iowa), And compare In re Langslow (D. C, 3 Am. B. E. 265, 97 Fed. 772; In re N. Y.), 1 Am. B. R. 258, 98 Fed. 869; Silverman (D. C, N. Y.), 3 Am. B. In re Plimpton (D. C, Vt.), 4 Am. R. 227, 97 Fed. 323. B. R. 614, 103 Fed. 775. 13. Of one of the districts in Ala- 15. General Order XXXV(4). bama, it was, early in 1900, stated: 36 562 The Law and Practice in Bankruptcy. Additional Duties. [5 51. has been attempted.^' It is suggested also that through an exam- ination had to test the truth of the affidavit, the bankrupt will often be found able to make the deposit. The affidavit must state that " the petitioner is without, and cannot obtain, the money with which to pay such fees." On examination as to its truth, it will usually be held faltse if it appears that he has exempt property,*^ or has paid an attorney for services in preparing the petition and schedujes, or, it has been held, if the bankrupt is at the time earn- ing fair wages.** The cases are, however, not uniform.** The necessity of, in some way, securing the fee of the trustee when one is appointed has already been considered.^" €, Additional duties. — The amendatory act of 1908 has added § Yl to the original law. It prescribes other duties for the clerk.** It might well have been subdivision b of this section. It should be read with it. 16. The practice suggested by the following rule adopted by Judge Ooxe of the Northern District of New York, has proven effective: V. In case a petition is filed by a proposed voluntary bankrupt which is accompanied by an affidavit under subdivision 2 of § 51 of the act, it shall be the duty of the clerk to file said petition without the payment of the fees provided for by law. If the «lerk, or the referee to whom said petition is referred, has reason to be- lieve such affidavit is false, he may file a certificate to that effect and cause the bankrupt to be examined. If upon such examination the referee reports in writing that the statements contained in such affidavit are false, and that the bankrupt has or can ob- tain money with which to pay said lees, such report shall be sufficient proof upon which to base proceedings under subdivision 4 of general order No. XXXV. See, also, "Supplemen- tary Forms," post. 17. In re Bean (D. C, Vt.), 4 Am. B. R. 53, 100 Fed. 262. 18. In re Collier (D. C, Tenn.), 1 Am. B. E. 182, 93 Fed. 191. Compare, also. In re Williams, 2 N. B. N. Rep. 206. 19. Compare the cases just cited with Sellers v. Bell (C. C. A., 5th Cir.), 2 Am. B. R. 529, 94 Fed. 801. SO. See p. 549, ante. 21. See i 71 of this work. SECTION FIPTY-TWO. COUPENSATIOir OF CUBRKS AND BLABSHALS. § 52. Compensation of Clerks and Marshals. — a Clerks shall respectively receive as full compensation for their services to each estate, a filing fee of ten dollars, except when a fee is not required from a voluntary bankrupt. b Marshals shall respectively receive from the estate where an adjudication in bankruptcy is made, except as herein otherwise provided, for the performance of their service in proceedings in bankruptcy, the same fees, and account for them in the same way, as they are entitled to receive for the performance of the same or siinilar services in other cases in accordance with laws now in force, or such as may be hereafter enacted, fixing the compensation of marshals. Aaaloeons provisioiu: In IT. S.: Act of 1867, § 47, R. S., S$ 6124, 6126, 5127, 5127A; Act of 1841, § 13; Acto of 1800, J§ 46, 47. Crois reterejices: To the law: §§ 2(3); § 48-d 51(2); 71. To tiie General Orders: X, XIX, XXXV (1) (4). SYITOPSIS OF SECTION. I. Compensation of Clerks. a. The filing fee. b. Other fees. II. Compensation of Marshals. a. Fixed by general law. b. While acting as receiver. c. Accounts of marshals. I. COMPENSATIOir OF ClfRXS. a. The filing fee.— By subsection a the filing fee of the derK 563 564 The Law and Peactioe in Bankeuptot. Other Fees of Clerks; Compensation of Marshals. [§52. is fixed at ten dollars, and must be paid before a petition is filed.' It is in "full compensation" for the services of the clerk to each estate. General Order XXXV (1) interprets the quoted words by providing that the fees allowed to clerks " shall be in full compensation for all services performed by them in regard to filing petitions or other papers required by the act to be filed with them, or in certifying or delivering papers or copies of records to referees or other officers, or in receiving or paying out money." b. Other fees. — But clerks may charge the fees allowed them by law for copies of papers in bankruptcy proceedings furnished to persons other than the referees or other officers, or expenses necessarily incurred in publishing or mailing notices or other papers. In some districts, it is even prescribed by rule that clerks may charge a fee for copying and mailing the petition and order known as Form 'So. 57.^ The validity of such a rule is doubted. It is a severe sitretch of meaning to declare such mandates "copies furnished to other persons." Money so collected is not for " ex- penses," but for fees pure and simple. The clerk is also entitled to disbursements for postage, stationery and clerical work.* It is thought that General Order XXXV(l) is not in accord with § 52-a; if not, the latter must control. What has been said else- where as to pauper oases* and the right to demand indemnity ap- plies^ to clerks as well. The clerks are now salaried officers.* Any surplus of fees collected must be turned into the treasury. '^ Section 71, added by the amendatory act of 1903, also authorizes the clerks to charge fees for bankruptcy searches. II. COMPENSATION OF MARSHALS. Fixed by general law. — The marshals and their field deputies are now also salaried officers.® They play small parts in the ad- ministration of the present bankruptcy law. Under the former law, they acted as messengers as well as custodians, and their fees were fixed by the statute.® Under the present statute, the only 1. Bankr. Act, § 51(2), Per diem compensation al- 2. See In re Durham, 2 N. B. N. lowed by statute for services under Rep. 1104. See, also, under § 39, U. S. E. S., §§ 574, 638, 828, see ante. United, States v. Marvin, 212 U. S. 3. In re Dunn Hardware & Furni- 275, 22 Am. B. R. 717. ture Co. (D. C, N. Car.), 14 Am. B. 7. Act of May 28, 1896; U. S, R. 186, 134 Fed. 997. Compiled Laws. 4. See under § 51. 8. This, only since Act of May 28, 5. General Order X. 1896. 6. Under the former statute, their 9. See " Analogous Frovisions," fees were limited to those fixed by ante. the general law. See " Analogous Provisions," ante. Compensation of Clekks and Marshals. 565 § 52.] Compensation of Marahals. duties they are iisually called upon to perform are the service of subpoenas and writs of injunction/" and the taking possession of and caring for property.^* Their fees in either case are those fixed by the general law.^^ They also may demand indemnity.^' When a petition accompanies an order, the statutory fee, it seems, can be charged for each paper, though they are bound together.^* b. While acting as receiver.-The compensation of a marshal while acting as a receiver is considered elsewhere.^' His fees by way of commissions upon moneys disbursed or turned over to any person, including a lienholder, .and upon moneys realized by the trustees from property turned over in kind to such trustees are fixed by § 48-d. It seems that a marshal cannot act as a receiver in bankruptcy.*' c. Accounts of marshals. — ^Marshals are required to account for their fees in bankruptcy cases. This is regulated by General Order XIX, which requires no comment.*^ 10. Compare Bankr. Act, §§ 11-a, Woodard (D. C, N. Car.), 2 Am. B. 18-a; Equity Rules XIII, XV. E. 692, 95 Fed. 955; In re Scott (D. 11. See Bankr. Act, §§ 2(3), 3-e, C, N. Car.), 3 Am. B. R. 625, 99 Fed. and 69. 404; In re Adams, etc. (D. C, Col.), 12. U. S. R. S:, 5 829. 4 Am. B. R. 107, 101 Fed. 215. 13. General Order X. 16. Act of May 28, 1896, § 20. 14. In re Damon (D. C, N. Y.), 5 17. The referee has a similar duty. Am. B. R. 133, 104 Fed. 775. General Order XXVI. 15. See under § 2. See, also, In re SECTION FIFTY-THREE. { DUTIES OF ATTORNET-GENERAL. § 53. Duties of Attorney-General. — a The attorney-general shall annually lay before Congress statistical tables showing for the whole country, and by States, the number of cases during the year of voluntajy and involuntary bankruptcy ; the amount of the property of the estates; the dividends paid and the expenses of administering such estates; and such other like information as he may deem important. Analogous proTislona: None. CroM references: None. I. ATTOItlIET-GEirERAI.'S REPORTS. The statistical tables required by this section will be found in the annual reports of the attorney-general beginning with that of 1898. The statistics required must be furnished by the proper officers on demand by the attorney-general. 668 SECTION FIFTY-FOUR. STATISTICS OF BANKRITFTCY PROCEEDINOS. § 54. Statistics of Bankruptcy Proceedings. — a OflScers shall fumisli in writing and transmit by mail such information as ia within their knowledge, and as may be shown by the records and papers in their possession, to the attorney-general, for statistical purpoees, within ten days after being requested by him to do so. Analogona pro-viaions: lulT. S.: R. S., § 6127B. Cress references: To tbe law: None. I. STATISTICS. These reports are called for by the clerks at the request of the attorney-general, and are made on blanks furnished by the De- partment of Justice. From them the attorney-general's annual report, required by section 53, is compiled. He can also ask for other or special reports from all the districts or a single district. There are no recorded oases construing this sectiom. 567 SECTION FIFTY-FIVE. M£ETI>r&S OF GREDITOBS. § 55. Meetings of Creditors. — a The court shall cause the first meeting of the creditors of a bankrupt to be held, not leas than ten nor more than thirty days after the adjudication, at the county seat of the county in which the bankrupt has had his principal place of business, resided, or had his domicile; or if that place would be manifestly inconvenient as a place of meeting for the parties in interest, or if the bankrupt is one who does not do business, reside or have his domicile within the United States, the court shall fix a place for the meeting which is the most con- venient for parties in interest. If such meeting should by any mischance not be heild within such tinie, the court shall fix the date, as soon as may be thereafter, when it shall be held. 6 At the first meeting of creditors the judge or referee shall pre- side, and, before proceeding with the other businesei, may allow or disallow the claims of creditors there presented, and may pub- licly examine the bankrupt or cause him to be examined at the instance of any creditor. c The' creditors shall at each meeting take such steps as may be pertinent and necessary for the promotion of the best interests of the estate and the enforcement of this act. d A meeting of creditors, subsequent to the first one, may be held at any time and place when all the creditors who have se- cured the allowance of their claims sign a written consent to hold a meeting at such time and place. e The court shall call a meeting of creditors whenever one- fourth or more in number of those who have proven their claims shall file a written request to that effect ; if such request is signed by a majority of such creditors, which number represents a ma- jority in amount of such claims, and contains a request for such meeting to be held at a designated place, the court shall call such meeting at such place within thirty days after the date of the filing of the request. / Whenever the affairs of the estate are ready to be closed a final meeting of creditors shall be ordered. .AnalogoiuproTlcloiis: InlT. S.: As to time and place of first meeting, Act of 1867, § 11, E. S., §§ 5019, 5W.2; Act of 1841, § 7; Act of 1800, 568 Meetings of Oebditobs. 569 955.] Scope of Section. S 6; As to presiding ofiicer at first meeting, Act of 1867, i 12, K. S. ■5 5033; As to allowance of claims at first meeting, see Analogous Pro- visions under Section Fifty-seven, postj As to other meetings. Act of 1867, §§ 27, 28; E. S., §§ 5092, 5093, 5098; As to the final meeting. Act of 1867, § 28, E. S., §§ 5093. 5096. JmEng.: As to first meeting. Act of 1883, Schedule I, Rules 1-4; As to subsequent meetings. Act of 1883, § 89(2) ; Act of 1890, § 18; Act of 1883, Schedule I, Rules 5-7; and, generally, as to meetings of cred- itors. General Eules 249-257. ences are surrendered ; that subsection In re Port Huron Dry Dock Co., Fed. } limits the allowance of claims for Cas. 11,293; Dutton v. Freeman, Fed. penalties and forfeitures; that subaee- Cas. 4,210. tion m permits the proof of a claim ot 8. Act of 1867, General Order one bankrupt estate against another, XXXIV. and that subsection n places a time 9. Act of 1867, Forms Nos. 21, 22, limitation upon the provability of 23, 24, 25. debts. These subsections are closely 10, Matter of Back Bay Automo- fcile Co. (Ref., Mass.), 19 Am. B. R. 33. Peoof and Allowance of Claims. 58T S 57-a.] Proof; How Made Generally. ance is much the same as that between evidence and judgment.'* Before a claim can be regarded as proven the written proof called for by § 5T-n must at least have been filed or lodged with the court or some oiBcer thereof. That such written proof has been completed is not enough so long as the proof remains in the hands of the creditor or his attorney.'^ II. PROOF OF CLAIMS. a. How maae generalUy. — Claims in bankruptcy must be proven in the manner prescribed in the bankruptcy law as supple- mented by the general orders and official forms.-'* Affidavits used in insolvency or general assignment proceedings under State laws This distinction has been lucidly maintained by Judge Ray, In re Horn- stein (D. C, N. Y.), 10 Am. B. R. 308, 122 Fed. 266, where he says: " It will be noted that the proof of a claim is one thing, and the allowance of such claim is quite another thing. Claims may be proved, but not al- lowed. They may be provable, not not allowable. They may be provable, and then allowed in part only, or on con- ditions only. The statute does not say that the claims of creditors who have received preferences shall not be proved; but it does say that such claim shall not be allowed unless or until the creditor surrenders his pref- erence. By plain implication, the proof of the claim is permitted. The claim of a creditor who has received a preference may be proved; but it cannot be allowed, unless he shall sur- render the preference. Strange, in- deed, is that construction of this law, In the face of those provisions, which will prevent a creditor from coming into court and proving his claim, having the amount of the preference received by him, if any (and that may be a serious and necessary question for determination, both as to the fact of preference and its amount), deter- mined by the court, and then having his proved claim allowed on surren- dering the preference. Any creditor has the right to come into court for that very purpose. To hold other- wise will logically prevent a creditor who has in fact received a preference, by way of lien or otherwise, for only a small part of his claim, coming into court and proving his claim, and then having it allowed on surrendering the preference — a mode of procedure the statute expressly permits." " Debts are not the less provable, within the meaning of the Bankrupt Act, because the statute of limitations may be successfully pleaded against their allowance. As well say that a. debt was not sueable because the stat- ute of limitations might be pleaded to an action upon it." Hargadine-Mc- Kittrick Dry Goods Co. v. Hudson (C. C. A., 8th Cir.), 10 Am. B. R. 225, 122 Fed. 232, aflf'g 6 Am. B. R. 657. 11. Compare In re Wise, 2 N. B. N. Rep. 151. See In re Merrick, Fed. Cas. 9,463. 12. In re Back Bay Automobile Co. (D. C, Mass.), 19 Am. B. R. 835, 158 Fed. 679, rev'g 19 Am. B. R. 33. 1,3. In re Dunn Hardware & Furni- ture Co. (D. C, N. Car.), 13 Am. B. R. 147, 132 Fed. 719; In re Coventry- Evans Furniture Co. (D. C, N. Y.), 22 Am. B. R. 272, 166 Fed. 516. The practice covering the presentation of claims of creditors to the referee in bankruptcy is outlined in In re Sum- ner (D. C, N. Y.), 4 Am. B. R. 123, 101 Fed. 224. Verified proofs of claim. — A wife who, in her verified proofs of claims against the bankrupt estate of her husband, makes no reference to any payment on account of loans which were the subject matter of her 688 The Law and Peactice in Bankkuptcy. Proof ; How Made General. [§ 57-a. are not enough; though, where the facts and amounts tally with the schedule and include those called for by § 57-a, they will, provided there is no objection, usually be accepted and filed. Proofs of debt must show at least (1) the claim; (3) the consideration therefor;'* (3) whether any, and, if so, what, securities are held therefor; (4) whether any, and if so, what, payments have been made thereon, and (5) that the sum claimed is justly owing from the bankrupt to the creditor.'^ The statement as to consideration must be suflSciently full and explicit to enable other creditors to investigate as to the fairness and legality of the claim.'" Proofs must be (a) in writing, (b) under oath, and (c) signed by the creditor." A claim so proven should be received and filed by a referee receiving it, and amounts to a prima facie case ; '' thus, proving the debt for all purposes in the proceeding, unless objected to or continued for consideration. Even if objected to, the sworn proof of claim is prima facie evidence of its validity; when objection is made, clause / provides that the objection shall be heard and determined, and not the claim.'" If the proof of debt is not relied upon by the creditor, but he attempts to establish his claim by other evidence, he cannot, on appeal, use the allegations of his proof of debt to supply deficiencies in his testi- claims, but expressly states that " no part of said debt has been paid," and scratches out from the blank form the word " except," violates the express requirements of this section. In re Girvin (D. C, N. Y.), 20 Am. B. R. 490, 160 Fed. 197, 206. 14. In re Stevens (D. C, Vt.), 5 Am B. E. 806, 10/ Fed. 243, holding that the statement of consideration should be sufficiently specific and full to enable creditors to pursue proper and legitimate inquiry as to the fair- nsss and legality of the claim, and if it be ao meagre and general in char- acter as not to do this it is insuffi- cient. In re Creasinger (Ref., Cal.), 17 Am. B. R. 538, 543. 15. These facts are essential. 16. In re Scott (D. C, Tex.), 1 Am. B. R. 553, 93 Fed. 418; In re Stevens (D. 0., Vt.), 5 Am. B. R. 806, 104 Fed. 325; In re Water- town Paper Co. (C. C. A., 2d Cir.), 22 Am. B. R. 190, 169 Fed. 252. Statement of oonsideration. — This provision with reference to con- sideration relates only to the proof of claim and not to the averments of the petition. In re Brett (D. C, N. J.), 12 Am. B. R. 492, 130 Fed. 981. " For legal services " has been held to be an insufficient statement of con- sideration. In re Scott (D. C, Tex.), Am. B. R. 553, 93 Fed. 418. A state- ment that the claim is " for goods, wares and merchandise " is insuffi- cient. In re Blue Ridge Packing Co. (D. C, Pa.), 11 Am. B. R. 36, 125 Fed. 619. A statement that the con- sideration is a written promise to pay a certain sum, " for value re- ceived ", is not sufficient In re Cov- entry-Evans Furniture Co. (D. C, N. Y.), 22 Am. B. R. 272, 166 Fed. 516. 17. As to propriety of permitting attorney for trustee to make out and present formal proof of creditor's claim, see In re McKenna (D. C, Ark.), 15 Am. B. R. 4, 137 Fed. 611. 18. In re Sumner (D. C, N. Y.), 4 Am. B. R. 123, 101 Fed. 224; In re Shaw (D. C, Pa.), 6 Am. B. R. 499, 109 Fed. 780; Whitney v. Dresser, 15 Am. B. R. 326, 200 U. S. 532; Matter of Mclntyre & Co. (C. C. A., 2d Cir.), 24 Am. B. R. 1, 174 Fed. 627. But where not so proven until after the bankrupt's death, the proof does not have this effect. In re Shaw (D. C, Pa.), 7 Am. B. R. 458, 112 Fed. 947. 19. In re Castle Braid Co. (D. C, N. Y.), 17 Am. B. R. 143, 145 Fed. 224; In re Carter (D. C, Ark.), 15 Am. B. R. 126, 138 Fed. 846, holding that when the creditor presents a properly verified claim, the burden of proof is shifted upon the objector; in re Cannon (D. C, Pa.), 14 Am. B. R. 114, 133 Fed. 837. But see In re Blue Ridge Packing Co. (D. C, Pa.), 11 Am B. R. 36, 125 Fed. 319; In re Proof and Allowance of Claims. 589 § 57-a.] Requirements of Gen. Ord. XXI. mony."* The Btatement of the claim should be itemized and set forth the dates of the several items where possible.'"' The proof of claim is not a pleading, but a deposition which must set forth the evidence with particularity.''^ The proof presented to sustain the claim should conform to the statement, at least as to amount and grounds.'''^ It is a serious matter to reject a claim upon the ground that the witnesses are unworthy of belief.'" Other requirements, as where the claim is evidenced by a written instrument or has been assigned since bankruptcy, are considered later. b. Requirements of General Order XXI. — Strict practice requires, however, that proofs of debt conform to General Order XXI (1) (2) (3). Thus, proofs (1) should be entitled in the court and in the cause; (2^ should contain a clause to the effect that "no note has been received for such account, nor any judgment ren- dered thereon;" (3) if an open account, should state when the debt became or will become due, and (4) if on items maturing at dif- ferent dates, the average date should be stated.^* A proof of claim is not vitiated merely because the caption incorrectly states the court.^^ If made (a) by a partnership, it must appear by oath that the affiant is a member of the partnership; if (b) by agent, the reason why it is not made by the claimant must be stated; and if (c) on behalf of a corporation, it must be sworn to by the treasurer, or, if none, the corresponding fiscal officer of such corporation.^* Scott (D. C, Tex.), 1 Am. B. K. 553, stand until it shall be properly and 93 Fed. 418; In re Wooten (D. C, successfully attacked. In re Roanoke N. Car.), 9 Am. B. R. 247, 118 Fed. Furnace Co. (D. C, Pa.), 18 Am. B. 670, holding that every creditor R. 661, 152 Fed. 846; In re Coventry- should establish his claim by a pre- Evans Furniture Co. (D. C, N. Y.), ponderance of evidence; In re Dun- 22 Am. B. R. 272, 166 Fed. 516. lap Carpet Co. (D. C, Pa.), 22 Am. 19a. Matter of Mclntyre & Co. B. R. 788. (C. C. A., 2d Cir.), 24 Am. B. R. 1, Proof of claim as evidence. — 174 Fed. 627. The Supreme Court in the case of 20. In re Wooten (D. C., N. Car.), Whitney v. Dresser, 200 U. S. 532, 9 Am. B. R. 247, 118 Fed. 670. See 15 Am. B. R. 326, has sustained the In re Ferguson (D. C, Pa.), 11 Am. principle declared in the text, holding B. R. 371, 127 Fed. 407. that the words of section 57-f sug- 21. Matter of Creasinger (Ref, gest, if they do not distinctly import, Cal.), 17 Am. B. R. 538, 145 Fed. that the objector is to go forward; it 224. is the objection, and not the claim, 22. In re Lansaw (D. C, Mo.), 9 which is there pointed out for hear- Am. B. R. 167, 118 Fed. 365. ing and determination, indicating 23. Matter of Rome (D. C, N. J.), that the claim is regarded as having a 19 Am. B. R. 820. certain standing already established 24. General Order XXI (1). See by the oath. " Supplementary Forms," post. The proof of claim is prima facie 25. In re Blue Ridge Packing Co. evidence that the allegations made (D. C, Pa.), 11 Am. B. R. 36, 125 therein are correct, and the peti- Fed. 619. tioner's status as a creditor must 26. General Order XXI (1). 590 The Law and Peactice in Bankeuptct. Before Whow Proof TaJcen; Who May Make. [§ 57-a. c. Requirements of Official Forms. — Several forms have been officially adopted by the supreme court governing tbe practice on proof of claims. The forms prescribed are: (1) for an unsecured debt (No. 31) ; (2) for a secured debt (No. 32) ; (3) for a debt due a corporation (No. 33) ; (4) for a debt due a partnership (No-. 34) ; (5) for proof by agent or attorney (No. 35) ; (6) for proof of secured debt by agent (No. 36). Blanlcs are not supplied by the government, but are on sale in law-book or stationery stores. Each of them contains an allegation which is not required by law;^'^ none of them contains the allegation to the effect that the claimant has no note or judgment.^* When none of these forms fit a given case, they should be varied or combined, reference being had chiefly to the requirements of the statute as to what constitutes a proof of debt. Some of these variations are con- sidered later. Illustrative cases will be found in the foot-note.^* d. Before whom proofs taken. — Proofs of debt can be taken before any of the officers designated in § 20 of the act.*" This is a marked change from the law of 1867. They are not now usually taken before the referee. There being no requirement to that effect, the mere signature of the officer, without a certificate as to his authority or even a seal, seems enough,*^ though referees can perhaps by rule require a certificate as evidence that the officer is " authorized to administer oaths." The proof being in the nature of a deposition and, if objected to, amounting to a pleading also, claims should not be sworn to before the attorney for the bankrupt.'^ e. Who may make proof. — Claims must be made by the credi- tor which includes his duly authorized agent, attorney, or proxy.'* Officer of corporation. — Suffi- Shaw (D. C, Pa.), 6 Am. B. R. 499, cieut reason should be given why a 109 Fed. 780; In re Stevens (D. C, claim by a corporation is not made by Vt.), 5 Am. B. E. 806, 107 Fed. 243. the officer designated. Matter of Re- 30. See discussion under § 20, ante. boulin Fils & Co. (Ref., N. J.), 19 See, also, In re Sugenheimer (D. C, Am. B. R. 215. N. Y.), 1 Am. B. R. 425, 91 Fed. 744. 27. That relative to set-offs and 31. Not so under the law of 1867. counterclaims. In re Nebe, Fed. Cas. 10,073. See, 28. Required by General Order also, for instances of the strict prac- XXI ( 1 ) . tice under the former law, In re Ha- 29. In re Ankeny, 1 N. B. N. 511; ley. Fed. Cas. 5,918; In re Strauss, In re Scott (D. C, Tex.), 1 Am. B. Fed. Cas. 13,532; In re Lynch, Fed. R. 553, 93 Fed. 418; In re Wise, 2 Cas. 8,635. N. B. N. Rep. 151; In re Stevens (D. 32. In re Kcyser, Fed. Cas. 7,748; C, Vt.), 5 Am. B. E. 11, 104 Fed. In re Nebe, Fed. Cas. 10,073. 325; In re Sumner (D. C, N. Y.), 4 33. Bankr. Act. § 1(9). Am. B. R. 123, 101 Fed. 224; In re Peoof and Allowance of Claims. 591 ^ 57-a.] Proof of Assigned Claim. If made by an agent or attorney in behialf of a creditor it mnat .appear why it was not made by the creditor.^* The method of proof where the claimant is a partnership, a corporation, or if -made by agent, attorney, or proxy, is indicated above.** If a iirm having a corporation as a partner de facto is adjudicated a bankrupt, the corporation as a general creditor may not prove a <5laim against the estate for money advanced and goods sold to the firm, upon the ground that the partnership agreement was nltra vires.^^ A creditor who is indebted to the bankrupt in an amount much larger than his claim will not be allowed to prove such claim.*'' Where the wife's common law disability to enter into contracts in respect to her separate property has been removed, she is entitled to prove a claim against her husband's estate in bankruptcy, in the absence of deception on her part or conduct inconsistent with such claim.** It has been held if proof is made of an equitable claim, as by a cestui que trust, it must be not only of his claim but of all others similarly situated.*® A father may prove a claim against the estate of his son who is a bankrupt.*" f. Against whom made — This question becomes sometimes im- portant when a copartnership is bankrupt and the creditor holds obligations against it and its members.*^ g. Proof of assigned claims. — If the claim was assigned after bankruptcy General Order XXI (3) controls. The requirement that the referee give immediate notice to the original creditor, and the ten-day limit on the filing of objections by such creditor, 34. Matter of Eeboulin Fils & Co. proof could be made by an agent. (Ref., N. J.), 19 Am. B. R. 215. 36. Wallerstein v. Ervin (C. C. A., Claim by attorney. — ^A claim 3d Cir.), 7 Am. B. R. 256, 112 Fed. should not be presented by the attor- 124, aff'g In re Ervin, 6 Am. B. E. ney for the bankrupt where it is con- 656. tested. In re Wooten (D. C, N. Car.), 37. In re Gerson (D. C, Pa.), 5 9 Am. B. R. 247, 118 Fed. 670. But it Am. B. E. 850, 105 Fed. 891. seems that the referee is not bound to 38. In re Neiman (D. C., Wis.), 8 reject a claim merely because it is Am. B. R. 329, 109 Fed. 113. Thus, filed by a bankrupt's attorney. In re she may prove a claim against her Kimball (D. C, Mass.), 4 Am. B. E. husband's estate for services rendered 144, 100 Fed. 777. in his saloon. In re Domenig (D. C, 35. For illustrative cases imder the Pa.), 11 Am. B. R. 552, 128 Fed. 146. former law, see In re Barnes, Fed. Or for money loaned. James v. Gray Cas. 1,012; Ex parte Norwood, Fed. (C. C. A., 1st Cir.), 12 Am. B. E. 573, Cas. 10,364; In re Whyte, Fed. Cas. 131 Fed. 401. 17,606; In re Watrous, Fed. Cas. 17,- 39. In re Kenney & Co. (D. C, 270; In re Ford, Fed. Cas. 4,932; In Ind.), 14 Am. B. R. 611, 136 Fed. 451. re South Boston Iron Co., Fed. Caa. 40. In re Eider (D. C, N. Y.), 3 13,183; but the former law differs ma- Am. B. R. 192, 96 Fed. 811. terially from the present as to when 41. See under § 63, post. ComparOi 592 The Law and Peactice in Bankeuptcy. Debts Created by Fraud. [§ 57-b. should be noted. Claims assigned before the bankruptcy, as well as those assigned after but before proof, must be supported by the deposition of the owner at the time of the bankruptcy,''^ if he is also the claimant, the ordinary proof of debt would seem enough.** It has been held that the assignee of a chose in action must state the consideration which passes between the original parties unless the instrument be negotiable.** The proof of a claim which has been assigned should set forth the date and facts of transfer and the name of the original creditor.*' The failure of a wife to register an assign- ment to her of a claim against her husband, as her separate property, under a state statute, does not preclude her from proving the claim against his estate.*" h. How proven, if evidenced by a written instrument. — This is regulated by subsection 6. If founded on a note or bond, or written contract, the original instrument must be attached to the proof of debt; otherwise, it will not be allowed.*' But the failure to file a written instrument with the proof of claim thereon raises no presumption against the existence of such instrument.*' The attaching of the note does not relieve the creditor of stating the con- sideration in his proof of debt.**^ When the claim is allowed, the written evidence may be withdrawn, upon leaving a copy in its place. Where it is lost or destroyed, it may still be proven by a proper afR- davit.*° The practice of attaching both original note and copy to the proof of debt, and requesting the referee to return the former, is usual. Where the absence of the original notes upon which the claim is based is not objected to, the court may treat their presence as waived."" Where a note contains a stipulation as to payment of costs in case of suit, such stipulated fee will not be considered in determining the amount of the claim. """^ i. Debts created by fraud. — The referee has no jurisdiction to decide that s claim was created by the fraud of the bankrupt. He also, " Subrogation Claims," in this Canal, etc., Co., Fed. Cas. 7,998, 10 section. Consult, also, Wallerstein v. N. B. R. 76. Ervin (C. C. A., 3d Cir.), 7 Am. B. 45. In re Fortune, Fed. Cas. 3,586 E. 256, 112 Fed. 124. 1 Low. 384. 42. If sufficient to estop him from 46. In re Miner (D. C, Oreg.), 9 making the same claim, it will be Am. B. R. 100, 117 Fed. 953. enough. In re Miner (D. C, Ore.), 47. Compare In re MeCauley, 2 N 8 Am. B. R. 248, 114 Fed. 998. B. N. Rep. 1085. Claims assigned before bank- 48. In re Dresser (C. C. A., 2d ruptcy are proved by the assignee. Cir.), 13 Am. B. R. 747, 135 Fed. The original assignor is not entitled 495. to be recognized. In re Worcester 48a. In re Coventry-Evans Furni- County (C. C. A., 1st Cir.), 4 Am. B. ture Co. (D. C., N. Y.), 22 Am. B. R R. 496, 504, 102 Fed. 808; In re For- 272, 166 Fed. 516. tune, Fed. Cas. 3,586. 49. Form No. 37. See, also, In re 43. Eao parte Davenport, Fed. Cas. Emison, Fed. Cas. 4,459. 3,586. See, also, In re Mills, Fed. 50. In re Carter (D. C, Ark.), 15 Cas. 9,612; In re Pease, Fed. Cas. Am. B. R. 126, 138 Fed. 846. 10,880. 50a. In re Hersey (D. C, la.), 22 44. In re Lake Superior Ship Am. B. R. 863, 171 Fed. 1004. Pkoof and Allowance of Claims. 593 § fl7-a-m.] Amendment of Proofs of Debt. may only allow such claim.^^ Where a personal judgment has been procured in a State court creditors who were not parties to the pro- ceeding in the State court may show that such judgment was pro- cured by fraud or collusion.^^ Creditors whose judgments have been annulled as fraudulent under the bankruptcy act are still entitled to prove their claims."* j. Claims by one bankruptcy estate against another. — Here sub- division m regulates. Without it, the trustee of the creditor estate would have power to prove. The court could compel him to file the additional deposition if necessary.** k. Statements, transcripts of judgments, etc., attached The practice of attaching statements of accounts to claims is general and should be followed. Likewise, a transcript of judgment should bet annexed as an exhibit when the claim rests on a judgment; the proof, itself, should, however, show the consideration of the debt so in judgment.*" 1. Amendment of proofs of debt — The referee wiU usually aUow such amendments to proofs of debt as justice requires, and claims objected to are often expunged or allowed to be withdrawn, with leave to amend and refile. Thus a claim filed within the required, time may be amended, even after the lapse of a year, for the pur- pose of supplying the oath of the creditor and a statement that: no payments have been made upon the amount claimed, in con- formity with the law,"* or for the purpose of itemizing the proofs; 51. In re Lazarovic (Sef., San.), 1 judication, where the claim upoif Am. B. K. 476. which the original proof was made 52. In re Phelps (Eef., N. Y.), 3 is the same as that ultimately proved. Am. B. R. 434. Hutchinson v., Otis, 190 U. S. 552, 10' 54. In re Richard (D. C, N. Car.), Am. B. R. 135, aflf'g 8 Am. B. E. 382;. 2 Am. B. R. 506, 94 Fed. 633. Com- 115 Fed. 937. pare In re Smith (Ref., N. Y.), 1 The sole question in any given case- Am. B. R. 37. is whether the document tendered i* 55. In re Elder, Fed. Cas. 4,326. a proper amendment, and furtherance- For the impeachment of judgments of justice requires it to be filed. If proven in bankruptcy, see under § 63 so, and the document proposed to be of this work. amended was filed within the year, it 56. In re Roeber (C. C. A., 2d should be allowed to be filed even Cir.), 11 Am. B. R. 464, 127 Fed. 122; though the year has then elapsed. The Buckingham v. Estes (C. C. A., 6th statute prescribes no limit as to the Cir.), 12 Am. B. R. 182, 128 Fed. 584. time within which amendments may Amendment after lapse of be filed. Bennett v. American Credit year. — Clause n, of this section, can- Indemnity Co. (C. C. A., 6th Cir.), 20 not be taken to exclude an amendment Am. B. R. 260, 263, 159 Fed. 624. to a claim already filed, admittedly . ( Opinion of Judge Cochran in District defective, more than a year after ad- Court.) 38 594 The Law and Practice in Bankbuptcy. § 57-b.] Proof of Secured, etc., Claims. where a gross charge has been made," or in the case of a claim upon certain notes to show the balance due/* or where composition was offered but not finally accepted."** Where the assignment of a claim not filed within a year of the adjudication, is filed in due time the claim may be amended after the year."" But an amendment amount- ing to the presentment of a new claim will not be allowed after a year has elapsed. '"' The right to permit a withdrawal of a claim seems clear; for instance where a creditor files a claim based upon notes containing clauses waiving the bankrupt's homestead exemption, he will be permitted to withdraw such claim so as to proceed in the state court to subject the bankrupt's exempt property to the payment of the notes.""* Illustrative cases under the present and former law will be found in the foot note."^ m. Filing proofs of claims. — Proofs of debt should be filed with the referee. If with the clerk of the district court, it becomes his duty to transmit them to the referee."^ So also of claims filed with the trustee."* Where the trustee does not deliver such proofs of claims to the referee, the creditor should not be charged with the failure."* Proofs on receipt are usually stamped with a filing stamp, showing the day and hour received, but are not allowed until called at a meeting of creditors. III. PROOF OF SECURED, PRIORITY AND PREFERRED CLAIMS. a. In general. — Subsections e, g and h relate specifically to the proof of claims of secured, priority and preferred creditors. Secured or priority creditors need not surrender their securities, 57. Matter of Creasinger i(Ref.,i But see, also, In re Moebius (D. C, Cal.), 17 Am. B. E. 538, 145 Fed. Pa.), 8 Am. B. R. 590, 116 Fed. 47. 224. 60a. In re Strickland (D. C, Ga), 58. In re Faulkner (C. C. A., 8th 21 Am. B. R. 734, 167 Fed. 867. Cir.), 20 Am. B. R. 542, IGl Fed. 900, 61. In re Friedman (Ref., N. Y.), holding that where a paper is signed 1 Am. B. R. 510; In re Smith (Ref., and sworn to by a creditor, by which N. Y.), 2 Am. B. R. 648; In re Myers it appears that he is a holder of over- (D. C., Ind. ), 3 Am. B. R. 760, 99 due and unpaid notes of the bank- Fed. 601; In re Wilder (D. C., N. Y.), rupt, and an order for the sale of 3 Am. B. R. 761, 101 Fed. 104; In re collateral securities described therein Stevens (D. C, Vt. ), 5 Am. B. R. is granted and the sale confirmed, an 806, 107 Fed. 243; In re Montgom- amendment, after the expiration of ery. Fed. Cas. 9,729; In re McCon- a year after adjudication, when the nell, Fed. Cas. 8,712; In re Myrick, amount due upon the notes is as- Fed. Cas. 10,000; In re Parkes, Fed. certained after applying the proceeds Oas. 10,754; In re Jaycox, Fed. Cas. of the sale of the collateral, is prop- 7,242; In re New Brunswick Carpet «rly granted and the creditor is en- Co., 4 Fed. 514. titled to prove for the balance due. 62. General Order XX. 58a. In re Home & Co. (Ref., 63. General Order XXI(l). Miss.), 23 Am. B. R. 590. 64. Orcutt Co. v. Green, 17 Am. B. 59. Bennett v. American Credit R. 72, 204 U. S. 96. Indemnity Co. (C. C. A., 6th Cir.), Filing nnno pro tnno. — It has 20 Am. B. R. 258, 159 Fed. 624. been held that proofs of claims, duly 60. Hutchinson v. Otis (C. C. A., received by the trustee and handed Ist Cir.), 8 Am. B. R. 382, 115 Fed. to his attorney with instructions to 937 ; affirmed, 10 Am. B. R. 135, 190 file them, and the attorney's clerk neg- TJ. S. 552; In re McCallum (D. C, lects to file the same, cannot be filed Pa.), 11 Am. B. R. 447, 127 Fed. 768. Peoof and Allowance of Claims. 595 § 57-b.] Proof of Secured Claims. but the value thereof may be determined and deducted, and divi- dends paid on unpaid balances. Preferred creditors, on the other hand, must surrender their advantage and place themselves on an equality with the other creditors before they will be permitted to share in the estate. b. Secured claims. — (1) In general. — The act contemplates that secured creditors may and shall prove their claims, and they are to set forth the claim, the consideration therefor, and whether any, and, if so, what securities are held therefor, etc. Claim of se- cured creditors and those having priority may also be allowed for certain purposes, thus, for the purpose of fixing the sum on which a dividend from the general estate is to be paid and also for limiting the voting power or voice of the secured creditor, or creditor having a priority, at creditor's meeting.''^ Secured claims must be proven on one of the forms provided for that purpose."" That " secured credi- tor " has a limited meaning in bankruptcy should always be remem- bered."' A secured creditor, as stated above, may or may not sur- render his security, as he chooses."* If he does, it inures to the benefit of all creditors, and his claim, if otherwise unobjectionable, is allowed at the full amount. If he does not, he can, it seems, have his claim allowed temporarily to enable him to participate in creditors' meetings prior to the determination of the value of his security, but only for such sums as seems to be owing over the security. He may retain his security and prove for the amount of his claim after deducting therefrom the value of his security."* If the security is equal in value to the claim, he cannot prove any part of his claim, although the creditor bids in the property at a foreclosure sale for less than his claim."'* A creditor cannot prove both a debt and the security thereof, but he may prove either one.™ As has already been nunc pro tunc in the discretion of Ct., Neb.), 11 Am. B. R. 265; In re the referee. Matter of Ingalls Bros. Goldsmith (D. C, Tex.), 9 Am. B. E. (C. C. A., 2d Cir.), 13 Am. B. R. 419, 118 Fed. 763; In re Hines (D. C, 512, 137 Fed. 517. Pa.), 16 Am. B. E. 495, 144 Fed. 142; 65. In re Cramond (D. C, N. Y.), Steinhardt v. National Park Bank, 19 17 Am. B. R. 22, 145 Fed. 566. Am. B. R. 72, 120 N. Y. App. Div. 66. Forms Nos. 32 and 36. 255, 105 N. Y. Supp. 23, revg. 18 Am. 67. In effect, no creditor is secured B. R. 86; In re Stevens (D. C, Ore.), in bankruptcy unless there is a lien 23 Am. B. R. 239, 173 Fed. 842. held by him or accruing to his benefit Compare In re Little (D. C, Iowa), on the property of the bankrupt. 6 Am. B. R. 681, 110 Fed. 621. Bankr. Act, § 1(23). Thus see 69a. Matter of Davis (Ref., Pa.), Swarts v. Bank (C. C. A., 8th Cir.), 23 Am. B. R. 156, affd. 23 Am. B. R. 8 Am. B. R. 673, 117 Fed. 1. , 446, 174 Fed. 556. 68. See sui nom. " What is a Sur- 70. First National Bank v. Eason render" in this section, post. (C. C. A., 5th Cir.), 17 Am. B. R. 69. Kohout v. Chaloupka (Sup. 593, 149 Fed. 204. 596 The Law and Peactice in Bankruptcy. What Constitutes Secured Creditor. [§ 57-b. explained, the value of securities is often arrived at summarily at first meetings to permit a creditor to vote the unsecured balance. A claimant may of course, be fully secured.'" If so, he should not be allowed to file a proof, and does not become a party to the proceed- ing^" A creditor by proving an unsecured claim is not barred from proving the amount of a secured claim less the sum realized on the security.'* Where a debt is secured by life insurance policy the value of the policy should be deducted therefrom and the balance may be proved against the estate.'* A creditor whose claim is secured or partly paid by an accommodation indorser may prove the claim to its full amount, and exclude from the bankrupt estate the avails or such security or part payment." There is no authority vested in the court, upon finding that there was an excess due the bankrupt after the payment of the secured claim, to enter a decree against the creditor, who is an adverse claimant, for the amount of the excess.'* Where book accounts are assigned to secure a debt the creditor must turn over to the trustee the balance of the amount collected by him remaining after payment of his debt, without reference to the adverse claim of another creditor." Where a lease did not provide security for the -payment of water-rates and taxes by the bankrupt tenant, the landlord must establish his claim therefor before the referee,"" (2) What constitutes a secured creditor. — Section 1, sub- division 23, defines a secured creditor as one who "has security for his debt upon the property of the bankrupt of a character to be assignable under this act, or who owns such a debt for which some indorser, surety or other person secondarily liable for the bankrupt has such security upon the bankrupt's assets." No matter how great may be the security which one may have, if it be property of another than the bankrupt, the creditor may prove his entire claim against the bankrupt estate, and receive a dividend thereon, and thereafter institute proceedings to enforce his claim upon the security for the balance." And this rule applies even where the security that 71. Matter of Kenney (Ref., Am. B. R. 650, 124 Fed. 469. Mass.), 10 Am. B. E. 452, holding 75. In re Noyes Bros. (C. C. A., that where a claim offered in proof is 1st Cir.), 11 Am. B. R. 506, 127 Fed. fully secured it should be disallowed. 286 ; In re Matthews ( D. C., N. Car. ) , 72. Illustrative cases on se- 13 Am. B. R. 91, 132 Fed. 274. cured claims under the present law 76. Matter of Mertens (C. C. A., are: In re Frick (Ref., Ohio), 1 Am. 2d Cir.), 15 Am. B. R. 362, 142 Fed. B. R. 719; In re Brown (D. C, Pa.), 445. 5 Am. B. R. 220, 104 Fed. 762; In re 77. Fitch v. Richardson (CCA Rhoads, 2 N. B. N. Rep. 178; In re 1st Cir.), 16 Am. B. R. 835, 147 Fed Spring, 2 N. B. N. Rep. 509; In re 196. Peasley (D. C, N. H.), 14 Am. B. R. A creditor whose security consists 496, 137 Fed. 190; In re Grieve (D. of assigned accounts does not aban- C., Conn.), 18 Am. B. R. 737, 151 don his security by consenting to a Fed. 711. Under the law of 1867, liquidation of the bankrupt's in- Yeatman v. New Orleans, etc., 95 debtedness. In re Cyclopean Co (C U. S. 764; In re Sauthoff, Fed. Cas. C A., 2d Cir.), 21 Am. B. R 679* 12,379: In re Cram, Fed. Cas. 3,343; 167 Fed. 971. In re Dunkerson, Fed. Cas. 4,167 ; In 77a. In re Yodleman-Walsh Foun- re Anderson, Fed. Cas. 350; In re dry Co. (D. C., N. Y.), 21 Am. B. R. Jaycox, Fed. Cas. 7,240; In re New- 509, 106 Fed. 381. land. Fed. Cas. 10,170. 78. See In re Headlev IT> C 73. In re Ball (D. C. Vt.), 10 Mo.), 3 Am. B. R. 272, 97 Fed Am. B. R. 564, 123 Fed. 164. 765, citing Collier, Bankr. (1st Ed )' 74. In re Busby IT). C. Pa.), 10 p. 283. "'' Proof and Allowance of Claims. 597 § 57-b.] Ascertaining value of Securities. is held is security for a partnership debt but is property of individual members of the firm, the partnership and the individual estates being considered distinct and separate.'" A holder of a promissory note containing a waiver of exemption is in effect a secured creditor.'" A holder of a mortgage on exempt property of the bankrupt is not a secured creditor.*"* (3) Ascertaining value of securities. — The methods of ascertaining the value of the securities to be deducted are prescribed by subsection h. If the value has been legally determined outside of the court of bankruptcy, it will take proof of and be governed by that fact.'^ This subsection has no application where the securities were not the property of the bankrupt.*^ The agreement by the terms of which the securities are pledged usually provides for a sale of the securities, and the disposition of the proceeds.*'^ The creditor may, if the terms of the agreement admit, deduct the interest which has accrued up to the date of the liquidation of the claim, and prove for the balance of his claim after the remaining proceeds of the liqui- dation has been deducted.*^'^ If by action in a State court, the trustee should intervene and see that the security brings what it is fairly worth.** Section 6 relating to exemptions does not limit the pro- visions of subsection hj so as to authorize a creditor to prove his entire claim and to receive dividends thereon from the estate, where such claim is secured by a mortgage on exempt property.*' The value of the security may be ascertained by converting it into money pursuant to the contract, and in the absence of fraud, the creditor may prove the balance of his claim.*"* It is only when the securities have not been disposed of by the creditor in accordance with his con- tract that the court may direct what shall be done in the premises. Of course where there is fraud or a proceeding contrary to the contract, the interposition of the court might properly be invoked.*' Although the property pledged as se- curity may be converted into money as agreed between the par- 79. Ex parte Graves, 2 Jur. N. S. presented for allowance against the 651; Ece parte Peacock, 2 G. & J. bankrupt's estate. 67; In re Howard, Cole & Co., 4 83. In re Wiesen (D. C, Pa.), 15 N. B. R. 571, Fed. Cas. 6,750; In Am. B. E. 27, 138 Fed. 164. re Coe (Ref., Ohio), 1 Am. B. R. 83a. In re Kessler & Co. (D. C 275. N. Y.), 22 Am. B. R. 606, 171 Fedi 80. In re Meredith (D. C, Ga.), 751, in which Judge Hand decides 16 Am. B. R. 331, 144 Fed. 230. that the English rule is not ap- 80a. In re Bailey (D. C, Utah), plicable. :J4 Am. B. R. 201, 176 Fed. 990. 84. See under §§ 11 and 47; also, 81. In re Cramond (I). C., N. Y.), In re Buse, Fed. Cas. 2,221; In re 17 Am. B. E. 22, 145 Fed. 566. Stewart, Fed. Cas. 13,418. 82. Matter of Graves (D. C, 85. In re Lantzenheimer (D. C Vt), 20 Am. B. R. 818, 163 Fed. Iowa), 10 Am. B. R. 720, 124 Fed. 358, holding that where the bank- 716; In re Meredith (D. C, Ga.), 16 rupt is indorser upon a corporation Am. B. R. 331, 144 Fed. 230. note, and the proof of claim there- 85a. In re Peacock (D. C, No. on sets forth that the note is Car.), 24 Am. B. E. 159, 178 Fed. 851. secured by a mortgage on both the 86. Hiscoek v. Varick Bank, 206 real and personal property of the U. S. 28, 18 Am. B. R. 1, 9, affg. 15 maker, the bankruptcy court has no Am. B. R. 362, holding that the jurisdiction over the mortgaged court may direct the disposition of property except to_ ascertain its a pledge, or the ascertainment of value and to see to its proper appli- its value, where the parties have «ation in payment of the note when failed to do so by their own agree- ment. 598 The Law and Peacticb in Bankruptcy. Proof of Secured Claims. [§ 57-e. ties, yet the secuired creditor may not dispose of the property to himself, under the guise of a sale.®^ Where a debt is proved as a secured debt in the usual way, and the trustee objects on the ground that the security claimed constitutes a voidable preference, the court may hear and decide the issue, and allow the claim as a secured or unsecured debt, before the alleged security is converted into money.*''^ (4) Effect of proving seoueed debt as unsecueed. — The law here was well settled prior to the present statute. If a secured creditor proves his debt as unsecured, he thereby waives his secur- ity.^* This rule yields, however, where such a proof was made by one ignorant of his legal rights and without fraudulent intent.** Thus, where from ignorance or inadvertance a claim has been proved as unsecured the court, in the exercise of its discretion, may permit the creditor to have his p'roof expunged so that he may take steps to have the value of the security determined and to prove for the excess only. This right will generally be accorded to one ask- ing it and excusing his mistake, if neither the bankrupt nor any other party will be injured ; that is, if their rights after the grant- ing of an order to expunge the proof will not be less or different than they would have been had not the mistake been made of prov- ing the claim as unsecured.*" It has been held that proof without mention of the security does not of itself operate as a discharge of a mortgage security ; that while the creditor was prevented from setting up the same against the assignee, no one but the assignee could avail himself of the faot.*^ Where the security is the prop- erty of the bankrupt held by an endorser, or a person secondarily liable, it is not necessary that the creditor should prove as a secured creditor in order to retain his rights as against the endorser.*^ c. Priority claims. — Subection e of this section yokes priority 87. Van Kirk v. Vermont Slate re Brand, 3 N. B. E. 324, Fed. Caa. Co. (D. C, N. Y.), 15 Am. B. R. 239, 1,809; In re Granger, 8 N. B. R. 30, 140 Fed. 38; In re Mertena (D. C, Fed. Caa. 5,684. N. Y.), 14 Am. B. R. 226, 134 Fed. 89. In re Brand, Fed. Cas. 1,809; 104, 105. In re Harwood, Fed. Cas. 6,185; In 87a. In re Quinn (C. C. A., 8th re Parkes, Fed. Cas. 10,754; In re Clr.), 21 Am. B. R. 264, 165 Fed. 144. Baxter, 12 Fed. 72. 88. In re BIoss, 4 N. B. R. 147, 90. In re Hubbard, 1 N. B. E. 679, Fed. Cas. 1,562; Heard v. Jones, 15 Fed. Cas. 6,813. N. B. R. 402; Ex parte Solomon, 1 91. Cook v. Parrington, 104 Mass. G. & J. 25; Stewart v. Isldor, 1 N. B. 212. R. 485; Hatch v. Seely, 13 N. B. E. 92. Merchant's Bank v. Comstock, 380; Ex parte Downs, 1 Eose, 96; In 55 N. Y. 24. Pkoof and Allowance of Claims. 599 §57-g.] Proof of Preferred Claims. claims with secured claims, both as to manner of proof and the ascertainment of the value of the priority. A landlord's claim for rent, constituted a lien by State statute, must be proved to protect the landlord's right to priority of payment.''* The reasons for the rule of prima facie proof applicable to proofs of claims do not apply to petitions for priority. Thus, allegations relating to priority are not prima facie evidence of their truth."* It is thought that what is said of secured claims, ante, applies equally to debts entitled to priority. d. Preference claims. — (1) In general, — Subsection g has been as much discussed as any clause in the present law. The former statute denied allowance to a claim filed by a creditor who accepted a preference " having reasonable cause to believe that the fame was made or given by a debtor contrary to any provisions of the act ;" nor could any dividend be paid on such a debt until the creditor surrendered his advantage.®^ The words quoted do not appear in the present act. Further, the definition of " prefer- ence " was, by a shifting of clauses while the bill was in committee, so changed asi to lead to the ruling that any payment by debtor to creditor, after, though without knowledge of, actual insolvency, was a preference, even though lacking intent and made years be- fore. This question is discussed at length elsewhere.^® A few of the more valuable cases on the now historic controversy will be found in the foot-note.^'' Pirie v. Chicago Title & Trust Co-^^ settled the matter. After it, all payments subsequent to insolvency were preferences, the surrender of which was required before the claim of a creditor so " preferred " could be allowed. A further effect of that decision wais to declare in substance that all of the indebtedness of the bankrupt to a particular creditor, existing during the period of insolvency, was to be treated as one claim, 93. In re Hayward (D. C, Pa.), 12 249, 97 Fed. 923; Columbus Elec. Co. Am. B. R. 264, 130 Fed. 720. v. Worden ( C. C. A., 7th Cir. ) , 3 Am. 94. In re Jones (D. C, Mich.), 18 B. E. 634, 99 Fed. 400; In re Fixen Am. B. K. 206, 151 Fed. 108. (C. C. A., 9th Cir.), 4 Am. B. E 10, 95. Act of 1867, § 23, E. S., § 5084. 102 Fed. 295. Contra: In re Piper^ Compare In re Kingsbury, Fed. Cas. 2 N. B. N. Eep. 8; In re Smoke (D. 7,816; In re Walton, Fed. Cas. C, N. Y.), 4 Am. B. K. 434, 104 Fed.' 17,130; In re Forsyth, Fed. Cas. 289; In re Hall (Ref., N. Y.), 4 Am! 4,948; In re Currier, Fed. Cas. 3,492. B. E. 671. Apparently contra, even 96. See under § 60, post. since Carson, etc., Co. v. Chicago Title 97. Declaring payments in due & Trust Co., 182 U. S. 438, 5 Am. B. course preferences. — In re Knost R. 814; In re Dickson (C. C. A., 1st (Ref., Ohio), 2 Am. B. R. 471; In re Cir.), 7 Am. B. R. 186, 111 Fed. 726, Conhaim (D. C, Wash.), 3 Am. B. R. 98. 182 U. S. 438, 5 Am. B. R 814. 600 The Law and Peactiob in Bankeuptcy. Proof of Preferred Claims. [§ 57-g. and any payment made and received, even in good faith, by both parties during such period was to be treated as a preference, and muist be surrendered before the balance of the claim, or any part of it, could be allowed.^' Under the act before the amendment of 1903 it was frequently held that a creditor was not required to surrender a payment made on an open account where, at the time of such payment or subsequent thereto, the creditor extended new credits to the bankrupt in excess of the amount of such payment, the net result of the entire transaction being to increase the indebt- edness to the creditor, and the value of the bankrupt estate being enhanced to a like amount.^"" (2) The amendments of 1903. — The conditions resulting from this new doctrine — a reversal of the settled policy of all bank- ruptcy laws to protect transactions in due course even up to the moment of bankruptcy^"^ — were so unsatisfactory to business men and disastrous to the credit system, that the demand for remedial legislation became practically unanimous. Congress has responded by amendments (1) making it certain that no transaction more than four months before the bankruptcy is a preference,*"^ and (2) limiting that which must be surrendered as a condition prece- dent to proving a debt to (a) preferences that are " voidable under section sixty, subdivision b," and (b) advantages possessed by creditors " to whom conveyances, transfers, assignments, or incum- brances, void or voidable under § 67, subdivsion e, have been made or given." (3) Meaning of the amendments. — Considered broadly, sub- section g seems now to mean what the " protected transactions " clauses of the English system have meant for nearly two centuries. He who has obtained an advantage over other creditors, in any of 99. In re Delling (D. C, N. Y.), 85; Peterson v. Nash (C. C. A., 8th 10 Am. B. R. 688, 124 Fed. 852. See, Clr.), 7 Am. B. E. 181, 112 Fed. 311; also, In re Jones (D. C, S. Car.), 10 Dickson v. Wyman (C. C. A., Ist Am. B. E. 513, 123 Fed. 128. Contra: Cir.), 7 Am. B. E. 186, 111 Fed. 726. In re Wolf (D. C, Tenn.), 10 Am. B. These cases were cited and apparently E. 153, 122 Fed. 127, holding that the approved in the case of Jaquith v. Al- case of Carson, etc., Co. v. Chicago den, 189 U. S. 78, 9 Am. B. E. 73. Title & Trust Co., 182 U. S. 438, 5 See, also, Yaple v. Dahl-Millakan Gro- Am. B. E. 814, did not apply to a eery Co., 193 U. S. 526, 11 Am. B. R. payment in full of a separate and in- 596; Matter of Watkinson (D. C, dependent debt. Pa.), 16 Am. B. E. 38, 143 Fed. 602. 100. Matter of Sagor (C. C. A., 101. See English Act of 1883, § 49. ■2d Cir.), 9 Am. B. E. 361, 121 Fed. See, also, historical review in In re ■658; Gans v. Ellison (0. C. A., 3d Hall, supra. ■Cir.), 8 Am. B. R. 153, 114 Fed. 734; 102. This change is considered in ICimball v. Eosenham Co. (C. C. A., detail under § 60. Sth Cir.), 7 Am. B. E. 718, 114 Fed. Pboof and Allowance of Claims. 601 f 57-g.] Proof of Preferred Claims. the ways indicated in the present law, and only such an one, must hereafter surrender his advantage before his claim can be filed or allowed. The intention of its framers is expressed in the sentence next before the last."' There may be some question, for instance, about the necessity of surrendering where the advantage consists of a lien through legal proceedings within the preference period, such a lien not being strictly either a conveyance, transfer, or ^assignment, or even an incumbrance in the common meaning of the word. The intention to require the surrender of such an advan- iiage is nevertheless clear; nor is it doubted that the words of the law accomplish it. The discrepancies between a preference which Is an act of bankruptcy,^"* and one that is even now merely void- able may also cause discussion. Again, the intention is clear. If not voidable under § 60-b, a preference need not be surrendered; reasonable cause to believe a preference intended must appear. ^°° But as to transfers it must appear that they were made with a fraudulent intent.^"" Cases under the former law are not in point, save remotely, and are, therefore, not cited. Still, whatever be the ultimate decisions as to transactions, less common or more subject to suspicion, the exasperating practice of requiring the ■surrender of mere payments, made and received in due course, is at an end. It is now definitely established that where a creditor at adjudication has a claim for a balance due upon an open account for ^oods sold and delivered to the bankrupt within the four months period, payments received by the creditor within said four months, and in good faith, without knowledge of the bankrupt's insolvency, do not constitute preferences which must be surrendered before proof of the claim for the balance due will be allowed.^""* (4) Effect of amendment of 1903. — The effect of this change in § 67-g is to make only those preferences voidable which are made so by § 60-b, or by § 67-e, which latter refers only to •conveyances made with intent to defraud creditors or rendered invalid by some statute of the State. Section 60-b, thus referred to, makes transfers voidable by the trustee when the creditor has leasonable cause to believe that the debtor intends thereby to 103. The intention of Congress ment as will obviate this menace to is indicated by the following from trade." the analysis accompanying the House The fundamental pnrpose of revision of the amendatory bill. this provision is to secure an equality " Carson, etc., Co. v. Chicago of distribution of the assets of a Title & Trust Co., 182 U. S. 438, bankrupt estate. Keppel v. Tiffin B Am. B. E. 81i, having held that Savings Bank, 197 U. S. 356, 13 Am. f 60-a is a definition of 'preference,' B. E. 552. it necessarily follows that payments 104. Compare § 3-a (2) with § and other bona fide transactions af- 60-a-b. ter actual insolvency, though in due 105. In re Hines (D. C., Pa.), 16 course of trade and without knowl- Am. B. E. 495, 144 Fed. 142. edge or reasonable cause to believe 106. In re Bloch (C. C. A., 2d that a preference was intended, must Cir.), 15 Am. B. E. 748, 142 Fed. Ibe, under § 57-g, surrendered before 674. ■a creditor who received such a pay- 106a. Wild & Co. v. Provident ment could prove the balance of his Life & Trust Co. (Sup. Ct.), 214 U. ■debt. This was not what was in- S. 292, 22 Am. B. E. 109; Yaple v. tended by the framers of the law. Dahl-Milliken Grocery Co., 193 U. S. There is a very urgent and widf- 526, 11 Am. B. E. 596. spread demand for such an amend- 602 The Law and Pbactice in Bankruptcy. Surrender of Preferences. [I 57-g. create a preference.-"''' Only creditor® whose transactions have been entirely in due course will be apt to offer proofs for allow- ance. This objection will, therefore, not often be made. If it is — as to prevent voting for trustee — it must usually be heard and decided somewhat summarily. The action of the creditor in sur- rendering or not will often turn on the decision. Whether, if he does not surrender after the point is raised, he can thereafter prove his debt is a question; it is thought that, even after a refusal, the creditor can surrender at any time before a suit is brought.'"® Eor time when this amendment went into effect, see " Supplementary Section to Amendatory Act," post. (5) Cases peige to amendment of 1903 still valuable. — The amendments just considered have rendered many cases decided under the law of 1898 no longer applicable, and they will not be cited. Some cases are nevertheless still of value. Those bearing on (1) what is a preference, and (2) whether a credit granted in good faith after the commission of a preference may be set off against the preference in determining the amount to be sur- rendered, will be found elsewhere.'"'' That until surrender a creditor has not a provable debt and may not be a petitioning credi- tor in an involuntary case is still the law.''" So also, it seems, is the doctrine that where the principal creditor cannot prove without surrendering, a guarantor cannot."' Likewise, the rule that credi- tors who cannot prove without surrendering their advantage on a particular debt, cannot prove other and detached debts not so tainted,"^ also that it is immaterial whether the creditor is entitled to priority or not."* The difference between a mere preference 107. In re First Nat. Bank of Bank (C. C. A., 8tli Cir.), 8 Am. B. Louisville (C. C. A., 6th Cir.), 18 Am. R. 673, 117 Fed. 1. Contra, under the B. R. 766, 155 Fed. 100. former law, In re Arnold, Fed. Cas. 108. Compare cases under "What 551; In re Richter, Fed. Cas. 11,803. is a Surrender," post. But see In re Barnes, Fed. Cas. 1,013. 109. See under § 60 of this work. A creditor having two distinct 110. In re Rogers (D. C, Ark.), claims of the same class, both of 4 Am. B. R. 540, 102 Fed. 687. which are due at the time of his re- 111. In re Schmechel Co. (D. C, ceiving a preferential payment upon Mo.), 4 Am. B. R. 719, 104 Fed. 64; one of them, is not entitled to prove In re Hurlbutt (C. C. A., 2d Cir.), 16 either claim until he has surrendered Am. B. R. 198, 143 Fed. 958. the preference. In re Mayo Contract- 112. In re Teslow (D. C, Minn.), ing Co. (D. C, Mass.), 19 Am. B. R. 4 Am. B. R. 757, 104 Fed. 229; In re 551, 157 Fed. 469. Conhaim (D. C, Wash.), 3 Am. B. R. 11,3. In re Bashline (D. C, Pa.), 6 249, 97 Fed. 923; Matter of Beswick Am. B. R. 194, 109 Fed. 965; In re (Ref., Ohio), 7 Am. B. R. 395; In re Proctor (Ref., Iowa), 6 Am. B. R. Meyer (D. C, Tex.), 8 Am. B. R. 598, 660; In re Read (Ref., N. Y.), 7 Am. 115 Fed. 997; Swarts v. Fourth Nat. B. R. 111. Peoof and Allowance of Claims. 603 § 57-g.] When Surrender Required. and a voidable preference, discussed in some of the cases, ^^* now. becomes important; the former need not be surrendered.^^" (6) When sueeendee eequieed. — As the law now stands no claim is allowable where the claimant has received any advantage over his co-claimants by means of a preference which is voidable under § 60-b, or by means of a conveyance, transfer, assignment or incumbrance which is void or voidable under § 67-e. A correct understanding of what is required under this section will necessi- tate a careful reading of the provisions of those sections and of the cases cited in the discusision thereunder. A creditor who has a voidable preference may make and file his formal proof of claim without surrendering his preference, and in that sense his claim is provable. In other words', it is susceptible of a formal statement in writing which may be filed in court. But the claimant may not secure an allowance of his claim, he may not vote upon it at a meeting of creditors, he may not obtain any advantage by means of it in the bankruptcy proceedings, until he first surrenders his preference.^ ^® Subsection g was not intended to impose a penalty, but merely to give creditors who received preferences options to keep what they have received and take no dividends from the estate, or to surrender their preference and share equally with other creditors in the general distribution. '''' The fact that the net result of transactions within the four months was beneficial to the estate does not relieve the creditor from sur- rendering a large payment made on an account which had run for a long time prior to such period.-'^* Payments on a running account are not to be considered as preferences, required to be sur- rendered, where new sales succeed payments and the net result is to increase the value of the estate.^ ■'^ Where payments were made 114. Compare, for instance, In re A preferred creditor's claim Hall, ante. For a case where bona will be disallowed unless he surren- fides was the test, see In re Wyly ders his preference. In re Coffey (D. C, Tex.), 8 Am. B. R. 604, (D. C, N. Y.), 19 Am. B. R. 148, 116 Fed. 38. And compare In re 167. Bullock (D. C, N. Car.), 8 Am. B. 118. In re Watkinson (Ref., Pa.), R. 646, 116 Fed. 667. 17 Am. B. R. 56. 115. Cases where transactions 119. Wild & Co. v. Life & Trust thought preferences under the former Co. (C. C. A., 3d Cir.), 18 Am. law were held not so, are the fol- B. R. 506, 153 Fed. 562, aflg. 17 lowing: In re Stevens, Fed. Cas. Am. B. R. 56. This case was re- 13,391; In re Horton, Fed. Cas. versed by the Supreme Court on the 6,707; In re Independent Ins. Co., ground that the court below had Fed. Cas. 7,019. The elements of directed a surrender of a payment " preference " under that law were made during the four months period, so diflferent from those under the notwithstanding the fact that the present law as amended, as to render creditor had no knowledge of the these and similar cases valuable only insolvency of the bankrupt. See 214 as suggestions, not as precedents. U. S. 292, 22 Am. B. R. 109. The 116. Stevens v. Nave-McCord Co. decision in this ease is based upon (C. C. A., 8th Cir.), 17 Am. B. R. Carson, etc., Co. v. Chicago Title 609, 150 Fed. 71. & Trust Co., and Jaquith v. Alden, 117. In re Conhaim (D. C, both cited above. Wash.), 3 Am. B. R. 250, 97 Fed. 923. du-t The Law and Peactice in Bankeuptoy. Payment of Notes Discounted at Bank. [§ 57-g. upon an indebtedness during the period of four months prior to the debtor's bankruptcy, and notes were given for the balance, such notes cannot be proved as independent debts without a surrender of such payment.^^" A preference must have been actually in- tended in fact on the debtor's part, or there must have existed what the law regards as the equivalent of such an intent on his part, and such intent is not to be conclusively presumed from the mere fact that the debtor knows himself to be insolvent.^^"- A creditor who holds two separate and distinct debts against the estate of a bankrupt must surrender a preferential payment on one of such debts before he can prove the other.^''^ But where such pay- ment is made upon a distinct and independent debt from that which is sought to be proved it need not be surrendered."' Thus, if a creditor has received a preference from a firm composed of two persons, but has an individual claim against one of them, he may prove the latter without surrendering his preference.^^* It is incumbent on the parties opposing a claim to prove that in fact a preference has been received.^''" The surrender must be made to the trustee, and not to the bankrupt or any other person. ^^'* (7) Payment of notes discounted at a bank. — The payment Payments to an attorney in the as ought to have led a reasonably settlement of a running account prudent man to the conclusion that places him in the same position as a preference was thereby intended, any other creditor whose claims In re PfaflBnger (D. C, Ky.), 18 Am. have been paid within the four B. R. 807, 154 Fed. 528. months period, and such payments Partial payment on a note to the extent of an excess of a rea- does not constitute a preference sonable allowance will be deemed which must be surrendered under preferential. In re Shiebler & Co. this subdivision. Rutland County (D. C, N. Y.), 20 Am. B. R. 777, Nat. Bank v. Graves (D. C, Vt.), 163 Fed. 545. 19 Am. B. E. 446, 156 Fed. 169. 120. Dunn v. Gans (C. C. A., 3d 122. In re Mayer (D. C, Tex.), 8 Cir.), 12 Am. B. R. 316, 129 Fed. Am. B. R. 598, 115 Fed. 997; Liv- 750; In re Thompson (D. C, Pa.), ingston v. Heineman (C. C. A., 6th 10 Am. B. R. 288, 121 Fed. 607; Cir.), 10 Am. B. R. 39, 120 Fed. arising under the act before the 786. amendment of 1903. 123. In re Abraham Steers Lum- 121. In re Mayo Contracting Co. ber Co. (C. C. A., 2d Cir.), 7 Am. 5. In re Collins (Ref., Iowa), 2 529. Am. B. R. 1; In re Richards (D. C, 60. In re Waite, Fed. Cas. 17,044, Wis.), 2 Am. B. R. 518, 95 Fed. 258. 1 Low, 207. 56. The following are typical: Lit- 61. Carson, etc., Co. v. Chicago, tie V. Alexander, 21 Wall. 500; etc., Trust Co., 182 U. S. 438, 5 Am. Tenth Nat. Bank v. Warren, 96 U. B. R. 814; Jaquith v. Alden, 189 U. S. 539; Sage v. Wynkoop, 104 U. S. S. 78, 82, 9 Am. B. R. 773; New York 319; In re Dunkle, Fed. Cas. 4,160; Co. Nat. Bank v. Massey, 192 U. S. In re Baker, Fed. Cas. 763. 138, 11 Am. B. R. 42; In re Fixen 57. Bankr. Act, S 1(25). Coder &, Co. (C. C. A., 9th Cir.), 4 Am. B. V. Arts (C. C. A., 8th Cir.), 18 Am. R. 10, 102 Fed. 296; In re Arndt B. R. 513, 152 Fed. 943, mod'f'g 16 (D. C, Wis.), 4 Ain. B. R. 773, 104 Am. B. R. 583, affd. 22 Am. B. R. 1, Fed. 234; In re Sloan (D. C, Iowa) 213 U. S. 223. 4 Am. B. R. 356, 102 Fed. 116; West 58. Stern v. Louisville Trust Co. v. Bank of Lahoma (Sup. Ct Okl ) (C. C. A., 6th Cir.), 7 Am. B. R. 16 Am. B. R. 733; In re Warner' 305, 112 Fed. 501. Fed. Cas. 17,177; In re Clark, Fed! 58a. Rogers v. Fidelity Sav. Bank Cas. 2,812. & Loan Co. (D. C, Ark.), 23 Am. B. Payments on a running ac- P 1, 172 Fed. 735. The one absolute count. — Where a creditor has a, essential of a preference is that the claim on a running account for goods bankrupt transfer some pbrtion of sold and delivered during the four his property to the creditor. Mason months period, the account being V. National Herkimer Co. Bank (C. made up of debits and credits, leaving C. A., 2d Cir.), 22 Am. B. R. 733, a net amount due from the bank- 172 Fed. 529. rupt estate, pavments made within 59. Gibson v. Dobie, Fed. Cas. such period without knowledge of 5,394, 14 N. B. R. 156, 5 Biss. 198. the debtor's insolvency are not pref- 59a. Roberts v. Johnson (C. C. erences. Wild & Co. v. Provident A., 4th Cir.), 18 Am. B. R. 132, 151 Life & Trust Co. 214 U. S. 292, 22 Fed. 567; Mason v. Nat. Herkimer Am. B. R. 109, revg. 18 Am b' R. Co. Bank (D. C, N. Y.), 21 Am. B. 506, 153 Fed. 562. R. 98, 163 Fed. 920, revd. on other Peefeeeed Ceeditoes. 657 § 60-a.] Transfer of Property. 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.*^* (3) Intent or 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 fact that the trans- fer was made in good faith is immaterial, if it is made within the prescribed period to secure an antecedent debt, and is intended and accepted as a preference, and so results.'^ 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 preference."* Good faith alone would not be suflBcient to preserve the transfer, if it in fact constituted a preference."' (4) Estate must be diminished. — A fictitious transaction not affecting the estate of the debtor or the rights of creditors cannot be deemed a transfer, although assuming the form of one.*" So, also, where the transfer does not diminish the general fund, as where it consists of the giving of a fair security for a present loan,"' the substitution of securities pledged to an old loan,"* or The repayment of stolen money does not constitute a prefer- ence, the person to whom it is re- stored being in entire ignorance both of the theft and the restoration. Mc- Naboe v. Columbian Manufacturing Co. (C. C. A., 2d Cir.), 18 Am. B. R. 684, 153 Fed. 967. In the above case tne president of a bankrupt corpora- tion converted into cash a portion of its assets and repaid himself, as agent of another corporation, money which he had stolen from its funds and applied to the uses and purposes of the bankrupt and it was held that such repayment did not constitute a preference under the bankruptcy act. 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 Cir.), 10 Am. B. R. 14, 121 Fed. 663. So held where payment was made from the general funds of the bankrupt, although the loan was made for a particular purpose but not used therefor. In re Kearney (D. C, Pa.), 21 Am. B. R. 721, 167 Fed. 995. 61a. Block V. Rice (D. C, Pa.), 21 Am. B. R. 691, 167 Fed. 693. 62. See Clarion Bank v. Jones, 21 Wall. 325; Giddings v. Dodd, Fed. Cas. 5.405; In re Batchelder, Fed. Cas. 1,098. 63. Morgan v. First Nat. Bank (C. C. A., 4th Cir.), 16 Am. B. R. 639, 145 Fed. 466, so held in respect to a trust deed executed in good faith by an insolvent to secure an ante- cedent debt. Brewster v. Goff Lum- ber Co. (D. C, Pa.), 21 Am. B. R. 106, 164 Fed. 127. 64. Hackney v. Raymond Bros. Clarke Co. (Sup. Ct., Neb.), 10 Am. B. R. 213; citing Johnson v. Wald (C. C. A., 5th Cir.), 2 Am. B. R. 84, 93 Fed. 640. As to preferences ob- tained indirectly, see In re Beerman (D. C, Ga.), 7 Am. B. R. 431, 112 Fed. 663; Frank v. Musliner, 9 Am. B. R. 229, 76 N. Y. App. Div. 617. 65. Morgan v. First Nat. Bank (C. C. A., 4th Cir.), 16 Am. B. R. 639, 145 Fed. 466; Matter of Gesas (C. C. A., 9th Cir.), 16 Am. B. R. 872, 146 Fed. 734. 66. In re Steam Vehicle Co. (D. C, Pa.), 10 Am. B. R. 385, 121 Fed. 939. 67. In re Wolf (D. C, Iowa), 3 Am. B. R. 555, 98 Fed. 74 ; First Nat. Bank v. Penn. Trust Co. (C. C. A., 3d Cir.), 10 Am. B. R. 782, 124 Fed. 968 ; Tiffany v. Boatman's Sav. Bank, 18 Wall. 375; In re Noel (D. C, Md.), 14 Am. B. R. 715, 137 Fed. 694; McDonald v. Clearwater Ry. Co. (C. C, Idaho), 21 Am. B. R. 182, 164 Fed. 1,007. 68. See Cook v. TulHs, 18 Wall. 332; Sawyer v. Turpin, 91 U. S. 114; 658 The Law and Peaotice in Bankruptcy. Transfer of Property; Payment of Antecedent Debts. [§ 60 a. 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. 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 time by way of payment on or security of an ante- cedent debt is a preference.^* A transfer of gooda within the four months period in part payment of unsecured debts, consti- tutes 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 de- livered to the trustee for the benefit of the estate.''' The assign- ment of a policy of fire insurance, within the statutory period, aa security for an antecedent debt, constitutes a preference.''* A Clark V. Iselin, 21 Wall. 369; Stew- art V. Piatt, 101 U. S. 731; Birnhisel V. Firman, 22 Wall. 170; In re Weaver, Fed Caa. 17,307; Butt v. Car- ter, Fed. Caa. 1,844. 69. Furth v. Stahl, 10 Am. B. R. 442, 205 Pa. St. 439. See, also, Dressel v. North State Lumber Co. (D. C, N. Car.), 9 Am. B. R. 541, 119 Fed. 531, holding that the return of money to a bankrupt 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 tlie bankrupt. 70. Hackney v. Raymond Bros. Clarke Co. (Sup. Ct., Nebr.), 10 Am. B. R. 213; Lyon v. Clark, 124 Mich. 100, 105, 88 N. W. 1,046; North v. Taylor, 6 Am. B. R. 233, 61 N. Y. App. Div. 253, 70 N. Y. Supp. 338. 71. 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, Iowa), 3 Am. B. R. 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. Caa. 2,955. But compare Brooks v. Davis, Fed. Cas. 1,950; Adams v. Merchants' Bank, 2 Fed. 174. It is suggested that In re Sanderlin (D. C, N. Car.), 6 Am. B R. 384, 109 Fed. 857, is more reliable authority here than is McNair v. Mclntyre (C. C. A., 4th Cir.), 7 Am. B. R. 638, 113 Fed. 113, that reversed it. In Iiouiaiana, a conveyance of real estate by an insolvent husband, within the four months period, to his wife, does not constitute a preference, under section 60-b, where the subject matter of the conveyance does not ex- ceed in value the total property of the wife. Gomila v. Wilcombe (C. C. A., 5th Cir.), 18 Am. B. R. 143, 151 Fed. 470. 72. In re Ansley Bros. (D. C, N. Car.), 18 Am. B. R. 457, 153 Fed. 983. 73. 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 presented, and in a, proper way may be consid- ered as an expense of the receiver in bankruptcy. 74. Hanson v. Blake & Co. (D. C, Me.), 19 Am. B. R. 325, 350, 155 Fed. Peefeeeed CeeditoSs. 659 § 60-a.] Mortgage of Property. transfer of firm property in payment of an individual partner's 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."* (6) Mortgage of properitt. — ^A transfer may include a mort- gage of the bankrupt's property as well as an absolute eonvey- aneeJ' Thus, a chattel mortgage, given on the verge of bank- ruptcy, may constitute an unlawful preference." A mortgage is a security and a transfer, and subject to the provisions of sub- divisions a and 6. Such a mortgage or transfer as constitutes a preference under subdivision a is not voidable under subdivision h unless the creditor who receives it, or is benefited by it, or his agent, has reasonable 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, hy virtue of a contract of purchase in connection with another and separate transaction does not constitute a preference, barring proof of the claim under the mortgage.'" The taking of a chattel mort- gage by a creditor to receive 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 342, holding that the assignee has no 79. Coder v. Arts (C. C. A., 8th equitable lien upon the insurance Cir.), 18 Am. B. E. 513, 152 Fed. money. 943, mod'f'g 16 Am. B. R. 583, affd. 75. In re Gillette et al. (D. C, N. 22 Am. B. R. 1, 213 U. S. 223. Y.), 5 Am. B. R. 119, 104 Fed. 769. A mortgage given by an in- See, also, In re Beerman (D. C, Ga.), solvent debtor within the four 7 Am. B. R. 431, 112 Fed. 662. months period is void under 60-b 76. Withrow v. Fowler, Fed. Cas. where the creditor had reasonable 17,919. Compare Amsinck v. Bean, cause to believe a preference intended. 22 Wall. 395; In re Hines (D. C, In re Tindal (D. C, S. Car.), 18 Am. Pa.), 16 Am. B. R. 495, 144 Fed. 142. B. R. 773, 155 Fed. 456. Or where 76a. In re Lynn Camp Coal Co. the creditor received the mortgage (Cir. Ct., Ky.), 22 Am. B. R. 60, with knowledge of the bankrupt's in- 168 Fed. 998. solvency. Pittsburg Plate Glass Co. 77. In re Coffey (D. C, N. Y.), v. Edwards (C. C. A., 8th Cir.), 17 19 Am. B. R. 148, 164, holding that Am. B. R. 447, 148 Fed. 377. Where the effect of a mortgage, being to en- it does not appear whether the mort- able the mortgagee to obtain a gagor vyas insolvent when the mort- greater percentage of his debt than gage was given or not, but he was in- other creditors, renders it a voidable solvent, and the mortgagee knew it preference. when he took possession, the mort- 78. Coder v. McPherson (C. C. A., gage constitutes a preference. In re 8th Cir.), 18 Am. B. R. 523, 152 Fed. Reynolds (D. C, Ark.), 18 Am. B. 951; Rutland County Nat. Bank v. R. 666, 153 Fed. 295. Graves (D. C, Vt.), 19 Am. B. R. 80. Mills v. Virginia-Carolina Lum- 446, 156 Fed. 168; In re Hickerson ber Co. (C. C. A., 4th Cir.), 20 Am. (D. C, Idaho), 20 Am. B. R. 682, B. R. 750, 164 Fed. 168, mod'f's 18 162 Fed. 345. Am. B. R. 218. 660 The Law and Practice in Bankruptcy. Notes and Checks. [§ 60-a. 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 bankruptcy of the partnership.*^ And the assignment of a mortgage given within the four months' period by an insolvent corporation has been held to constitute a preference.*' 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 bank- rupt.** A mortgage on exempt and non-payment property may be avoided as preferential so far as it pertains to the non-exempt prop- gP^-y 84a (7) Notes and checks. — It is not the giving of a note by the bankrupt to a creditor that constitutes a preference, but the pay- ment thereof within the four months' period.*' But the delivery of the note of a third person constitutes a preference.*" Payments on a note or cheek even where there is an endorsement 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 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 preference.*' 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."" 81. Hussey v. Riehardson-Roberts firming 7 Am. B. R. 412. If the bank Dry Goods Co. (C. C. A., 8th Cir.), received the bankrupt's cheek for an 17 Am. B. R. 511, 148 Fed. 598. amount to be applied on account of 82. In re W. J. Floyd & Co. (D. a matured note held by the bank, it C, N. Car.), 19 Am. B. R. 438, 156 constitutes a voidable preference. Fed. 206. Ridge Ave. Bank v. Sundheim (C. C. 83. In re Mills Co. (D. C, K. A., 3d dr.), 16 Am. B. R. 863, 145 Car.), 20 Am. B. R. 501, 162 Fed. 42. Fed. 798. 84. Matter of Cohen (D. C, N. 89. Ohio Valley Bank v. Mack (C. y.), 20 Am. B. R. 796, 163 Fed. 444. C. A., 6th Cir.), 20 Am. B. R. 40. 84a. In re Bailey (D. C, Utah), 163 Fed. 155. 24 Am. B. R. 201, 176 Fed. 990. Where a bank received payment 85. In re Wolf & Levy (D. C, on a note from an indorser, a cor- Tenn.), 10 Am. B. R. 153, 122 Fed. poration, the maker, another corpo- 127. ration, being a bankrupt, the officers 86. Dickinson v. Bank of Rich- of both corporations being the same, mond (C. C. A., 4th Cir.), 6 Am. B. it was not a preference. Mason v. R. 551, 110 Fed. 353. Nat. Herkimer County Bank (C. C. 87. Swarts v. Fourth Nat. Bank A., 2d Cir.), 22 Am. B. R. 733, 172 (C. C. A., 8th Cir.), 8 Am. B. R. Fed. 529, revg. 21 Am. B. R. 98, 163 673, 117 Fed. 1; In re Lyon (C. C. Fed. 920. A,. 2d Cir.), 10 Am. B. R. 25, 121 90. Swarts v. Bank (C. C. A., 8th Fed. 723, a%. 7 Am. B. R. 412, 114 Cir.), 8 Am. B. R. 673, 117 Fed. 1; Fed. 326; Landroy v. Andrews, 6 Secnrity transferred to an ac- Am. B. R. 281, 21 R. I. 597 ; In re commodation maker of a promissory George M. Hill Co. (C. C. A., 7th note for the benefit of an insolvent Cir.), 12 Am. B. R. 221, 130 Fed. debtor constitutes a preference. In 315. re Bailey & Son (D. C, Pa.), 21 Am. 88. In re Lyon (C. C. A., 2d Cir.), B. R. 911. 10 Am. B. R. 25, 121 Fed. 723, af- Pbefeeeed Ckeditobs. 661 1 60-a.] Deposit of Money; Payment of Wages. (8) 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.'* The action of a bank in apply- ing the deposit or any portion thereof upon the depositor's indebt- edness to the bank does not constitute a preferential transfer.®' So, 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 preference.®* (9) Payment of wages. — The payment of wages by a bank- rupt is not a preference.®'' The payment of checks given by a corporation to its president for present advances with which to pay its workmen their weekly wages is not a preference.®' (10) 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 subdivision b must at least be available. The transfers must, in short, be voidable. 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 Laundry v. Andrews (Sup. Ct., R. 92. In re Elsaaser (Ref., Pa.), 7 I.), 6 Am. B. R. 281. Am. B. R. 215; In re Little (D. C, 91. In re Hill Co. (C. C. A., 7th Iowa), 6 Am. B. R. 682, 110 Fed. Cir.), 12 Am. B. R. 221, 130 Fed. 621; In re Smith, Thorndyke & 315; West v. Bank of Lahoma (Sup. Brown Co. (C. C. A., 7th Cir.), 22 Ct., Okl.), 16 Am. B. R. 733. As to Am. B. R. 350, 170 Fed. 900. whether a payment of a clearing 93. Lowell v. International Trust house check by a clearing house asso- Co. (C. C. A., lat Cir.), 19 Am. B. eiation is a preference, see Rector v. R. 853, 158 Fed. 781. City Deposit Bank Co., 15 Am. B. 94. Pratt v. Columbia Bank (D. R. 336, 200 U. S. 405. C, N. Y.), 18 Am. B. R. 406, 157 A deposit of money to one's Fed. 137. credit in a bank does not operate to 95. Matter of Read (Ref., N. Y.), diminish the estate of the depositor, 7 Am. B. R. Ill; In re Feuerlicht for when he parts with the money he (Ref., N. Y.), 8 Am. B. R. 550; In re creates at the same time on the part Abraham Steers Lumber Co. (D. C, of the bank, an obligation to pay the N. Y.), 6 Am. R R. 315, 110 Fed. amount of the deposit as soon as the 738, aff'd 7 Am. B. R. 332, 112 Fed. depositor may see fit to draw a check 406. against it. It is not a transfer of 96. In re Union Feather & W. Co. property as a payment, pledge, mort- (C. C. A., 7th dr.), 7 Am. B. R. gage, gift or security. New York Co. 472, 112 Fed. 774. Nat. Bank v. Massey, 192 U. S. 138, 97. See this subject, generally, 11 Am. B. R. 42. under this section, post. 662 The Law and Peaotice in Bankruptcy. Effect, a Greater Percentage. [$ BO-a. others, since the changes made in § 57-g, are of value only by way of possible suggestion. f. Effect, a greater percentage — The tes.t 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 is not required to be specifically proven, but is conclusively presumed from the effect of the trans- action in giving one creditor a greater percentage of his debt than any other creditor of a like class.** Intent, save as evidence of a reasonable cause to believe, is immaterial; it has given place to the new element, resultant inequity.*"* But the " greater per- centage " refers only to creditors of the same class. This is the reason why the payment 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 creditors, 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.*** Payments and sales in the general course of busi- ness do not constitute preferences where the net result is; to in- 98. Swarts v. Fourth Nat. Bank B. R. 539, 131 Fed. 769; In re Mayo (C. C. A., 8th Cir.), 8 Am. B. R. Contracting Co. (D. C, Mass.), 19 673, 677, 117 Fed. 1. Am. B. R. 551, 157 Fed. 469; Mills 99. Hackney v. Hargreaves Bros., X;. J; ^■J^^\" * S"" ^^- 1\^' ?^a 11 Arr, R n iRi iRH RS KT^K Ro/ Cir. , 20 Am. B. R. 237, 159 13 Am B. R. 164, 168, 68 Neb. 624, ^ed. 8Q7, holding that it is not rev'g 10 Am. B. R. 213. ^ preference to make a pay- 100. Compare Crooks v. The Peo- ment upon a running account of pur- ple's Bank, 3 Am. B. R. 238, 46 N. Y. chases and payments where the effect App. Div. 335. was not to diminish the fund to 101. In re Keller (D. C, Iowa), which the creditors look for pay- 6 Am. B. R. 334, 109 Fed. 118. Com- »«"*! ^^^^f^ \ ^p", .r^ Ss'r^m^*;' pare Swarts v. Bank (C. C. A., 8th ^34 *' ' Cir.), 8 Am. B. R. 673, 117 Fed. 1; a distresi for rent by a land- Mills V. Fisher & Co. (C. C. A., 6th lord does not enable the landlord to Cir.), 20 Am. B. R. 237, 241, 159 obtain a greater percentage of his Fed. 897. debt than other creditors of the 102. Brittain Dry Goods C6 v. same class, where there is but one B"r«27 i«T ""'-'.irii II ^"^ i2"A^'B.^r32ri29^Fid: ^e""-'' B. R. 629, 68 Kan. 734; Matter of 103. i„ ^e Coffey (D. C, N. Y.), Cotton Export, etc., Co. (C. C. A., 19 Am. B. R. 148, 165. 2d Cir.), 10 Am. B. R. 14, 121 104. Brittain Dry Goods Co. v. Fed. 663; In re Douglass Coal Bertenshaw, 11 Am. B. R. 629, Oft & Coke Co. (D. C, Tenn.), 12 Am. Kan. 734. Peefeered Ceeditoes. 663 § 60-a.] Creditors Only May be Preferred. crease the bankrupt's estate.^"" The transfer of a homestead exemption is not a preference, since it is not subject to the demands of creditors.*"' g. Creditors only may be preferred.— Though the words " person " and " creditor " are used interchangeably in this sub- section, it is clear that only a creditor can receive a preference.*"** An indorser or a surety may be a creditor within the meaning of the bankruptcy law.'"' Thus, where the surety is the president of the bankrupt, 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 credi- tors, a preference arises which may be recovered from him by the trustee.*"* A payment for transfer to any one other than a cred- itor, unless for the latter's benefit, falls within the remedies indi- cated 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 practi- tioner, 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 mort- gagee was not a creditor, such mortgage may not be attacked.**" A customer of a stock broker who deposits stock and security for 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.*** 105. In re Sagor (C. C. A., 2d Fed. 660; Matter of McCord (D. C, Cir.), 9 Am. B. R. 361, 121 Fed. 658; N. Y.), 22 Am. B. R. 204, 174 Fed. Jacquith v. Alden, 9 Am. B. R. 773, 72. 189 U. S. 78, 47 L. Ed. 717. 109. Act of 1867, § 35. In the 106. Mills V. Fisher & Co. (C. C. Revised Statutes this section was A., 6th Cir.), 20 Am. B. R. 237, 159 broken up into two, §§ 5128, 5129. Fed. 897. 110. In re Clifford (D. C, Iowa), 106a. In re Kayser (C. C. A., 3d 14 B. R. 281, 136 Fed. 475. Cir.), 24 Am. B. R. 174, 177 Fed. 111. Richardson v. Shaw & David- 383. son, 209 U. S. 365, 19 Am. B. R. 107. Swarts V. Siegel (C. C, Mo.), 717, affg. 16 Am. B. R. 842, holding 8 Am. B. R. 220, 114 Fed. 1001; that where by agreement a stock- Wood V. United States (D. C„ broker pledges his customer's stocks Mass.), 16 Am. B. R. 21, 143 Fed. upon general loans, the customer for 424; In re Hines (D. C, Pa.), 16 whom the stocks are carried on mar- Am. B. R. 495, 144 Fed. 147; Lud- gin by the broker is not a creditor, vigh V. Umstradter (D. C, N. Y.), 17 and does not receive a voidable pref- Am. B. R. 774, 148 Fed. 319; In re erence where within the four months Bailey & Son (D. C, Pa.), 21 Am. period he closes the transaction, pays B. R. 911; Brown v. Streicher (D. the balance owing the broker and re- C, R. I.), 24 Am. B. R. 267, 177 Fed. ceives stocks worth more in the 473. market than the sum paid to take 108. Kobusch v. Hand (0. C. A., them up. 8th Cir.), 19 Am. B. R. 379, 156 664: The Law and Peactice in Bankeuptcy. Illustrative Cases. [§ 60-a. h. Illustrative cases. — In addition to the cases alre^ady cited the cases in the foot-note may be referred to. These cases supple- ment the authorities already cited but do not readily admit of classification.* ** 112. Tranaactlons held not to be preferences. — The following have been held not to be preferences, even within the four months period: The renewal of notes more than four months old, Chattanooga Bank v. Rome Iron Co. (C. C, Ga.), 4 Am. B. E. 441, 102 Fed, 755); the payment of interest on notes. In re Keller (D. C, Iowa), 6 Am. B. R. 621, 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. E. 231, 97 Fed. 197; the avails of book accounts assigned as collateral to a present loan. Young v. Upson (C. C, N. Y.), 8 Am. B. R. 377, 115 Fed. 192; the collection and application of the avails of collateral security given before the period. In re Little (D. C, Iowa), 6 Am. B. R. 681, 110 Fed. 621; the proceeds of a pledged fire insurance policy. In re West Norfolk Lumber Co. (D. C, Va.), 7 Am. B. R. 648, 112 Fed. 759. See, also, McDonald v. Daskam (C. C. A., 7th Cir.), 8 Am. B. R. 543, 116 Fed. 276; a payment to an ofBcial successor under order of court, Fry v. Penn Trust Co. (Sup. Ct., Pa.), 5 Am. B. R. 51; a payment in pursuance of a valid executory contract more than four months old, Sabin v. Camp (D. C, Oveg. ), 3 Am. B. R. 578, 98 Fed. 974. Apparently contra. In re Sheridan (D. C, Pa.), 3 Am. B. R. 554, 98 Fed. 406; pay- ments to a surety who afterward pays the bankrupt's debt, In re New (D. C, Ohio), 8 Am. B. R. .566, 116 Fed. 116; where a sheriff still has in his hands money collected on an execu- tion, In re Kenney (D. C, N. Y.), 3 Am. B. R. 353, 97 Fed. 554. Com- pare, however. In re Blair (D. C, N. Y.), 4 Am. B. R. 220, 102 Fed. 987; and where a mortgage is taken as security by a lender who knows that the borrower is hard pressed, the latter using the money to pay h'n debts, In re Pearson (D. C, N. Y.), 2 Am. B. R. 482, 95 Feu. 425. See, also, In re Harpke (C. C. A., 7th Cir.), 8 Am. B. R. 535, 116 Fed. 295; payment of interest on dower. In re Riddle's Sons (D. C, Pa.), 10 Am. B. R. 204, 122 Fed. 559. Transactions held preferences. — The following have been held pref- erences: Attachments, In re Bur- lington Malting Co. (D. C, Wis.), 6 Am. B. R. 369, 109 Fed. 777; In re Schenkein (Ref., N. Y.), 7 Am. B. R. 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 (Ref., N. Y.), 6 Am. B. R. 187; a. cash sale of all property to an out- sider and payment in full of several creditors, Boyd v. Lemon Gale Co. (C. C. A., 5th Cir.), 8 Am. B. R. 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 re Klingaman (Ref., Iowa), 2 Am. B. R. 44; Silberstein v. Stahl, 4 Am. B. R. 626, 32 N. Y. Misc. 353; a payment after insolvency by means of a postdated check. In re Lyon (D. C, N. Y.), 7 Am. B. R. 412, 114 Fed. 326; affirmed, 10 Am. B. R. 25, 121 Fed. 723; a loan by a banker to the bankrupt of the amount of the latter's deposit. In re Cobb (D. C, N. Car.), 3 Am. B. R. 129, 96 Fed. 821 ; a payment on the bank- rupt's note after its sale to and dis- count 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. IDS; repayment of a loan out of a certain fund under an a:j;r('i^nient en- Pbefeeeed Ckeditoes. 665 S 60-b.] What Preferences Are Voidable. m. WHAT FREFEKENCES ABE VOIDABIiE. a. In general. — Prior to the amendment of 1903, this subdi- vision was regarded as broad enough to include a preference ac- cording to subdivision a, as construed by the Supreme Court in Pirie v. Chicago Title & Trust Go.,^^^ v?here the broad distinction was made between said subdivisions showing that under subdivi- sion b, 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 subdivision 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 § 70-a, to protect intervening 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 33 to what is " reasonable cause to believe " and the practice on and measure of damages in suits to recover.^ ^' tered into when the loan was made, repetition that none of them are now Torrance v. Winfield Nat. Bank (Sup. valuable unless they show the all- Ct., Kan.), 11 Am. B. R. 185; agree- essential element of voidable prefer- ment that chattel mortgage, executed ences; "reasonable cause to believe prior to four months shall be lien on that a preference was intended." certain specified articles made within 113. 5 Am.- B. E. 814, 182 U. S. said period. First Nat. Bank v. John- 438. son (Sup. Ct., Neb.), 10 Am. B. R. 114. In re Andrews (C. C. A., 1st 208. See, also. In re Colton, etc., Cir.), 10 Am. B. R. 387, 144 Fed. 922; Co. (D. C, N. Y.), 8 Am. B. R. 257, aff'g 14 Am. B. R. 247. 115 Fed 158; In re Metzger, etc., Co. 115. Atkins v. Spear, 49 Mass. (D. C, Ark.), 8 Am. B. R. 307, 114 490; Zahm v. Fry, Fed. Cas. 18,198; Fed. 957; Swarts v. Siegel (C. C. A., Eison v. Knapp, Fed. Cas. 11,861. 8th Cir.), 8 Am. B. E. 690, 117 116. See In re Phelps (Ref., N. Fed. 13. Y.), 3 Am. B. R. 396; In re Cobb (D. The practitioner should, however, C, N. Car.), 3 Am. B. R. 129, 96 Fed. note that the provocation for many of 821. these decisions — the necessity of sur- 117. See cases cited later under render of " innocent " partial pay- this section, ments — is now gone. It will bear The Law and Peaotice in Babtketiptoy, Beasonable Cause to Believe Preference Intended. [§ 60-b. c. The person receiving it — A transfer may be made to a third person and still be a preference; for a creditor may be benefited thereby. ^^® Hence, the phrasing " the person receiving it, or to be benefited thereby;" words found in the same connection in the law of 1867.^^® To constitute a preferential transfer, it is imma- terial 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 othere.^^" It seems to follow, from the last words in the subsection that the suit can be brought not only against the creditor or his agent, but also against a transferee not a creditor. b. Reasonable cause to believe a preference intended. — (1) In general. — The former law and the present are here not exactly equivalent ; though the phrase " reasonable cause to be- lieve " occurs in both. Its meaning is not easily explained. Each case will turn on its own facts. ^'^^ Reasonable cause to believe a preference intended is a very different thing from intent to prefer, per se. That reasonable cause to believe must exist at the time of the alleged preference also follows.*^* (2) Actual knowledge not required. — The cases under both laws 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 ordi- 118. Western Tie & Timber Co. 631, 70 N. Y. Supp. 359; Crooks v. V, Brown (C. C. A., 8th Cir.), 12 Am. People's Bank, 3 Am. B. R. 238, 46 N. B. R. Ill, 129 Fed. 728 (reversed on Y. App. Div. 335; Beck v. Connell other grounds, 13 Am. B. R. 447) ; (Supr. Ct., Pa.), 8 Am. B. R. 500, af- Hackney v. Hargreaves, 13 Am. B. R. firming s. c., 6 Am. B. R. 93; Levor v. 164, 3 Neb. (unoff.) 676, in which Seiter, 8 Am. B. R. 459, 69 N. Y. case it was held that a transaction the App. 33; Matter of Bartheleme (Ref., legal effect of which is to appropriate N. Y.), 11 Am. B. R. 67; Baden v. out of the assets of the bankrupt an Bertenshaw (Sup. Ct., Kan.), 11 Am. amount required to settle with a cred- B. R. 308; Ryttenberg v. Schefer (D. itor, and which was subsequently C, N. Y. ), 11 Am. B. R. 652, 131 turned over to such creditor, is a Fed. 313; Pratt v. Christie, 12 Am. preference; Benjamin v. Chandler (D. B. R. 1, 95 N. Y. App. Div. 282; In C, Pa.), 15 Am. B. R. 439, 142 Fed. re Coffey (Ref., N. Y.), 19 Am. B. R. 217. 148, 165. Compare, also, In re Wyly 119. Bankr. Act, § 35. Compare (D. C, Tex.), 8 Am. B. R. 604, 116 Bartholow v. Bean, 18 Wall. 635; Fed. 38, and In re Bullock (D. C, N. Graham V. Stark, Fed. Cas. 5,676; Ahl Car.), 8 Am. B. R. 646, 116 Fed. V. Thorner, Fed. Cas. 103; Cooking- 667; Long v. Farmer's State Bank (C. ham V. Morgan, Fed. Cas. 3,183. C. A., 8th Cir.), 17 Am. B. R. 103, 120. Hackney v. Hargreaves Bros., 147 Fed. 360; In re Burlage Bros. 13 Am. B. R. 164, 68 Neb. 624; (D. C, Iowa), 22 Am. B. R. 410, 169 rev'g 10 Am. B. R. 213. Fed. 1006. 121. For instance: North v. Tay- ***• I" ''<' Hunt, Fed. Cas. 6,881; lor, 6 Am. B. R. 233, 62 N. Y. App. ^rump v. Chapman Fed. Cas. 3,456; ' ' •^•^ In re Ouimette, Fed. Cas. 10,622. Peefeeeed Ceeditoes. 667 § 60-b.] Reasonable Cause to Believe Preference Intended. narily prudent business man to conclude that a preference was intended."' It is not enough that a creditor has merely some 123. In re Jacobs (Ref., La.), 1 Am. B. R. 518; In re Richards (D. C, Wis.), 2 Am. B. R. 518, 95 Fed. 258; Crittenden v. Barton, 5 Am. B. R. 775, 59 N. Y. App. Div. 555; Sebring v. Wellington, 6 Am. B. R. 671, 63 N. Y. App. 498; Hackney v. Raymond Bros. Clarke Co. (Sup. Ct., Neb.), 10 Am. B. R. 213; Sundheim V. Ridge Ave. Bank '(D. C, Pa.), 15 Am. B. R. 132, 138 Fed. 951; In re Hines (D. C, Pa.), 16 Am. B. R. 495, 144 Fed. 543; In re Virginia Hardwood Mfg. Co. (D. C, Ark.), 15 Am. B. R. 135, 139 Fed. 209; In re Armstrong (D. C, Iowa), 16 Am. B. R. 583, 145 Fed. 202; Stevenson V. Milliken-Toralinson, 13 Am. B. R. 201, 99 Me. 320; Suffel v. McCartney Nat. Bank, 16 Am. B. R. 259, 127 Wis. 208, 106 N. W. 837 ; In re Mills Co. (D. C, N. Car.), 20 Am. B. R. 501, 162 Fed. 42; Rogers v. Fidelity Sav. Bank & Loan Co. (D. C, Ark), 23 Am. B. R. 1, 172 Fed. 735; Bueh nan v. Smith, 16 Wall, 277; Rison v. Knapp, Fed. Cas. 11,861; In re McDonough, Fed. Cas. 8,775; Webb V. Sachs, Fed. Cas. 17,325. Absolute knoirledge a£ insol- vency is not required. All that is necessary is the possession by the creditor, at the time, of such infor- mation relative to the debtor's af- fairs as should lead a reasonably prudent person to conclude that the property of the debtor at a fair valuation would not be sufficient to pay his debts. In re Pfaffinger (D. C, Ky.), 18 Am. B. R. 807, 154 Fed. 528; Getts v. Janesville Grocery Co. (D. C, Wis.), 21 Am. B. R. 5, 163 Fed. 417. Knowledge is not necessary, nor even belief, but only reasonable cause to believe, which is a very dif- ferent thing. Pratt v. Columbia Bank (D. C, N. Y.), 18 Am. B. R. 406, 415, 157 Fed. 137. Neither knowl- edge nor actual belief are required to be shown. In re Neill-Pinckney-Max- well Co. (D. C, Pa.), 22 Am. B. R. 401, 170 Fed. 481 ; Dulany v. Wagga- man (Sup. Ct., Dlst. Col.), 22 Am. B. R. 36, 37 Wash. L. Rep. 370. It is sufficient if the facts brought home to the person sought to be af- fected are such as would produce ac- tion and inquiry on the part of " an ordinarily intelligent man" (Grant V. Bank, 97 U. S. 80); "a prudent business man" (Bank v. Cook, 95 U. S. 343; Toof V. Martin, 13 Wall. 40) ; " a person of ordinary pru- dence and discretion " (Wager v. Hall, 16 Wall. 584); "an ordinarily prudent man" (In re Eggert [C. C. A., 7th Cir.], 4 Am. B. R. 449, 102 Fed. 735; McElvain v. Hardesty (C. C. A., 2d Cir.), 22 Am. B. R. 320, 169 Fed. 320 ; " a prudent man " (Dutcher v. Wright, 94 U. S. 553) ; " an ordinarily intelligent and pru- dent business man " (Wright v. Sampter [D. C, N. Y.], 18 Am. B. R. 355, 358, 152 Fed. 196). " He who deliberately shuts his eyes and ears to means of knowledge, and as to matters which he says ' he is not interested in,' has reasonable ground to believe what ordinarily diligent inquiry could ascertain." In re Coffey (Ref., N. Y.), 19 Am. B. R. 148, 166. it has been held that a creditor, who receives a check of $4,000 on the day before the filing of an involun- tary petition against his debtor, a corporation, has reasonable cause to believe that a preference was in- tended. Wright v. Skinner Manu- facturing Co., (C. C. A., 2d Cir.), 20 Am. B. R. 527, 162 Fed. 315. An indirect repurchase by a credi- tor 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. R. 387, 144 Fed. 922, affg. 14 Am. B. R. 247. Where a creditor takes a transfer- of the residence of one partner within the four months period and a short time before had taken a like transfer of the residence of the other partner, he will be deemed to have had reason- able cause to believe that the firm was insolvent. Brewster v. Goil (D. C, Pa.), 21 Am. B. R. 239, 164 Fed. 124. To avoid a transfer as a prefer- ence it must be shown that the trans- feree had reasonable cause to believe a preference intended. Hussey v 668 The Law and Peactice in Bankeuptcv. Reasonable Cause to Believe; Knowledge of Insolvency. [§ 60-b. cause for suspicion. He 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.*** 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.*"®* (3) Mjcre guess ok suspicion insufficient. — There must be something more than a mere guess or suspicion.**® The creditor is not to be charged with knowledge of his debtor's financial con- dition from mere nonpayment of his debt, or from circumstances, which give rise to mere suspicion in his mind of possible in- solvency.**^ (4) Knowledge of insolvency. — To make a transfer such a preference as is voidable under section 60-b it must have been actually intended on the debtor's part, or there must have existed what the law regards as the equivalent of such an actual intrnt on his part, and such an intent is not to be conclusively presumed from the mere fact that the debtor knows himself to be in- solvent.*** While proof of belief in insolvency is not now neces- Richardson-Roberts Dry Goods Co. conclusion, per Jenkins, J. : " The re- (C. C. A., 8th Cir.), 17 Am. B. R. sultant of all these decisions we take 511, 138 Fed. 598. to be this: That the creditor is not 124. Huttig Manufacturing Co. v. to be charged with knowledge of his Edwards (C. C. A., 8th Cir.), 20 Am. debtor's financial condition from mere B. R. 349, 160 Fed. 619. nonpayment of his debt, or from cir- 125. Coder v. McPherson (C. C. cumstances, which give rise to mere A., 8th Cir.), 18 Am. B. R. 523, 152 suspicion in his mind of possible in- Fed. 951 ; Pittsburg Plate Glass Co. solvency ; that it is not essential that V. Edwards (C. C. A., 8th Cir.), 17 the creditor should have actual knowl- Am. B. R. 44/, 148 Fed. 377. ed{,e of a belief in his debtor's insol- 125a. In re Wolf Co. (D. C, Pa.), vency, but that he should have rea- 21 Am. B. R. 73, 164 Fed. 448, afifd. sonable cause to believe his debtor sub.nom. Sharpe V. Allender (CCA. to be insolvent; that if facts and 3d Cir.), 22 Am. B. R. 431, 170 Fed. circumstances with respect to the 589. debtor's financial condition are 126. Off V. Hakes (C C. A., 7th brought home to him, such as would Cir.), 15 Am. B. R. 696, 142 Fed. 364. put an ordinarily prudent man upon Knowledge inferred. — Whether inquiry, the creditor is chargeable or not there was reasonable cause to with knowledge of the facts which believe that a preference was in- such inquiry should reasonably be tended may be inferred from all the expected to disclose." This case was facts and circumstances of the case, followed and approved in Stuart v. but their determination must be Farmer's Bank of Cuba City (Sup. something more than a guess, and Ct., Wis.), 21 Am. B. R. 403, 177 the transferee must have had more N. W. 820. than reasonable cause to suspect. 127. First Nat. Bank of Phila- Forbes v. Howe, 102 Mass. 427. delphia v. Abbott (C C. A., 8th The court in In re Eggert (CCA., Cir.), 21 Am. B. R. 436, 165 Fed. 7th Cir.), 4 Am. B. R. 449, 102 Fed. 853. 735, affg. 3 Am. B. R. 541, 98 Fed. 128. In re Mayo Contracting Co. 843, reviews the authorities very ex- (D. C, Mass.), 19 Am. B. R. 551, haustively and comes to the following 157 Fed. 469. Peefeeked Ceeditoes. 669 § 60-b J Knowledge of Insolvency. sary/^° the element of insolvency should appear, for it will be impossible to show that there is " a reasonable cause to believe that a preference was intended," unless it is shown that the person receiving it had reasonable cause to believe that the debtor was insolvent."" But payments made by the debtor, even while in- solvent, and received by the creditor, without any intent to injure the other creditors is not a voidable preference.""^ It has been held sufficient that a transfer of the insolvent's property is made, which has the effect to give a preference, and that the party who receives it has reasonable cause to believe that it is intended by the party who procures the transfer, or who gives to the transfer the effect of a preference, that it should have that effect, although the insolvent is innocent of that intention.^^" Whether or not the creditor has reason- able cause to believe the debtor insolvent is a question of fact,^^^ for the jury, and where the evidence justified a submission of the question, the finding of the jury is not reviewable.'^* Where the referee and bankruptcy court have considered the conflicting evidence as to the reasonable cause to believe that a preference was intended, their find- ing should not be disturbed, unless it clearly appears that they have fallen into some error of law or have committed some serious mistake of fact in reaching their conclusion.'^** It has been held that it is 129. In re H. C. King Co. (D. C, Mass.), 7 Am. B. E. 619, 113 Fed. 110. But see Des Moines Sav. Bank V. Morgan Co., 12 Am. B. R. 781, 123 Iowa, 432. 130. Ex post facto knowledge that the debtor was, at the time of the preference, insolvent is not ma- terial, nor does it matter, per se, what knowledere the debtor had on the subject. The test is whether the creditor who is charged with having received a. voidable preference had at the time of receiving it such infor- mation as ought to have led a rea- sonably prudent man to the conclu- sion that a preference was thereby intended. In re Pfaffinger (D. C, Ky.), 18 Am. B. R. 807, 154 Fed. 528. 131. In re First Nat. Bank of Louisville (C. C. A., 6th Cir.), 18 Am. B. R. 766, 155 Fed. 100; Hardy V. Gray (C. C. A., 1st Cir.), 16 Am. B. R. 387, 144 Fed. 922; Tumlin v. Brvan (C. C. A., 5th Cir.), 21 Am. B. R. 319, 165 Fed. 166. 132. Benedict v. Deshel, 11 Am. B. R. 20, 177 N. Y. 1; Parker v. Black (D. C, N. Y.), 16 Am. B. R. 202, 143 Fed. 560. Compare In re Andrews (C. C. A., 1st Cir.), 16 Am. B. R. 387, 144 Fed. 922, holding in e.Te:t that it is necessary to ^ow that the debtor actually intended to give a preference, unless there exists what the law regards as the equiv- alent thereof; otherwise the reason- able cause to believe that there was such intention cannot exist. 133. Hackney v. Raymond Bros. Clarke Co. (Sup. Ct., Nebr.), 10 Am. B. R. 213; Laundry v. First Nat. Bank (Sup. Ct. Kan.), 11 Am. B. R. 223 ; Deland v. Miller & Cheney Bank, 11 Am. B. R. 744, 119 Iowa, 368; In' re Andrews (D. C, Mass.), 14 Am. B. R. 247, 135 Fed. 599; Thomas v. Adelman (D. C, N. Y.), 14 Am. B. R. 510, 136 Fed. 973; Upson v. Mount Morris Bank, 14 Am. B. R. 6, 103 N. Y. App. Div. 367; Wetstein v. Fran- ciscus (C. C. A., 2d Cir.), 13 Am. B. R. 326, 133 Fed. 900; Turner v. Fisher (D. C, Cal.), 13 Am. B. R. 243, 133 Fed. 594; and is not review- able by the supreme court. Kauf- man v. Tredway, 12 Am. B. R. 682, 195 U. S. 271. 134. Ridge Ave. Bank v. Sundheim (C. C. A., 3d Cir.), 16 Am. B. R. 863, 145 Fed. 798. 134a. Coder v. Arts (C. C. A., 2d Cir.), 18 Am. B. R. 523, 152 Fed. 943; First Nat. Bank of Philadel- phia V. Abbott (C. C. A., 8th Cir.), 21 Am. B. R. 436, 165 Fed. 853. 670 The Law and Practice in Bankkuptcy. Purpose and EfEect to be Considered. [§ 60-b. not necessary for a creditor to know or have reasonable cause to believe that the debtor was insolvent, where a mortgage or pledge is made, within the four months' period, to secure an antecedent debt.^" Where the creditor knew that the debtor's business was bad, and it was necessary to continually press the debtor for payment, the creditor may be said to have had reasonable cause to believe that the debtor was insolvent and that a preference was intended.^'" A bank may loan money on a bill of sale of the debtor's property to permit him to compromise with his creditors and to go on with his business, where upon investigation it appears that the debtor has sufficient property to pay his debts.^''^ The fact that most of the bankrupt's indebted- ness to a creditor was past due at the time of a payment on account within the four months' period is not sufficient to charge the creditor with notice of the bankrupt's insolvency, and that a preference was intended.'^' Where in an action to recover a preference the complaint alleges that the defendant had reasonable cause to believe that his debtor was insolvent, an averment in defense that the defendant had no knowledge of the debtor's insolvency is insufficient/'^ (5) Purpose and effect to be considered. — Courts cannot permit to be done by indirection what the law forbids to be directly done, and, without regard to the form, they consider the purpose and effect of the transaction however devious the ways by which it is accomplished.^'* Under the former law, any transfer out of due course of trade was prima facie evidence of fraud ; ^*^ even in the absence of this provision, the same rule probably applies to preferences under the law of 1898."^ The amendment of 190.3 135. In re Mills Co. (D. C, N. 137. In re Goodhile (D. C, Car.), 20 Am. B. E. 501, 162 Fed. (Iowa), 12 Am. B. R. 374, 130 Fed. 42; In re Bailey & Son (D. C. Pa.), 782. In this ease the court laid 21 Am. B. K. 911. down the rule that under the pres- 136. Thomas v. Adelraan (D. C, ent law the condition of the debtor's N. Y.), 14 Am. B. R. 510, 136 Fed. affairs must be known to be such 973. The mere fact of taking se- that prudent business men would curity is not of itself sufficient to conclude that the aggregate of the show knowledge. Matter of Alden debtor's property, at a fair valua- (Ref., Ohio), 16 Am. B. R. 362. tion was not sufficient to pay hia Where a teller of a bankrupt bank debts, before there is a reasonable cashes his own check against the cause to believe that the debtor is funds of the bank, he will be held to insolvent, and that a preference have had knowledge of the inaolv- would, therefore, be the result of r ency of the bank, and the transac- payment while in such condition, tion constitutes a preference. In re See Bardes v. First Nat. Bank, 1" Plant (D. C, Ga.), 17 Am. B. R. Am. B. R. 771, 122 Iowa, 443; But- 272, 148 Fed. 37. ler Paper Co. v. Goembel (C. C. A., A debtor's fear about his credit 7th Cir.), 16 Am. B. R. 26, 143 Ferl. should put a pressing creditor upon 295; First Nat. Bank of Philadel- inquiry as to the situation of it and phia v. Abbott (C. C. A., 8th Cir.), the necessity for it. He cannot neg- 21 Am. B. R. 436, 165 Fed. 853. leet to investigate, be intent on se- 138. Plunimer v. Myers (D. C., curity, and purposely ignorant and Pa.), 14 Am. B. R. 805, 137 Fed! blind, or intend to be, of his circum- 660; American Lumber, etc., Co., v. stances until after he gets the se- Taylor (C. C. A., 3d Cir.), 14 Am. curity, and escape being held to have B. R. 231, 137 Fed. 321. had reason to believe what the effect 139. Roberts v. Johnson (C. C. of the giving of it will be. In re A., 4th Cir.), IJ Am. B. R. 132, 136i Coffey (D. C, N. Y.), 19 Am. B. R. 151 Fed. 567, 570. 148, 105. 140. Act of 1867, § 35, R. S. § 136a. In re Bartlett (D. C, Pa.), 5130. 22 Am. B. R. 891, 172 Fed. 679. 141. Walbrun v. Babbit. 16 Wall. Peefereed Ceeditoes. 671 § 60-b.] Belief or Knowledge of Agent. provides in effect that, in order to make a payment a preference, it must have been made by the debtor with intent to prefer, and the creditor who received it must have had reasonable cause to believe that a preference was intended.'*^ (6) Evidence of reasonable cause to believe. — Where there is no evidence tending to show that a creditor had reasonable cause to believe that payments made by the bankrupt were in- tended as a preference a recoveiy cannot be had;'*' the law pre- sumes that such payments are legal and the burden of proof is on the trustee, seeking to recover them, to overcome this presump- tion."'' This burden may be shifted to the person to whom the transfer was made, where it appears that the parties are relatives and the circumstances were such as to put the transferee upon his guard."** The unrequested repayment of a loan, with a letter stating that the money can no longer be used, is not sufficient alone to establish reasonable cause to believe that a preference was intended.'*' What constitutes reasonable cause to believe may depend upon the circumstances of the case ; direct evidence is not essential.'*"^ (7) Sale of entire stock. — The sale of an entire stock of goods of a retail merchant is a suspicious circumstance per se, naturally calculated to put the purchaser on inquiry."" Such a purchase is presumptively questionable, and casts the burden of proof on the purchaser to show that he had no notice of facts or circumstances sufficient to arrest his attention, puts him on inquiry, and requires him to use such means of knowledge as were at hand in order to learn whether the seller is not in financial difficulty, and whether a general statement, such as that the book accounts are insufficient to pay the mercantile creditors, was true.'*' d. Belief or knowledge of agent or attorney. — Here the statute 577. Compare In re Eggert (D. C:, ners loaned him money on several Wis.), 3 Am. B. E. 541, 98 Fed. occasions, upon the understanding 843; In re Andrews (C. C. A., 1st that security would be given there- Cir.), 16 Am. B. R. 387, 144 Fed. for, and less than a month prior to 922. his adjudication she received a prom- 142. Rutland Co. Nat. Bank v. issory note of the firm, secured by Graves (D. C, Vt.), 19 Am. B. R. a deed of trust upon certain per- 446, 156 Fed. 168. sonal property, and it was held that 143. Keith v. Gettysburg Nat. the burden is upon her, in seeking Bank, 10 Am. B. R. 762, 23 Pa. to establish a lien under said deed, Super Ct. 14; In re Neill-Pickney- to show that the transactoin was in Maxwell Co. (D. C, Pa.), 22 Am. good faith and without knowledge B. R. 401, 170 Fed. 481. on her part of the grantor's insolv- 144. See Deland v. Miller & ency. Cheney Bank, 11 Am. B. R. 744, 145. Wright v. Sampter (D. C, 119 Iowa, 368; Getts v. Janesville N. Y.), 18 Am. B. R. 355, 358, 152 Grocery Co. (D. C, Wis.), 21 Am. Fed. 196. B. R. 5, 163 Fed. 417. The plaintiff 145a. Whitwell v. Wright (N. Y., must prove, in order to establish his App. Div.), 23 Am. B. R. 747, 136 cause of action, that when the cred- App. Div. 246. itor received the payment he had 146. In re Knopf (D. C, S. Car.>, reasonable ground to believe that it 16 Am. B. R. 432, 146 Fed. 109 ; Dok- was intended as a preference. Bene- ken v. Page (C. C. A., 8th Cir ) 17 diet V. Deshel, 11 Am. B. R. 29, 177 Am. B. R. 228, 147 Fed. 438; Allen N. Y. 1; In re Leach (C. C. A., 6th v. McMannes (D. C, Wis.), 19 Aiu Cir.),22 Am. B. R. 600, 171 Fed. 622; B. R. 276, 156 Fed. 615; McElvain Harder v. Clark (City Ct., N. Y.), v. Hardesty (C. C. A., 8th Cir.), 22 23 Am. B. R. 756, 66 Misc. 584. Am, B. R. 320, 1(59 Fed 32 144a. In re Sanger (D. C, W. 147. Allen v. McMannes (D. C, Va.), 22 Am. B. R. 145, 169 Fed. Wis.), 19 Am. B. R. 276, 280 156 722, in which ease it appeared that Fed. 615, and cases cited. ' A sister-in-law of one of two part- 672 The Law and Peactice in Bankruptcy. Recovery of Preference. [§ 60-b. states the rule of law, i. e., that any knowledge possessed by the agent of the creditor may be imputed to the latter ; "* but not if, when acquired, the agent was acting in his own interest.^*" This general rule extends to such agents as attomeys-at-lawj^^" but not where the attorney acquired it while acting as attorney for the debtor;'"^ to sub-agents,'"^ but not, it seems, to attorneys of such sub-agents.'"' This latter rule, though supported by high author- ity, may be doubted; it would leave a tempting loophole to the " diligent " creditor. e. Recovery of preference. -(1) In general. — While all the elements of a voidable preference previously outlined exist, the property affected or its value may be recovered. But the proof must show that the bankrupt made the transfer with intent to prefer, and that the creditor who received them had reasonable cause to believe that a preference was intended.'"* A transfer made with intent to give a preference may be set aside, even if recorded within the four months' period, for in a fraudulent trans- action, the grantee is presumed to be a party to the fraud, and does not occupy the position of an innocent holder for value.'"" A trustee is entitled to recover property, transferred within the statutory period, under an agreement made anterior to such period, where it was in payment of an antecedent debt. But he has no right to recover exempt property or the proceeds thereof.'"' The creditor may, in certain cases, retain possession of the property trans- ferred pending the determination of the question as to whether the transfer was preferential.'""* (2) Eecovery by trustee only. — Subsection b provides that a preference 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 confusion. The right of a trustee to recover a preference is not assignable.'""'' But, if the trustee refuses to sue, it has been held that a creditor may be permitted to do so for the benefit of all.'"' It is unfortunate that, 148. Rogers v. Palmer, 102 U. S. 153. Hoover v. Wise, 91 U. S. 263; Sage v. Wynkoop, Fed. Cas. 308. 12,21,5. See, also, Babbitt v. Kelley, 154. Rutland County Nat. Bank 9 Am. B. R. 335, 95 Mo. App. 529. v. Graves (D. C, Vt), 19 Am. B R. 70 S. W. 384; Off v. Hakes (C. C. 446, 156 Fed. 168; In re Leach (C. C. A., 7th Cir.), 15 Am. B. R. 696, 142 A., 6th Cir.), 22 Am. B. R. 599 Fed. 364: In re Nassau (Ref., Pa.), 171 Fed. 622. 15 Am. B. R. 793, 140 Fed. 912. 155. Matter of McKane (D. C, 149. Crooks v. People's Bank, 3 N. Y.), 19 Am. B. R. 103, 158 Fed. Am. B R. 238, 46 N. Y. App. Div. 647. 335, 61 N. Y. Supp. 604. 156. Vitzthura v. Large (D. C, 150. In re Ebert (Ref., Wis.), la.), 20 Am. B. R. 666, 162 Fed. I Am. B. R. 340; In re Dunavant 685. (D. C, N. Car.), 3 Am. B. R. 41, 156a. In re Blake (D. C, N. Y.), 96 Fed. 542; Rogers v. Palmer, 102 22 Am. B. R. 612, 171 Fed. 298. U. S. 263; Vogle v. Lathrop, Fed. 156b. Belding-Hall Mfg. Co. v. Cas. 16,985; Brown v. Jefferson Mercer, etc.. Lumber Co., (C. C. A., County Bank, 9 Fed. 258. 6th Cir.), 23 Am. B. R. 595, 175 Fed. 151. In re Ebert (Ref., Wis.), 1 335. Am. B. R. 340; Mayer v. Hermann, 157. Compare under § 11, ante. Fed. Cas. 9,344; The Distilled Spirits, See, also, on the general proposition II Wall. .356. that only a trustee should sue, 158. Storrs v. City of Utiea, 17 Olennv v. Lan^don, 98 U. S. 20; N. Y. 104. In ro' Ttothschild (Ref., Ga.), 5 Am'. P. R. 507. Pkefebeed Ceeditoes. 6Y3 § 60-b.] Recovery of Preference; in what Court. 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 asset 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) Against whom action brought. — The words of sub- section h are clear : the recovery must be had of the person " re- ceiving it or to be benefited thereby." Where the proceeds of an execution sale have been paid to a judgment creditor, before the filing of an involuntary petition, the remedy is by action by the trustee against the creditor for having received a preference.*"* An action may be maintained against the board of trustees of a township to recover a preference.*®* (4) In what couet; the amendments of 1903. — The sub- ject has been discussed in detail elsewhere.*®* The condition of things prior to the amendatory 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 the subsection 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. 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 determination hastened by a reference to the referee, as special master. Such suits are analogus to judgment creditors' suits to set aside fraudulent conveyances, and are, therefore, properly within the equity jurisdiction of the court.*®* But a suit by a 158. For an unsuccessful attempt Pa.), 15 Am. B. R. 439, 142 Fed. 217. to cure this defect in tlie bankruptcy 161. Painter v. Napoleon Township system, see In re McNamara, 2 N. B. (D. C, Ohio), 19 Am. B. R. 412, 156 N. Rep. 341. Fed. 289. 159. Bankr. Act, § 64-b(2) as 162. See under § 23, ante. amended. 163. Pond v. New York Exchange 160. In re Bailey (D. C, Or.), 16 Bank (D. C, N. Y.), 10 Am. B. R. Am. B. R. 289, 144 Fed. 214. See, 343, 124 Fed. 992; Wall v. Cox, 181 also, Benjamin v. Chandler (D. C, U. S. 244, 5 Am. B. R. 727; Parker v. 43 674 The Law and Pkactice in Bankeuptcy. Recovery of Preference ; Practice. [§ 60-b. trustee in bankruptcy to recover the value of certain personal property, alleged to have been fraudulently transferred by the bankrupt to enable the transferee to obtain an unlawful prefer- ence, 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 applica- tion of a state law."** 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 bankrupt.^^" The words "any court of bankruptcy" seem to imply that the district court, while so setting, is still exercising its bankruptcy jurisdiction. The referee is not a "court of bank- ruptcy " within the meaning of this clause.^""* (5) Permission 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 applicable to the court in which they are brought. The right to a jury trial is considered elsewhere.^"'^ Careful pleading is essential. In order to recover the bill must allege and the proof must sustain the four statutory elements constituting a preference.^'** Some of the more valuable discussions on practice under the present law will be found in the foot-note.^"' In a suit by a Black (D. C, N. Y.), 16 Am. B. E. 167. See Section Nineteen, ante. 202, 143 Fed. 560, aff'd 18 Am. B. E. 168. Painter v. Napoleon Town- 15; Off V. Hakes (C. C. A., 7th ship (D. C, Ohio), 19 Am. B. E 412 Cir.), 15 Am. B. E. 696, 142 Fed. 156 Fed. 289, holding that a bill, in 364. an action to recover the payment of 164. Warraath v. O'Daniel (C. C. a township, which fails to allege that A., 6th Cir.), 20 Am. B. E. 101, 159 the enforcement of the transfer eon- Fed. 87. stituting the alleged preference will 164a. Miller v. New Orleans Acid be to enable the said board of trus- 6 Fertilizer Co., 211 U, S. 496, 21 tees to obtain a larger percentage of Am. B. E. 416, aff'g 117 La. 821, its debts than any other creditor of 42 S. E. 329. the same class, is demurrable. 165. Allen v. McMannes (D. C, Sufficiency of complaint in an Wis.), 19 Am. B. E. 276, 156 Fed. action by a trustee to set aside a 615. preference, see Lesser v. Bradford 165a. In re Overholzer (Eef. No. Eealty Co., 17 Am. B. E. 524, 116 Dak.) 23 Am. B. E. 10, holding N. Y. App. Div. 212; aff'g is' Am. that where upon the petition of a B. E. 123. trustee, the referee in charge issued A petition by a trustee is insuffi- an order directed to the grantee of cient which fails to allege and prove real estate to show cause why the insolvency and reasonable cause to conveyance should not be set aside believe that a preference was in- as preferential, the proceeding must tended. In re Leach (C. C. A be dismissed where, upon the return 6th Cir.), 22 Am. B. E. 599 171 day, the grantee appears specially by Fed. 622; Taylor v. Nichols, 23 attorney and objects to the jurisdic- Am. B. E. 310, 134 N. Y. App Div tion of the court. 787. 166. In re Mersman (Eef., N. Y.), 169. Crooks v. People's Bank 3 7 Am. B. E. 46. But see Chism v. Am. B. E. 238, 46 N Y App Div Bank (Sup. Ct., Miss.), 5 Am. B. 335, 61 N. Y. Supp. 604 ;" In re Nel- 56. See, also, under Section Forty- son ( D. C., Wis. ) , 1 Am. B E 63 "even, ante. 98 Fed. 76; Chism v. Bank (Sup. Ct.i Peefeeeed Ceeditoes. 675 § 60-b.] Recovery of Property or its Value. 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 the land will be overruled.^'" A proceeding to set aside an illegal preference 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 praetiee.^^"* f. Property or its value. — (1) In general. — Similar words were used in the law of 1867. The option of suing for the prop- erty or for its value rests with ' '^ Ai^-^1^ 4^T; CaS: 2"An[%^r692^ ^.h^l n^^^^i^^^J, ^705'^- '' In re Silverman (D. C, N. Y ) 3 48 «»»«■#„ tT' f" ",T^-. Am. B. R. 227, 9) Fed. ' 325. ""(^om' sectfon,^*. '^"'^ '''''''''''' ^ ^his Td.^ J.? Mo.^,TZ. B^rilo, % *^- ^" ^^ ^- ^- H'" C°. (C. C. A., Expenses of Administeeinq Estates. 691 162.] Compensation of Attorneys; for Bankrupts. for services only to the extent that the services were rendered in behalf of the estate or to its benefit."** And no allowance will be made to the receiver for services rendered by his attorney in the interest of petitioning creditors who were his clients."^ The re- ceiver 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."^ 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 compensation for his services.®^ (5) Fob bankrupts in iNVOiiUNTAEY OASES. — 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 per- formance of the prescribed duties materially benefit or hasten the administration 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."* (6) Foe bankeupts in voluntaey 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 divi- 7th Cir.), 20 Am. B. R. 73, 159 Fed. 54. See Bankr. Act, § 7, ante. In 73. re Payne (D. C, N. Y.), 18 Am. B. 50. In re Ketterer Manufacturing R. 192, 151 Fed. 1,018; In re Wood- Co. (D. C, Pa.), 19 Am. B. R. 646, ard (D. C, N. Car.), 2 Am. B. R. 155 Fed. 987; In re Huddleston (D. 692, 95 Fed. 955. C, Ga.), 21 Am. B. R. 669, 167 Fed. 55. See foot-notes of next para- 428 Text, cited and approved In re graph, where the cases in both volun- Leonaid (D. C, Nev.), 24 Am. B. tary and involuntary bankruptcy are R. 97, 103, 177 Fed. 503. collated. 51. In re Oppenheimer (D. C, 56. In re Eschwege (Ref., N. Y.), Pa.), 17 Am. B. R. 59, 146 Fed. 140. 8 Am. B. R. 282. 52. In re Kelley Dry Goods Co. 57. In re Goldville Mfg. Co. (D. (D. C, Wis.), 4 Am. B. R. 528, 102 C, S. Car.), 10 Am. B. R. 552, 118 Fed. 748. Fed. 892; In re Rosenthal (D. C, 53. In re Zier (C. C. A., 7th Cir.), Mo.), 9 Am. B. R. 626, 120 Fed. 848. 15 Am. B. R. 646, 142 Fed. 102, hold- 58. In re Felaon (D. C, N. Y.), 15 ing that the disallowance of fees in Am. B. R. 185, 139 Fed. 275; In re such a case rests primarily on the Stratemeyer (D. C, Hawaii), 14 Am. fact that the services were not bene- B. R. 120. ficial to the estate. 692 The Law and Peactice in Bankkuptcy. Compensation of Attorneys ; for Trustees. [§ 63. dends;*® and, on the other, that he is entitled to an allowance for all services to the bankrupt during the proceeding, whether bene- ficial 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 -lone after the appointment of the trustee. But it has been held that an attorney for a voluntary bankrupt is entitled to an allowance for services reasonably necessary to enable the bankrupt to perform his duties under the Act and to secure 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 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 bankrupt'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 allowance in voluntary eases 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.** Thus, two per cent of the amount realized from the estate, has been held a proper allowance.*' (7) Foe trustees. — The fees of the attorney for the trustee are strictly an expense of administration and are payable as pro- 59. In re Beck (D. C, Iowa), 1 No. Dak.), 23 Am. B. E. 710, 175 Am. B. R. 535, 92 Fed. 889. Fed. 867. 60. In re Cross (D. C, N. Y.), 3 63. In re Castleberry (D. C, Ga.), Am. B. R. 187, 96 Fed. 816; Ma:tter 16 Am. B. R. 430, 143 Fed. 1,018. of Hitchcock (D. C, Hawaii), 17 64. In re Martin (D. C, N. Y.), Am. B. R. 664. 18 Am. B. R. 250, 151 Fed. 780. A reasonable fee for the bank- 65. In re 9'Connell (D. C., N. Y.), rupt's attorney, as part of the costs 3 Am. B. R. 422, 98 Fed. 83; In re of administration, is entitled to pri- Smith (D. C., N. Car.), 5 Am. B. E. ority of payment out of the proceeds 559, 108 Fed. 39. Compare In re of the sale oi mortgaged property. Goodwin, 2 N. B. N. Rep. 445. Matter of Frank Meis (D. C, Ky.), 66. Compare In re Carolina Coop- 18 Am. B. R. 104. erage Co. (D. C, N. Car.), 3 Am. 61. In re Mayer (D. C, Wis.), 4 B. R. 154, 96 Fed. 950; Matter of Am. B. R. 238, 101 Fed. 695, 697; In Frank Meis (D. C, Ky.), 18 Am. re Terrill (D. C, Vt.), 4 Am. B. R. B. E. 104, holdin,-^ that where there 625, 103 Fed. 781 ; In re Anderson had been no litigation and where (D. C, S. Car.), 4 Am. B. E. 640, the services to the bankrupt had not 103 Fed. 854. been onerous, an allowance of $75 62. In re Brundin (D. C, Minn.), was excessive and should be reduced 7 Am. B. R. 296, 112 Fed. 306; In re to $25. Averill, 1 N. B. N. 544. See, also, 67. Matter of Frank Meis (D. C Ex parte Hale, Fed. Cas. 5,910. Ky.), 18 Am. B. R. 104. ' 62a. In re Christianson (D. C, Expenses of Administering Estates. 693 §62.1 Compensation of Attorneys; for Trustees. vided in this section."' The trustee is not entitled to a counsel iee upon an order rejecting a claim not prosecuted in good faith.*" It was held early 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.'" This may be doubted, the trustee's fee being limited by § 48 and Gen- * eral Order XXXV (3).'* When an attorney accepts the office of s trustee he surrenders 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 to the court, for his compensation.'^ And where an attorney for creditors seeking to remove a trustee is sub- sequently employed as attorney for the new trustee, his compensation must be limited to services rendered after his employment as attorney for the trustee.'^* 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;" but a trustee should not be allowed for services which a business man, with the help of the supreme court forms, could himself perform,'* or for those rendered before the appointment of the trustee." The allowance should be moderate, rather than large.". It is, it seems, always discretionary. Allowances should 68. In re Burke (Ref., Ohio), 6 Am. B. R. 502; In re Stotts (D. C, Iowa), 1 Am. B. R. 641, 93 Fed. 438. Action to recover preference. — The reasonable fee of counsel em- ployed by the trustee to recover a voidable or fraudulent preference made by the bankrupt constitutes a part of the trustee's expenses, and as such a part of the costs and ex- penses of administration entitled to preferential payment. Page v. Rogers (C. C. A., 6th Cir.), 17 Am. B. R. 854, 149 Fed. 194; rev'd on other grounds, 211 U. S. 575, 21 Am. B. R. 496. 69. Matter of Rome (D. C, N. J.), 19 Am. B. R. 820. 162 Fed. 971. 70. In re Mitchell (Ref. Pa.), 1 Am. B. R. 687. 71. Compare In re Muldaur, Fed. Cas. 9,905. Judge Ray in the case of In re McKenna (D. C, N. Y.), 15 Am. B. R. 4, 1-,/ Fed. 611, holds that a trustee is not entitled to compensa- ti n for services rendered as an at- torney; In re Felson (D. C, N. Y.), 15 Am. B. R. 185, 139 Fed. 275; In re Halbert (C. C. A., 2d Cir.), 13 Am. B. R. 39 J, 134 Fed. 236. 72. In re Evans (D. C, N. C), 8 Am. B. R. 730, 116 Fed. 909. 72a. In re Fidler & Son (D. C, Pa.), 23 Am. B. R. 16, 172 Fed. 632. 73. In re Knight (Ref., Ohio), 5 Am. B. R. 560; In re Burrus (D. C, Va.), 3 Am. B. R. 296, 97 Fed. 926. Compare, also, for an attempt to es- tablish compensation on a sliding scale basis, In re Smith (Ref., N. Y.), 2 Am. B. R. 648. See, also, In re Drake, Fed. Cas, 4,058; In re Noyes, Fed. Cas. 10,371; In re Tread- well, 23 Fed. 442; In re Rude (D. C, Ky.), 4 Am. B. R. 319, 101 Fed. 805; In re McKenna (D. C, N. Y.), 15 Am. B. R. 4, 137 Fed. 611; Matter of Ninam (Ref., Mich.), 14 Am. B. R. 515, allowing fee of $2,500 where the attorney by his diligence re- covered assets valued at $16,000- In re Hoffman (D. C, Wis.), 23 Am. B. R. 19, 173 Fed. 234. The attorney's allowance may be $75 where the report of the trus- tee shows assets received to the amount of $7,500. In re Lang (D C, Tex.), 11 Am. B. R. 794, 127 Fed. 755. An allowance of $15,000 has been held not to be excessive. Page V. Rogers (C. C. A., 6th Cir.), 17 Am. B. R. 854, 149 Fed. 194, rev'd on other grounds, 211 U. S 575, 21 Am. B. R. 496. 74. In re Knight (Ref., Ohio), 5 Am. B. R. 560. 75. In re N. Y. Mail Stea.Tiship Co. Fed. Cas. 10,210. 76. In re Talton (D. C, N. Car ) 14 Am. B. R. 617, 137 Fed. 178* 694 The Law and Practice in BANKEtrPTCY. Effect of Amendment of 1903. [§ 62. not be made until the services are rendered, or, usually, until the final meeting of 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 prac- tice,'^ though doubtless not essential. A trustee's attorney should not be deprived of his compensation because he had previously acted for the bankrupt j'' but where attorneys have acted for a receiver and been paid for their services, they should not be allowed compensa- tion for services to the trustee.'** The trustee is entitled upon an accounting to amounts reasonably expended by him for the services of an attorney, made necessary for the preservation of the estate which had been assigned to him as assignee for creditors prior to his appointment as trustee.'" (8) For assignee prior to bankruptcy. — Attorneys 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 aet.*^ 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(3) should also be read in this connection. It is in line with the practice as previously established in some of the districts.*'' Compare In re Knight (Ref., Ohio), 79. In re Byerly (D. C, Pa.), 12 5 Am. B. R. 560, with In re Curtis Am. B. R. 186, 128 Fed. 637. See, (C. C. A., 7th Cir.), 4 Am. B. R. 17, also, Randolph v. Scruggs, 190 U. S. 100 Fed. 784. See, also. In re Daven- 533, 10 Am. B. R. 1. port, Fed. Cas. 3,587; In re Cook, 80. In re Pauly (Ref., N. Y.), 2 17 Fed. 328. Am. B. R. 333. In Randolph v. 77. Consult In re Arnett (D. C, Scruggs, 10 Am. B. R. 1, 190 U. S. Tenn.), 7 Am. B. R. 522, 112 Fed. 533, a claim for services beneficial to 770; Ex parte Whitcomb, Fed. Cas. the estate was allowed. 17,529. Attorneys for assignees. — As to 78. In re Dimm & Co. (D. C, Pa.), the compensation of attorneys for 1" Am. B. R. 119, 144 Fed. 402. general assignees, paid them prior Tne attorney for tie trustee to bankruptcy, see Louisville Trust is entitled to recover from him the Co. v. Comingor, 184 U. S. 18, 7 Am. amount, included in a composition, B. R. 421; In re Klein & Co. (D. C, for services rendered to the trustee N. Y.), 8 Am. B. R. 559, 116 Fed. in the collection of debts, although 523. Compare In re Mays (D. C, the plaintiff also acted as attorney W. Va.), 7 Am. B. R. 764, 114 Fed. for the bankrupt. Keyes v. McKir- 600. row (Sup. Jud. Ct., Mass.), 9 Am. 81. Compare Bankr. Act, §§2 (3), B. R. 322. 40, 48. 78a. In re Southern Steel Co. 82. See foot-note 41, ante, (D. C. Ala.), 22 Am. B. R. 476, 169 Fed. 702. SECTION SIXTY-THREE. DEBTS WHICH MAT BE PROVED. § 63. Debts which may be Proved. — a Debts of the bankrupt may be proved and allowed against bis 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 con- tract, 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 application to the court, be liquidated in such manner as it shall direct, and may thereafter be proved and allowed against his estate. — Amalogona provisions: In TI. S.: As to provable debts in general, Act of 1867, § 19, R. S., § 5067; Act of 1841, § 5; Act of 1800, § 39; As to un- liquidated claims. Act of 1867, § 19, E. S., § 5067; As to contingent claims. Act of 1867, § 19> R. S., § 5068; Act of 1841, § 5; Act of 1800, S 39; As to surety debts. Act of 1867, § 19, R. S., §§ 5069, 5070. Im Eng.: Act of 1883, § 37. Cross references: To ithe law: §§ 1(11), 5, 11-a, 17, 67, 59-b, 64-b, 65-a, 68. To the General Orders: XXI. To tbe Forms: Kos. 31, 32, 33, 34, 35, 36, 37. SYNOPSIS OF SECTION. DEBTS WHICH MAT BE FBOVZa>. L History and Comparative Legislation. IL Determination of Provability. a. As affected by statute. b. Defenses to allowance. 695 696 The Law and Practice in Banketjptot, Synopsis of Section. [f 63. c. Proved and allowed. d. Ex contractu and ex delicto. e. The debt must have existed when the petition wot filed. f. Equitable debts. g. Debts against more than one person. h. Provability as affected by the person proving. i. Provability as affected by fraud or preference. j. Cross-references. III. Fixed Liability Absolutely Owing. a. In general. b. Whether then payable or not. c. Evidence by a judgment. (1) In general. (2) Impeaching judgments. d. Evidenced by an instrument in writing. e. Indorser and surety debts. IV. Open Accounts; Contracts. a. Founded on open account. b. Debt founded on a contract, express or implied. (1) In genekai.. (2) Owing at time of filing petition. (3) Bkeach of warranty. (4) Contingent contractual liabilities. (5) Continuing contracts. (6) Contracts of employment and for com- missions. (7) Breach of covenant in lease. (8) Implied contracts. V. Judgments Entered after Bankruptcy. VI. Claims for Costs. a. In general. b. Costs against an involuntary bankrupt. c. Costs incurred in good faith in an action to recover a provable debt. d. Costs in attachment suits. VII. Unliquidated claims. a. In general. b. Effect and purpose of subsection. Debts Which May Be Peoved. 697 9 63.] History and Comparative Legislation. c Injuries to person or property. d. Liquidation, how accomplished. e. Contingent liabilities. VIII. What Debts are not Provable. a. In general. h. Judgments for fines. c. Alimony due or to accrue. d. Rent to accrue. e. Debts outlawed by a statute of limitations^ f. Commissions of trustee. g. Cross-references. I. HISTORY AND COMFABATIVE LJEGISLATION. A clear understanding of what is a provable debt is important to either the due administration of, or practice under, all bank- ruptcy 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 excep- tions, 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 un- liquidated damages arising otherwise than by reason of a contract, promise or breach of trust," in substance declares provable : " all debts and liabilities, present or future, certain or contingent."^ 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 1. See Bankr. Act, § 17. express provision as to the apportion- 2. Eng. Aft of 1883, § 37. ment of rent and proving for the 3. The difference betireen the same; fourth, the embodiment in the two statutes in this particular are present act of an express provision aa tersely stated in a previous edition, to proving a judgment recovered after as foUovrs (3d Ed., p. 380): the commencement of proceedings in " The following are the most im- bankruptcy upon a debt at that time portant differences: first, omission provable; fifth, the embodiment of an from the present act of any express express provision making costs in- provision authorizing the proving of eurred by the bankrupt in cer- contingent debts and liabilities, or tain suits by and against him the liability of the bankrupt as provable debts; sixth, the embod- surety, indorser, or guarantor; sec- iment of a provision that unliquidated ond, omission of any express provision claims against the bankrupt may, as to the proving of damages result- pursuant to application to the court, jng from a conversion or trespass by be liquidated in such a manner as it the bankrupt; third, omission of any shall direct, and may thereafter be 698 The Law and Practice in Bankeuptct. Determination of Provability. [§ 63. law ; these are unquestionably still in force, even though omitted from the Act of 1898. The omission of other provisions, not ex- pressive of general rules, seems to warrant the view that having been dropped out, they are no longer the law. These differences are considered in appropriate paragraphs, post. n. DETERMINATION OF FBOV ABILITY. a. As affected by statute. — Subdivision a indicates those "debts " that are provable ; subdivision b those debts which, be- cause 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 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 urged had action been brought on the claim may be urged against its allowance in bank- ruptcy.® If the claim is not enforceable because of some state statute, 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 coi^ poration enters into an ultra vires contract upon which it could not bring an action it cannot prove a claim arising thereon in bankruptcy.* So contracts void because of the consideration being proved and allowed against the bank- ease it was held that in Massachu- rupt's estate; seventh, the lack of any setts, a wife's claim for money ad- general provision as to the time when vanced to her husband from her sep- a debt must have become fixed and arate estate as a loan, cannot be en- owing in order to be provable." forced by either legal or equitable 4. In re Sutherland, Fed. Cas. proceedings, and so cannot be proved 13,639; In re Foye, Fed. Cas. 5,021; against her husband's estate in bank- Wilson V. Bank, 3 Fed. 391. ruptcy. 5. In re Presoott, 9 N. B. R. 385, 7. In re Rachel Goodman, 8 N. B. Fed. Cas. 11,389, 5 Biss. 523. R. 380, Fed. Cas. 5,540, 5 Biss. 401. 6. In re Talbot (D. C, Mass.), 7 8. In re Jaycox & Greene, Fed. Am. B. R. 29, 110 Fed. 924, in which Cas. 7,244, 12 Blatch. 209. Debts Which Mat Be Peoved. 699 S 63.] " Proved " and " Allowed." illegal or because the contract is against public policy cannot be the foundation of a debt provable or at least allowable in bank- ruptcy.* So as to stock gambling transactions. 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 con- siderations here referred to relate more to the allowance of the claim than to the mere presentation of it for the purpose of proof. c. " Proved " and " allowed." — In this connection, it is im- portant 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 main- tained 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.** It has been held that the term " provable debt " is not limited in its meaning to a debt against the allow- ance of which no defense can be successsfully 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.** 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 dis- tinction between the " provability " and " allowability " 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 againsit the estate. 9. In re Chandler, 9 N. B. E. 514, 13. Note that the words " provable Fed. Cas. 590, 6 Blss. 53; In re debts" occur in § 17, and the words Greene, 15 N. B. R. 198, Fed. Cas. "provable claims" in § 59-b. 5,751; Ex parte Jones, 17 Ves. 332; 14. Hargadine, etc.. Dry Goods Co. Lowe V. Waller, 1-2 Douge, 736; In re v. Hudson (C. C. A., 8th Cir.), 10 Young, Fed. Cas. 18,145, 6 Biss. 53; Am. B. R. 225, 122 Fed. 232, affirming Ex parte Mumford, 15 Ves. 289; Leh- 6 Am. B. R. 657. Where a firm gives man v. Strassberg, 2 Woods, 554; Ex a promissory note to secure an exist- parte Cottrell, 2 Cowp. 742; Ex parte ing indebtedness of one of the mem- Daniels, 14 Ves. 191. bers, the statute of limitation is not 10. See Hill v. Levy (D. C, Va.), a bar to the provability of the note, 3 Am. B. R. 374, and note, 98 Fed. 94. although the original indebtedness 11. Capell V. Trinity Church, 11 was so barred. Dacovich v. Schley N. B. R. 536, Fed. Cas. 2,392. (C. C. A., 5th Cir.), 13 Am. B. R. 12. See In re Jordan, 2 Fed. 319. 752, 134 Fed. 72. 700 The Law and Practice in Bankruptcy. Ex Contractu and Ex Delicto. [§ 63. d. Ex contractu and ex delicto. — Liabilities grounded in con- tract are, almost without exception, provable. So also are judg- ments grounded in tort. Whether mere liabilities ex delicto may be liquidated and thus become provable, has been doubted. 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 bank- rupt were, by the terms of another section, made provable, but were also declared not dischargeable.*'^ 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 is somewhat artificial.** Besides, § 17 now excepts from dis- chargeable debts many " provable debts " that are unliquidated torts; the words " judgments in actions " in § l7-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-contract,** may now be liquidated and proven and allowed, at least all those that are both in praesenti debts (as distinguished from fines or duties)^** and are excepted from the efFect of a discharge by § 17. The supreme court has recently held that subdivision a of this section, defining provable debts, must be read in connection with § 17 limiting the operation of discharges, 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 com- 15. Act of 1867, § 19, E. S., 5067; liquidated damages "by reason of a In re Bailey, Fed. Cas. 729; In re contract, promise, or breach of trust;" Hennocksburgh, Fed. Cas. 6,367; Act of 1883, § 37. Weaver v. Voils, 68 Ind. 191. 19. See In re Hirschman (D. C, 16. In re Schuchardt, Fed. Cas. Utah), 4 Am. B. R. 715, 104 Fed. 12,483; Oilman v. Gate, 63 N. H. 69, and In re Filer (E«f., N. Y.), 5 278 Am. B. R. 582, for the prevailing rule 17. Act of 1867, § 33, R. S., § 5117. before the amendatory act of 1903. 18. On the other hand, it is, of And compare In re Lazarovie (Ref., course, true that much practical in- Kan.), 1 Am. B. R. 476, and In re convenience would result from the Cushing (Ref., N. Y.), 6 Am. B. R. doctrine stated in the text. Consult 22. Section Seventeen. See, also, the lim- 20. For instance: fines for crimes, itation of the English statute to un- alimony, and rent to accrue. Debts Which May Be Proved. 701 § 63-a.] Debt Existed when Petition Piled. mitted by the bankrupt while acting as an ofiBcer, 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 elect to bring his action in trover, as for a fraudulent con- version, instead of in assumpsit for a balance due upon an open account.^^ A claim based upon a fi^audulent connivance with the bankrupt to impose upon other creditors, as where money was advanced to the bankrupt to give him a fictitious commercial rating, is not allowable.^^* e. The debt must have existed when the petition was filed. — Here the statute is not entirely harmonious. Subs, 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 adjudication, it is not " absolutely owing.""' Where a vendee under an executory contract of sale is adjudicated an involuntary bankrupt, the 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 re- quiring that it should state that the debt proved existed " at and before filing of the petition for adjudication of bankruptcy " must be construed 21. Crawford v. Burke, 195 U. S. filing of the petition. In re Swift 176, 12 Am. B. E. 659, reversing (C. C. A., 1st Cir.), 7 Am. B. R. 201 111. 581. 375, 112 Fed. 315; In re National 21a. In re Friedman (D. C, Wire Corp. (D. C, Conn.), 22 Am. Wis.), 21 Am. B. E. 213. B. E. 186, 166 Fed. 631. Thus, the 22. In re Burka (D. C, Mo.), 5 of a contract guaranteeing the re- Am. B. E. 12, 107 Fed. 674; In re demption of corporate stock, three Garlington (D. C, Tex.), 8 Am. B. E. years after date of issue, is a prov- 602, 115 Fed. 999; Swartz v. Fourth able claim, although the time for Bank (C. C. A., 8th Cir.), 8 Am. redemption has not arrived at the B. E. 673, 117 Fed. 1, 54 C. C. A., date of bankruptcy. In re Pettin- 387; In re Adams (D. C, Mass.), gill (D. C, Mass.), 14 Am. B. R. 12 Am. B. R. 368, 130 Fed. 381, 728, 137 Fed. 840; In re Neff (C. C. holding that a creditor cannot prove A.), 6th Cir.), 19 Am. B. E. 23, for an indebtedness arising between 157 Fed. 57, aff'g 19 Am. B. R. the filing of an involuntary petition 911. and the adjudication of his debtor The statns of a claim must de- as a bankrupt; In re Coburn (D. C, pend upon its provability at the time Mass.), 11 Am. B. R. 212, 126 Fed. the petition was filed. It cannot be 218. Compare In re Bingham (D. C, benefited by its status at a later Vt), 2 Am. B. R. 22S, 94 Fed. 796; date. In re Neff (C. C. A., 6th Cir.), In re Reliance, etc., Co. (D. C, Pa.), 19 Am. B. R. 23, 157 Fed. 57; Board 4 Am. B. R. 49, 100 Fed, 619; In re of County Commissioners v. Hurley Swift (C. C. A., 1st Cir.), 7 Am. (C. C. A., 8th Cir.), 22 Am. B. R. B. E. 374, 112 Fed. 315, affirming 209, 211, 169 Fed. 92; In re Read- 8. c, 5 Am. B. R. 335, 105 Fed. 493; ing Hosiery Co. (D. C, Pa.), 22 Am. In re Crawford, Fed. Cas. 3,363; In B. R. 562, 171 Fed. 195. re Ward, 12 Fed. 325; In re Morrill, 23. Phenix Nat. Bank v. Water- 19 Fed. 874; Fowler v. Kendall, 44 bury, 20 Am. B. R. 140, 123 Apo. Me. 448. Div. 453, 108 N. Y. Supp. 391, aff'd A Ireach of contract may re- 23 Am. B. R. 250, 197 N. Y. 161. suit from the filinsr of a petition, and 23a. In re Inman & Co. (D. C., in such a case the claim for dam- Ga.), 23 Am. B. E. 566, 175 Fed. ages ripens simultaneously with the 312. 702 The Law and Peactioe in Bankeuptct. Equitable Debts. [§ 63-a. 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 pay- able are provable in bankruptcy, and being provable the holder ")f such debts may be a petitioner to have the debtor involuntarily adjudged a bankrupt.'"* 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 same effect are numerous.*^ Such claims are provable under the present bankruptcy 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 24. In re Swift (C. C. A., Ist Cir.), 7 Am. B. R. 374, 112 Fed. 315, aff'g 5 Am. B. R. 335. 25. In re Alexander, 4 N. B. R. 178, Fed. Cas. 161. 26. Ex parte Yonge, 3 Ves. & B. 31; Ex parte Williamson, 2 Ves. 252; Ex parte Dewdney, 15 Ves. 479. 27. For instance: Sigsby v. Willis, Fed. Cas. 12,849; In re Buckhause, Fed. Cas. 2,086. Proof of equitable claims. — In re Blandin, 5 N. B. R. 39, Fed. Ca«. 1,527, 1 Low. 543, Judge Lowell of district court of Massachusetts de- cided that the wife of a bankrupt might prove in bankruptcy as a cred- itor of the estate of her husband, for money realized by him out of the property which she held as her Sep- arate estate, under the statutes of Massachusetts, the evidence clearly showing that the transaction between her and her husband was intended to be a loan and not a gift. In render- ing 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 li- quidated or capable 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 per- sons. It has always been the law of England that equitable demands may be proved in bankruptcy; Ex parte Williamson, 2 Ves. Sr. 252; Ex parte Taylor, 2 Rose, 175. ' A commission in bankruptcy,' said Lord Eldon, ' is nothing more than a substitution of the authority of the lord chancellor, enabling him to work out the pay- ment of those creditors who could by legal action or equitable suit have compelled payment.' Ex parte Dewd- ney, 15 Ves. 498. The nineteenth sec- tion of our statute (Act of 1867) makes provable all debts and liabili- ties, in language broad enough cer- tainly 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 cogniz- able in a court of admiralty. If this be not 80, 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." Debts Which May Be Proved. 703 § 63-a.] Provability as Affected by the Person Proving. 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 involve the principle of law that money secured by false 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.'" 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 main- tained an action against the bankrupt? Thus, in a case of prin- cipal and agent, if the principal has become a bankrupt, the claim may be proved in bankruptcy against him.^^ So the holder of a joint obligation 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 endorsed by one or more of the individual members, all of whom as a firm and as individuals afterwards 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.— An assignee of the creditor has a provable debt if his assignor had, even if the assignment post-dates the bankruptcy.'* But where the creditor 28. James v. Gray (C. C. A., 1st therein, until from all sources he has Cir.), 12 Am. B. E. 573, 131 Fed. received full payment of his claim, 401; In re Peasley (D. C, N. H.), but no longer. Board of County 14 Am. B. R. 496, 137 Fed. 190. Commissioners v. Hurley (C. C. A., 29. In re Arnold & Co. (D. C, 8th Cir.), 22 Am. B. R. 209, 169 Mo.), 13 Am. B. R. 320, 133 Fed. Fed. 92. 789, holding that a claim for money 32. Downing v. Traders' Bank, 11 obtained by the bankrupt, to use in N. B. E. 371, 2 Dill. 136. gambling ventures, through false 33. In re Howard, Cole & Co., 4 representations may be proved. N. B. R. 571, Fed. Cas. 6,750; Mead 30i Randolpli v. Scruggs, 10 Am. v. Bank, 2 N. B. R. 173, Fed. Cas. B. R. 1, 190 U. S. 533. 9,366, 6 Blatch. 185; Emery v. Bank, 31. In re Troy Woolen Co., 8 N. 7 N. B. R. 217, Fed. Cas. 4,446, 3 B. E. 412, Fed. Cas. 14,203. Cliff. 507; Board of County Commis- 31a. Proof where several Ha- sioners v. Hurley {C, C. A., 8th Cir.), ble. — The obligee in a bond, or 22 A-a. B. R. 209, 169 Fed. 92. Soe the holder of a claim upon which under Section Five, ante, and, for several parties are personally liable, limitations on the doctrine there may prove his claim against each of stated, see Lamoille, etc.. Bank v. the estates of those who become Stevens' Estate (D. C, Vt.), 6 Am. bankrupt, and may at the same time B. R. 164, 107 Fed. 245, and Shat- pursue the others at law, and he may tuck v. Bugh (Ref., N. Y.), 6 Am. recover notwithstanding payments B. E. 56. after the bankruptcy by other oblig- 34. In re Goodman Shoe Co. (D. ors or by their estates dividends from C, Pa.), 3 Am. B. R. 200, 96 Fed. each estate in bankruptcy upon the 494 ; In re Murdock, Fed. Cas. 9,939 ; full amount of his claim at the time In re Pease, Fed. Cas. 10,880. For the petition in bankruptcy was filed 704: The Law and Practice in BANKEurxcT. Provability as Affected by Person Proving. [§ 63-a. is a debtor of the bankrupt in a larger sum than the amount claimed, such claim is not provable.^* An executor may prove a debt against the bankrupt, notwithstanding a provision in the will for a deduction of any debt due the testator from the bankrupt.** 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 hus- band;** 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 conferring 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 per- formed 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.'*^ If still a feme covert, a wife who is bank- rupt may allege her coverture as a defense and prevent proof. ''^ An alien creditor may prove a claim. Under a statute rendering invalid a direct gift of corporate stock from husband to wife, her loan of the certificates, endorsed in blank to him, creates no allow- able claim against his estate.** Other 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.** method of proving assigned claims, 39a. In re Kyte (D. C, Pa.), 21 see under Section Fifty-seven, ante. Am. B. R. 110. 35. In re Gerson (D. C, Pa.), 5 40. In re Kaufmann {D. C, N. Am. B. R. 850. Y.), 5 Am. B. R. 104, construing sec- 36. In re Woods (D. C, Pa.), 13 tion 21 of the New York Domestic Am. B. R. 240, 133 Fed. 82. Relations Law; In re Suckle (D. C, 37. In re Novak (D. C, Iowa), 4 Ark.), 23 Am. B. R. 8(jl, 176 Fed. Am. B. R. 311, 101 Fed. 800; Hawk 828, construing Ark. Stats. (Kirby), :-JZ'^i'i- «;'o^f *• V"- """m- ^ "-'i" - ^Vinkles (D. C, Wis.), 463, 102 Fed. 679; In re Neiman (D. jg Am. B. R. 696, 132 Fed. 590, con- C, Wis.), 6 Am. B. R. 329, 109 Fed. gtruing section 2343 of the Revised 113. This is not the rule in Massa- Statutes of Wisconsin, 1898. chusetts : In re Talbot ( D. C, Mass. ) , 42. In re Goodman, Fed. Cas. 7 Am. B. R. 29, 110 Fed. 924. But 5,540. see In re Nickerson (D. C, Mass.), , *3- I" ""^^ tucker ( D C., Mass. ) , 8 Am. B. R. 707, 116 Fed. 1003. ^^ Am. B. R. 247, 148 Fed 928, but «„ T T^ • /T-. /-. -n \ see Tucker v. Curtin C. C. A., 1st 38. In re Domeing (D. C, Pa.), (,;,. )^ j^ ^,^ ^ ^ gg^^ j^g ^^^ 11 Am. B. R. 552, 128 Fed. 146. 929, as to loan of certificates to firm 39. So, also, of a child's claim for of which the husband was a member, alleged services rendered a bankrupt 44. In re Ervin (D. C, Pa.), 6 father. In re Brewster (Ref., N. Y.), Am. B. R. 356, 109 Fed. 135; af- 7 Am. B. R. 486. Debts Which May Be Peoved. 705 §63-a(l).] Fixed Liability Absolutely Owing. i. Provability as affected by fraud or preference. — Here there is some confusion owing to doubt as to the exact meaning of " prov- able."*'* Since the amendment of § 57-g by the act of 1903, there can be little doubt; all preferences and the more common frauds, both constructive and in fact, being voidable. If the transaction upon which the debt is based was fraudulent as against the other creditors it is not provable.*® In short, if the fraud may be at- tacked under either § 60-b or § 67-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 numer- ous cases under the former law are probably no longer in point-*^ So also of some of those under the new law, prior to the amend- atory act.** J. Cross-references — In addition to the references in the pre- ceding paragraphs, the practitioner will find much that bears on the provability of debts under Section Seventeen. He should also havB in mind the doctrine of set-off, discussed in Section Sixty- eight. Xa. FIXED LIABILITY ABSOLUTELY OWING. a. In general. — Subsection a(l) provides that debts may be proved and allowed which are " a fixed liability, as evidenced by a judgment or an instrument 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, firmed as Wallerstein v. Ervin (C. C. Am. B. R. 454, 109 Fed. 623. Contra: A., 3d Cir.), 7 Am. B. R. 256, 112 In re Richard (D. C, N. Car.), 2 Am. Fed. 124; also In re Ervin (D. C, B. R. 507, 94 Fed. 633. Pa.), 7 Am. B. R. 480, 114 Fed. 596; 46. In re Lansaw (D. C, Mo.), 9 In re Clark (D. C, Wash.), 7 Am. Am. B. R. 167, 118 Fed. 365; In re B. R. 96, HI Fed. 893; In re Swift Royce Dry Goods Co. (D. C, Mo.), (D. C, Mass.), 5 Am. B. R. 415, 106 13 Am. B. R. 257, 133 Fed. 100, hold- Fed. 65; affirmed, s. c, 7 Am. B. R. ing that where property of a bank- 374, 112 Fed. 315; In re Graff (D. C, rupt corporation is traced to the N. Y., 8 Am. B. R. 744, 117 Fed. 343; hands of a managing officer, and such In re Chase (D. C, Mass.), 13 Am. officer fails to account for such prop- B. 294, 133 Fed. 79. erty in excess of his demands against Director of bankrupt corporation the corporation, his claim against the who invests money in another corpo- corporation should be rejected, ration, organized to take over the 47. For instance: In re Black, assets of the bankrupt, may, under Fed. Cas. 1,459; In re Schwartz, Fed. certain circumstances be held to be a Cas. 12,502; In re Arnold, Fed. Cas. creditor of the bankrupt. In re Hoi- 551 ; In re Rundle et al., Fed. Cas. brook Shoe and Leather Co. (D. C, 12,138. Mont.), 21 Am. B. R. 511, 165 Fed. 48. In re Lazarovic (Ref., Kan.), 973. 1 Am. B. R. 476; In re Norcross 45. In re Owings (D. C, Mc), 6 (Ref., Mo.), 1 Am. B. R. 644. 106 The Law and Peactice in Bankruptcy. Fixes Liability; Evidnced by judgment. [§ 63-a (1). be an unfortunate limitation were it not for the broader words of subdivision (4).** 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.*"'' b. Whether then payable or not— These words of the statute characterize the debt rather than the time of payment. To be prov- able under subdivision (1), a debt must be a fixed liability absolutely owing at the time the petition is filed; but the time of payment is immaterial."" This statutory provision is further emphasized by the provision for the allowance of interest to or a rebate of interest after the date of bankruptcy."*^ This phrasing has been most discussed in considering the provability of a contract of indorsement not fixed by default and protest until after the petition was filed."^ It has also been well considered in connection with a bond to secure an annuity."* Likewise, 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 sub- division (4)."" c. Evidenced by a judgment.— (1) In General.— 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. But the rendering of a verdict is not, it seems, a judgment entitling such verdict to proof."" This doctrine has not been strictly observed where the application was for an in- junction to prevent the arrest of the bankrupt or injury to his 49. See sub nom. " Founded on Act of 1867, § 19, R. g., § 5067. Contract, Express or Implied," in 52. See " Indorser 'and Surety this section, post. Debts," post. 49a. In re Brown (C. C. A., 9th 53. Cobb v. Overman (CCA 4th Cir.), 21 Am. B. R. 123; In re Cir.), 6 Am. B. R. 324, 109 Fed. 65 Walljer (C C. A., 9th Cir.), 21 Am. reversing Bray v. Cobb (DC n' B. R. 132. Car.), 3 Am. B. R. 788, 100 Fed.''27o' 49b. In re Hartman (D. C, Pa.), and holding that the bond of a bank- 21 Am. B. R. 610, 166 Fed. 776. rupt to secure the payment of an an- 50. In re Swift (D. C, Mass.), 5 nuity for life is provable Am. B. R. 415, 111 Fed. 893; the 54. In re Silverman Bros. (D C provability of a claim depends upon Mo.), 4 Am. B. R. 83, 101 Fed. 219' its status at the time the petition ia reversing s. c, 2 Am. B R 15 ' filed, In re Pettingill & Co. (D. C, 55. See sub nom. " Continuina Mass.), 14 Am. B. K. 728, 137 Fed. Contracts," in this section, post ° ^43. , . ., 56. Black v. McClelland, Fed. Cas. 51. Compare, for similar words, 1,462. Dkbts Which Mat Be Pboved. 707 S63-a(l).] Evidenced by Judgment. estate.'^ 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 judgment, and will ascertain the nature of the liability, the original cause of action."* If the judgment has resulted in a void or voidable lien, because within four months of the bank- ruptcy, 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.'" A claim evidenced by a judgment recovered more than ten years prior to bankruptcy is not provable, unless renewed asi 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 exemptionsi, is a provable claim.** A judgment for damages for a breach of promise of marriage is a provable debt.** (2) Impeaching judgments. — Here the English doctrine is much broader than our own.*' Full faith and credit being neces- sarily given to the judgments of the state courts when pleaded in the federal courts, it was, under the former law, held that a judg- ment of a aitate court could not be impeached when presented as a claim in bankruptcy, but resort must be had to the state court.** 57. For instance: See In re Lew- 59. See Section Sixty-seven of this ensohn (D. C, N. Y.), 3 Am. B. R. work. Doyle v. Heath (Sup. Ct., R. 696, 99 Fed. 73; In re Coje (D. C, N. I.), 4 Am. B. R. 705; In re Peas« Y.), 5 Am. B. R. 780, 108 Fed. 837, (Ref., N. Y.), 4 Am. B. R. 547. and In re Sullivan (Ref., N. Y.), 2 60. Compare In re Yates (D. C, Am. B. R. 30. And examine In re Cal.), 8 Am. B. R. 69, 114 Fed. 365; Fife (D. C, Pa.), 6 Am. B. R. 238, In re Sheehan, Fed. Cas. 12,737. 109 Fed. 880. 61. In re Farmer (D. C, N. Car.), 58. Turner v. Turner (D. C, Ind.), 9 Am. B. R. 19, 116 Fed. 763. 6 Am. B. R. 289, 108 Fed. 785. 62. In re Rebman (C. C. A., 9th A decree for alimony is neither Cir.), 17 Am. B. R. 767, 150 Fed. a fixed liability evidenced by a judg- 759. ment nor a debt within the meaning 6i3. Claster v. Soble, 10 Am. B. R. of the bankrupt act. Wetmore v. 446, 22 Pa. Super. Ct. 631. Wetmore, 196 U. S. 68, 13 Am. B. 64. In re MeCauley (D. C, N. Y.), R. 1. 4 Am. B. R. 122, 101 Fed. 223 ; In re A father's liability under an Fife (D. C, Pa.), 6 Am. B. R. 258, agreement with his divorced wife 109 Fed. 880; Finnegan v. Hull (N. to pay her for the support of hia Y. Sup. Ct. ), 6 Am. B. R. 648. minor children until they respect- 65. See In re Phelps (Ref., N. Y.), ively become of age is not a provable 3 Am. B. R. 434; affirmed on review, debt against his estate. Dunbar v. without opinion, and cases cited. Dunbar, 190 U. S. 340, 10 Am. B. R. 66. In re Campbell, Fed. Cas. 139. See, also. In re Hubbard (D. 2,349; McKinsey v. Harding, Fed. C, 111.), 3 Am. B. R. 528, 98 Fed. Cm. 8,866; In re Bums. Fed. Caa. 710. 708 The Law and Peactice in Bankeuptct. Evidenced by an Instrument in Writing. [§ 63-a (1). That it is conclusive between the bankrupt and the judgment cred- itor is elementary. But where the rights 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 other- wise." A judgment not regular on its face, or by a court which did not have jurisdiction of the subject-matter, may of course be attacked anywhere; but jurisdiction need not affirmatively appear,"* nor can the recitals of the judgment, as a rule, be contradicted in a collateral proceeding. d. Evidenced by an instrument in writing. — To be provable under this subdivision, a debt, if not in judgment, must rest on an instrument in writing."* This means any document or written evidence of the agreement whence the debt arises. A usurious note is not provable.'" but where the claim could be established apart from such note and unaffected by it, the creditor should be permitted to prove it.'^ Notes of a bankrupt corporation, 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.'^ A bill of sale to se- cure the purchase price of goods purchased by the bankrupt may be unenforceable against the other creditors, because unrecorded, but a claim for the unpaid purchase price is nevertheless provable as an unsecured claim against the bankrupt's estate.'^* Collection fees stipulated to be paid in a promissory note due before the filing 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 bankruptcy.'^* Where 2,182. Contra: Ex parte O'Neil, Fed. R. 123, 132 Fed. 618, holding that Cas. 10,527. where the purchase of ,its own stock 67. See Candee v. Lord, 2 N. Y. by a corporation renders it insolvent 269. And compare Hassell v. Wil- and results in a fraud upon the rights cox, 130 U. S. 493. of creditors, a note given upon such 68. In re Columbia Real Estate purchase in the hands oj the payee is Co. (D. C, Ind.), 4 Am. B. R. 411, not provable 101 Fed. 965. 72a. In re Burlage Bros. (D. C, 69. As to sufficiency of instrument Iowa), 22 Am. B. R. 410, 169 Fed. to bind parties, see Matter of Struc- 1006. tural Steel Co. (Ref., Ohio), 13 Am. 73. In re Keeton (D. C., Tex ) 11 B. R. 373. Am. B. R. 367, 126 Fed. 426; s. c.', 11 70. Matter of Wilde's Sons (D. C, Am. B. R. 370, 126 Fed 429- In re N. Y.), 13 Am. B. R. 217, 133 Fed. Garlington (D. C, Tex.), 8 Am. B. 562, stating the law as to the rights R. 602; In re Gebhard (D. C, Pa.), of banks in respect to usurious con- 15 Am. B. R. 381, 140 Fed. 671- In tracts. re Thompson Milling Co.' (T>.' C. 71. In re Robinson (D. C, Mass.), Tex.), 16 Am. B. R. 454 144 Fed 14 Am. B. R. 626, 136 Fed. 994. 314; In re Hersey (D C ' lowa^ 22 72. In re N. Y. Car Wheel Works Am. B. R. 863. 171 Fed 998 (D. C, N. Y.), 15 Am. B. R. 571, 73a. McCabe v. Patton (CCA 141 Fed. 430; s. c, 14 Am. B. R. 595, 3d Cir.), 23 Am. B. R. 335 174 Fed 139 Fed. 421. But see In re Smith 217. Lumber Co. (D. C, Tex.), 13 Am. B. Debts Which May Be Pkoved. 709 § 63-a (1).] Indorser and Surety Debts. such notes are placed in the hands of an attorney for collection prior to adjudication the fees stipulated are provable.'* e. Indorser and surety debts. — The present statute contains no equivalent to § 5069 of the Eevised Statutes;"* and it was for some time doubted whether an indorser whose liability became fixed after the bankruptcy could prove against the bankrupt's es- tate." It is now thought that, in spite of this omission and the per- suasive argument based on the harmonies of the statute, contra,'''' such liabilities, because on "contract, express or implied," are prov- able. 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 liability of the prin- cipal 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 therein 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 officer whose duty it is to collect and pay over public funds becomes fixed on the officer's failure to make payments of the money collected, and if such failure occurs prior to the adjudication of the bankrupt surety, such liability is provable against his estate."^ Corporate bonds issued under proper statutory authority to secure the payment of money borrowed for the transaction of the business of the corpora- A statute antboxizing such a 46, 55 N. Y. App. Div. 170; Hayer v. stipulation in a promissory note Comstock (Sup. Ct., Iowa), 7 Am. cannot be extended to include such a B. R. 493; In re Laraon, (D. C, N. stipulation in a chattel mortgage. Y.), 22 Am. B. R. 635, 171 Fed. 516; But if the services of an attorney in Whitwell v. Wright (Sup. Ct., N. the collection of such a note had been Y.), 23 Am. B. R. 747, 136 App. Div. performed prior to the filing of the 246. petition the fees stipulated to be 79. In re Dunnigan, 2 N. B. N. paid would have been provable as a Rep. 755. Compare, on this general debt against the estate of the bank- subject, Zartman v. Hines (Ref., N. rupt. In re Chadwic!: (D. C, Ohio), Y.), 6 Am. B. R. 139. 15 Am. B. R. 528, 140 Fed. 674. 80. Moch v. Market St. Nat. Bank 74. In re Edens & Co. (D. C, So. (c. C. A., 3d Cir.), 6 Am. B. R. 11, Car.), 18 Am. B. R. 643, 151 Fed. io7 Fed. 897; In re Smith (D. C, R. 940; Merchants' Bank v. Thomas (C. I), 17 Am. B. R. 112, 146 Fed. 912; C. A., 5th Cir.), 10 Am. B. R. 299, l„ rg Semmer Glass Co. (C. C. A., 2d i= Ai.^"®; CB-, . Cir.). 14 Am. B. R. 25, 135 Fed. 77. 75. Act of 1867, § 19. See Gorman v. Wright (C. C. A., 4th 76. See In re Schaefer (D. C., Cir.), 14 Att,. B. R. 135, 136 Fed. 164. Pa.), 5 Ani. B. R. 92, 104 Fed. 973, 81. Hibbard v. Bailey (C. C. A., as overruled by the same judge in In 3d Cir.), 12 Am. B. R. 104, 129 Fed. 89 ^nl°?pJ RQ?-' f^**' %® 1- ^- ^- ^^5- 'e^ersing 10 Am. B. R. 545, 123 firn.iS f ; fi 'a R IJ' ruling af- Fed. 185. As to liability of firm on «U^ fn r» WLv^^'/pif ^v^V f'^k "°*« ^^«" t° «"^ety of one of the A^'w w fii^ ^ ' N- Y-)' « members on an official bond, see In n-r rt^' ^ ,1. r, . ^^ Speer Bros. fD. C, Or.), 16 Am ^7" ^1?*4,.^*^ ^""•*'" °° ^*"'^- B. R. 524, 144 Fed. 910 ™§8%ee'sf le^rnd'',!' 'p'" T ""• ^'^ ^ Alexander fC. C. re?mith",yef.'N"Y')': iTXl'.^l l^d ' 265^'''- ^ ' '' ^"^^ ^^ ^^ ''• ''" 37; Smith v. Wheeler, 5 Am. B. R. 710 The Law and Peactice in Bankkuptcy. Open Accounts; Contracts. [§63-a(4). tion are valid claims.'" A note given by a corporation for the in- debtedness of another, for which it is in no way responsible, is not provable against the corporation.'''* IV. OPEN ACCOUNTS; CONTRACTS. a. Debt founded on open account. — Subdivision 4 of this sub- section makes a debt " founded on an open account " provable anA allowable. These words have not yet been construed. In view of the words that follow, they seem almost unnecessary. 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 sustained in consequence of false and fraudulent representations.'* 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 corporation, not ultra vires.^^ If the contract is illegal because in violation 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 fraudulently procured by the bankrupt to bet on horse races;'* but the rule does apply to speculative contracts for the future delivery of cotton and grain, no actual delivery being intended.'** 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."* 82. In re Waterloo Organ Co. (C. Fnblio policy not opposed by C. A., 2d Cir.), 13 Am. B. R. 477, 134 brewers' contract with bankrupt sa- F?d. 341. loon keeper restricting the bankrupt 82a. Mapes v. German Bank (C. from selling any other beer than that C. A., 8th Cir.), 23 Am. B. R. 713, manufactured by the brewer. Matter 176 Fed. 89. at Clark (Bef., Cal.), 21 Am. B. R. 83. Crawford v. Burke, 195 U. S. 776. 176, 12 Am. B. R. 659, reversing 201 86. In re Arnold (D. C, Mo.), 13 111. 581. Am. B. R. 320, 133 Fed. 789. 84. Tindle v. Birkett, 205 U. S. 86a. In re Aetna Cotton Mills 183, 18 Am. B. R. 121, aff'g 15 Am. (D. C, So. Car.), 22 Am. B. R. 629, B. R. 179. 171 Fed. 994. 85. Corporaite contract by lum- 87. In re Ellis (C. C. A., 6th Cir.), ber company to guaranty the comple- 16 Am. B. R. 221, 143 Fed. 103, where tion of a building contract, held a subcontractor was held to have no ultra vires. In re Smith Lumber Co.. claim provable in bankruptcy for ma- (D. C, Tex.), 13 Am. B. R. 118, 132 terials furnished to a contractor. Fed. 618. See, also. In re Waterloo where the agreement between them Organ Co. (C. C. A., 2d Cir.), 13 Am. required no payment, unless pay- B. R. 466, 134 Fed. 341; Forsyth v. ment was made to the contractor by Woods, 11 Wall. 484; Buckner v. the owner. Street, Fed. Cas. 2,098; In re Chand- 87a. In re National Wire Corp. ler. Fed. Cas. 2,590; In re Young, (D. C., Conn.), 22 Am. B. R. 186, Fed. Cas. 18,145; In re Jaycock, Fed. 166 Fed. 631; In re Inman & Co. Cas. 7,244; In re Green, Fed. Cas. (D. C, Ga.), 22 Am. B. R. 524, 175 5,761. Compare, also. In re Ervin Fed. 312. (D. C, Pa.), 7 Am. B. R. 480, 114 Fed. 596. Debts Which May Be Pkoved. Yll § 63-a (4).] Contingent Contractual Liabilities. (2) Owing at time op filing petition. — Subdivision 4 does not repeat the words " absolutely owing at the time of the filing of the petition against him," but it is probable 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.'* For instance, where an agreement takes effect on a certain 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.'"* (3) Breach of wabranty.-^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.'^ (4) Contingent contractual liabilities. — While contingent contractual obligations may not be proved,®^* yet if liabilities there- under 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.*^ A claim for damages for the breach of an executory contract is provable, if it may be liquidated under section 63-b."^ The importance of these doctrines when applied to indorser and surety liabilities has already been considered."* 88. In re Swift (C. C. A., 1st (Sup. Ct.), 212 U. S. 445, 21 Am. Cir.), 7 Am. B. R. 374, 112 Fed. B. R. 484. 315. 91. Switzer & Johnson v. Henk- 89. In re Adams (D. C, Mass.), ing (C. C. A., 6th Cir.), 19 Am. B. 12 Am. B. R. 368, 130 Fed. 788; In R. 300, 158 Fed. 784. re Bingham (D. C, Vt.), 2 Am. B. 91a. In re Inman & Co. (D. C, R. 223, 96 Fed. 796; In re Pettingill Ga.), 22 Am. B. R. 524, 175 Fed. 312. (D. C, Mass.), 14 Am. B. R. 728, 137 92. In re Smith (D. C, R. I.), 17 Fed. 443. Compare In re Gerson (C. Am. B. R. 112, 146 Fed. 923; In re C. A., 3d Cir.), 6 Am. B. R. 11, 107 James Dunlap Carpet Co. (D. C, Fed. 897, holding that while the lia- Pa.), 20 Am. B. R. 882, 163 Fed. bility of an indorser on a note does 541, holding that claims, although not become fixed and absolute until contingent when filed, may be proved after his bankruptcy, it may still if they became definite and capable be proved against his estate, if such of liquidation within a year of the liability has become fixed within the adjudication. Compare In re Pet- time limited for proving claims. tingill & Co. (D. C, Mass.), 14 Am. 89a. Phenix Nat. Park Bank v. B. R. 728, 137 Fed. 143, holding that Waterbury (N. Y. Ct. of Appeals), a claim for a breach of a contract 23 Am. B. R. 250, 197 N. Y. 161. to purchase stock at a fixed date, 90. In re Grant Shoe Co. (C. C. after the bankruptcy,, is provable; In A., 2d Cir.), 12 Am. B. R. 349, 130 re Imperial Brewing Co. (D. C, Fed. 881, affirming II Am. B. R. Mo.), 16 Am. B. R. 110, 143 Fed. 48, 125 Fed. 576. See, also. In re 579. Stern (C. C. A., 2d Cir.), 8 Am. 93. In re Spittler (D. C, Conn.), B. R. 569, 116 Fed. 604, in which 18 Am. B. R. 425, 151 Fed. 942; In case it was held that claims for re National Wire Corp. (D. C, damages for breach of contract are Conn.), 22 Am. B. R. 186, 166 Fed. provable claims. In re Stoever (D. 631. C, Pa.), 11 Am. B. R. 345, 127 94. See under "Indorser and Fed. 304. Surety Debts," ante, p. 709. 90a. Grant Shoe Co. v. Laird Co. 712 The Law and Pkactice in Bankruptcy. Contracts of Employment and for Commissions. [§ 63-a (4). (5) Continuing contracts.^-A discharge does not operate upon a contract 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 enjoyment."' 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 defendant in replevin on his bond given to secure the return of the chattels, is too contingent, even after judg- ment in replevin against him, and is thus neither provable nor dis- chargeable."' (6) Contracts of employment and for commissions. — Where contracts of employment are made for specified periods of time which are breached by the bankrupt before the expiration thereof, the dam- ages resulting therefrom are provable although at the time of the bankruptcy the contract was not terminated."" It has been held in contravention of this doctrine that a contract of employment in force at the time of bankruptcy is terminated by operation of law, and that the employees claim of damages therefor is contingent and not prov- able.""* So also where a contract has been made for the sale of goods on commission for a specified time a breach either by some act of the bankrupt or by the bankruptcy will give rise to a claim for dam- ages, which is provable.'"" The reason is: There is a contract by which the liability is fixed, that, being broken by the b_inkrupt during course of performance, amounts to a rescission, a right of action thus vesting immediately in the creditor. The annual fee to be paid under a contract with a mercantile agency is a provable debt although only a part of the year has elapsed.^"^ (7) Breach of covenant in lease. — ^Where the trustee of a 95. Robinson v. Pesant, 8 N. B. R. bankrupt, see In re Saxton Furnace 426, 53 N. Y. 419. Co. (D. C, Pa.), 15 Am. B. R. 445, 96. Cobb V. Overman (C. C. A., 4th 142 Fed. 293. As to effect of bank- Cir.), 6 Am. B. R. 324, 109 Fed. 65. ruptcy of corporation upon contract 97. Fowler v. Kendall, 44 Me. 448. containing provisions for revocation 98. Clemmons v. Brinn (Sup. Ct., in case of dissolution, see In re N. Y. App. T.), 7 Am. B. R. 714. Sweetser (C. C. A., 2d Cir.), 15 Am. 99. In re Silverman (D. C, Mo.), B. R. 650, 142 Fed. 131. Claim only 4 Am. B. R. 83, 101 Fed. 219; In re allowed for commissions on orders Pollard, Fed. Cas. 11,252; Orr v. filled by the bankrupt. In re Ladue Ward, 73 111. 318. Tate Mfg. Co. (D. C, N. Y.), 14 Am. 99a. In re Inman & Co. (D. C, B. R. 235, 135 Fed. 910. Ga.), 22 Am. B. R. 524, 175 Fed. 312. 101. Matter of Buffalo Mirror and 100. As to claim for oomnils- Beveling Co. (Ref., N. Y.), 15 Am. alons on contract repudiated by B. R. 122. Debts Which May Be Proved. 713 j63-a(4).] Breach of Covenant in Lease; Implied Ctontraeta. bankrupt tenant dispossesses a sub-tenant, a claim of the latter for breach of a covenant of quiet enjoyment contained in his lease, is not a provable debt against the tenant's estate, since it did not constitute " a fixed liability absolutely owing at the time of the filing of the petition."^ "^ There is no doubt about the bankrupt's liability if he continues to use the premises. Of course it would be different, if by the terms of the contract the rent was all pay- able in advance and had become due before the petition, although the terms extended beyond that time. So a continuing covenant to pay taxes as they might be assessed throughout a period of years to come, would not be provable in bankruptcy. Failure to pay installments prior to the petition would give rise to a debt which would be provable, but it would not release the covenanter from liability to pay subsequent assessments.-"'* bo since coven- ants that one will warrant and defend a title are not broken until a paramount title is asserted and established, there is no provable debt until that time, notwithstanding there may be adverse claim- ants; and there being no provable debt the covenanter is not re- leased from the obligation. But if the covenant has been broken, then the party may prove his claim in bankruptcy. A covenant against incumbrances being broken at the time of the conveyance, if an incumbrance did then exist, is a debt provable in bankruptcy. The bankruptcy court has ample power to liquidate the damages.'"* We will consider hereafter under unliquidated claims the prova- bility of claims for accruing installments of rent. (8) Implied conteacts. — This means the same as quasi-con- tracts. If the view expressed, ante, that, since the amendatory acts, all torts can be liquidated and then proved, ultimately pre- vails, the doctrine permitting the creditor to waive the tort and proceed on the theory of an implied contract, becomes of little im- portance.-"" If he 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 102. In re Pennewell (C. C. A., 6th on which a capias was issued was in Cir.), 9 Am. B. R. 490, 119 Fed. 139. tort, that alone will not exclude it See, also, In re Miller (D. C, Vt.), 13 from claims provable in bankruptcy, Am. B. R. 87, 132 Fed. 414. for the tort may be waived, and a 103. Murray v. De Rottenham, 6 judgment had, as upon an implied Johns. Ch. 52. contract. Barrett v. Prince (C. C. 104. Parker v. Bradford, 45 Iowa, A., 7th Cir.), 16 Am. B. R. 64, 143 311. Fed. 302. 105. Compare, generally. Keener on 106. Crawford v. Burke, 195 U. 8. Quasi-Contracts. 176, 12 Am. B. R. 659. WolTer of tort. — ^Though a suit 714 The Law and Pbactice in Bankruptcy. Judgments after Bankruptcy ; Costs. [§ 63-a (2) (3) (5). have waived the tort, and will be precluded from a recovery based thereon."' In any event, a creditor whose claim is grounded in tort, is not entitled to priority, even one whose claim rests on con- version. Once the goods are sold and the avails mingled with the debtor's funds, such a creditor's claim is for damages only."* If a promise to pay in the form of a due bill is unenforceable because in violation of a state law, relative to the " doing of business " in a state by a foreign corporation, the claim may not be proved upon the theory of an implied contract.^"*" V. JUDGMENTS ENTERED AFTER BANKRUPTCT. Subdivision 5 of subsection a permits the proof and allowance of debts "founded upon provable debts reduced to judgments after the filing of the petition and before the consideration of the bank- rupt's application for a discharge, etc." This clause gives statu- tory recognition to the doctrine of Boynton v. Ball,^"^ which settled a controversy under the law of 1867, that outlasted the statute itself. The contention was that he debt, being merged in the judgment, and the latter post-dating the bankruptcy, became a new debt which could not be proved, and was, therefore, not discharged.'^" There can now be no doubt. The debt, whether merged or not — and it seems it is not — may be proved in the form of the judgment, provided costs and interest after the bankruptcy are credited. But the judgment must (1) be founded upon a provable debt, and (2) be entered before "the consideration of the bankrupt's application for a discharge," i. e., be- fore the day on which the show cause order returnable thereon is called and heard. This provision manifestly does not include liabili- ties for torts.''' VI. CI.AIMS FOR COSTS. a. In general. — Subdivision 2 and 3 of subsection a are for the purpose of permitting the proof and allowance of debts founded on a claim for costs incurred prior to the bankruptcy incurred in an action by or against the bankrupt, but which has not yet been taxed. These subdivisions, in a sense, extend the doctrine of Boynton v. Ball to costs which were not taxable at the time of the bankruptcy. Costs taxed prior to that time are debts and may be 107. Standard Varnish Wks. v.'' 110. See In re Pinkel (Eef. N. Haydock (C. C. A., 6th Cir.), 16 Am. Y.), 1 Am. B. R. 333; In re McBryde B. E. 286, 143 Fed. 318; In re (D. C, N. Car.), 3 Am. B. R. 729, 90 Hirschman (D. C, Utah), 4 Am. B. Fed. 686. R. 715, 104 Fed. 69. 111. Matter of N. Y. Tunnel Co. 108. Ungewitter v. Von Sachs, (C. C. A., 2d Cir.), 20 Am. B. R. 25, Fed. Cas. 14,343. 159 Fed. 688, holding that a claim 108a. In re Montello Brick Works for damages for causing death by CD. C, Pa.), 26 Am. B. R. 375, 174 wrongful act is not provable against Fed. 498. the estate in bankruptcy of the al- 109. 121 U. S. 457. leged wrongdoer. Debts Which May Be Peoved. 715 §63-a(2)(3).] Claims for Costa. proved as such."* Costs taxed siubsequently are not, unless within the terms of subsection o(2) or subsection a(3).^" b. Costs against an involuntary bankrupt. — By subdivision 2 costs taxable against an involuntary bankrupt who waa a plaintiff, at the time of the filing of the petition against him, in a cause of action which would pass to the trustee, but which he declines to prosecute after notice, are provable debts. There are no cases directly applicable to thisi subdivision. Clearly such costs to be provable must, however, be against one who, when the petition was filed, was a plaintiff in an action which, on the adjudication, passed to the trustee, but which the trustee declines, after notice, to prosecute any further. c. Costs incurred in good faith in an action to recover a prov- able debt. — Under subdivision 3 a debt may be proved and al- lowed which is 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. There was no similar provision in the law of 1867. Thus neither the party litigant nor the sheriff had a provable debt against the estate for the costs or disburse- ments on an attachment or judgment dissolved or set aside by the bankruptcy.*** On the other hand where such annulled liens were shown to be similar to, and in aid of, the bankruptcy proceeding, the sheriff, or the creditor who had paid him, was often, for equit- able reasons, awarded such costs and disbursements out of the estate."' It is not thought that subdivision (3) has modified these rules. The party litigant now has by statute 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 112. Ex parte Foster, Fed. Cas. 115. In re Williams, Fed. Cas. 4,960; In re CNeil, Fed. Cas. 10,527; 17,705; In re Welch, Fed. Cas. 17,367; Graham v. Pierson, 6 Hill, N. Yi 247. In re Jenks, Fed. Cas. 7,276; Zeiber 113. See In re Marcus (D. C, v. Hill, Fed. Cas. 18,206; In re Mass.), 5 Am. B. E. 19, 104 Fed. 331; Holmes, Fed. Cas. 6,631. Aiken v. Haskins, 6 Am. B. R. 46, 34 116. In re Young (D. C, N. Y.), N. Y. Misc. 505. 2 Am. B. R. 673, 96 Fed. 606; In re 114. Gardner v. Cook, Fed. Cas. Jennings (Ref., N. Y.), 8 Am. B. R. 6,226; In re Ward, Fed. Cas. 17,145; 358. In re Davis, Fed. Cas. 3,616. See 117. Compare In re Allen (D. C, Matter of Thompson Mercantile Co. Cal.), 3 Am. B. R. 38, 96 Fed. 512; (R«f., Minn.), 11 Am. B. R. 579. In re Lewis 'D. C, Mass.), 4 Am. 716 TiiK Law and Practice in Bankkuptcy. Coats in Attachment Suita. [§ 63-a(2) (3), 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 ele- ments, costs are not provable unless within the meaning of sub- division (2). d. Costs in attachment suits. — The costs and disbursements in an attachment suit pending against a bankrupt at the time of the filing of the petition, 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 incideait 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 in the last 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 bank- rupt court may, in the exercise of its equitable jurisdiction, re- quire the trustee to pay such charges as have benefited the estate in his hands, though incurred before the bankruptcy; if he re- ceived the benefit of the attachment he was obliged to sustain the burden."2 B. R. 51, 99 Fed. 935. And generally apparently contra, In re Foster, Fed. under § 64-b(5). Cas. 4,960, 2 Story, 131; In re Haus- 118. See Bankr. Act, § 1(11). berger, 2 N. B. R. 92, 2 Ben. 504; 119. In re Young (D. C, N. Y.), London v. King, 50 Ga. 302; In re 2 Am. B. R. 673. 96 Fed. 606. Preston, 5 N. B. R. 293. 120. In re Allen (D. C, Cal.), 3 122. See In re Fatune, 2 N. B. R. Am. B. R. 38, 96 Fed. 512. 662, Fed. Cas. 4,955; Garden v. Cook, 121. In re Fortune, 2 N. B. R. 662, 7 N. B. R. 346, Fed. Cas. 5,226; In re Fed. Cas. 4,955, 1 Low, 306; Gardner Ward, 9 N. B. R. 349, Fed. Cas. V. Cook, 7 N. B. R. 346, Fed. Cas. 17,145; In re Jenks, 15 N. B. R. 301, 5,226; In re Geo. S. Ward, 9 N. B. R. Fed. Cas. 7,276; Zeiber v. Hill, 8 N. 349, Fed. Cas. 17,145; In re Hatje, B. R. 239, Fed. Cas. 18,206; In re 12 N. B. R. 548, Fed. Caa. 6,215, 6 Holmes, 14 N. B. R. 493, Fed. Cas. Bias. 436; In re Preston, 6 N. B. R. 6,631. 545, Fed. Caa. 11,394. See, however. Debts Which May Be Pboved. 717 5 63-b.] Unliquidated Claims; Injuries to Persons or Property. VII. UNUQUIDATED CIJUMS. a. In general. — Subsection b permits the liquidation, and sub- sequent proof and allowance, of an unliquidated claim against the bankrupt. The law of 1867 permitted the liquidation of damages for conversion only; that, as has been shown, was (aside from debts grounded in fraud or embezzlement) the only tortious lia- bility provable. The words of the present law are much broader and seem to be taken from K. S., § 5068, which regulated the liquidation of " contingent debts and contingent liabilities." b. Effect and purpose of subsection. — Subsection b adds nothing to the class of debts which may be proved under subsection a; its purpose is to permit an unliquidated claim, coming under the provisions of subsection a, to be liquidated as the court shall direct.^^* The present prevailing opinion is that only debts coming within subsection a can be liquidated and no tortious liabilities may be, save on the theory of quasi-contract.^^* A claim for unliquidated damages for loss of future profits is prov- able in bankruptcy, where it is based on a contract right.**' Cases under the former law will be found in the foot-note.**^ c. Injuries to persons 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 nature as to authorize a waiver of the tort and a recovery upon the quasi-contract, and is, therefore, 123. Dunbar v. Dunbar, 190 U. S. United Button Co. (D. C, Del.), 15 340, 349, 10 Am. B. E. 139. Am. B. E. 390, 140 Fed. 495. An nitUqnidated claim will Taxes and preminnifi of insnr- only be allowed under section ance, if they are not a fixed liability, 63b, upon application to the court to are not such unliquidated claims direct the manner of liquidation. In against the bankrupt as can be re Silverman Bros. (D. C, Mo.), 4 proved, for only those claims can be Am. B. E. 83, 101 Fed. 219. admitted to proof under this provision 124. In re Hirschman (D. C, which can be liquidated by legal pro- Utah), 4 Am. B. R. 715, 104 Fed. 69, ceedings instituted at the time of the holding that subsection 6 covers only bankruptcy. Matter of Pittsburg such claims as when liquidated are Drug Co. (D. C, Pa.), 20 Am. B. E. provable debts under the classification 227, 237, 164 Fed. 482. of the preceding subsection a, and 125. Matter of Manhattan Ice Co. does not authorize the liquidation (D. C, N. Y.), 7 Am. B. E. 408, 114 and proof of claims arising ex delicto Fed. 400n, aff'd 8 Am. B. E. 569. unless they are of such a nature that 126. In re Smith, Fed. Cas. 12,975; the claimant might at his election In re Cook, Fed. Cas. 3,151; Ex parte waive the tort and recover in quasi Lake, Fed. Cas. 7,991; Abbott v. contract. See, also. In re Filer (Ref., Rowan, 33 Ark. 593. N. Y.), 5 Am. B. E. 582; Matter of Tl8 The Law and Peactice in Bankeuptct. Contingent Liabilities. [§ eS'b. not provable against the master's estate in bankruptcy.^"' So, a judgment, in an action under an employer's liability act to re- cover for personal injuries, is not a provable claim against the bank- rupt'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 bank- ruptcy.^"* [ 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 unliquidated, may be filed, and thereupon the claim is before the court to be dealt with as the interests of the part- ies may require ; there must be liquidation 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 unliquidated claims ; ordinarily such determination will be based upon the principles 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 "unliquidated damages" and "contingent liabilities."^'' The phrase here "unliquidated claims" may refer to both. The former law provided for the liquidation of contingent debts and lia- bilities,"* and the cases under it, as well as those under its pre- decessor, drew a clear distinction between demands whose existence 127. Matter of Wigmore & Sons Ind.), 14 Am. B. R. 611, 136 Fed. Co. (Eef., Cal.), 10 Am. B. R. 661. 451. 128. In re Crescent Lumber Co., 133. Consult Zimmer v. Sehlee- (U. C, Ala.), 19 Am. B. R. 112, 154 hauf, 115 Mass. 52. ied. 724. 1?4. R. S. § 5068. "In all cases 129. Brown & Adams v. United of contingent debts and contingent Button Co. (C. C. A., 3d Cir.), 17 liabilities contracted by the bank- Am. B. R. 565, 149 Fed. 48, aff'g 15 rupt, and not herein otherwise pro- Am. B. R. 390. vided for, the creditor may make 130. In re Rouse (Ref., Ohio), 1 claim therefor, and have his claim Am. B. R. 393. allowed, with the right to share in 130a. In re Rubel (D. C. Wis.) the dividends, if the contingency hap- 21 Am. B. R. 566, 170 Fed. 1021. pens before the order for the final 131. In re Mertens (C. C. A., 2nd dividend; or he may, at any time, Cir.), 16 Am. B. R. 825, 144 Fed. apply to the court to have the pres- 818. ent value of th« debt or liability 131a. In re Buchan's Soap Corp. ascertained and liquidated, which (D. C, N. Y.) 22 Am. B. R. 382, shall then be done in such manner as 169 Fed. 1017. the court shall order, and he shall be 132. See Matter of Structural allowed to prove for the amount so Steel Car. Co. (Ref., Ohio), 13 Am. ascertained.'' B. R. 373; In re Kenney (D. C, Debts Which Mat Be Pboved. 719 § 63.] What Debts Are Not Provable. depended on a contingency and existing demands where the cause of action depended on a contingency; the former not being prov- able in any event and the latter only vrhen liquidated.*"* The present law has no similar clause and it has been vigorously as>- serted 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 reason- ing will doubtless extend to all existing demands based on contract where only the cause of action depends on a contingency. Such a construction harmonizes the statute both as to distribution of assets and as 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 conditional preliminary proof au- thorized 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 leesee 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.*'* VXn. WHAT DEBTS AB£ NOT FROVABXJ!. a. In general. — From what has already been said, it results that substantially all liabilities either ex contractu or ex delicto, provided they are liquidated either before the bankruptcy, or, if not, thereafter, are provable debts under the terms of subsection 6. Their© are exceptions, which, and the reasons for them, are con- sidered here. 135. Kaggin v. Magwire, 15 Wall. 137. Bankr. Act, § 57-n. 549; French v. Morse, 68 Mass. Ill; 138. Compare foot-note 134, ante. Jemison v. Blowers, 5 Barb. (N. Y.) 139. In re Shaffer (D. C, Mass.)] 686; McNeil v. JSnott, II Ga. 142; In 10 Am. B. R. 633, 124 Fed. Ill; In re Mead, 14 Fed. 287. re Ells (D. C, Mass.), 3 Am. B. E. 136. For example, read Collier on 564, 98 Fed. 967. See, also, Evans v. Bankruptcy, 3d ed., pp. 382, 383. See, Lincoln Co., 10 Am. B. K. 401, 204 also, In re Imperial Brewing Co. (D. Pa. St. 448, 54 Atl. 321. C, Mo.), 16 Am. B. R. 110, 143 Fed. 679. 720 The Law and Peactioe in Bankruptcy. Debts Not Provable; Alimony; Rent. [§63- b. Judgments for fines. — These are not provable/^" though there is authority the other way.^^^ Fines are provable, if at all, only because " a fixed liability absolutely owing." But the crim- inal 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 punishment 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 mean- ing 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 not 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 dis- charge,*^^ is superfluous. Now, however, alimony, whether due at the time of bankruptcy or accrued or to accrue thereafter, is not a provable debt. The cases are summarized elsewhere.**' 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 peiriods " 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 au- thority is that rent to accrue is not even a contingent claim,**® 140. In re Sutherland, 3 N. B. R. 143. 181 U. S. 575, 5 Am. B. R. 314, Fed. Cas. 13,639; People v. 829. Spalding, 10 Page, 284, aff'd 4 How. 144. For instance, in Kentucky, 21; In re Moore (D. C, Ky.), 6 Am. see In re Houston (D. C, Ky.), 2 B. R. 590 111 Fed. 145. Am. B. R. 107, 94 Fed. 119. 141. In re Alderson (D. C, W. 145. See Bankr. Act, § 17-a(2). Va.), 3 Am. B. R. 544, 98 Fed. 588, 146. See Section Seventeen, holding that a judgment obtained in 147. Act of 18G7, § 19, R. S., f a State court against a bankrupt for 5071. fines upon indictments is a discharge- 148. In re May, Fed. Cas. 9,325; able judgment. This does not seem to In re Hufnagel, Fed. Caa. 6,837 ; In be good law. re Croney, Fed. Cas. 3,411. 142. See 1 N. B. 48, 57. 149. Compare Ex parte Houghton, Fed. Cas. 6,725. Debts Which May Be Pkoved. 721 § 63-a.] Rent to Accrue. and is therefore, not capable of proof.^"" The reasons given are various, but that asserting that the adjudication amounts to a breach of the leasd 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.^'^^ Eent to accrue is not a fixed liability absolutely owing, because 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 sub- sequent 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.^"" Wliere a receiver in bankruptcy continues in oc- cupation of- leased premises, from the filing of the petition until the tenant's adjudication as a bankrupt, it has been held that the land- lord 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 mean- ing of 63-a(l).^'' But it has been held that a provision in a lease, authorizing the landlord to re-enter upon the bankruptcy of the ten- 150. In re Jefferson (D. C, Ky.), Am. B. R. 23, 134 Fed. 142. 2 Am. B. R. 206, 93 Fed. 948; In re 151a. Matter of Roth & Appel Arnstein (D. C, N. Y.), 4 Am. B. R. (D. C, N. Y.), 22 Am. B. R. 504, 174 246, 101 Fed. 706; In re Collignon Fed. 64. (Ref., N. Y.), 4 Am. B. R. 250; In 152. Bankr. Act, § 63-a (4). re Mahler (D. C, Mich.), 5 Am. B. 153. Deane v. Caldwell, 127 Mass. R. 453, 105 Fed.* 428 ; Atkins v. Wil- 242. cox (C. C. A., 5th Cir.), 5 Am. B. R. 154. Compare In re Mahler (D. 313, 105 Fed. 595: In re Ells (D. C, C, Mich.), 5 Am. B. R. 453, 105 Fed. Mass.), 3 Am. B. R. 664, 98 Fed. 967; 428. In re Hays, etc., Go. (D. C, Ky.), 9 155. In re Curtis (Sup. Ct., La.), Am. B. R. 144, 117 Fed. 879; In re 9 Am. B. R. 286, 33 So. 125. It was Winfi3ld Mfg. Co. (D. C, Pa.), 15 held upon rehearing in this case that Am. B. R. 24, 137 Fed. 984; Watson the indorser on notes given for such V. Merrill (C. C. A., 8th Cir.), 14 rent was liable thereon upon the the- Am. B. R. 453, 136 Fed. 359; In re ory that although such notes were Rubel (D. C, Wis.), 21 Am. B. R. not provable against the bankrupt's 566, 170 Fed. 1021; In re Roth & estate, the consideration was not Appel (D. C, N. Y.), 22 Am. B. R. affected by the bankruptcy of the 504, 174 Fed. 64. Apparently contra, lessee, the non-provability of the In re Goldstein (Ref., Pa.), 2 Am. notes being based upon the contin- B. R. 603. gent nature of the claim. 151. Compare In re Jefferson (D. 156. Matter of Hinckel Brewing C, Ky.), 2 Am. B. R. 206, 93 Fed. Co. (D. C, N. Y.), 10 Am. B. E. 948, with In re Ells (D. C, Mass.), 484, 123 Fed. 942, but see, contra. In 3 Am. B. R. 564, 98 Fed. 967. re Adams (D. C, Mass.), 12 Am. B. A lease is not terminated ipso R. 368, 130 Fed. 381. facto by an adjudication of bank- 157. Matter of Pittsburg Drug Co. niptcy. In re Pennewell (C. C. A., (D. C, Pa.), 20 Am. B. R. 227, 234, 6th Cir.), 9 Am. B. R. 490, 119 Fed. 164 Fed. 482. See Martin v. Orgain 139; Watson v. Merrill (C. C. A., 8th (C. C. A., 5th Cir.), 23 Am. B. R. Cir.), 14 Am. B. R. 453, 136 Fed. 454, 174 Fed. 772. 359: In re Adams (D. C, Conn.), 14 722 The Law and Peactice in Bankedptcy. Debts Outlawed by Statute of Limitationa. [§ 63- ant, and permitting the landlord to recover the difference between the rent reserved and the rent collected by the landlord from other sources, does not enable the landlord to prove a claim for rent ac- cruing subsequent to the bankruptcy of the tenant.^"* If the trustee elects to assume the lease and sell the same and the landlord acqui- esces, the trustee steps into the bankrupt's shoes, and the question here discussed will not arise. The trustee, however, usually retains pos- session for a brief period, paying on a quantum meruit basis mean- while. e. 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 con- flict 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 eilect."" The reason for this doctrine seems to be one of abstract equity. Strictly, an outlawed debt is within the terms of § 63-a(l) and, therefore, provable. But, since such a debt could not have been asserted before bankruptcy 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. 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."^ The statute of limitations of the state of the bank- rupt's residence, and in which he was adjudged a bankrupt, governs the rights of the creditors in the administration of the bankrupt's es- tate."^ Any creditor of the bankrupt may interpose the statute of limitations as a defense against the allowance of a claim."' It is the duty of a trustee to plead the statute wherever an outlawed claim is presented."* 157a. Matter of Roth & Appel (D. C, Pa.), 16 Am. B. R 245 14T (D. C, N. Y.), 22 Am. B. E. 504, 174 Fed. 602. Fed. 64. 161. In re Eldridge, Fed. Cas 158. In re Ray, Fed. Cas. 11,589; 4,331. Contra: Nichols v Murrav In re Shepard, Fed. Cas. 12,753. Fed. Cas. 10,223. ' "' 159. In re Kingsley, Fed. Cas. 162. Hargadine, etc., Drv Goods 7,819; In re Hardin, Fed. Cas. 6,048: Co. v. Hudson (C. C. A. 8th Cir ) In re Cornwall, Fed. Cas. 3,250; In 10 Am. B. R. 225, 122 Fed 232 ai- re Reed, Fed. Cas. 11,635; In re Noe- firming 6 Am. B. R. 657. ' son. Fed. Cas. 10,288. 163. In re Lafferty (DC Pa ) 160. In re Lipman (D. C, N. Y.), 10 Am. B. R. 290, 122 Fed. 558'' In re 2 Am. B. R. 46, 94 Fed. 353; In re Kingsley, Fed. Cas. 7,819. Resler (D. C, Minn.), 2 Am. B. R. 164. In re Wooten (DC N 602, 95 Fed. 804; In re Watkinson Car.), 9 Am. B. R. 247, 118 Fed'67o" Dbbts Which May Be Pboved, 723 S 63.] Commissions of Trustees. f. Commissions of trustee. — A claim for commissions and ex- penses 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 liability of an estate in bankruptcy to pay a general assignee or receiver for his services and disbtirse- ments, 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. 165. In re Standard Dairy and Ice Co. (Sup. Ct., Diat. Columbia), 20 Am. B. R. 321. SECTION SIXTY-FOUR. DEBTS WHICH HAVE PRIOBITT. § 64. Debts which have Priority. — a 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 in advance of the payment of dividends to creditors, and upon filing the receipts of the proper public officers for such payment he shall be credited with the amount thereof, and in case any question arises as to the amount or legality of any such tax, the same shall be heard and determined by the court. h The debts to have priority, except as herein provided, and to be paid in full out of bankrupt estates, and the order of payment shall be (1) the actual and necessary cost of preserving the estate subsequent to filing the petition; (2) the filing fees paid by cred- itors in involuntairy cases, and, where property of the bankrupt, transferred or concealed iy him either before or after the filing of the petition, shall have been recovered for the benefit of the estate of the bankrupt by the efforts and at the expense of one or more creditors, the reasonable expenses of such recovery;* (3) the cost of administration, including the fees and mileage payable to witnesses as now or hereafter provided by the laws of the United States, and one reasonable attorney's fee, for the professional ser- vices actually rendered, irrespective of the number of attorneys employed, to the petitioning creditors in involuntary cases, to the bankrupt in involuntary eases while performing the duties herein prescribed, and to the bankrupt in voluntary cases, as the court may allow; (4) wages due to workmen, clerks, traveling or city salesmen^ or servantsi which have been earned within three months before the date of the commencement of proceedings, not to exceed three hundred dollars to each claimant; and (5) debts owing to any person who by the laws of the States or the United States is entitled to priority. c In the event of the confirmation of a composition being set aside, or a discharge revoked, the property acquired by the bank- •Amendment of 1903 in italics, t Amendment by Act of June 15, 1906. 724 Debts Which Have Priobitt. 726 S 64.] Synopsis of Section. rapt in addition to his estate at the time of the composition was confirmed or the adjudication was made shall be applied to the payment in full of the claims of creditors for property sold to him on credit, in good faith, while such composition or discharge was in force, and the residue, if any, shall be applied to the payment of the debts which were owing at the time of the adjudication. Analogous proTicioni: In IT. S.: Act of 1867, $ 28, R. S., § 5101; Act of 1841, § 5; Act of 1800, § 62. In Zhig.: Preferential Payments in Bankruptcy Act of 1888, § 1. Cross references: To «»e law: §§ 12, 13, 14, 15, 17, 57, 62, 63, 66, 67-c-f. To the General Orders: X, XXVIII. SYNOPSIS OF SECTION. DEBTS 'WHICH HAVE FBIOBITT. I. Priorities in General. a. Comparative legislation. b. Construction of section. c. Priorities versus liens. d. Debts due the United States. e. Order of priority. f. Practice. II. Payment of Taxes. a. In general. b. Construction and effect. c. Court to determine amount and legality. d. Taxes not debts and need not be proved. e. Payment out of proceeds of sale. f. Taxes entitled to priority. g. Bight to subrogation upon payment of taxes. h. Taxes accrued since proceedings were instittUed. i. Intent on taxes. j. Illustrative cases. ILL Preserving Estate; Filing Fees. a. Cost of preserving the estate. (1) In gesteeal. (2) Amendments of 1903. b. Filing fees in involuntary cases. 726 The Law and Peactice in Bankbttptot. Comparative Legislation. [5 **• IV. Cost of Administration. a. In general. b. Witness fees and mileage. c Attorney's fees. V. Payment of Wages. a. In general. b. Construction and effect. c. Assignee of claim for wages. d. When services performed. e. Persons entitled to priority. • (1) woekmen, cleeks oe seevants. (2) Teaveling oe city salesmen. VI. Debts Entitled to Priority under State Laws. a. In general. b. Liens under state laws and bankrupt act. c Conflicting or overlapping state priorities. d. Liens. e. Fees and expenses of general assignee and receivers and their attorneys. f . Sheriff's fees. g. Sheriff's disbursements. h. Other illustrative cases. I. PBIOBrrilSS IN GEIfERAI,. a. Comparative legislation.— The list of debts entitled to priority bas increased with each successive bankruptcy law. That of England, in substance, gives priority of payment to (1) the costs of administration, (2) taxes, (3) wages to a limited amount within a limited time, and (4) rent where the landlord has dis- trained the bankrupt's goods.* Our law of 1800 merely saved debts due the United States; that of 1841 added debts for labor within six months to the amount of $25.^ The law of 1867 pro- vided five classes of priority debts: (1) costs of suits in the pro- ceeding and for preserving the estate; (2) debts and taxes due the United States; (3) debts and taxes due the States; (4) wages to an operative, clerk or house-servant not to exceed fifty dollars for labor performed within six months; (5) priorities given by 1. See S 1, Preferential Paymentb 2. See "Analogous Provisions" in English Bankruptcy Act of 1888. ante. ' Debts Which Have Peioeitt. 727 § 64.] Priorities Versus Liens. the laws of the United States.' The present act goes much further. b. Construction of section — The federal courts have construed the priority provisions of the Bankrupt Act with a fair degree of liberality,* but subdivision a must be strictly construed when it would inure to the benefit of a particular creditor, and not to a municipality.^ c. Priorities versus liens. — ^Many cases seem to hold the broad doctrine that these priorities are superior to valid liens.® This may be doubted;^ even where property vested in the trustee is sold free and clear of incumbrances. Section 64-b has been con- strued as referring to the disbursement of the proceeds of unin- cumbered property, and not to the proceeds of property incum- bered by valid liens.® But the costs of administration have been construed, upon equitable grounds, to be entitled to priority of payment even out of the proceeds of property incumbered by valid liens.^ It is true that the whole estate is or may be marshaled and administered and liens paid through the trustee. But the rule that the bankrupt's assets come to his trustee charged with all hona fide liens,^" even if within the four months' period, seems to negative the doctrine of the cases cited at the beginning of this 3. Act of 1867, § 28 R. S., § 5101. (Ref., Ky.), 18 Am. B. R. 104. 4. In re Jones (D. C, Mich.), 18 10. Yeatman v. Savings Inst., 95 Am. B. R. 206, 151 Fed. 108. U. S. 764. 5. In re Broom (D. C, N. Y.), 10 Liens first paid. — Judge Ray Am. B. E. 427, 123 Fed. 639. says in Re Cramond (D. C, N. Y.), 6. For instance: See In re Coffin 17 Am. B. R. 22, 38, 145 Fed. 966, (Ref., Tex.), 2 Am. B. R. 344; In re "Liens on the property of the bank- Byrne (D. C, N. Y.), 3 Am. B. rupt, not void or voidable under some R. 268, 97 Fed. 762; In re Tebo (D. provision of the law, whether ob- C, W. Va.), 4 Am. B. R. 235, 101 tained and created by express con- Fed. 419. tract or by virtue of compliance with 7. Compare In re Frick (Ref., the lien law of a State, since the Ohio), 1 Am. B. R. 719; In re Mc- amendment to the act, are first to be Connell, Fed. Cas. 8,712; In re Ham- paid (excepting taxes) subject to bright, Fed. Cas. 5,973; Gardner v. abatement for commissions expressly Cook, Fed. Cas. 5,226. allowed to referees and trustees on all 8. Matter of Meis (Ref., Ky.), 18 sums disbursed to creditors in the one Am. B. R. 104. case and to any one in the other." 9. Where a mortgagee invokes the The trustee in bankruptcy is vested jurisdiction of the bankruptcy court with no better right or title to the to enforce his lien, a reasonable fee Ijankrupt's property than belonged to for the attorney of the bankrupt, as T^ ''^P'^T^P* ^* the time when the i i ii. 1 i J • • J. i- . trustee s title accrued. York Manu- part of the costs of administration is fecturing Co. v. Cassell, 15 Am B. entitled to priority of payment out R. 633, 201 U. S. 344, rev'g 14 Am. of the proceeds of a sale of the mort- B. R. 52. See also In re Proudfoot gaged property. Matter of Meis (D. C, W. Va.), 23 Am. B. R. 106, 173 Fed. 733. 728 The Law and Peactice in Bankeuptct. Order of Priority. [§ 64. paragraph. The question is often one of extreme difficulty. Equity may step in and charge against property affected by liens the "cost of preserving " it, or a proportionate share of the " attorney's fee " — this, however, only on a showing that his service was beneficial to the property or lienor — ^but equity presumably will not declare the " filing fees " or " wages " or " state priorities " superior to valid liens. The lien creditor is prior in right, and should, therefore, unless directly benefited by the acts or disbursements for which priority is claimed, be prior in distribution.** d. Debts due the United States. -These are entitled to priority of payment. This follows from § 3466 of the Eevised Statutes,*^ though the words are somewhat general. It even seems that the United States need not prove its debt,*' and that the doctrine of laches does not apply, any more than to any other sovereign.** Hence, § 3467, which makes the trustee personally liable, if, with notice, he fails to pay a debt due the United States.*' Being a debt, the order of payment is probably next after taxes, which are not debts, cannot be proved as such and are not affected by a dis- charge.*" This doctrine is ancient" and, even in the absence of statutory provisions, would probably be enforced, the sovereign not being affected by the provisions of a statute, unless an intention so to do therein appears. Even assuming that the United States is included within the meaning of the word " person " as used in § 64b (5), it was not intended thereby to subordinate debts due the United States, which are given priorly by U. S. Eev. Stats., § 3466; such debts are prior to debts due to wage earners given priority under § 64b (4).*'* e. Order of priority. — The words " order of payment " clearly indicate .that, after taxes and debts to the United States, priority debts must be paid in the order indicated in subdivision 6. If there is not sufficient to pay all priority debts, the last class in order abates first. If priority debts of a given class, as those 11. Compare, generally, Sections Hart v. U. S., 95 U. S. 316. It is a Sixty-seven and Seventy. long and firmly established rule that 12. U. S- V. Fisher, 2 Cranch, 358 ; the sovereign is not bound by a stat- Lewis v. U. S., 92 U. S. 618; In re ute of limitations in which it is not Rosey, Fed. Cos. 12,066; U. S. v. Gris- named, and the provision of the bank- wold, 8 Fed. 496. rupt act requiring a claim to be 13. U. S. v. Murphy, 15 Fed. 589; proved within a vear is a plain limi- In re Huddell, 47 Fed. 206; Lewis v. tation on the creditor's remedy In U. S., 92 U. S. 622. re Stoever (D. C, Pa.), 11 Am. B. R. Proof of debt is not required 345, 349, 127 Fed. 394. where the debt is due the United 15. U. S. v. Barnes, 31 Fed. 705. States. Section 64-b(5) is in pari 16. Compare In re Cleanfast Hos- materia with U. S. Rev. Stats., §§ iery Co. (Ref., N. Y.) 4 Am. B R. 3466 and 3467, and adds nothing to 702. ' the rights given by those sections nor 17. Field v. U. S., 9 Pet. 182. takes anything away. In re Stoever 17a. Title Guaranty & Surety Co. (D. C, Pa.), 11 Am. B. R. 345, 127 v. Guarantee Title & Trust Co. (C. Fed. 394. C. A., 3d Cir.), 23 Am. B. R. 340, Page 728. 174 Fed. 385, revg. 22 Am. B. R. 851. 14. Cooke V. U. S., 91 U. S. 389; ^ Debts Which Have Peioeity. 729 § 64-a.] Payment of Taxes. specified in subdivision (3), must abate in part, the order between each of them is fixed by general equity rules." Taxes, costs, and expenses of administration have priority over dower.^' If prop- erty held by the bankrupt in trust passes to the trustee in bank- ruptcy it will be subject to the interest of the beneficiaries therein; but such beneficiaries will not be entitled to priority of payment unless they can trace the trust property, in its original or some substituted form, in the estate which comes into the hands of the trustee.^" f. Practice. —Priority should be specifically claimed."' This is usually done by a sentence to that effect and giving the grounds of the claim, inserted in the proof of debt. If not claimed, it will be deemed waived; though amendment setting up the claim will usually be allowed. It is not lost even if a claim is not made until after the first dividend ; "^"^ nor although the claim of priority is not made until after the expiration of a year from the date of the adjudication, and the claimant voted at the election of trustee.''"* The act does not contemplate that taxes assessed upon the bankrupt's real property, and which are matters of public record, shall be proved like an ordinary debt."' Allegations in a petition relating to an alleged priority are not to be taken as prima jade true, for the purpose of establishing such priority, in the absence of evidence for or against the fact."* 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 pay- ment in full only of taxes due the United States or the State. The subsection is explicit and needs little explanation. The words 18. In re Burke (Ref., Ohio), 6 19 Am. B. R. 481, 156 Fed. 715. Am. B. R. 502. For the order of 22. In re Scott (D. C, Tex.) 2 priority and the apportionment of Am. B. R. 324, 96 Fed. 607. an estate insufficient to pay preferred 22a. In re Ashland Steel Co. (C. claims, see Matter of Grignard Lith. C. A., 6th Cir.), 21 Am. B R 834' Co. (D. C, N. Y.), 19 Am. B. R. 743, 168 Fed. 679. 155 Fed. 699. 23. In re Prince & Walter (D. C 19. In re Forbes (Ref., Ohio), 7 Pa.), 12 Am. B. R. 675, 131 Fed. Am. B. R. 42. 546; In re Harvey (D. C, Pa.), 10 20. Deere Plow Co. v. McDavid Am. B. R. 567, 122 Fed. 745. (C. C. A., 8th Cir.), 14 Am. B. R. 24. In re Jones (D. C., Mich.) 18 653, 137 Fed. 802. Am. B. R. 206, 151 Fed. 108. 21. In re McFadgen (D. C, Pa.), Y30 The Law and Practice in Bankruptcy. Taxes ; Court to Determine Amount. [§ 64-a. " 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 higher class than the debts enumerated in subsection bj this is probably the law. b. Construction and effect, — Construed strictly, the words of this subdivision 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.^' Taxes, as a class, are thus put at the head of every thing — even above the expense of preserving the estate, or the cost of adminis- tering it.^'i Some question has arisen as to whether taxes are payable prior to the costs of preserving and administering the estate; it has been held that they should be subordinated to such costs ; ^^^ but there is evidence of an intent to prefer taxes over debts of all kinds in placing before the provisions as to priority of debts a positive require- ment that all taxes shall be paid. A claim for taxes due the United States is entitled to priority of payment, to the exclusion of all reasonable expenses of administration.^" c. Court to determine amount and legality.— Subsection a pro- vides 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 court." This authorizes the court to inquire as to whether the tax is a valid claim. While a state court may construe a tax statute and define its meaning, it is for the federal court to de- termine whether a tax is thereby created within the meaning of a federal statute giving a preference to taxes." The finding of a state or local board as to the amount of the tax does not conclude the court." 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 over-due.^"^ d. Taxes not debts and need not be proved. —A tax is not, in a strict sense, a debt,^" althoug:h they are within the meaning of a definition of a debt as contained in § 1(9), (11).'^ But they 25. City of Waco v. Bryan (C. C. son, 203 U. S. 483, 17 Am B T? fi*? A., 5th Cir.), 11 Am. B. R. 481, 127 69. ... xi. oo, Fed. 79; City of Chattanooga v. Hill 28. State of New Jersey v Ander (C. C. A., 6th Cir.), 15 Am. B. E. son, 203 U. S. 483, 17 Am B R 6^! 195, 139 Fed. 600. 29. Matter of Selwyn ' Importing 25.a In re Prince & Walter (D. Co. (Ref., N. Y. ), 18 Am BR 100 C, Pa.), 12 Am. B. R. 675, 131 Fed. 29a. In re Weissman (D C 546. Comr.), 24 Am. B R Tin 178 t?o/I' 25.b In re Halsey Electric Gen- 115. ^°' "^ ^^^ erator Co. (D. C, N. J.), 23 Am. B. 30. Lane Co. v. Oregon 7 Wall K- 401. (U. S.) 71; State of New' Jersey v 26. In re Prince & Walter (D. C, Anderson, 203 U S 483 17 Am b' Pa.), 12 Am. B. R. 675, 131 Fed. 546; R. 63, 69; In re United Button' Co In re Weiss (D. C, N. Y.), 20 Am. (D. C, Del.), 15 Am B R 39? 400 B. R. 247, 159 Fed. 295. 140 Fed. 495. ' ' 27. State of New Jersey v. Ander- 31. In re Fisher & Co. (D. C N JO, 17 Am. B. R. 404, 411, 148 Fed! Debts Which Have Peiokity. 731 § 64-a.] Tax Entitled to Priority. 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 prop- erty, 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 espec- ially true when the payment would inure solely to the benefit of a secured creditor.^^ Tbe 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.*^ 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 pro- ceeds 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 acquire 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.** f. Taxes entitled to priority — The word " tax " is not used in a restricted or narrow sense but is intended to include all obliga- tions 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 32. In re Prince &, Walter (D. C, assessed against property which is set Pa.), 12 Am. B. R. 679, 131 Fed. 546; off as exempt and though the said In re Harvey (D. C, Pa.), 10 Am. taxes arc a Hen upon and enforceable B. R. 567, 122 Fed. 745; In re Fisher against the exempt property, and & Co. (D. C, N. J.), 17 Am. B. R. their payment would exhaust the fund 404, 411, 148 Fed. 907. otherwise going to the general credi- 33. But see In re Stalker (D. C, tors. For latter cases, see In re Ba- N. Y.), 10 Am. B. R. 709, 123 Fed. ker (Ref., Tex.), 1 Am. B. R. 526; 961. In re Hollenfeltz (D. C, Iowa), 2 34. In re Harvey (D. C, Pa.), 10 Am. B. E. 499, 94 Fed. 629; In re Am. B. R. 567, 122 Fed. 745; In re Conhaim (D. C, Wash.), 4 Am. B. Clark Coal & Coke Co. (D. C, Pa.), r. 53 100 Fed. 268; In re Hilberg 22 Am B. R. 84r, 173 Fed. 658 (Ref., Pa.), 6 Am. B. R. 714. 35. In re Veitch (D. C, Conn.), _ ' „, '/. _., . _.„ 4 Am. B. E. 112, 101 Fed. 251. ,^^- diattanooga. City of, v. Hill 36. In re Tilden (D. C, Iowa), 1 (C- C. A., 6th Cir.), 15 Am. B. R. Am. B. E. 300, 91 Fed. 500, holding 195, 139 Fed. 600. that the trustee must, at the request 38. In re Prince & Walter (D. C, of the bankrupt, pay the taxes legally Pa.), 12 Am. B. E. 675, 131 Fed. 640. owing by such bankrupt even though 732 The Law and Practice in Bankkuptcy. Taxes Entitled to Priority. [§ 64-a. 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 special taxes, but they are nevertheless taxes imposed for a public purpose no matter vrhat the name under which they are levied or imposed and are clearly within the meaning of the term "tax" as used in this section.** The interpretation and meaning of the word " tax " is to be determined ultimately by the federal courts.*" 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 adminis- tration of the Bankrupt Act ;** although the decisions of the courts of the states where the tax is payable should be given well-nigh control- ling force.** 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 payable as of the date of the entry of the tax lien in the proper office, where such entry is re- quired.*'* Taxes, assessed against a partnership, must be paid from the estate of an individual partner where he is individ- ually liable under the state law.** An assessment levied for a local improvement is a tax entitled to priority of payment.*" A tax imposed upon retail dealers in cigarettes in addition to the other taxes is within this section.*' A claim against a default- ing tax collector is not a debt for "taxes."*^ 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 39. In re Lange Co. (D. C, Iowa), C, N. J.), 23 Am. B. E. 401. 20 Am. B. R. 478, 159 Fed. 586. See 43a. In re Clark Coal & Coke Co. In re Wyoming Valley Ice Co. (D. (D. C, Pa.), 22 Am. B. R. 843, 173 C, Pa.), 21 Am. B. R. 1, 165 Fed. Fed. 658. 789. 44. In re Green (D. C, la.), 8 40. In re Lange Co. (D. C, Iowa), Am. B. R. 553, 116 Fed. 118. See 20 Am. B. R. 478, 159 Fed. 586. Matter of Flatau (D. C, N. Y.), 21 41. New Jersey v. Anderson, 203 Am. B. R. 352. U. S. 483, 17 Am. B. R. 64. 45. In re Stalker (D. C, N. Y.), 42. First Nat. Bank v. Aultman 10 Am. B. R. 709, 123 Fed. 961. (Ref., Ohio), 12 Am. B. R. 12, citing 46. In re Lange Co. (D. C, Iowa), In re Ott (D. C, Iowa), 2 Am. B. R. 20 Am. B. R. 478, 159 Fed. 586. 637, 647, 95 Fed. 274; In re Camp 47. In re Waller (D. C, Md.), 15 (D. C, Ga.), 1 Am. B. R. 165, 91 Am. B. R. 753, 142 Fed. 883. As to Fed. 745. taxes payable by tax collector on his 43. New Jersey v. Anderson, 17 own property, see In re Porterfleld Am. B. R. 64, 203 U. S. 483 (revers- (D. C, W. Va.), 15 Am. B. R. 11, ing 14 Am. B. R. 604). This case 138 Fed. 192. also supersedes In re Danville Roll- 48. In re Cosmopolitan Power Co. ing Mill Co. (D. C, Pa.), 10 Am. B. (C. C. A., 7th Cir.), 14 Am. B. R. R. 327, 121 Fed. 432. See, also. Mat- 604, 137 Fed. 858, rev'd on other, ter of Mutual Mercantile Agency grounds, 203 U. S. 483, 17 Am. B. R. (Ref., N. Y.), 8 Am. B. R. 435; In re 63. Halsey Electric Generator Co. (D. Debts Which Have Peiobity. 733 § 64-a.] Taxes Accruel Since Proceedings were Instituted. merely a collecting agency, and the tax is not that of the corpora- tion 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."" An annual water rent due to a municipality is a tax within the meaning of this section."* But 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.'^ A debt due the state on a judgment for a fine is not entitled to priority."* g. Right 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 munici- pality 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."* A purchaser at a tax sale is not entitled to subrogation to a municipality's right to priority of payment of taxes from the assets of the bankrupt."" h. Taxes accrued since proceedings were instituted. — Taxes upon property in the hands of the trustee, accrued since the pro- ceedings were instituted, do not fall within the strict letter of the law, but the bankruptcy act does not withdraw the estates of bank- rupts from the reach of the taxing power and they are subject, in consequence, to the payment of taxes imposed while in the hands of trustees."' The tax assessed prior to adjudication is " legally 49. In re Wyoming Valley Ice Co. v. Bryan (C. C. A., 5th Cir.), 11 Am. (D. C, Pa.), 16 Am. B. R. 594, 145 B. E. 481, 127 Fed. 9. See In re Barr Fed. 267. Pumping Engine Co. (Kef., Pa.), 11 50. In re Ott (D. C, la.), 2 Am. Am. B. E. 312. B. E. 637, 95 Fed. 274. 55. In re Brinker (D. C, N. Y.), 51. In re Industrial Coal Storage 12 Am. B. E. 122, 128 Fed. 634. & Ice Co. (D. C, Pa.), 20 Am. B. E. 56. In re Prince (D. C, Pa.), 12 904, 163 Fed. 390. Am. B. E. 675, 131 Fed. 546; Swarts 52. In re Broom (D. C, N. Y.), v. Hammer (C. C. A., 8th Cir.), 9 10 Am. B. E. 427, 123 Fed. 639. See Am. B. E. 691, 120 Fed. 256; aff'd. In re Parker, Fed. Cas. No. 10,719. 194 U. S. 441, 11 Am. B. E. 708; 53. In re Alderson (D. C, W. Va.), City of Waco v. Bryan (C. C. A., 5th 3 Am. B. E. 544, 98 Fed. 588. Cir.), 11 Am. B. E. 481, 127 Fed. 54. Cooper Grocery Co. v. Bryan 79; In re Sims (D. C, Ga.), 9 Am. (C. C. A., 5th Cir.), 11 Am. B. E. B. E. 162, 118 Fr-' 356; In re Keller 734. 127 Fed. 815, citing City of Waco (D. C, Iowa), 6 Aiu. B. E. 334, 367, 734 The Law and Pkactice in Bankeuptcy. Cost of Preserving Estate. [§ 64-b (1). due and owing" on the day of assessment, although not payable until after adjudication." i. Interest on taxes. — 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 in- terest subsequent to adjudication have no application in the case of public taxes."" 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."" III. PRESERVING ESTATE; FILING FEES. a. Cost of preserving the estate. — (1) In general. — Subdi- vision 1 of subsection h 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 sub- division are broad and have a corresponding elasticity of application They give priority to the (1) actual and (2) necessa^r 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 ap- pointment of trustees.*^ Where property is sold in admiralty to en- force 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 these are sufficiently within § 63. 109 Fed. 131; In re Conhaim (D. C, 59. Matter of Kallak (D. C, N. Wash.), 4 Am. B. R. 59, 100 Fed. Dak.), 17 Am. B. R. 414, 147 Fed. 268. 276; Matter of Schuyler & Co. (Eef., Tte trustee shonld pay "all N. Y.), 21 Am. B. R. 428, holding takes owing by the bankrupt." This that taxes carry interest at penal rate includes the original tax and all to the date of payment, other sums accrued thereon under the 60. In re Force (Ref., Mass.), 4 revenue laws of the State up to the Am. B. R. 114; In re Cleanfast Ho- time the payment is actually made or siery Co. (Ref., N. Y.), 4 Am. B. R. tendered. Matter of Kallak (D. C, 702; In re Keller (D. C, Iowa), 6 N. Dak.), 17 Am. B. R. 414, 147 Fed. Am. B. R. 351, 109 Fed. 131; U. S. v. 276. It is settled law that the bank- Herron, 20 Wall. 251 ; In re Moller, rupt's estate is taxable while it is in Fed. Cas. 9,700; In re Brand, Fed. the hands of the bankrupt's trustee. Cas. 1,809; In re Ambler, Fed. Cas. In re Fisher & Co. (D. C, N. J.), 17 271. Am. B. R. 404, 412, 148 Fed. 907. 61. In re Scott (D. C, N. Car.), 3 57. In re Flynn (D. C, Mass.), 13 Am. B. R. 625, 99 Fed. 404.. Cer- Am. B. R. 720, 134 Fed. 145; New tificates issued by a receiver with Jersey v. Anderson, 17 Am. B. R. 64, the consent of the court to raise 203 U. S. 483, reversing 14 Am. B. R. money necessary to care for and pre- 604, holding that a franchise tax as- serve the bankrupt estate are entitled sessed after adjudication upon a re- to priority of payment from the pro- turn made by the corporation before ceeds of the sale of such property, adjudication was " legally due and In re Alaska Fishing and Develop- owing" and collectible. ment Co. (D. C, Wash.), 21 Am. B. 58. In re Fisher & Co. (D. C, N. R. 685, 167, Fed. 875. J.), 17 Am. B. R. 404, 413, 148 Fed. 61a. In re Hughes (D. C, N. J.), 907. 22 Am. B. R. 303, 170 Fed. 809. Debts Which Have Peioeity. 735 § 64-b (2).] Filing Fees in Involuntary Cases. Hence, the reference here seems rather to the expenses of parties, not officers, in preserving the estate.®* The impossibility of phras- ing any rule whereby to determine when priority will be decreed is apparent. Nor, it seems, is it material w^hat has been paid, as long as the court finds that the disbursement was not necessary."* 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.*'* (3) Amendment of 1903. — The doctrine that the expense of preserving the estate is entitled to priority was, prior to the amend- atory act, 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). Now, to entitle a creditor to an allowance for expenses and priority of pay- ment, the applicant must show that he has (1) at his expense (3) 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. Nor 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 sub- section b requires the payment of filing fees paid by creditors in involuntary cases. This subdivision 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 disbursements on creditors' pe- titions for involuntary bankruptcy. Such a creditor is entitled, not only to a return of his filing fee, but also his other disbursements, as for service of process ;°° the latter, however, as cost of administration, 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 62. In re Burke (Eef., Ohio), 6 64. In re Lesser (C. C. A., 2d Am. B. E. 502. Compare, also, gen- Cir.), 5 Am. B. K. 320, 100 Fed. erally, cases cited sub nom. " Cost of 433, reversed on another point in Administration," " Fees of General Metcalf v. Barker, 187 U. S. 165, 9 Assignees," and " Sheriff's Fees," Am. B. R. 36. Compare, also, In re post, under this section. Little River Lumber Co. (D. C, 63. In re Allen (D. C, Cal.), 3 Ark.), 3 Am. B. R. 682, 101 Fed< Am. B. R. 38, 96 Fed. 51. 558; In re Groves, 2 N. B. N. Rep. 63a. In re Youdelman-Walsh 466. Foundry Co. (D. C, N. Y.), 21 Am. 65. For definitions of these words, B. R. 509, 166 Fed. 381; In re see Bankr. Act, § 1. Hersey (D. C, Iowa), 22 Am. B. E. 66. In re Silverman (D. C. N 860, 171 Fed. 1,001. Y.), 3 Am. B. E. 227, 97 Fed. 325.' Y36 The Law and Peactice in Bankeuptcy. Cost of Administration; Attorney's Fees. [§ 64-b (3). to, but not the same as, that for indemnity deposits required by General Order X."" On the analogy of these provisions, money ad- vanced 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 col- lected in;°" but such an advancement is strictly a "cost of admin- istration." IV. COST OF ADMINISTRATION. a. In general. — Subdivision 3 makes next in order of priority the payment of the "cost of administration." This phase 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 § 63. It may in- clude the referees' fees for allowing claims, fixed by § 40, as amended by the act of 1903, and disbursements of the bankrupt 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.''" It may also include a great variety of disburse- ments made necessary in the administration of the estate but not costs awarded in proceedings not a part of the bankruptcy proceed- ing.'^ Compensation for services of accountants, acting without au- thority of the court, will not be allowed.'^"- It is impossible to phrase any fixed rule. b. Witness fees and mileage. — These are expressly given priority. They would have it were the law silent. Their amount is fixed by the Eevised Statutes.''^ c. Attorney's fees. — Costs of administration under subdivision 3 include "one reasonable attorney's fee." This subject is con- sidered in detail under Section Sixty-two. The allowance must be (1) iu one item," (2) reasonable, and (3) for professional services actually rendered. It seems that the basis of compensation is not payment for all services which the bankrupt may request of his at- 67. Compare In re Matthews (D. see In re Lesser (C. C. A 2d Cir ) C, Iowa), 3 Am. B. R. 265, 97 Fed. 5 Am. B. R. 320, 100 'Fed. 433* 772; also In re Burke (Ref., Ohio), rev'd on other grounds in 187 U s' 6 Am. B. R. 502. 165, 9 Am. B. R. 36; In re Neelv 68. See Whiston v. Smith, Fed. (D. C, N. Y.), 5 Am. B R 836 Cas. 17,523. 108 Fed. 371. 69. In re Hatcher (D. C, Tex.), 71a. Matter of Marks (Ref Ga ) 16 Am. B. R. 722, 145 Fed. 658. 22 Am. B. R. 54. ^ ■' ■!>■ See General Order X. 72. § 848. See, also, under S 21 70. In re Tebo (D. C, W. Va.), 4 ante. ^ ' Am. B. R. 235, 101 Fed. 419. 73. In re Lewin (D. C, Vt.) 4 71. For exceptions to this rule, Am. B. R. 632, 103 Fed. 850. ' Debts Which Have Priority. 737 § 64-b (4).] Payment of Wages. torney, bat for the services to the bankrupt in involuntary cases, while performing the duties devolved upon the bankrupt by the bankruptcy law;'* the services rendered must be such as aid in the settlement of the estate, and will not include services rendered in securing an ex- emption for the bankrupt.'** Thus, where partnership bankrupts have different attorneys but one allowance can be made." An attor- ney who uselessly files a second involuntary petition, and subse- quently 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.'^ Clerical work per- formed by an attorney in posting the bankrupt's books and in making extra copies of schedules cannot be charged for as professional serv- ices." It should afiirmatively appear that the services were reason- ably necessary and rendered in good faith,'* although the prevailing 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 per- formed and their value." No attorney's fee will be allowed, under this section, except upon notice to parties interested, and upon pe- tition by, or recommendation of, parties mentioned in the statute.*" Though but three kinds of legal services in bankruptcy cases are enu- merated 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 su- perior to that of a iona fide lienor.*^ Claims of attorneys for services essential to the proper administration of the bankrupt's estate, rank second only to labor claims.*^ V. PAYMENT OF WAGES, a. In general, — Subdivision 4 specifies the wages which are to have priority in payment. The amendment of 1906 added "travel- 74. In re Payne (D. C, N. Y.), 230; In re Curtis (C. C. A., 7th 18 Am. B. R. 192, 153 Fed. 1,018. Cir.), 4 Am. B. R. 17, 100 Fed. 784; 74a. In re O'Hara (D. C, Pa.), In re Goldville Mfg. Co. (D. C, S. 21 Am. B. R. 508, 166 Fed. 384. Car.), 10 Am. B. R. 552, 118 Fed. 75. See In re Eschwege (Ref., N. 892; In re Lang (D. C. Tex.), 11 Y.), 8 Am. B. R. 282. Am. B. R. 794, 127 Fed. 755. 76. Frank v. Dickey (C. C. A., 8th 80. In re Young (D. C, N. C), Cir.), 15 Am. B. R. 155, 139 Fed. 16 Am. B. R. 106, 142 Fed. 891. 744. 81. In re Friek (Ref., Ohio), 1 77. In re Connell & Song (D. C, Am. B. R. 719; Liddon v. Smith (C. Pa.), 9 Am. B. R. 474, 120 Fed. C. A., 5th Cir.), 14 Am. B. R. 204, 846. 135 Fed. 43. Contra: In re Duncan 78. In re Rosenthal (D. C. Mo.), (Ref., Tex.), 2 Am. B. R. 321. Com- 9 Am. B. R. 626, 120 Fed. 848; In pare, also. In re Tebo (D. C, W. re Carr (D. C, N. Car.), 9 Am. B. VaJ, 4 Am. B. R. 235, 101 Fed. 419. R. 58, 117 Fed. 572. 82. In re Erie Lumber Co. (D. C, 79. Smith v. Cooper (C. C. A., Ga.), 17 Am. B. R. 689, 700, 150 5th Cir.), 9 Am. B. R. 755, 120 Fed. Fed. 817. 738 The Law and Pkactice in Bankeuptcy. Assignee .of Claim for Wages. [5 64-b(4). ing 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 analo- gous but different priority to the wage-earner is probably given by every state law. Still, such statutes apply in certain circum- stances, as where they give priority for labor 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 derk 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 im- material whether under the laws of the state the claim is or is not superior to a homestead right.®* A laborer may be entitled to priority of payment hereunder although he has not perfected his lien under a state statute.®® b. Construction and effect — The term " wages " should be con- strued, in a broad and general sense, as meaning compensation for services rendered. Any other construction would lead to glaring inconsistencies and manifest injustice.*" Commissions on sales of traveling salesmen constitute wages within the meaning of this provision.*^ c. Assignee of claim for wages. — An assignee of a claim for wages is entitled to priority of payment although the assignment was made prior to the commencement of the bankruptcy proceed- 83. See "Conflicting and Over- Am. B. R. 106, 173 Fed. 733. See lapping State Priorities," in this sec- " Priorities versus Liens," ante; In tion under Vlft, post. re Tebo (D. C, W. Va.), 4 Am. B. 84. In re Matthews (D. C, Ark.), K. 235, 101 Fed. 419, is thus not 6 Am. B. E. 96, 109 Fed. 603. a reliable authority. In Kentucky wage-earners have 87. In re Erie Lumber Co. (D. C, no lien upon and are not entitled to Ga.), 17 Am. B. R. 689, 150 Fed. 817. priority of payment out of the pro- 88. Matter of Strickland (Ref, ceeds of mortgaged property sold by Ga.), 20 Am. B. R. 923. the trustee in bankruptcy of the 89. In re Cramond (D. C, N. mortgagor. In re Mulhauser (C. C. Y.), 17 Am. B. R. 22, 145 Fed. 966; A., Ky.), 10 Am. B. R. 231, 121 Fed. In re Burton Mfg. Co. (D. C, Iowa), 629, followed in Matter of Meis (Ref., 14 Am. B. R. 218, 134 Fed. 157. Ky.), 18 Am. B. R. 104. 90. In re New England Thread Co. 85. In re Coe, Powers & Co. (C. C. (C. C. A., 1st Cir.), 20 Am. B. R. A., 6th Cir.), 6 Am. B. R. 1, 109 47, 158 Fed. 788. Fed. 550. 91. In re New England Thread Co. 86. In re Cramond (D. C, N. Y.), (C. C. A., 1st Cir.), 20 Am. B. R. 47, 17 Am. B. R. 22, 145 Fed. 966; In 158 Fed. 788; In re Fink (D. C, re Proudfoot (D. C, W. Va.), 23 Pa.), 20 Am. B. R. 897, 163 Fed. 135. Debts Which Have Priority. 739 J«4-b(4).] When Services Ferformed. 1*2 ings.'* But such priority is lost by the assignee's acceptance of the debtor's note and due bill, the transaction operating as a nova- tion.** If the claim be assigned after being proved, the assignee is subrogated to the priority of the assignor.** d. When services performed The labor must have been per- formed within three months of the fQing of the petition,*" although a different and longer period be prescribed by a state statute.*' The holding that, if performed thereafter without actual notice of the bankruptcy, the right to priority exists, seems erroneous f though perhaps such a disbursement could be allowed as an ex- pense of administration. If a labor claim is reduced to judgment within the four months' period, priority may still be asserted ta the amount of the judgment,*^ but probably not for the costs. 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 an infant for wages, earned more 92. Shropshire v. Bush, 17 Am. B. E. 77, 204 U. S. 186, holding that " The priority is attached to tlie debt and not to the person of the creditor; to the claim and not to the claimant." Matter of Harmon (D. C, W. Va.), 11 Am. B. E. 64, 128 Fed. 170. Compare In re Fuller &, Bennett (D. C, W. Va.), 18 Am. B. E. 443, 152 Fed. 538; In re Driggs (D. C, N. Y.), 22 Am. B. E. 621, 171 Fed. 897. Priority personal. — 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. E. 646, 99 Fed. 399. Thus, where, prior to the bankruptcy of a corpora- tion, its employees assign their claims for wages to secure one who ad- vanced the money for their wages, the assignee is not entitled to priority of payment. In re St. Louis lee, etc., Co. (D. C, Mo.), 17 Am. B. E. 194, 147 Fed. 752. But where the assign- ment took place after the bankruptcy proceedings were commenced it was held that the claims for wages are en- titled to priority in the hands of the assignee. In re Campbell (D. C;, Wis.), 4 Am. B. E. 535, 102 Fed. 686. 93. In re Fuller & Bennett (D. C, W. Va.), 18 Am. B. E. 443, 152 Fed. 538. 94. In re North Carolina Car Co. (D C, N. Car.), 11 Am. B. E. 488, 127 Fed. 178; Matter of Langley & Alderson (D. C, Wis.), 24 Am. B. E. 69. 95. In re Eouse (C. C. A., 7th Cir.), 1 Am. B. E. 234, 91 Fed. 96, reversing s. c. 1 Am. B. E. 231, 91 Fed. 514. 96. Matter of Slomka (C. C. A., 2d Cir.), 9 Am. B. E. 635, 122 Fed. 630, reversing 9 Am. B. E. 124. 97. In re Gerson (Eef., Pa.), 1 Am. B. E. 251. 98. In re Anson (D. C, Cal.), 4 Am. B. E. 231, 101 Fed. 698. 99. Matter of Lewis County (Eef., E. L), 12 Am. B. E. 279; In re Sweetser (C. C. A., 2d Cir.), 15 Am. B. E. 650, 142 Fed. 131. But as to salary payable to clerks on vacation during three months' period, see In re Gladding (D. C, E. I.), 9 Am. B. E. 700, 120 Fed. 709. If the claim is for services of teamster with wagon and team, he may have priority only for his personal services. Matter of Winton Lumber & Mfg. Co. (Eef., Ky.), 17 Am. B. E. 117. 740 The Law and Pbactice in Bankeuptcy. Persons Entitled to Priority. [§ 64-b (4). than three months before the commencement of bankruptcy pro- ceedings, is not entitled to priority.^"* e. Persons entitled to priority. — (1) Woekmen, cleeks or SERVANTS. — The question as to who is entitled to priority for wages is not, it seems, controlled by the statutory definition of "wage- earner."*"' The words are used in their common and popular sense ; dictionaries should be consulted, as well as cases. The phrase " oper- ative, clerk, or house-servant," in the law of 1867, is thought to be practically equivalent. Cases 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 book- keeper, employed by a bankrupt at a regular salary payable monthly, is a clerk within the meaning of this subdivision.'"* Under the pres- ent law, the following have been held not entitled to priority under this subsection: a contractor,'"" a general buyer for jobbers,'"" an officer or manager of a corporation,'"^ a manager of a branch broker's office,'"'^ a blacksmith shoeing horses and repairing tools in his own shop,'"' and a person engaged merely in an incidental agency.'"" But a clerk selling goods in a store"" is entitled to priority, and so is a la- borer " 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 100. In re Huntenburg (D. C, I.), 11 Am. B. R. 646. N. Y.), 18 Am. B. R. 697, 153 Fed. I07. In re Grubbs-Wiley Co. (Ref., 768. Mo.), 2 Am. B. R. 442, 96 Fed. 183;' 101. In re Scanlon (D. C, Ky.), In re Carolina Cooperage Co. (D C 3 Am. B. R. 202, 97 Fed. 26; In re N. Car.), 3 Am. B. R. 154, 96 Fed Gurewitz (C. C. A., 2d Cir.), 10 950. Am. B. R. 350, 121 Fed. 982. 107a. In re Brown (D. C., N. Y.), 102. In re Pevear, Fed. Cas. 22 Am. B. R. 496, 171 Fed. 281 1 1,053 ; In re Erie Rolling Mill Co., 108. Weaver v. Hugill Shoe & 1 Fed. 585; In re Waites & Co., 39 Supply Co. (Ref., Ohio), 16 Am B Fed. 264. R. 516. 103. In re New England Thread 109. In re Mayer (D. C. Wis ) 4 Co. (D. C, R. I.), 18 Am. B. R. 840, Am. B. R. 119, 101 Fed. 227 154 Fed. 742. IIO. In re Flick (D. C. Ohio) 5 104. In re Baumblatt (D. C, Pa.), Am. B. R. 465, .105 Fed. 503 See 19 Am. B. R. 500, 153 Fed. 485. also. In re King Co. (D. C, Maas.)! Under the act of 1867, Judge 7 Am. B. R. 619, 113 Fed. 120. Lowell decided that the word in- 111. In re Gurewitz (C. C. A eluded "a person employed for tem- 2d Cir.), 10 Am. B. R. 350 121 porary service in adjusting the books Fed. 982; In re Copper King (D. C., and accounts of a bankrupt." Ex Cal.), 16 Am. B R 148 14^? VpA parte Rockett, Fed. Cas. 11,977. 649. ' ' 105. In re Rose (Ref., Ohio), 1 Ula. In re Caldwell (D C Am. B. R. 68. Ark.), 21 Am. B. R. 236, 164' Fed 106. Matter of Smith (Ref., R. 515. Debts Which Have Pbiositt. 741 §64-b(5).] Priority Under State LawB. a manager of a store may apply a payment of wages miade to him within the three months' period upon wages due be- fore such period, and that he is entitled to priority in the payment of the balance of his claim.* ^* Every laborer who actually labors under the authority of the court for the preservation or enhance- ment of the fund or property in cusiodia legis is entitled to an equitable lien equivalent in effect to that of a bona fide purchaser without notice.**' r^ (2) Teavelinq or city salesmen. — 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.**' VI. DEBTS ENTITLED TO PRIORITY TTNDER STATE ULWS. a. In general. — Subdivision 5 requires the payment of " debts owing to any person who by the laws of the States or the tjnited States is entitled to priority." Here the practitioner should again bear in mind the rule as to liensi, previously stated.**® b. Liens under state laws and Bankrupt Act ^Where a prior- ity 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 through 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 re- membered, too, that this subdivision has no application where the state statute gives priority to a class already given priority by the 112. In re Andrews (Ref., N. C), Traveling or city lalennem.— 19 Am. B. R. 441; Matter of Mc- As to who are traveling salesmen B T 588°'- B',^'i^h'''',.^^ '^°; *""**^ ^^^' amendment, see In re New s^pecL^fppHc^atL'"t^othrrebt"s ^."t".'n ?^%' ."%'^- ^^ ^- ''' such payments are to be applied to ^**"-'' ^" ^'^^ ^- ^- *^' 158 Fed. 788, wages earned during the three '■^'S ^8 Am. B. R. 840; In re Fink months period. In re Flick (D. C, (^- C., Pa.), 20 Am. B. R. 897, 16S Ohio), 5 Am. B. R. 465, 105 Fed. Fed. 135. '"ll3. In re Erie Lumber Co. (D. (D^c' J Y ) ^TaJTTZ S 114. in re Scanlon (D. C. Ky ) *^®' ^^^ " Priorities versus Liens," 3 Am. B. R. 202, 97 Fed. 26; In re ^' "' »"*''• flof ^*,rt!'^.,'?x5'' ^»>' 3 Am. B. R. "7. In re Byrne (D. C, low.), 3 696, 90 Fed. 705. Am. B. R. 268, 97 Fed 762 742 The Law and Pkactice in Bankeuptcy. Liens under State Laws and Bankruptcy Act. [§ 64-b (5). bankruptcy law; the bankrupt act not only controls the state law in ease of absolute conflict, but by its express regulation of these priorities excludes the state law altogether.^^' Subject to these ex- ceptions, if the state law gives the priority, the same must be recog- nized in the bankruptcy proceedings.^" Thus, a landlord's claim for rent in arrears, being entitled to priority under the state law, is within this subsection.^^" The Bankrupt Act expressly recognizes the existence of state statutes, and makes them the basis for allow- ing 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 stat- nte.^^^ It seems that a creditor shall be allowed the same priority under the Bankrupt Act which he would have had, had not the latter act superseded the state laws governing the distribution of estates of 118. In re Lewis (D. C., Mass.), 4 Am. B. R. 51, 99 Fed. 935; Matter of Slomka (C. C. A., 2d Cir.), 9 Am. B. R. 635, 122 Fed. 630. A State statute cannot override the act of Congress, even if a lien exists under the former at the time when the proceedings in bankruptcy are begun. In re Consumers' Coffee Co. (D. C, Pa.), 18 Am. B. R. 500, 151 Fed. 933. 119. Compare In re Fall City, etc., Co. (D. C, Ky.), 3 Am. B. R. 437, 98 Fed. 592; In re Worcester Co. (C. C. A., 1st Cir.), 4 Am. B. R. 497, 102 Fed. 808; In re Crow (D. C, Ky.), 7 Am. B. R. 545, 116 Fed. 110; In re Potter (D. C, Ky.), 16 Am. B. R. 226, 143 Fed. 407; Moore V. Greene (C. C. A., 4th Cir.), 16 Am. B. H. 648, 145 Fed. 480; if the State statute gives no lien to a county on the property of a tax collector for moneys collected by him, the county is iiot entitled to priority of payment out of his bankrupt estate. In re Waller (D. C, Md.), 15 Am; B. R. 753, 142 Fed. 883; In re Iroquois Machine Co. (D. C, R. I.), 22 Am. B. R. 183, 166 Fed. 629, holding that where an attach- ment upon a debtor's property is dis- solved by his adjudication as a bank- rupt, the attaching creditor's claim for costs of the attachment is a debt entitled to priority. 120. Matter of Pittsburg Drug Co. (D. C, Pa.), 20 Am. B. R. 227, 164 Fed. 482. Under the Feimsylvania stat- ute, a, landlord is entitled to priority of payment not exceeding the rent for one year, and this preference will be recognized by a court of bank- ruptcy. In re West Side Paper Co. (D. C, Pa.), 20 Am. B. R. 289, 293, 159 Fed. 241. But such a priority has been disallowed under certain circumstances. VoUmer v. Mc- Fadgen (C. C. A., 3d Cir.), 20 Am. B. Ri 540, 161 Fed. 914, aff'g 19 Am. B. R. 481. 121. In re Crow (D. C, Ky.), 7 Am. B. R. 545, 116 Fed. 110, 112, approved In re Bennett (C. C. A., 6th Cir.), 18 Am. B. R. 320, 153 Fed. 673. 122. In re Potter (D. C, Ky.), 16 Am. B. R. 226, 143 Fed. 407, Money due from a gnardian to his vard, on a settlement of- his accounts in a probate court of Ken- tucky, 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 vol- untary or involuntary assignment, or the death of the insolvent, debts due as guardian shall be paid in full before any payment shall be made to general creditors. (Ky. St, 1903, § 74). In re Crow (D. C, Ky.), 7 Am. B. R. 545, 116 Fed. 110. But see under the Michigan statute, 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 insol- vency laws of Rhode Island, are en- titled to priority against the estate in bankruptcy. In re Daniels (D. C, R. I.), 6 Am. B. R. 699, 110 Fed. 745. A claim for materials supplied to a corporation, being entitled to priority under the laws of Kentucky, has been held to be entitled to prior- Debts Which Have Pbiority. 743 § 64-b (5).] Conflicting or Overlapping State Priorities. insolvent debtors."* While the priority of a landlord's lien, given under the state statute, is undoubtedly preserved by clause 6(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.'''* A state is a " person " within the meaning 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 bank- ruptcy."** c. 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 prin- ciple, it would seem that where the federal statute prescribes a class as entitled to priority, as " workmen, clerks or servants," no over- lapping state statute having the same purpose but defining the c]a?s in different words should apply."° Thus, it has been well said by Judge Lowell: . " When both a state law and the bankrupt act give priority to the same class of debts, the bankrupt act not only controls the ity under the .bankrupt act, although by himself or wife during the mar- a technical lien had not ripened at riage, and upon the bankruptcy of the date of the corporation's adjudi- the husband, community creditors cation in bankruptcy. In re Bennett, are entitled to priority of payment Trustee, etc. (C. C. A., 6th Cir.), 18 as to community property. In re Am. B. E. 320, 153 Fed. 673; aff'g Chavez (C. C. A., 8th Cir.), 17 Am. 18 Am. B. R. 847. Such lien does B. R. 641, 149 Fed. 73. not exist for manufactured goods Priority of debts owing by .sold to a manufacturer and jobber, foreign corporation to residents engaged in manufacturing the same of state out of property in the state, goods, and also in selling such goods sustained and applied, see In re manufactured by others. In re Standard Oak Veneer Co. (D. C., IStarks-Ullman Saddlery Co. (C. C. Tenn.), 22 Am. B. R. 883, 173 Fed. A., 6th Cir.), 22 Am. B. R. 596, 171 103. Fed. 834. 123. In re Jones (D. C, Mich.), Priority of nnrecorded mort- 18 Am. B. R. 206, 151 Fed. 108. gage. — In Kentucky under a stat- Iiien for rent. — Upon the ad- ute providing .that no mortgage shall judication of a tenant in a juris- 'be valid as against creditors until diction where the landlord has by acknowledged or proved according to statute a preferred lien upon the ten- law and lodged for record, a mort- ant's chattels on the leased prem- gage acknowledged in 1905, but not ises, the landlord's claim- for the recorded until within four months rent due at the adjudication is en- of the mortgagor's adjudication in titled to priority of payment from 1906, is not a valid lien as against the proceeds of a sale of said chat- creditors whose claims were created tels. In re Bishop (D. C, S. Car.), while the mortgage was withheld 18 Am. B. R. 635, 153 Fed. 304. See from record, and the mortgagee is In re Hersey (D. C, Iowa), 22 Am. not entitled to priority of payment B. R. 860, 171 Fed. 998. over such creditors, but in the dis- 124. In re Consumers' Coflfee Co. tribution of the assets should share (D. C., Pa.), 18 Am. B. R. 500, 151 pro rata with the general creditors. Fed. 933. Matter of Doran (D. C, Ky.), 17 124a. In re Western Implement Am. B. R. 799, 148 Fed. 327. .See also Co. (D. C, Minn.), 22 Am. B. R. In re Clark Coal & Coke Co. (D. C, 167, 166 Fed. 576. Pa.), 23 Am. B. R. 273, 173 Fed. 125. Thus, see In re Rouse (D. 658. C, 111.), 1 Am. B. R. 231, 91 Fed. Commnnlty property. — In New 514; In re Union Planing Mill, 2 N. Mexico, a husband has only a com- B. N. Rep. 384; In re Shaw (D. C, munity interest in property acquired Pa.), 6 Am. B. R. 501, 109 Fed. 782. 744 The Law and Peactioe in Bankeuptcy. Fees of Assignees, Beceirers and Their Attorneys. [S64-b(5). state law in case of absolute conflict between the two, but, by ita express regulation of these priorities, excludes the state law alto- gether."*** This distinction seems sometimes to have been over- looked."" d. Liens. — Aa 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 proceedai of the sale of the prop- erty.**' Other cases illustrating this distinction will be found in the footnote."** ' e. 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 S'Uch 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 i£ intelligently, successfully and honestly, is entitled to be paid a fair and reasonable compensation for his services and those of his at- torneys, out of the assets turned over by him to the trustee in bank- ruptcy of his assignor.*** But it must appear that the services rendered were an actual benefit to the estate,*** and that the assign- 126. In re Lewis (D. C, Mass.), Cir.), 15 Am. B. R. 559, 140 Fed. 689. 4 Am. B. B. 51, 99 Fed. 935. 129. In re Duble (D. C, Pa.), 9 127. See In re Byrne (D. C, Am. B. B. 121, 117 Fed. 794; In' re Iowa), 3 Am. B. B. 268, 97 Fed. 762; Bourller Cornice & Boofing Co. (D. In re Lawler (D. C, Wash.), 6 Am. C, Ky.), 13 Am. B. B. 585, 133 Fed. B. B. 184, 110 Fed. 135. 958. 128. In re Cramond (D. C, N. 1.30. In re Kerby-bennis Co., 2 y.), 17 Am. B. B. 22, 145 Fed. 966; Am. B. B. 402, 95 U. S. 116; In re Mott V. Wissler Mining Co. (C. C. Lowensohn (D. C, N. Y.), 4 Am. B A., 4th Cir.), 14 Am. B. B. 321, 135 E. 79, 101 Fed. 776; In reEmslie (c! Fed. 697; In re Austin (D. C, Ha- C. A., 2d Cir.), 4 Am. B. R. 126, 102 waii), 13 Am. B. B. 136; In re Thaek- Fed. 291; In re Mitchell (D. C, ara Mfg. Co. (D. C, Pa.), 15 Am. B. Del.), 8 Am. B. R. 324, 116 Fed 8t! R. 258, 140 Fed. 126. 131. Summers v. Abbott (C. C. A., Where property was conTerted 8th Cir.), 10 Am. B. B. 254, 122 Fed! by a bankrupt prior to adjudication 36; In re Pattee (D. C, Conn.) 16 and mingled with the other assets, Am. B. R. 450, 143 Fed. 994- lA rg the trustee takes such assets subject Hersey (D. C, Iowa), 22 Am. B. R. to the claim of the owner of the prop- I'oo^^^^"^- ^^?- erty converted, and such owner is en- j j , '■,, .^^ „^^ * ^"^ (D. C., titled to priority of payment from the 'S ' l^VtnSoA^^L'll ^t proceeds of the sale thereof. Erie c., Ga.), 14 Am. B E 78 i^?" wii" Railroad Co. v. Dial (C. C. A., 6th 643. ■ 'o, i^i sea. Debts Which Have Pbioeity. 745 § 64-b(6).] Fees of Assignees, Receiyers and Their Attorneys. ment was not made for the purpose of avoiding inevitable bank- ruptcy."' 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 per- mitted 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 qvasi receiver.*'" The United States Supreme Court has disapproved the doctrine that a general assignment for creditors, valid under a state statute, is constructively 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 recalcitrancy, evidencing an intent to deprive creditors of rights given them 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,*'" the strict rule applicable i to general assignees may apply instead. But if the fees have been actually paid to the assignee, before notice of bankruptcy or in pur- suance of an order of a court, the trustee in bankruptcy cannot pro- ceed to collect summarily; he must collect by suit.**" What goes 133. Matter of Congdon (D. C, I.), 11 Am. B. E. 514; Matter of Minn.), 11 Am. B. E. 219, 129 Fed. Gladding Co. (Eef., R. I.), 9 Am. B. 478, affirmed 15 Am. B. E. 46, 142 E. 171. Fed. 102. 136. Randolph v. Scruggs, 190 U. 134. In re McCauley, 2 N. B. N. S. 533, 10 Am. B. E. 1; Summers v. Rep. 1089; Stearns v. Flick (D. C, Abbott (C. C. A., 8th Cir.), 10 Am. Ohio), 4 Am. B. R. 723, 103 Fed. B. E. 254, 122 Fed. 36. 019; Wilbur v. Watson (D. C, E. 137. See In re Lock-Stub Check I.), 7 Am. B. R. 54, 111 Fed. 493; Co. (Ref., N. Y.), 5 Am. B. R. 106n; In re Chase (C. C. A., 1st Cir.), 10 In re Peter Paul Book Co. (D. C, N. Am. B. R. 677, 124 Fed. 753; Matter Y.), 5 Am. B. E. 105, 104 Fed. 786. of Harson (Eef., E. I.), 11 Am. B. 138. Compare Mauran v. Crown, E. 514. For case of doubtful author- etc., Co. (Sup. Ct., B. I.), 6 Am. B; , ity where fees paid were not dis- E. 734. turbed, see In re Scholtz (D. C, 139. See Bankr. Act, | 3-a(4), as Iowa), 5 Am. B. R. 782, 106 Fed. 834. amended in 1903. 135. Matter of Harson (Ref., R. 140. Comingor v. Louisville Trust Y46 The Law and Peactice in Bankkuptcy. Sheriff's Fees. [§ 64-b(5). before does not, of course, apply where the assignment or receiver- ship is more than fonr months before the bankruptcy; in such a case, the administration continues in the state court. f. Sheriff's fees. — One of the most diflBcult questions which has arisen under the present law is whether a sheriff has priority for his fees and disbursements 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 cred- itor 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 dis- cussed 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 authori- tatively 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 Co., 184 U. S. 18, 7 Am. B. E. 421. Preston, Fed. Cas. 11,394- In re Compare In re Klein & Co. (D. C, Jenks, Fed. Cas. 7,276 • 'in re Ward N. Y.), 8 Am. B. E. 559, 116 Fed. 523. Fed. Cas. 17,145; In re Hatie Fed' 141. In re Young (D. C, N. Y.), Cas. 6,215. Apparently contra' In re 2 Am. B. E. 673, 96 Fed. 606. Housberger, Fed. Caa. 6,734; Piatt v Fees of a sheriff, accruing on a Stewart, Fed. Cas. 11,220; In re f writ of attachment founded on a prov- Foster, Fed. Cas. 4 960 I able debt and issued before the com- 144. In re Lewis (D C Mass ) f mencement of proceedings in bank- 4 Am. B. E. 51, 99 Fed. 935 • In re I ruptcy, are entitled to priority of Beaver Coal Co. (CCA 9th Cir ) ( payment, where such priority is given 7 Am. B. E. 542, 113 Fed. 889 af- ' under the Massachusetts insolvency firming s. c, 6 Am. B E 404 ' 107 laws. In re Lewis (D. C, Mass.), 4 Fed. 98; In re Youne (T> C. TSr' V l Am. B. E. 51, 99 Fed. 935. 2 Am. B. E. 673, 96 Fed.' 606 In re 142. See, generally, under §§ 60 Allen (D. C, Cal.), 3 Am b'e 38 ""^ "^^ ^^ Fed. 512. For a review of' the 143. In re Davis, Fed. Cas. 3,616; cases, see In re Jennings TRef N Zeiber v. Hill, Fed. Cas. 18,206; In Y.), 8 Am. B. E. 358 re Fortune, Fed. Cas. 4,955; In re Debts Which Have Peiobity. 747 S64-b(5).] Sheriff's Disburseiuents; Illustrative Ca^es. 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 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 cred- itor's fall. In the ultimate analysis, the question turns solely on what the state law is. g. 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(l).^*'' The cases under the law of 1867 are quite numerous and are still authorities.*** h. Other illustrative cases. — As will be noticed from the cases cited there is some confusion in the cases and they cannot always be reconciled."'^ 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 fundsi of the estate.*** State statutes fre^ quently 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 af- fected; in such cases the liens or priorities are to be preserved, and the creditors are entitled to priority of payment.*** 145. Compare In re Lengert Wagon C, Pa.), 4 Am. B. R. 536, 102 Fed. Co. (D. C, N. Y.), 6 Am. B. R. 535, 869. 110 Ped. 927 ; In re Francis- Valentine 148. In re Smart (D. C, Ohio), Co. (C. C. A., 9th Cir.), 2 Am. B. R. 14 Am. B. R. 672, 136 Fed. 974. 522i 94 Fed. 793. See, also, Deere Plow Co. v. McDavid 146. In re Fortune, Fed. Cas. (C. C. A., 8th Cir.), 14 Am. B. R. 4,955; In re Ward, Fed. Cas. 17,145; 653, 137 Fed. 802; In re Brunaing, In re Jenks, Fed. Cas. 7,276; Zeiber Tolle & Postel (D. C, Cal.), 22 V, Hill, Fed. Cas. 18,206; In re Am. B. R. 129, 169 Fed, 668, hold- Holmes, Fed. Cas. 6,631. ing that the special deposit or trust 147. In re Wright (D. C, Mass.), property must be traced, into the 2 Am. B. R. 692, 95 Fed. 807; In re hands of the trustee as part of the Goldstein (Ref., Pa.), 2 Am. B. R. bankrupt's estate. 603; In re Daniels (D. C, R. I.), 6 149. In re Goldberg (D. C, Me.), Am. B. R. 699, 110 Fed. 745; In re 16 Am. B. R. 521, 144 Fed. 566; Matthews (D. C, Ark.), 6 Am. B. R. Moore v. Green (C. C. A., 4th Cir.), 96, 109 Fed. 603; In re Meyers (D. 16 Am. B. R. 648, 145 Fed. 480. SECTION SIXTY-FIVE. DECI.ARATION AND PAYMENT OF DIVIDENDS. § 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 sub- sequent 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 bank- ruptcy, creditors residing within the United States shall first be paid a dividend 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 pro- visions of this act. ^— *^^^ * Amendments of 1903 in italics. 748 Declaration and Payment of Dividends. 749 § 65.] Comparatiye Legislation. Analoeons provliioiis: In IT. S.: Ab to first and subsequent dividends, Act of 1867, §§ 27, 28. R. S., SS 6092, 5093; Act of 1841, § 10; 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 allowed after first dividend. Act of 1867, § 28, R. S., § 5097; Act of 1841, § 10. In Ene.: Act of 1883, §§ 58-63; General Rules 232-234, 273(11) (12). Cross referenoes: To the law: §§ 39-a(l), 47-a(4) (9), 55-f, 57, 58-a(5) (6), 66. To the General Orders: XXIX. To the Forms: Nos. 40, 41. SYNOPSIS OF SECTION. DECLARATION AND PAYMENT OF DIVIDENDS. I. Dividends Generally. a. Comparative legislation. b. Cross references. c. Declaration of dividends. II. First and Subsequent Dividends. a. Time and amount. b. Amendment of 1903. c. Creditors entitled only to what the hanJcrupicy law gives them. d. Practice. e. Illtistrative cases. III. Rights of Creditors whose claims are Allowed Subse quent to Payment of Dividends. a. In general. b. Pinal dividends. IV. Preference to Residents of the United States. 1. DIVIDENDS GENERALLY. a. Comparative legislation. — The English law is and our law of 1867 was far more elaborate in their provisions on this subject. Some useful suggestions will be found in them.* The present section 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 test; 1. See "Analogous Provisions," ante. 750 The Law and Peactice in Bankeuptcy. Declaration of Dividends. [§ 65-a. though this rule has been somewhat modified by the proviso clauses added by the amendatory act of 1903. b. Cross references. — Some of the subjects treated in this con- nection in the law of 1867 are found elsewhere in the present law. Thus, of the method of declaring dividends/ and of paying divi- dends ; ' also of the notice to creditors of the declaration and pay- ment 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, ex- cept 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 bank- ruptcy laws, that each creditor of the same class shall receive his pro rata of the bankrupt's assets.' The subsection was of con- siderable importance prior to the amendatory act of 1903 ; the cases, which are by no means uniform, are collected in the footnote.' 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 com- puting commissions under §§40 and 48, as amended. 2. Bankr. Act, § 39-a(l). 7. In re Sabine (Ref., N. Y.), 1 3. Bankr. Act, § 47-a(4) (9). Am. B. R. 322; In re Ft. Wayne Elec. 4. Bankr. Act, § 58-a(5). Corp. (D. C, Ind.), 1 Am. B. R. 706, 5. See In re Sabine (Ref., N. Y.), 94 Fed. 109; In re Coffin (Ref., Tex.), 1 Am. B. R. 322. 2 Am. B. R. 344; In re Gerson (Ref., Definition. — A dividend in bank- Pa.), 2 Am. B. R. 352; In re Field- ruptcy hag been defined as a parcel of ing (D. C., Mo.), 3 Am. B. R. 135, 96 funds arising from the assets of the Fed. 800; In re Barber (D. C, estate rightfully allotted to the credi- Minn. ) , 3 Am. B. R. 306, 97 Fed. 547 ; tor entitled to share in the fund. In re Utt (C. C. A., 7th Cir.), 5 Am', whether in the same proportion with B. R. 383, 105 Fed. 754. the other creditors or in a different 8. Under § 64. proportion. In re Barber (D. C, 9. Under § 57. Minn.), 3 Am. B. R. 306, 97 Fed. 547. lO. Compare In re Little (D. C, 6. In re Gerson (Ref., Pa.), 2 Am. Iowa), 6 Am. B. R. 681, 110 Fed. B. R. 352; In re Barber (D. C, 621. Minn.), 3 Am. B. R. 307, 97 Fed. 547. Declakation and Payment of Dividends. 751 § 65-b.] First and Subsequent Dividends. II. FIRST AJTD SUBSEQUENT DIVIDENDS. a. Time and amount. — Subsection h provides for the time of declaring the first dividend, and the amount thereof, and regu- lates all subsequent dividends. The statute seems full and clear and is thought to be mandatory. The first dividend must be de- clared within thirty days after the adjudication, 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 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 prac- tice of declaring first and final dividend in small estates at one time is no longer possible.^' Since this amendment, if any divi- dends are declared, there must be two, the second at least three months after the first. The first proviso, added by the amend- atory 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 towards rapidity in administration. c. Creditors entitled only to what the bankruptcy law gives them.— Subsection e is the corollary of subsection a. It prevents a creditor from collecting from the bankrupt estate any greater amount than accrues under the provisions of the bankruptcy law. 11. In re Scott (D. C, Tex.), 2 14. It perhaps minimizes certain Am. B. R. 324, 96 Fed. 607. evils, which grew out of a liberal con- 12. Bankr. Act, § 39-a(l). struction of Bankr. Act, § 57-n. 13. See In re Smith (Ref., N. Y.), 2 Am. B. R. 648. Y52 The Law and Peactice in Bankbuptcy. Claims Allowed Subsequent to Payment of Dividends. [§ 65-c. 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 sometimes 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. d. 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 allowed 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 proposed 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.^* But a dividend so declared cannot be distrib- uted 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 ths court before the declara- tion of the dividend.^" Neither can a state court in any way inter- fere with the bankruptcy court in its distribution of the assets of the bankrupt.''*' e. Illustrative cases.-There are but few cases even under the former law. Some of them will be found in the foot-note.^' III. RIGHTS OF CREDITORS WHOSE CLAIMS ARE ALLOWED STTBSEQTJENT TO PAYMENT OF DIVIDENDS. a. In general.— There was a corresponding clause in the fomer law. Claims cannot be allowed after one year after the adjudica- tion;^^ thus, the list of creditors entitled to share is fixed at that time. Prior to the amendments of 1903, it was held that if a dividend had been paid within the year, such dividend and payment 15. In re Hagan, Fed. Cas. 5,898; 20. In re Bridgman, Fed. Cas In re Town, Fed. Cas. 14,112; In re 1,867, 2 N. B. E. 252. Bank, etc., Fed. Cas. 895. 21. In re Walker (D. C., N Dak ) 16. See under § 47, ante. 3 Am. B. R. 35, 96 Fed. 550- In re 17. In re Heebner (D. C, Pa.), 13 James, Fed. Cas. 7,175- Bristol v Am. B. E. 256, 132 Fed. 1,003. Sanford, Fed. Cas. 1,893; Atkinson v" 18. In re N. Y. Mail S. S. Co., Fed. Kellogg, Fed. Cas. 613; In re Shee- Cas. 10,212, 3 N. B. E. 280. han. Fed. Cas. 12,737; In re Havnes 19. In re B. K. Smith, Fed. Cas. Fed. Cas 6 269 12,989, 15 N. B. E. 97. 22. Bankr. Act, § 57-n Declaeation and Payment of Dividends. 753 § 65-d.] Final Dividends ; Residents of United States. should not be disturbed 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 creditors who are not diligent, are per- mitted 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 applicaction 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 creditors, giving them an opportunity not only to know of the dividend, but notifying them that their claims should be proven, or their rights lost." IV. FBEFEBENCE 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 cred- itors, wherever the law of such a country does not permit such residents to prove thereon. The subsection is rarely available and requires no discussion. 23. Claflin v, Eason (Ref., Tex.), 25. In re Stein (D. C, Ind.), 1 2 Am. B. R. 263; In re Hegerty, 2 Am. B. E. 662, 94 Fed. 124. N. B. N. Rep. 1083; In re Smith, Fed. 26. Matter of Bell Piano Co. (D. Cas. 12,989; In re N. Y. Mail, etc., C, N, Y,), 18 Am. B. R. 183, 155 Fed. Co., Fed. Cas. 10,212. 272. 24. Matter of Eldred (D. C, N. 27. Matter of Eldred (D. C, N. Y.), 19 Am. B. R. 52, 155 Fed. 686. Y.), 19 Am. B. R. 52, 155 Fed. 686. SECTION SIXTY-SIX. UNCIiAIMED DIVIDENDS. § 66. Unclaimed Dividends.— a Dividends which remain un- ' claimed for six months after the final dividend has been declared shall be paid by the trustee into court. 6 Dividends remaining unclaimed for one year shall, under the - direction of the court, be distributed to the creditors whose claims J 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: Pro- vided, That in case unclaimed dividends belong to minors such minors may have one year after arriving at majority to claim such dividends. Analogous provisions: In TJ. S.: None. In Eng.: Act of 1883, § 162; (Jeneral Rules 345, 346A. Cross references: To the law: §§ 12, 65. SYNOPSIS OF SECTION. I. Unclaimed Dividends. a. Comparative legislation. b. In general. c. Illustrative cases. I. 1TNCI.AIMED DIVIDENDS. a. Comparative legislation. — This section is new. There was nothing like it in our previous laws. The English statute requires the payment of unclaimed dividends 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.^ There seems to be no provision in that act for a distribution among creditors who have already claimed and had their dividends. b. In general,— The practice here is simple. If for any reason a creditor entitled to a dividend does not accept it, the trustee must wait until six months after the declaration of the flnal divi- dend and then pay the money into court. If such dividends are 1. Act of 1883, I 162. 754 Unclaimed Dividends. 755 §66.] Illustrative Cases. not claimed for one year after the final dividend is declared, the same must be distributed to creditors whose claims 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 suggested by subsection 6.* 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. Illustrative cases. — There are but few cases, will be found in the foot-note.'' Some of them 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 Or- der XXIX. 5. Gilbert v. Lynch, 17 Blatch. 402. 6. Jackson v. Miller, 9 N. B. R. 143. 7. In re Fielding (D. C, Mo.), 3 Am. B. R. 135, 96 Fed. 800. As to the method of distribution now fixed by subs. 6, 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. b 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 proceeding 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 bank- ruptcy by or against such person shall be dissolved by the adjudica- tion of such person 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 (3) the party or parties to be benefited thereby had reasonable cause to believe the defendant was insolvent and in contemplation of bank- ruptcy, 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 contem- plation of or in fraud upon this act, and for a present considera- tion, which have been recorded according to law, if record thereof was necessary in order to impart notice, shall, to the extent of such present consideration 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 adjudged a bankrupt under the provisions of this act subsequent to the passage of this act and within four months prior to the * Amendment of 1901, in italics. 756 Liens. 757 §-67.] Text of Section. 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, ob- tained 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, attachment, or other lien shall be deemed wholly dis- charged 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, attach- ment, 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 shall 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, attachment, or other lien, of a bona fide purchaser for value who shall have acquired the same without notice or reasonable cause for inquiry. * Amendments of 1903 in italics. 758 The Law and Peactice in Bankeuptct. Synopsis of Section. [§ fl7 Aaalogon* provisions: In XT. S.: As to fraudulent transfers, Act of 1867, § 35, R. S., § 5129; As to liens which are unaffected. Act of 1867, i 20, R. S., § 5075; Act of 1841, § 2; Act of 1800, § 63; As to dissolution of attachment liens. Act of 1867, § 14, R. S., § 5044. In Eng.: None. Cross references: To the law: §§ 1(15) (25), 2(7) (15), 3-a(l) (2) (3), 14-b(4), 60-a-b, 70-e. To the General Orders: General Order XXVIII. To the Forms: No 43. SYNOPSIS OF SECTION. LIENS. I. Liens in General. a. Comparative legislation. b. Scope of section. c. Construction and general ejfect. d. Cross references. 11. Claims Void for want of Record or other Reasons. a. In general. b. State law controls. c. Want of record. (1) In general. (2) Chattel mortgages and contracts for conditional sale. d. Invalid for other reasons. III. Subrogation of Trustee to Rights of Creditors. a. In general. b. 7s the trustee a "judgment creditor?" IV. Vald Liens. a. In general. b. Miscellaneous valid liens. c. Mechanics' liens. d. Landlords' liens. e. Mortgages to secure future advances, and on after acquired property. f. Mortgagor in possession. g. Other valid liens. h. Effect of valid liens on distribution. LiEiNs. 759 § 67.] Comparative Legislation. V. Fraudulent Transfers and Liens. a. In general. b. Scope of subsection. c. Insolvency not essential. d. Within four months prior to filing the petition, e. Intent to hinder, delay or defraud. (1) In general. (2) Evidence of intent. f. Purchasers in good faith and for a present fair con- sideration. g. Transfers and incumbrances under state laws, h. Suits to recover property. (1) In general. (2) Amendment of 1903. i. Miscellaneous invalid transfers or incumbrances. (1) In general. (2) Mortgages to secure antecedent debts. (3) Chattel mortgages. (4) Voluntary settlements. (5) General assignments. ]. Practice. VI. Liens through Legal Proceedings. a. In general. b. Comparative legislation. c. Confusion concerning subs, c and subs. f. \ d. When subs. c. applies. e. Insolvency essential. f. Four months prior to the filing of the petition. g. Miscellaneous invalid liens through legal proceedings. (1) By judgment and execution. (2) By attachment. (3) By creditor's bill. h. Practice on suits to annul liens. i. Preserving liens, j. Saving clause. I. LIENS IN GENERAL. a. Comparative legislation.— 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. ]^or is that statute any more explicit as to liens, save those available 1. Act of 1883, § 4(1) (b). 760 The Law and Peactice in Bankettptcy. Scope ; Construction and General Effect. [§ 67, 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 difiBcult 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 particular, far more favorable to the cred- itor than was that of 1867. b. Scope of section. — Starting with the well-recognized doc- trine that a trustee in bankruptcy merely steps into the bankrupt's shoes and, therefore, takes his property subject to all 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 de- fraud creditors," and (4) those which were obtained through legal proceedings ; ' 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 place in this section, the allied subject of fraudulent transfers is here interdicted 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 sub- rogation with regard to liens which, because declared void, a mere creditor cannot enforce. Eead 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 I 2. Act of 1867, § 35, R. S., § 5129. v. Brackett, 21 Vt. 599. 3. Compare subs, d, post. See 5. See subsection a, and discus- Continental Bank v. Katz (Super, sion, infra. Ct., 111.), 1 Am. B. R. 19; In re 6. See subsection e, and discussion Moore (D. C, Vt), 6 Am. B. R. 175, under "Fraudulent Transfers and 107 Fed. 234; Ex parte Christy, 3 Liens," infra. How. 292; Yeatman v. Savings Inst., 7. See subsections c and f, and dis- 95 U. S. 764; Stewart v. Piatt, 101 eussions under "Liens through Legal U. S. 731 ; In re Stuyvesant Bank, Proceedings," infra. 49 How. Pr. 133. 8. In re Dunavant (D. C, N. Car.), 4. In re Davis, Fed. Cas. 3,618; 3 Am. B. R. 41, 96 Fed. 542; Doe v. Peck V. Jenness, 7 How. 612; Downer Childress, 21 Wall. 642. Liens. 761 J 67-a.] Claims Void for Want of Record. liens acquired after the baiitruptcy.* 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 bank- ruptcy, 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 purchaser for value, ^* not only stands in the shoes of the bankrupt as to his property, but, is 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.** It has also been held that, where a valid lien is incident to a debt and the debt is discharged, the lien nevertheless remains.*® Subdivisions a and h 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 § 70-6, 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 sub- section e, is made an objection to discharge. What is said in the appropriate paragraphs under the corresponding Sections of this work should be consulted here. II. CI.AIMS VOID FOR WANT OF RECORD, OR OTHSR REASONS. a. In general. — Subsection a precludes claims attaching as liens, which would not have been valid liens as against the claims of the 9. Kinmouth v. Braeutigam (Sup. 13. In re Legg, 96 Fed. 326; In ra Ct., N. J.), 4 Am. B. R. 344; In re Leigh (Ref., Col.), 2 Am. B. R. 606; Engle (D. C, Pa.), 5 Am. B. R. 372, affirmed, 96 Fed. 806. Contra: In 105 Fed 893 ^^ ^^^° Co-operative Shear Co. 10. In re Adams (Ref., N. Y.). 1 (Eff-' Ol'*")' 2 Am. ?■ E. 775. • -r. T. ,,^ T -A 4. iT\ n !*• Goldman v. Smith (Ref., Ky.), Am. B. R. 94; In re Dunavant (DC. g ^^ g ^ ^^^ ^^^^^^ ^ ^J; N. Car.), 3 Am. B. R. 41, 96 Fed. 542. garter, 94 U. S. 734. 11. See subsection e, and discussion 15. Bank of Commerce v. Elliot under "Fraudulent Transfers and (Sup. Ct., Wis.), 6 Am. B. R. 409. Liens," infra. Compare Bracken v. Johnston, Fed. 12. Chattanooga Bank v. Rome Cas. 1,761. T,n« Pn (r r Cla.\ 4 Am BR. *^- Mishawaka Woolen Mfg. Co. ir 102 Fed 755 Oontm^" In re ^- Smith (D. C, Wis.), 20 Am.S. R. 441, 102 Fed. 755. f^ontra. in re gj^^ ^gg j,^^ ggg. ^^^^ ^^ ^^j^^^ Booth (D. C, Oreg.), 6 Am. iJ. K. grounds sub nom. In re Bement' 674, 98 Fed. 975. (C. C. A., 7th Cir.), 22 Am. B. R. 616, 172 Fed. 98. T62 The Law and Pkactice in Bankeuptcy. Claims not Recorded ; State Law Controls. [§ 67-a. creditors of the bankrupt, " for want of record or for other reasons." It will be noticed that the subsection applies to claims which are ineffectual as liens against the creditors of the bankrupt for any reason; not alone "for want of record." 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." It is the state law of the state 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 an- other state where such registration 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 merely declaratory of the law. c. Want of record.— (1) In general.— 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 re- cording does not necessarily affect the validity of the lien as be- tween the immediate parties; usually it affects such validity merely as to creditors of a certain class ;^'' nor does it affect . the provability of the claim.^"'' The effect of this subsection is to preserve liens on the bankrupt's property, as against . 17. Humphrey v. Tatman, 198 U. E. 504, 134 Fed. 137. See, also, In S. 91, 14 Am. B. R. 74; Thompson re Gray (D. C, Okla.), 21 Am' B V. Fairbanks, 196 U. S. 516, 13 Am. E. 375. B. E. 437; In re First Nat. Bank of 19. In re Yukon Woolen Co. (D. Canton (C. C. A., 6th Cir.), 14 Am. C, Conn.), 2 Am. B. R. 805, 96 Fed. B. E. 180, 135 Fed. 62; Bryant v. 326. The above case follows the Swafford Bros. Co., 214 U. S. 279, general principle of law recognized 22 Am. B. E. 115; Reardon v. Rock by the Federal courts that where a Island Plow Co. (C. C. A., 7th Cir.), contract contemplates or provides 22 Am. B. R. 26, 168 Fed. 654; In re that property is to be delivered or Burke (D. C, Ga.), 22 Am. B. R. used in another State the lea; loci I 6&, 168 Fed. 994; Mattley v. Wolfe solutionis governs. See also Mat- j (D. C. Neb.), 23 Am. B. R. 673, 175 ter of Southern Textile Co. '(C C > Fed. 619. A., 2nd Cir.), 23 Am. B. R. 172, The validity of a pledge made, 174 Fed. 523. J executed and to be performed in New 20. First Nat'l Bank v. Connett York, and the rights of the parties (C. C. A., 8th Cir.), 15 Am. B. R. thereunder are governed by the State 662, 142 Fed. 33; Loeser v. Savings law. Hiscock v. Varick Bank, 18 Bank & Dep. Co. (CCA 6th Cir ) Am. B. R. 1, 6, 206 U. S. 28, aff'g 17 Am. B. R. 628, 148 Fed. 975- In 15 Am. B. R. 362. re McGehee (D. C., Ga.), 21 Am 18. So held in respect to a mort- B. E. 656, 166 Fed. 928. gage executed in New York upon 20a. In re Burlage Bros. (D. C, property in Connecticut. In re Iowa.), 22 Am. B. E. 410, 169 Fed Greene (D. C, Conn.), 13 Am. B. 1,006. Liens. 763 § 67-a.] Chattel Mortgages and Conditional Sales. the other creditors, where such liens have been duly recorded or filed, as required by a state statute. The construction and e£Fect of such a statute will largely depend upon state decisions. Refer- ence should be had to S'Uch decisions for a determination of the effect of a failure to record or file. It will not be-possible for us to more than suggest the principles involved in such a determina- tion. The cases are numei'ous which involve the question of the validity of unfiled or unrecorded chattel mortgages or contracfs of conditional sale as against general judgment creditors 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) Chattel mortgages and conteacts fob conditional SALE. — 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 subse- quent to the execution of the mortgages and before they were re- corded.^' 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 21. In re Beede (D. C, N. Y.), 11 Ga.), 8 Am. B. E. 423, 116 Fed. 404; Am. B. R. 387, 126 Fed. 853; In re In re Gosch (C. C. A., 5th Cir.), 12 Andrae Co (D C, Wis ), 9 Am. B. Am. B. R. 149, 126 Fed. 627; R. 135, 117 Fed. 561; In re Antigo reverainff q Am Tl P «in. Tn Screen Door Co. (C. C. A., 7th Cir.), 'f^p"^ ^ ,' ^•^^- ®^°' ^" 10 Am. B. R. 359, 123 Fed 249' " Eabenau (D. C, Mo.), 9 Matter of McDonald (D. C, Mass.), ^^- ^- ^- ^^O, 118 Fed. 471. Equit- 23 Am. B. R. 51, 173 Fed. 99. See ^^^^ claim on proceeds of sale. Han- cases cited in Note 17, ante. son v. Blake & Co. (D. C, Me.), 18 22. In re Harrison (N. Y.), 2 N. Am. B. R. 325, 155 Fed. 342; Pontiac B. N. Eep 541; In re Booth (D. C, Buggy Co. v. Skinner (D. C, N. Y.), Oreg.), 3 Am. B. R. 574, 98 Fed. 975; 20 Am B R 206 ISS F»H s« ,i,H In re Tatem et al. (D. C, N. C.) 6 A. T I i I E ' , Am. B. R. 426, 110 Fed. 519- In re " '^^^^ *° ^^ ^°^^^ P"**' ^^' *°'' N. Y. Econ. Printing Co. (c' C. A. "»st''"''e, suh nom. "Mechanics' 2d Cir.), 6 Am. B. R. 615, 110 Fed! I'iens." "Chattel Mortgages," "By 514; In re Sewell (D. C, Ky.), 7 Judgment and Execution," "By Cred- Am. B. R. 133, 111 Fed. 791; In re iters' Bill," etc. I^'l''^^*,^'^-.^-'--^'''''' "^ ^™- B- R. 2,3. Clayton v. Exchange Bank of Cn'ir /^x- ai'r.^",'%^!''^°^'°^ ^acon (C. C. A., 5th Cir.), 10 Am. Co. (C. C. A., 8th Cir.). 7 Am. B. R. r t> 170 10, ^.1 „,„. p, '' „ p„, 369, 112 Fed. 308; In re Hull (D. C, f m p r ^^' o a i J' l^\' Vt.), 8 Am. B. R. 302, 115 Fed. 858- **' <^- *^- ^*'->' ^ ^"'- ^- ^- 2". Dunplan Silk Co. v. Spencer (C C ^^^ ^*^- ®^^' ■'■'' ""^ Andrae Co. (D. A., 3d Cir.), 8 Am. B. R. 367, 115 C., Wis.), 9 Am. B. R. 135, 117 Fed. Fed. 689; In re Josephson (D. C, 561. 764 The Law and Peaotioe in Bankeuptot. Chattel Mortgages and Conditional Sales. [S 67-s. record.''* 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 in- tending to purchase such property and to creditors who give credit on the faith thereof.^^ Under the law in New York an unfiled chattel naortgage is void only as against judgment creditors of the mortgagor, and it has been held that a general creditor upon ob- taining judgment and issuing execution may impeach the validity of the mortgage for non-filing, although in the meantime it may have been filed.^® The court of appeals of 'Rew York has recently held that the trustee of a bankrupt mortgagor could attack a mort- gage for failure to file to the extent of the claims of those creditors whose claims accrued prior to the time when the 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 judgment.^'' This ruling of the court of appeals of New York would seem conclusive upon this question, in view of the determi- nation of the supreme court of the United States,^^ already re- ferred to, to the effect that federal courts are required in all such cases to follow the rulesi 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. As for instance, under the Ohio S'tatute relative to the filing of 24. Deland v. Miller & Cheney in full all the New York authorities Bank II Am. B. R. 744, 119 Iowa, applicable to the validity of unfiled 368; In re Wi hams (D. C Ga.). 9 ehattel mortgages. Am. B. K. 731, 120 Fed. 542. „„ oi -li. ^ j- _l ,«, -^t 25. In re Cannon (D. C, S. Car.), ^^J' ^^'1^°'' ^- Codington, 185 N. 10 Am. B. R. 64, 121 Fed. 582 ; ^- ^"' ^" ^^- ^- ^- 810, disapproving In re Claussen (D. C, No. Car.), 1° ^e New York Economical Printing 21 Am. B. R. 34; Matter of South- Co. (C. C. A., 2d Cir.), 6 Am. B. R. em Textile Co. (C. C. A., 2nd Cir.), 615, 110 Fed. 514. See, also, Gove v. 23 Am. B. R. 172, 174 Fed. 523. See Morton Trust Co., 12 Am. B. R. 297. 46*''^TV^''1?w'wr'rv*>'T^r* »« N- Y. App. Div. 177; Matter of 40, 5 Li. kiA. 693, where Chief Justice iiyr„i.,„„„i;i. ai. i. r, ,t. * Marshall says: "There is not per- Metropolitan Store, etc., Co. (Ref., haps a State in the Union, the laws ^- ^•)' ^^ Am. B. R. 119; In re of which do not make all conveyances Beede (D. C, N. Y.), 11 Am. B. R. not recorded and all secret trusts void 387, 126 Fed. 853 ; Matter of Thomp- as to creditors, as well as subsequent son (D. C, N. Y.), 10 Am. B. R, purchasers without notice. To sup- 242, 122 Fed. 174; In re DuckerfC. port the secret lien of a vendor c. A., 6th Cir.), 13 Am. B. R. 760, against a creditor who IS a mortgagee lo, i;.' j n<,i t o t,- ui 7^ /T would be to counteract the spirit of l v f oi * » ?> o^n ' ^•' these laws." N. Y.), 21 Am. B. R. 309. 26. In re Beede (D. C, N. Y.), 11 ^8. Humphrey v. Tatman, 198 U. Am. B. R. 387, 120 Fed. 853; In re S. 91, 14 Am. B. R. 74. Beede (D. C, N. Y.), 14 Am. B. R. 29. Compare In re Bumbam (D. 697, 138 Fed. 441, in which cases C, N. Y.), 15 Am. B. R. 548, 140 Judge Ray considered at length and Fed. 926. Liens. 765 § 67-a.] Chattel Mortgages and Conditional Sales. contracts of conditional sale, it has been held that an unfiled con- tract is void only as to creditors who, before the filing thereof, had " fastened upon " the bankrupt's property by some specific liens, and that the trustee has no rights as against such unfiled contract, in favor of the general creditors.'" But if a bankrupt gave a lien on cer- tain chattels to secure an antecedent indebtedness, the bankrupt re- maining in possession, with the power of disposition, and no notice by filing or otherwise being given, the lien is not effectual against 'the bankrupt's creditors, such lien being regarded as fraudulent against creditors.'"* It has been held 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.""' 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.'^ In this state it has also been held that under a statute (Rev. Laws, Mass. ch. 198, § 1) requiring a chattel mortgage to be recorded in the office of the clerk of the municipality where the mortgagor has his principal place of business and also in the clerk's office of the municipality 30. York Mig. Co. v. Cassell, 201 U. S. 351, 15 Am B. R. 633; Crosby V. Miller (Ct. App., D. C), 16 Am. B. R. 805, 25 R. I. 172; In re Doran (D. C, Ky.), 17 Am. B. R. 799, 148 Fed. 327. In Kentnel.y, an unrecorded con- tract of conditional sale, with reser- vation 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 Missouri it has been held that the instituting of bankruptcy pro- ceedings amounts to an effectual sequestration of the bankrupt's prop- erty in favor of all the creditors, and that therefore an unrecorded chattel mortgage is invalid as against the trustee representing all the credi- tors. Bradley v. McAfee (D. C, Mo.), 17 Am. B. R. 499, 149 Fed. 254; In re Pekin Plow Co. (C. C. A., 8th Cir.), 7 Am. B. R. 369, 112 Fed. 308^ In re Martin (C. C. A., 8th Cir.), 23 Am. B. E. 151, 173 Fed. 597. In Kansas, where the title of an assignee for the benefit of creditors is good as against an unfiled con- tract 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. 30a. In re Bellevue Pipe and 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. 30b. 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. 31. Humphrey v. Tatman, 198 U. S. 91, 14 Am. B. R. 74. 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 insol- vent 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. 7C(J The Law amj Pkactick in Bankruptcy. Subrogation of Trustee to Rights of Creditors. [§ 67-b. where he lives, 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.'^* Where a state statute provides that an unrecorded con- tract for the conditional sale of chattels, with reservation of title, is good as between the parties, such contract is not void as 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 adjudication of the vendee, and may not avoid the contract.*^ A failure to record a real property mortgage until after the adjudication of the bankrupt mortgagor and the appointment of his trustee has been held, under the Pennsylvania rule, to deprive the mortgagee of his lien as against the trustee."' 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 of the bankrupt mort- gagor.'* A contract for the conditional sale of a chattel is subject to the same rule.'^ in. SUBROGATION OF TRUSTEE TO RIGHTS OF CREDITORS. a. In general. — Subsection 6 in effect provides that when a, creditor is prevented by bankruptcy from enforcing his rights against a lien created or attempted to be created, by his debtor, the trustee 31a. Matter of McDonald (D. C, over what was collected of the pro- Mass.), 23 Am. B. R. 51, 173 Fed. 99. ceeds of resales, and the transac- 32. York Mfg. Co. v. Cassell, 15 tion constituted a conditional sale Am. B. R. 632, 201 U. S. 342. The The trustee is bound by the terms of statute under consideration in this such contract. Bryant v. SwaflFord was similar to that under considera- Bros. Dry Goods Co., 214 U. S. 279, tion in the following cases, where a 22 Am. B. R. 111. See, also, In re different rule was applied: In re McGehee, (D. C., Ga.), 21 Am B Press Post Printing Co. (D. C, R. 656, 166 Fed. 928. Ohio), 13 Am. B. R. 797, 134 Fed. 33. In re Lukens (D. C, Pa.), 14 998; In re Dunn Hardware & Fur- Am. B. R. 683, 133 Fed. 188. Com- niture Co. (D. C, N. Car.), 13 Am. pare as to mortgage executed in B. R. 147, 132 Fed. 719. good faith but not recorded, Rogers Conditional sale, what consti- t. Page (C. C. A., 6th Cir.), 15 tntes. — Where a contract in writ- Am. B. R. 502, 140 Fed. 596, 72 C. ing, under which goods were de- C. A. 164. livered to bankrupts in Arkansas, to 34. In re National Bank of Canton be resold in the usual course of busi- (C. C. A., 6th Cir.), 14 Am. B. R. nesa, provided that the title to and 180, 135 Fed. 62; In' re Marine Con- right of possession thereof, and all struction & Dry Dock Co. (D. C. N proceeds of resales thereof, should Y.), 14 Am. B. R. 466, 135 Fed. 921 • be vested and remain in the seller Skillen v. Endelman, 11 Am. B. r' until payment of the purchase price, 768, 79 N. Y. Supp. 413; Dodge v and that except for the right to re- Nodin (C. C. A., 8th Cir!) 13 Am sell the goods in the ordinary course B. R. 176, 133 Fed. 363 (under Colo- of business, the bankrupts should rado statute) ; In re Hull (D C not remove them from the city in Vt.), 8 Am. B. R. 302, 115 Fed. 858! which they were doing business, an 35. In re Garcewich (C C A obligation arose upon the part of the 2d Cir.), 8 Am. B. R. 149, 115 Fed' bankrupts to account for and pay 87. Liens. 767 § 67-b.] Is Trustee a " Judgment Creditor." in bankruptcy is subrogated to the rights of such creditors for the benefit of the estate. This provision preserves for the benefit of the estate a light which some particular creditor had been prevented from enforcing by the intervention of the debtor's bankruptcy.'" The subsection is doubtless declaratory of the rule at law.'' This provision of the statute does not transfer to the trustee the right of a judgment creditor to enforce an equitable lien acquired by the filing of a cred- itor's bill before bankruptcy proceedings were begun, or abate such creditor's right to prosecute suit.'* Thie word "prevented" as used in this subsection means prevented by the bankruptcy proceedings.^' The trustee under subdivisions a and 6 of this section stands in the position of creditors.*" The trustee is not only invested with the title to the bankrupt's property, but since, after the filing of the pe- tition, the creditors are powerless to pursue and enforce their rights, the trustee is vested with their rights of action with respect to all property of the bankrupt transferred or incumbered by him in fraud of his creditors.*^ A trustee is not, however, an innocent purchaser or a lien creditor, but generally speaking he takes the bankrupt's property subject to such claims and with such rights as the bankrupt himself had.**^ Other cases in point are referred to in the foot-note.*^ b. Is the trustee a " judgment creditor ? " — This is in doubt. The majority of cases under the law of 1867 held that, since the bankruptcy arrests proceedings in the state courts, the assignee (trustee), as the representative of the whole body of creditors, could bring any of that class of equitable actions where the existence of a judgment and execution returned unsatisfied are necessary elements; 1. e., that he was in effect, if not in name, a judgment creditor.** 36. In re New York Economical 41a. York Manfg. Co. v. Cassell, Printing Co. (C. C. A., 2d Cir.), 6 201 U. S. 344, 15 Am. B. R. 633; In Am. B. R. 615, 110 Fed. 518. re Fish Bros. Wagon Co. (C. C. A., 37. Compare In re Yukon Woolen 8th Cir.), 21 Am. B. R. 149, 151. Co. (D. C, Conn.), 2 Am. B. R. 805, 42. In re Kenney (D. C, N. Y.), 96 Fed. 326. 3 Am. B. R. 353, 97 Fed. 554; In re 38. Taylor v. Taylor, 59 N. J. Eq. Boston (D. C, Neb.), 3 Am. B. R. 86, 45 Atl. 440. 388, 98 Fed. 587; In re Howland (D. 39. In re Doran (C. C. A., 6th C, N. Y.), 6 Am. B. R. 495, 109 Cir.), 18 Am. B. R. 760, 154 Fed. Fed. 869; Barnes Mfg. Co. v. Norden 467, modifying 17 Am. B. R. 799. (Sup. Ct, N. J.), 7 Am. B. R. 553; 40. Matter of Gerstman & Band- Patten v. Carley, 8 Am. B. R. 482, man (Spec. M., N. Y.), 17 Am. B. R. 69 N. Y. App. Div. 423; In re Beede 882. (D. C, N. Y.), 14 Am. B. R. 697, 41. In re Rodgers (C. C. A., 7th 138 Fed. 441; Receivers of Virginia Cir.), 11 Am. B. R. 79, 93, 125 Fed. Iron, etc., Co. v. Staake (C. C. A., 169, reversed on other grounds, 198 4th Cir.), 13 Am. B. R. 281, 133 U. S. 280, 14 Am. B. R. 102; Bush v. Fed. 717. Export Storage Co. (C. C, Tenn.), 43. Barker v. Barker's Assignee. 14 Am. B. R. 138, 136 Fed. 918; Fed. Cas. 986; Beecher v. Clark, Fed. Mitchell V. Mitchell (D. C, N. C), Cas. 1,223; In re Duncan, Fed. Cas. 17 Am. B. R. 382, 389, 147 Fed. 280; 4,131; In re Metzger, Fed. Cas. In re Bement (C. C. A., 7th Cir.), 9,510. See under the present act, 22 Am. B. R. 616, 172 Fed. 98; In Skilton v. Codington, 185 N. Y. 80, re Burke (D. C, Ga.), 22 Am. B. 15 Am. B. R. 810. Contra: In re R. 69, 168 Fed. 994; Reardon v. Collins, Fed. Cas. 3,007; Cook v Rock Island Plow Co. (C. C. A., 7th Whipple, 55 N. Y. 150. But see Cir.), 22 Am. B. R. 66, 168 Fed. post in this paragraph. Compare 654. Piatt V. Stewart, Fed. Cas. 11,220, as This subject is further discussed reversed as Stewart v. Piatt 101 U under § 70. S. 731. 768 The Law and Peactice in Bankeuptcy. Valid Leins. [§ 67-d. This has been thought still the rule,** especially in view of the words, " may enforce such rights of such creditor for the benefit of the estate." The phrasing of § 70-e, limiting actions to avoid transfers to such suits as a creditor could have brought, has, however, again opened the question. Thus, it has been held in a well-considered case,*" that only a judgment creditor can share in property of the bankrupt, affected by a chattel mortgage not duly refiled as pro- vided in the New York statute, i. e., that the trustee is a judgment creditor only so far as he represents judgment creditors, the New York law denying to creditors whose debts are not reduced to judg- ment the remedy of a suit to set it aside. This confusion is, however, less serious to the administration of bankruptcy estates than at first appears. There can be no doubt about the trustee's power to sue the set aside a transaction which amounts to a fraud in fact, whether on the law or on the creditors ; and that, too, irrespective of whether any of the creditors had obtained judgments. Where, however, the wrong on creditors is purely constructive, and the remedy is denied until certain statutory preliminaries are observed, the case is different. The creditor whose debt is not in judgment can, of course, com- plain that the bankruptcy prevents him from observing those pre- liminaries, but, in a vast majority of cases, the judgment creditors may rejoin that the complaining creditor might have had a judg- ment had he been vigilant and is, therefore, not in a position to ask equity. Such a distinction would harmonize with the doc- trine that the trustee takes the assets in the "plight and condi- tion " they were in on the day of bankruptcy. *° In this view, the confusion noted will resolve itself into the old-time test of diligence as opposed to laches. On the whole this is unfortunate. The courts may, however, be relied on ultimately to bring the law back to the rule under the act of 1867. IV. VALID LIENS. a. In general.) — Subsection d is also declaratory of the law. It is intended to preserve liens created in good faith, " and not in contemplation of a fraud upon this act, and for a present consider- ation, which have been recorded according to law, if record thereof was necessary in order to impart notice." It is the converse of sub- sections c, e and /, and is emphasized by subsection 6, the sav- ing clause in the body of subsection e and the proviso clause at the end of subsection /. It is much broader than the corresponding clauses of the act of 1867, which protected liens by mortgage only.*' The supreme test of validity is, of course, " good faith."*' Want of present consideration or failure to record where record is necessary to 44. Compare In re McNamara, 2 46. This rule has been held not to N. B. N. Rep. 341 ; In re Harrison, 2 apply to liens, which, although valid N. B. N. Rep, 541. as to the bankrupt, are invalid as to 45. In re Economical Pr. Co. (C. creditors. First Nat. Bank v. Staake, C. A., 2d Cir.), 6 Am. B. R. 615, 110 202 U. S. 141, 15 Am. B. R. 639. Fed. 514. Compare In re Schmitt 47. Act of 1867, § 14, R. S., § (D. C, Ohio), 6 Am. B. R. 150; af- 5052. firmed as In re Shirley (C. C. A., 48. In re Soudans Mfg. Co. (C. C. fith Cir.), 7 Am. B. R. 299, 112 Fed. A., 7th Cir.), 8 Am. B. R. 45, 113 301. Fed. 804. Liens. 769 § 67-d.] Mechanic's Liens. impart notice are also important.** These are often elements of proof on the question of bona fides. A mortgage given to secure in- dorsers upon the bankrupt's notes is for a present consideration under this clause, since such indorsers became creditors contingently at the time of their indorsement.*"'' As will soon be seen, bona fides is not material where the lien is through legal proceedings. The uni- versal recognition of the rule of law here phrased into the statute results in cases construing it being rare, perhaps unnecessary. b. Miscellaneous valid liens. — The rule seems to be that where the lien does not contravene the bankruptcy law, and is recognized by the state law, it will be preserved.'"' A lien created by a verbal agreement, made in good faith and with the knowledge of the bank- rupt's creditors is valid."^ c. Mechanic's liens. — Here there was some question under the former law."'' There is now none under the present.'^ Such a lien is not one through legal proceedings,^* and, unless so, cannot be attacked, save for intention to hinder, delay, or defraud, an element not likely to appear in liens of this class. It seems even that such a lien may be perfected after bankruptcy.^" A mechanic's lien is not lost by the adjudication of bankruptcy, even though the lien did not attach until notice, and the notice was filed within four months preceding the bankruptcy adjudication."" A laborer's or material- man's lien for labor performed for, or materials furnished to, a 49. Compare subs. 2; In re Sou- 51. Goodnough Mercantile & Stock dans Mfg. Co. (C. C. A., 7th Cir.), Co. v. Galloway (D. C, Oregon), 19 8 Am. B. R. 45, 113 Fed. 804; In re Am. B. B. 244, 136 Fed. 504, holding Durham (D. C, Md.), 8 Am. B. K. that a lien on certain logs and lum- 115, 114 Fed. 750. ber, created anterior to the four 49a. In re Farmers Supply Co. months period to receive money ad- (D. C, Ohio), 22 Am. B. R. 460, vanced for labor and supplies, is 170 Fed. 502. valid. 50. Compare In re Lowensohn (D. 52. In re Dey, Fed. Cas. 3,871; In C, N. Y.), 4 Am. B. R. 79, 100 Fed. re Coulter, Fed. Cas. 3,276; Sabin v. 776; In re Alverson Bros. (Ref., S. Connor, Fed. Cas. 12,197; In re Cook, Car.), 5 Am. B. R. 855; In re Byrne Fed. Cas. 3,151. (D. C, Iowa), 3 Am. B. R. 268, 97 53. In re Kerby-Dennis (C. C. A., Fed. 762; In re Gerry (D. C, Pa.), 7th Cir.), 2 Am. B. R. 402, 95 Fed. 7 Am. B. R. 459, 461, 112 Fed. 957, 166 affirming s. c, 2 Am. B. R. 218, 959. See In re West Norfolk Lum- 94 Fed. 818; In re Emslie (C. C. A., ber Co. (D. C, Va.), 7 Am. B. R. 2d Cir.), 4 Am. B. R. 126, 102 Fed. 648, 112 Fed. 759; McNair v. Mcln- 291, reversing s. c, 3 Am. B. R. 282, tyre (C. C. A., 4th Cir.), 7 Am. B. R. 97 Fed. 929. See, also, In re Coe- 638, 113 Fed. 113; Evans v. Rounsa- Powers Co. (C. C. A., 6th Cir.), 6 ville (Sup. Ct., Ga.), 8 Am. B. R. Am. B. R. 1, 109 Fed. 550; In re 236; In re Hersey (D. C, Iowa), 22 Beck Prov. Co., 2 N. B. N. Rep. 532. Am. B. R. 863, 171 Fed. 998. Com- 54. Howard v. Cunliff (Ct. App., pare, also, Harvey v. Smith (Sup. Mo.), 10 Am. B. R. 71; In re Emslie Ct., Mass.), 7 Am. B. R. 497; In re (C. C. A., 2d Cir.), 4 Am. B. R. Standard Laundry Co. (C. C. A., 9th 126, 102 Fed. 292. Compare Fair- Cir.), 8 Am. B. R. 538, 116 Fed. 476; lamb v. Smedley Const. Co!, 36 Pa. In re Klapholz (D. C, Pa.), 7 Am. Super Ct. 17, 22 Am. B. R. 824. B. R. 703,. 113 Fed. 1,002; Clark v. 55. In re Houston (Ref., N. Y.), 7 Iselin, 21 Wall. 360; In re Hutto, Am. B. R. 92. Fed. Cas. 6,960; In re N. Y. Mail, 56. In re Emslie (C. C. A., 2d etc., Co., Fed. Cas. 10,209; In re Cir.), 4 Am. B. R. 126, 102 Fed. Dunkerson, Fed. Cas. 4,156; Gard- 292. ner v. Cook, Fed. Cas. 5,226. YTO The Law and Pbactice in Bankeuptcy. Landlord's Liens. [§ 67-d. subcontractor is not affected by the bankruptcy of the subcontractor.*^ In determining the validity of such liens the law of the State will control."* A mechanic's lien, defective upon its face, is not entitled to priority of payment in the distribution of the funds."" A failure to file a notice of lien as required by the statute, or otherwise to comply with the statute, affects the validity of the lien and it is not enforceable as such.'" Akin to mechanics' liens are all liens which exist by, or whose priority rests on, special statutes.** d. Landlord's liens. — In some of the States, the lessor is given a lien, either after or before distraint for rent. A landlord's stat- utory lien for rent is entitled to priority of payment over the claims of general creditors.®** The requirements of the State statute must be strictly observed or the lien will not be recognized."^ If distraint is necessary and has not been resorted to, there is no lien.°^ But it has been held that the lien was valid though it did not attach by the levy of a distress warrant until two days before the filing of a pe- tition in bankruptcy against the tenant."* Where a lien is given for the "current contract year," the landlord may enforce such lien against the trustee for rent due after the adjudication of the tenant, and for the remainder of such year."** Where a landlord's lien is not recognized by statute, a lien under a distress warrant is avoided 57. Crane Co. v. Smythe, 11 Am. B. R. 747, 94 N. Y. App. Div. 53; Kane Co. v. Kinney, 9 Am. B. E. 778, note, 174 N. Y. 69, 66 N. E. 619; In re Cramond (D. C, N. Y.), 17 Am. B. K. 22, 145 Fed. 966; Matter of Grissler (C. C. A., 2d Cir.), 13 Am. B. R. 508, 136 Fed. 754, hold- ing that where a mechanic's lien has been perfected as provided by a State statute, an action to enforce it will not be stayed by the bankruptcy court; Fehling v. Goings, 13 Am. B. R. 154, 67 N. J. Eq. 375. Money due under bnildins contract. — In the case of Matter of Roeber (C. C. A., 2d Cir.), 9 Am. B. E. 303, 121 Fed. 449, reversing 9 Am. B. R. 778, it was held that a trustee in bankruptcy takes title to the money due to a bankrupt under a building contract, free from the liens of subcontractors for labor and materials furnished for the building, although the notices of liens were filed pursuant to the statute, but after the contractor had filed his petition in bankruptcy. 58. Morgan v. First Nat. Bank (C. C, Pa.), 20 Am. B. R. 717, 162 Fed. C. A., 4th Cir.), 16 Am. B. E. 639, 145 Fed. 466. 59. In re Miner's Brewing Co. (D. C, Pa.), 20 Am. B. E. 717, 162 Fed. 327. 60. In re Cramond (D. C, N. Y.), 17 Am. B. R. 22, 145 Fed. 966. Failure to perfect. — Before a creditor can claim a lien given by a State statute he must comply with the statute and perfect his lien. It is only after so perfected that the lien is protected by a court of bank- ruptcy or any other court. In re Franklin (D. C, N. Car.), 18 Am. B. R. 218, 220, 151 Fed. 642. 61. For instance, in cases like In re Matthews (D. C, Ark.), 6 Am. B. E. 96, 109 Fed. 603; In re Gosch (D. C, Ga.), 9 Am. B. E. 613, 121 Fed. 604. But see In re Fall City Shirt Co. (D. C, Ky.), 3 Am. B. E. 437, 98 Fed. 592. 61a. In re V. D. L. Co. (D. C, Ga.), 23 Am. B. E. 643, 175 Fed. 635; In re Burns (D. C, Ga.), 23 Am. B. R. 640, 175 Fed. 633. 62. See Marshall v. Knox, 16 Wall. 551; In re Mclntire (D. C., W. Va.) 16 Am. B. R. 80, 142 Fed. 593. 63. In re Ruppel (D. C, Pa.), 3 Am. B. E. 233, 97 Fed. 778; In re Bayley (Eef., Pa.), 22 Am. B. E. 249. 64. In re Eobinson & Smith (C. C. A. 7th Cir.), 18 Am. B. R. 503, 154 Fed. 343. 64a. Martin v. Orgain (C. C. A., F.H 770^' ^^- ^'"- ?■ K- «*• 174 A :• „„:,*"'*^'"S """Jer Texas Stats., Art. 3,251. Liens. 771 § 67 -d.] Mortgages to Secure Future Advances. by subsection /.'" Even where such a lien is given, it is waived by the landlord taking a chattel mortgage for the rent.*' And where a landlord consents to the sale of property to which his lien has at- tached in bulk with other property not affected thereby he loses his lien, since under such circumstances it would be impossible to de- termine how much of the proceeds of sale was the product of the property covered by his lien." It seems that this subsection does not include a landlord's lien under the Pennsylvania statute.*' Cases under the law of 1867 will be found in the foot-note.*" e. Mortgages to secure further advances, and on after ac- quired propierty. Mortgages given in good faith by way of continuing collateral are valid to the amount advanced before the petition is filed.'" So also, it is thought, of mortgages purporting to cover property to be acquired.''^ A chattel mortgage, covering after ac- quired property in the possession of the mortgagor, valid under the laws of the State where given, is effectual as against the mortgagor's trustee in bankruptcy, and the taking possession of the property by the mortgagee after a condition broken within the period of four months prior to filing the petition against the mortgagor is not a preference.'^ f. Mortgagor in possession.— A chattel mortgage is not void for indefiniteness of description which purports to be upon all property 65. In re Dougherty Co. (D. C, man v. Bank of Monroe (C. C. A., Ga.), 6 Am. B. R. 457, 109 Fed. 8th Cir.), 9 Am. B. R. 4, 117 Fed. 480. 237; Matter of United States Food 66. In re Wolf (D. C, Iowa), 3 Co. (Ref., Mich.), 15 Am. B. R. 329. Am. B. R. 558, 98 Fed. 84. 71. Barnard v. Norwich, etc., Co., 67. Keyser v. Wesael (C. C. A., Fed. Cas. 1,007; In re Sentenne &, 3d Cir.), 12 Am. B. R. 126, 128 Fed. Green Co. (D. C, N. Y.), 9 Am. B. 281, affirming 10 Am. B. R. 586, R. 648, 120 Fed. 436. Compare Brett and distinguishing Carroll v. Young v. Carter, Fed. Cas. 1,844. (C. C. A., 3d Cir.), 9 Am. B. R. 72. Thompson v. Fairbanks, 196 643, 119 Fed. 577. See, also. In re U. S. 516, 13 Am. B. R. 437; In re Bayley (Ref., Pa.), 22 Am. B. R. Rogers (D. C, Vt), 13 Am. B. R. 249. 75, 132 Fed. 560; In re Hersey (D. 68. In re Consumers' Coffee Co. C, Iowa), 22 Am. B. R. 863, 171 (D. C, Pa.), 18 Am. B. R. 500, 151 Fed. 998. Fed. 933. In Pennsylvania, a land- The validity of a mortgage om lord's right of distraint upon the after acquired property as against goods and chattels on leased prem- a trustee in bankruptcy depends upon ises is not considered a superior lien the laws of the State wherein the to that of an execution against the property is situated; such a mort- owner of said goods. In re De gage held invalid in New York. In Lancey Stables Co. (D. C, Pa.), 22 re Marine Const, and Dry Dock Co. Am. B. R. 406, 170 Fed. 860. (C. C. A., 2d Cir.), 16 Am. B. R. 69. In re Bowne, Fed. Cas. 1,741; 325, 144 Fed. 649; In re Adamant Trim v. Wagner, Fed. Cas. 14,174; Plaster Co. (D. C, N. Y.), 14 Am. Bailey v. Loeb, Fed. Cas. 739. B. R. 815, 137 Fed. 251; Zart- 70. Marvin v. Chambers, Fed. Cas. man v. National Bank, 16 Am. B. 9,179. See Davis v. Turner (C. C. A., R. 152, 109 N. Y. App. Div. 406. 4th Cir.), 9 Am. B. R. 704, 120 Fed. Compare In re Burnham (D. C, N. 605; In re Williams (D. C, Ga.), 9 Y.), 15 Am. B. R. 548, 140 Fed. 926. Am. B. R. 731, 120 Fed. 542; Sted- 172 The Law and Peactice in Bankkuptcv. Other Valid Liens. [§ 67-d. " now being and remaining in the possession " of the mortgagor J' Nor does an agreement therein permitting the mortgagor to sell the mortgaged goods and use the proceeds thereof invalidate the mort- gage, where no fraudulent intention is found; the only effect of such agreement is to withdraw the goods sold from the operation of the mortgage.'* The lien of a chattel mortgage may be retained so far as valid.'"' g. Other valid liens. — A contract of conditional sale may give rise to a valid lien.'' The lien of a partner upon the partnership property for the surplus which may be due to him after the part- nership debts have been paid, will be recognized by the bankruptcy court; and if prior to the proceedings in bankruptcy a receiver has been appointed in an action to dissolve the partnership and procure an accounting and has taken possession of the property, the posses- sion of the State court through its officer will not be disturbed.'' An equitable lien as security for advances made to the bankrupt, created prior to the four months period, may be enforced against the lienor's trustee in bankruptcy and will attend the fund arising from the sale of the property to which the lien attaches."* A deposit of town funds with a bank without agreement that such funds shall be kept sepa- rate from other funds used by the banker in his business, does not create a lien upon the funds of the banker in the hands of his trustee in bankruptcy, to the extent of the deposit, unless the town funds can be identified.'"* An attorney's lien on the papers of his client," or on a judgment," or on a chattel mortgage which came into his possession before the filing of the petition,'" may be enforced notwithstand- ing bankruptcy. A bank's lien on the dividends to its stockholders who are debtors;'^ and the special lien given by a State statute to 73. In re Beede (D. C, K. Y.), 11 Fleming Co. (Ref., N. Y.), 21 Am. Am. B. E. 387, 126 Fed. 853; Davis B. R. 662. V. Turner (C. C. A., 4th Cir.), 9 Am. 79. Matter of John F. Pennell (D. B. R. 704, 120 Fed. 605. See Jones C, N. J.), 18 Am. B. R. 909, 159 Fed. Chatt. Mortg., § 65. 500. 74. In re Ball (D. C, Vt.), 10 Attorney's lien.— A creditor's at- Am. B. R. 564, 123 Fed. 164. As to torney, who has successfully prose- effect of mortgagor remaining in pos- cuted a claim, has a lien for his serv- session under Ohio law, see In re ices which may be enforced in the First Nat. Bank of Canton (C. C. bankruptcy court. In re Rude (D. C A., 6th Cir.), 14 Am. B. R. 180, 135 Ky.), 4 Am. B. R. 319, 101 Fed. 805. Fed. 62; In re National Valve Co. 80. Matter of Enrich's Fort Ham- (D. C, Ohio), 15 Am. B. R. 524, 140 ilton Brewery (D. C, N. Y.), 19 Am. Fed. 679 ; under New York law, see B. R. 798, 158 Fed. 644, holding that Skilton V. Codington, 15 Am. B. R. where an attorney, who had repre- 810, 185 N. Y. 80. sented an alleged bankrupt in certain 75. Matter of Davis (D. C, N. transactions, claims a lien for serv- Y.), 19 Am. B. R. 98, 155 Fed. 671. ices upon certain chattel mortgages 76. National Bank of Commerce v. which came into his hands prior to Williams (C. C. A., 5th Cir.), 20 the filing of the petition, the court Am. B. R. 79, 159 Fed. 615. may order that the mortgages and the 77. Clark v. Bininger, 38 How. assignments thereof be turned over Pr. 341, 3 N. B. R. 518. to the receiver, subject to the lien 77a. Goodnough Mercantile & of the attorney, who may have its Stock Co. V. Galloway (D. C, Oreg.), amount determined either in the 22 Am. B. R. 803, 171 Fed. 940. bankruptcy court or any other court 77b. In re Nichols (D. C, N. Y.), of competent jurisdiction. 22 Am. B. R. 216, 166 Fed. 603. 81. In re Dunkerson, Fed. Cas. 78. Rogers v. Winsor, Fed. Cas. 4,156; Matter of Gesas (C. C. A, 9th 12,023; In re N. Y. Mail, etc., Co., Cir.), 16 Am. B. R. 872, 146 Fed Fed. Cns. 10,209; Matter of Brown & Liens. 773 § 67-d.] Other Valid Liens. the manufacturer of machinery supplied to a factory/^ or to la- borers for wages,*' are valid, if perfected as required by such statute.** A livery stable keeper's statutory lien does not depend for its existence upon the institution of judicial or other proceed- ings, but is a perfect lien under the statute, and as such is cogniz- able .and enforceable in bankruptcy.*^ Maritime liensforrepairsand supplies furnished to vessels will bo enforced in a court of bank- ruptcy.** An artisan has a lien for repairs and improvements made to a bankrupt's automobile after petition filed and before*^ adjudication. Deeds of trusts and other transfers made in good faith to secure present loans, protected under a State statute, are within the protection of clause d of this section and valid liens.** But a deed of trust made by a corporation to secure ultra vires notes has been held fraudulent and invalid.** The lien of a pledgee 734. See, also, interesting case of Hutchinson v. Otis (C. C. A., lat Cir.), 8 Am. B. R. 382, 115 Fed. 937. 82. In re Matthews (D. C, Ark.), 6 Am. B. R. 96, 109 Fed. 603; In re Georgia Handle Co. (C. C. A., 5th Cir.), 6 Am. B. R. 472, 109 Fed. 632; In re Oconee Milling Co. (C. C. A., 5th Cir.), 6 Am. B. R. 475, 109 Fed. 866; Mott v. Wissler Mining Co. (C. C. A., 4th Cir.), 14 Am. B. R. 321, 68 C. C. A. 335. 83. Browder & Co. v. Hill (C. C. A., 6th Cir.), 14 Am. B. R. 619, 136 Fed. 821, where orders hy a bankrupt corporation upon a merchant to sup- ply goods to laborers as part pay- ment of wages were held not to be assignments of wages so as to sub- rogate the merchant to the rights of the laborers under a statute creating a lien in favor of such laborers. 84. In re Lillington Lumber Co. (D. C, N. Car.), 13 Am. B. R. 153, 132 Fed. 886. 85. In re Mero (D. C, Conn.), 12 Am. B. R. 171, 128 Fed. 630; In re Pratesi (D. C, Del.), 11 Am. B. R. 319, 126 Fed. 588. 86. The Ironsides, Fed. Cas. 7,069, 4 Biss. 518; In re Kirkland, Fed. Cas. 7,842, 12 Am. Law Reg. 300. Maritiiine liens may be enforced in a court of bankruptcy, although they are founded upon a State stat- ute, and are not strictly maritime liens. In re Scott, Fed Cas. 12,517, 1 Abb. N. S. 336. 87. In re Rich (Ref., Ohio), 17 Am. B. R. 893. 88. Crim v. Woodford (C. C. A., 4th Cir.), 14 Am. B. R. 302, 136 Fed. 34; Matter of Alden (Ref., Ohio), 16 Am. B. R. 362; In re Noel (D. C, Md.), 14 Am. B. R. 715, 137 Fed. 694; Wilder v. Watts (D. C, S. Car.), 15 Am. B. R. 57, 138 Fed. 426; In re Clifford (D. C, Iowa), 14 Am. B. R. 281, 136 Fed. 475. Warehouse xeceiptB. — ^As to val- idity of pledge of warehouse receipts to secure loans made to owner by trust company, see Union Trust Co. v. Wilson, 198 U. S. 530, 14 Am. B. R. 109; Love v. Export Storage Co. (0. C. A., 6th Cir.), 16 Am. B. R. 171, 143 Fed. 1; Security Warehousing Co. V. Hand (C. C. A., 7th Cir.), 16 Am. B. R. 49, 143 Fed. 32. 89. American Wood Working Ma- chinery Co. V. Norment (C. C. A., 4th Cir.), 19 Am. B. R. 679, 157 Fed. 801, holding that where a corpora- tion gives its notes, without consid- eration, to its principal stockholder and manager, who, as intended by tlu parties, pledges them as collateral se- curity for his personal indebtedness to the knowledge of the pledgees, a deed of trust securing the notes given by the corporation while insolvent, and within four months of its bankruptcy, 774 The Law and Peactice in Bankeuptcy. Fraudulent Transfers and Liens. [! 67-e. is not only recognized, but is unimpaired, and he has the right to reitain the property until it is released by a payment of his daim.'" An assignement of future wages constitutes a valid lien which is not affected by the discharge in bankruptcy of the mortgagor.** h. Effect of valid liens on distribution. — If valid, the lienor be- comes a secured creditor, and must be treated as such.®* V. FRATJDUI.ENT TRANSFERS AND LIENS. a. In generaL^-Subsection e nullifies (1) all " oonveyances, transfers, assignments or incumbrances, or any part thereof," on the bankrupt's property, (2) made or created " within four months prior to the filing of the petition," (3) " with the intent to hinder, delay or defraud his creditors ;" (4) " except as to pur- chasers in good faith and for a present consideration." All such property so disposed of remains as a part of the estate of the bank- rupt as passes to his trustee, whose duty it is to recover the same for the benefit of the creditors.** • The subsection then nullifies all con- veyances, transfers and incumbrances made by the bankrupt within four months prior to the filing of the petition, " which are held null and void against the creditor of such debtor " under State laws, and provides that such property shall pass to, and be recovered by, the trustee for the benefit of the creditors. The amendment of 1903 conferred concurrent jurisdiction upon courts of bankruptcy and State courts to recover property under the subsection. b. Scope of subsection.— This subsection is somewhat out of place here. Its counterpart in the law of 1867 is both different in the minor matters of phrasing and the time limit, and in effect more favorable to the debtor than the present subsection. The im- is fraudulent and void as to the cred- ment of pledge bv the bankrupt and iters of the corporation. pursuant to its terms t, ^./'l"™! ^- ^'=^,^'"*f ' ^^ N- S- 91- Citizens' Loan Ass'n v. Boston R. 546; Yeatman v. Savings Inst., 9 & Maine R. R. (Sun Ct Maq« ^ 10 TT. S. 764; Clark v. Iselin, 21 Wall. Am. B. R. 650. ^^l; , , , , , 92- See under § 57, ante. i,r .1*° °r ^ ^^^'.•~}^ *^^ "^^ °^ ^^ ^'°««'y '■^'ated to this clause Matter of Mayer, Leslie and Baylis is § 70-a(4), vesting title in the trus- if^S^Ll^?"-'-^^"^"-^-^-^^^' t«e of property transferred by the 157 Fed. 836, it was held that a bank- bankrupt In fraud of creditors- and ruptcy court is without power to re- also § 70-e, authorizing the trustee strain a sale by the pledgee of prop- to avoid any transfer which any cred- erty held by him under a valid agree- itor of the bankrupt might have avoided. Liens. 7Y5 § 67-e.] Inteut to Hinder, Delay or Defraud. portant elements of proof in that law — the creditor's reasonable cause to believe the debtor insolvent and that the transaction was in fraud of the act — have given place to the single element of intent to hinder, delay, or defraud."* The former law here interdicted transfers"" only. The present subsection has to do with incumbrances, too, at least so far as such liens result from the voluntary act of the debtor."' c. Insolvency not essential. — Unlike fraudulent preferences, fraudulent transfers may, it seems, be made at a time when the transferer is solvent." But, intent to hinder, delay, or defraud being necessary, insolvency will usually be an element of proof. d. " Within four months l)rior to filing the petition." — The meaning of these words is discussed elsewhere. The practitioner should also note that, if the period has elapsed, there may still be a remedy under the State law, as pointed out by § 70-e."' But the words quoted above do not apply where the fraudulent transaction amounted to a voluntary gift ;"" nor were the transfer was made more than four months before the petition in bankruptcy was filed. '^'"' There is a clear distinction between the creation of a lien within the four months period, and the enforcement' of one previously ac- quired j"^""* 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 of the petition in bankruptcy was filed.^""^ e. Intent to hinder, delay or defraud. — (1) In general. — The words "with intent to hinder, delay or defraud," as used in sub- section e, have their immemorial meaning.^"^ They have already 94. In re McLam (D. C, Vt.), 3 ware Co. (C. C. A., 5th Cir.), 13 Am. Am. B. E. 245, 97 Fed. 922. B. E. 422, 133 Fed. 874; Manning v. 95. See Bankr. Act, § 1(25) for Evans (D. C, N. J.), 19 Am. B. R. elastic meaning now given the word. 217, 222, 156 Fed. 106. 96. That is mortgages, pledges and A partnership assignment, the like, as distinguished from judg- made more than four months before ments, attachments and other liens the petition in bankruptcy was filed, through legal proceedings. • cannot be recovered Ijy the trustee 97. Pollock V. Jones (C. C. A., 4th under this provision. In re J. M. Cir.), 10 Am. B. E. 616, 124 Fed. Ceballos & Co. (D. C, N. J.), 20 Am. 163. Compare In re McLam (D. C, B. E. 459, 466, 161 Fed. 445. Vt.), 3 Am. B. E. 245, 97 Fed. 922; lOOa. Thompson v. Fairbanks, also In re Soudans Mfg. Co. (C. C. 196 U. S. 516, 13 Am. B. R. 437. A., 7th Cir.), 8 Am. B. E. 45, 113 100b. Woods v. Klein, 22 Am. Fed. 804. B. R. 722, 223 Pa. St. 257, 72 Atl. 98. Compare In re Adams (Eef., 523. N. Y.), 1 Am. B. R. 94; In re Grabs 101. Thomas v. Roddy, 19 Am. B. (Eef., Ohio), 1 Am. B. E. 465; In re R. 873, 122 N. Y. App. Div. 851, 107 Taylor, 95 Fed. 956. N. Y. Supp. 473. 99. In re Schenck (D. C, Wash.), 102. See Githens v. Shiffler Bros. 8 Am. B. R. 727, 116 Fed. 554. (D. C, Pa.), 7 Am. B. R. 453, 112 100. Little V. Holly Brooks Hard- Fed. 505. 776 The Law and Peactice in Bankeuptct. Fraudulent Transfer; Evidence of Intent. [§ 67-e. been considered in section three; also in section fourteen. The cases under the former law, found in the foot-note,^"' are thought still ap- plicable, 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 prohibited 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.^"^ (2) Evidence of intent. — Whether a conveyance was made with intent to hinder, delay and defraud creditors is a question of f act.^"' 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.'"^^ It is only an intent to hinder, delay, and defraud creditors unlawfully, 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.^"" An insolvent debtor has the jus disponendi of his property until the commencement of proceedings in bankruptcy against him. 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 pur- pose to afleet other creditors injuriously beyond the necessary 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.^^" A transfer made in good faith to pay or to secure an honest antecedent debt by an insolvent within four months of the filing of a petition in bank- ruptcy by or against him constitutes no evidence of an intent to delay or defraud creditors, notwithstanding the fact that its necessary 103. Sedgwick v. Place, Fed. Cas. (D. C, Cal.), 15 Am. B. R 499 140 12,620 ; In re Cowlea, Fed. Cas. 3,297 ; Fed. 984 ; Coder v. Arts (CCA In re McKibben, Fed. Cas. 8,859; In 8th Cir.), 18 Am. B. E 513 152 re Williams, Fed. Cas. 17,703; Cur- Fed. 943, raodifyinff 16 Am B R ran v. Hunger, Fed. Cas. 3,487. 583, aff'd 213 U. s! 223, 22 'Am' b' 104. Sherman v. Luckhardt (Sup. R. 1. Ct., Kan.), 11 Am. B. R. 26. Com- 108. Matter of McKane (D C N pare Stitch v. Berman, 15 Am. B. R. Y.), 19 Am. B. R. 103 155 Fed 674- ''^?nt^w-\f^'"'-Q°*-. ,-n n Cjingman v. Miller (C. C. a'., 8th .r ^S^; ^o"^.''* "'■ Sampter (D. C, Cir.), 20 Am. B. R. 360, 160 Fed N. Y.), 18 Am. B. R. 355, 152 Fed. 326. ' -^^Sne w • 1.. a . ,t^ ^ ^•'^"- I" ^e Elletson Co. (D. C, 106. Wright V. Sampter D. C, W. Va.), 23 Am. B. R 530 174 Fed NY.), 18 Am. B. R. 355, 152 Fed. 859; In re Kayser ( C b A.', 3d cfr ) ' ?n-r T T>, 1, ,r. n * „., ^* ^™- B- R- 174, 177 Fed. 383. ' 107. In re Bloeh C. C. A., 2d 109. Coder v Arts fC r A Srt Cir.), 15 Am. B. R. 748, 142 Fed. Cir.), 18 Am BR 513 '5lt' ?^2 674, holding that where a member of Fed.''943, modifyinf' 16 Am B R a firm pledges his life insurance poll- 583, aff'd 213 U S 223 22 Am S cies to secure certain creditors with R. i ; Sargent v Blak^' ir n a the understanding that they were not 8th Cir.) 20 Am B R 115 ieo'F^d firm assets, fraudulent intent is not Fed 57 ' shown. In re Benjamin (D. C, Pa.), I'lO. 'sar^-ent v BIiI-p (C r a 15 Am. B. R. 351, 140 Fed. ,320; In Sth Cir.) 20 Am BR n<< loV re Longbottom (D. C, Pa.), 15 A-n. 160 Fed 57? Cod^v' v Ar^e lA' Til' B. R. 437, 142 Fed. 291; In re Iini 223, 22 Am BR 1 ' ^^ ^- Liens. 777 § 67-e.] Purchasers in good Faith. effect is to hinder and delay them, and to deprive them of the oppor- tunity they might otherwise have had to collect their claims in full."^ So where a mortgage was given by an insolvent debtor within the four months period to secure a pre-existing debt owing to the mort- gagee, 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.^^^" When all the parties consent, the application of the partnership 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 and the partnership are insolvent, does not evidence any intent to hinder, delay, or defraud the creditors.^^" 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, having been made with intent to hinder and defraud creditors.^^' 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.^^^* 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.^^* The effect of the statute cannot be avoided by an agreement consigning goods to a person for sale and account, where it appears that the so-called consignor does not agree to take back such goods as remain unsold; such an arrangement constitutes a sale, and, if the facts disclose an intent to hinder or delay creditors, is fraud- nlent as against the creditors of the consignee.^"* 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 111. Coder v. Arts (C. C. A., 8th ment to withhold a chattel mortgage Cir.), 18 Am. B. E. 513, 519, 152 from record is evidence of fraudu- Ted. 943, modifying 16 Am. B. E. lent intent. 583, affd. 213 U. S. 223, 22 Am. B. 114a. Ludvigh v. American E. 1. Woolen Co. (D. C, N. Y.), 23 Am. B. Ilia. Coder v. Arts, 213 U. S. E. 314, 176 Fed. 145. 223, 22 Am. B. E. 1; In re Kullberg 115. Carter v. Goodykoontz (D. (D. C, Minn.), 23 Am. B. E. 758, 176 C, Ind.), 2 Am. B. R. 224, 94 Fed. Fed. 585. 108; Johnson v. Wald (C. C. A., 5th 112. Sargent v. Blake (C. C. A., Cir.), 2 Am. B. E. 84, 93 Fed. 640; 8th Cir.), 20 am. B. E. 115, 160 Fed. In re Steininger (C. C. A., 5th Cir.), 57. 6 Am. B. E. 68, 107 Fed. 669; In re 113. Henkel v. Seider (D. C, N. Hugill Mercantile Co. (D. C, Ohio), Y.), 20 Am. B. E. 773, 163 Fed. 553; 3 Am. B. R. 686, 100 Fed. 616; In Fouche V. Shearer (D. C, Ga.), 22 re Kellogg (Eef., N. Y.), 6 Am. B. Am. B. R. 828, 172 Fed. 592. E. 389; affirmed, 7 Am. B. R. 270, 113a. In re Kayser (C. C. A., 3d 112 Fed. 52; In re Shepherd (D. C, Cir.), 24 Am. B. R. 174, 177 Fed. 111.), 6 Am. B. R. 725. 383. 116. Compare Tiffany y. Lucas, 15 114. Rogers v. Page (C. C. A., 6th Wall. 410; Sedgwick v. Wormser, Cir.), 15 Am. B. E. 502, 140 Fed. Fed. Cas. 12,626; Curran v. Hunger, 596, 72 C. C. A. 164. See In re Fed. Cas. 3,487. Shaw (D. C, Me.), 17 Am.' B. R. 117. In re Moody (D. C, I6wa), 196, 146 Fed. 243; In re Hickerson 14 Am. B. R. 272, 134 Fed. 628, hold- ID. C, Idaho). 20 Am. B. E. 682, ina; that a transfer of all the bank- 162 Fed. 345, holding that an agree- rupt's property to a person with 778 The Law and Peactice in Bankeuptoy. Suits to Recover Property. [§ 67-e. of the insolvent's insolvency, or where facts are shown which place upon the purchaser the duty of making inquiries as to the insolvent'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.'"" The fact that a mortgagee knew that the proceeds of a mortgage 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 in- solvent. "''•' 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 bank- ruptcy.'" Since § 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 trustee, 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 trustee must then proceed by suit in the proper tribunal,'" and show facts bringing the case within this subsection. What has been said as to suits to set aside voidable preferences is largely applicable here.'^^ (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 brought under the subsection, and not merely to a suit based on a State law. The meaning and purpose of the amendment have already been discussed. 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.'^' For the time when the amendments became operative, see Sup- plementary Section to Amendatory Act," post. knowledge of the bankrupt's financial him within the four months period, condition is not in good faith. In re the transfer is void under subsection Knopf (D. C, S. Car.), 16 Ara. B. R. e of the above section. Matter of , ^32, 144 Fed. 245. See, also, Dokken Eobertshaw Mfg. Co (DC Pa ) 13 , V. Page (C. C. A., 8th Cir.), 17 Am. Am. B. R. 409, 133 Fed. 556 ' ' , B. R. 228, 147 Fed. 438. 119. See In re Deuell '(D C 117a. Matter of Rosenberg (Ref., Mo.), 4 Am. B. R. 60, 100 Fed 633' I N. Y.), 22 Am. B. R. 900. Sale in and many cases where the remedy of ' bulk sustained in Shelton v. Price contempt has been resorted to (D. C, Ala.), 23 Am. B. R. 431, 174 120. Bardes v. Bank 178 'u S Fed. 891. 524. 4 Am. B. R. 163. ' ' 117b. In re Kullberg (D. C, 121. See, eenerally, under «« 2 Minn.), 23 Am. B. R. 758, 176 Fed. and 23. ^ ^^ 585. 122. See § 60. 118. Matter of Farrell Co. (Ref., 123. Johnston v. Forsvth Mercan- N. Y.), 9 Am. B. R. 341, holding that tile Co. (D. C, Ga ) 11 Am BR where the provisions of the New York 669. 127 Fed. 845. See McNultv v' statute, L. 1902, chap. 528, entitled Feingold (D. C Pa ) 12 Am B r' "An act to regulate the sale of mer- 338, 129 Fed. I'.OOl! holdins 'that a ehandise n bulk," are willfully and trustee in bankruptcy may laintai^ deliberately ignored by an alleged a suit in equity in a district ^urt for bankrupt, upon such a sale made by °" -"" -.:_-•'- wk wuru lor Liens. 779 S 67-e.] Mortgages to Secure Antecedent Debts. i. Miscellaneous invalid transfers or incumbrances. — (1) In GENEBAL. — 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 succeed- ing paragraphs. (2) MoETGAGES TO SECUEE ANTECEDENT DEBTS. — These are void.*^'' 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.^^'^ Where the mortgagor remains in possession with power to sell in the usual course of business, under a mortgage that contains no provision defendants on accounts fraudulently filing of the petition, is not void, un- assigned to them by bankrupts, al- der section 67e, unless it was either though the face value of such ac- made with the intent on his part to counts is known to the trustee. As hinder, delay or defraud his creditors, to actions by trustees to set aside or some of them, or is held void as fraudulent conveyances, see Schmitt against hia creditors by the laws of V. Dahl, 11 Am. B. E. 226 (Sup. Ct., the jurisdiction in which the property Minn.); Kohout V. Chaloupka (Sup. is situated. Coder v. Arts (C. C. A., Ct., Neb.), 11 Am. B. R. 265. 8th Cir.), 18 Am. B. E. 513, 152 Fed. 124. For instance, In re Little 943, modifying 16 Am. B. E. 583 Eiver Lumber Co (D C-, Ark.), 1 jae. In re Wolf (D. C, Iowa), 3 Am. B. E. 483, 92 Fed. 585, and In »„ -u u kco no n< j oa /-f-i -Lr i re Head (D. C, Ark.), 7 Am. B. E. t \ ^ ^^^' ^^ ^^^- ^*' ^'^^ ^^'■ 556, 114 Fed. 489; In re Faulhaber ^^^^ ''■ ^^^"^ (C. C. A., 4th Cir.), 6 Stable Co. (C. C. A., 2d Cir.), 22 Am. Am. B. E. 311, 109 Fed. 69, affirming B. E. 381, 170 Fed. 68. See, also, for In re Alverson (Eef., S. Car.), 5 Am. decisions on this general subject, B. R. 855; Stedman v. Bank of Mon- Harvey v. Smith (Sup. Ct., Mass.), roe (C. C. A., 8th Cir.), 9 Am. B. E. 7 Am B. R. 497, and In re Standard 4, 117 ped. 237. Compare, also, In re Laundry Co. (C. C. A., 9th Cir.), 8 -no^ri/ia^,. m n t„„ \ c a t. t. Am. B. E. 538, 116 Fed. 476. ?o7 Ino J^' fca t '' t^^f " ^^ ^• 125. In re Eonk (D. C, Ind.), 7 ^^S, 109 Fed. 882; In re Durham (D. Am. B. E. 31, 111 Fed. 154; Pollock ^■' ^^-^ > ^ ^m. B. E. 115, 114 Fed. V. Jones (C. C. A., 4th Cir.), 10 Am. 750. See, also. In re Sawyer (D. C, B. E. 616, 124 Fed. 163 (affirming 9 Mass.), 12 Am. B. E. 269, 130 Fed. Am. B. E. 262) ; Farmers' Bank v. 384, where a chattel mortgage given Carr & Co. (C. C. A., 4th Cir.), 11 i„ security for the payment of notes iz ff).^c.,'S^ai.)\'i5"it.TkV9! ^ t r^^" -r'r- r'T'' 140 Fed. 984; Matter of Hutchinson f' to the amount actually loaned at Co. (Eef., Mich.), 14 Am. B. E. 518; *"^ *™^ *"« mrotgage was executed. Morgan v. First Nat. Bank (C. C. A., ^" ""^ Dismal Swamp Contracting Co. 4th Cir.), 16 Am. B. E. 639, 145 Fed. (D. C, Va.), 14 Am. B. E. 175, 135 466. Compare In re Wolf (D. C, Fed. 415. Iowa), 3 Am. B. E. 658, 98 Fed. 84, 127. In re Hugill (D. C, Ohio), 3 TlTllit^^JF^: 9^"^-^' ' Y ^- ^- '''' ''I !"'■ ?'■ '^^' Moptgage, wheninvaUd—Buta *''"' * et off the debt Y . . . ' g Tj AgR flue to him on loans, over-drafts, or __ -T^' J. 7". „■ ■ « ,, „.„ otherwise against deposits which are 20. In re Petrie, Fed. Cas. 11,040; „,ade with him. In re Bank of Madi- Ex parte Howard Nat. Bank, Fed. son. Fed. Cas. 890, 9 N. B. R. 184; Cas. 6,764; Ex parte Pollard, Fed. In re Petrie, Fed. Cas. 11,040, 7 N. B. Cas. 11,252. R- 332; Denman v. Boylston, 5 Cush. 21. Matter of Brewster (Ref., N. 1^4. So if the banker has received Y ) 7 Am B R 486 drafts for collection the proceeds of Jw. oi • ' t ' ji ' -kt' i. T. 1 T. 1 which afterwards came into his hands, 22. Steinhardt v. Nat. Park Bank, ^^ ^^.^^^ ^^^^ ^ j^^^ j^^,t^ ^^^ 19 Am. B. R. 72, 120 N. Y. App. Div. to him. In re Farnsworth, Fed. Cas. 266, rev'g 18 Am. B. R. 86. 4,673, 14 N. B. R. 148. Set-offs and Counteeclaims. 795 § 68-a.] Set-.0«f by Bank. As 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 de- positor'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 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, al though the liability of the indorser did not become absolute until Deposit! may be set off against 515. See, also, Matter of Levi (D. overdrafts. Tomlinson v. Bank of C, N. Y.), 9 Am. B. R. 176, 121 Fed. Lexington (C. C. A., 4th Cir.), 16 198; Matter of Semmer Glass Co. Am. B. R. 632, 145 Fed. 824. Money (Ref., N. Y.), 11 Am. B. R. 665; West deposited to a bankrupt's credit, at v. Bank of Lahoma, 16 Am. B. R. 733, the time of filing his petition in bank- 16 Okl. 508. ruptcy, may be set off against a debt Money paid by a bank in ignor- due from him to the bank. In re Lit- ance of a general assignment, having tie (D. C, la.), 6 Am. B. R. 681, 110 been returned by order of the court. Fed. 621. may be set off against the assignee's Effect of failure to off-set. — In notes. In re Meyer & Dickinson (D. Traders' Bank v. Campbell, 14 Wall. C, N. Y.), 5 Am. B. R. 593. 87, 6 N. B. R. 353, it appeared that Set-off and proof of balance.— insolvents upon the eve of bankruptcy Where, at the suggestion of the pres- gave to their banker a check upon ident of a bank in which a company, funds to their credit in that bank to indebted to it upon certain notes, kept apply upon the indebtedness due to an account, it was agreed that he the bank, although the banker and the should O. K. checks drawn against bankrupts knew of the insolvency of said account, but he did not attempt the latter. The supreme court held in any way to interfere with the the transaction to be a preference and management of the business of the voidable by the assignee in bank- company or seek to control it, and ruptcy and that he had the right to was not aware of its insolvency at the recover the amount so paid, and fur- time the agreement as to the checks ther held that although possibly had was made, the bank, upon the adjudi- the bankrupt stood upon its right of cation of the company, may set off its off-set, that right might have been deposits against the notes, and prove available to them, yet when they its claims for the balance. In re treated the money as the bankrupt's Medaris-Vine Carriage Co., 15 Am. own property, taking his check and B. R. 897, 15 Ohio Fed. Dec. 223. crediting the amount as a payment on 26. Steinhardt v. Nat. Park Bank, the indebtedness, the transaction be- 19 Am. B. R. 72, 120 N. Y. App. Div. came a voidable preference. 255, rev'g 18 Am. B. R. 86; Irish v. 25. New York County National Citizens Trust Co. (D. C, N. Y.), 21 Bank v. Massey, 192 U. S. 138, IX Am. B. R. 39. Am. B. R. 42, reversing 8 Am. B. R. r96 The Law and Peactice in Bankeuptcy. Joint aad Several Claims. [§ 68-a. after the petition in bankruptcy was filed." And so also the amount of a note held by a bankrupt bank may be set off against the amount on deposit in the bank to the credit of the maker of the note.^* f. Being in the same right. — To be mutual, debts between parties must be owing to and be due in the same rights and capaci- ties.^" 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 creditor of a corporation cannot set off his liability for unpaid subscriptions for its stock,^^ and, where the ownership of the claim is merely nominal, it cannot be set off against a debt due from such owner.'^ 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.''* But the trustee in bankruptcy may set off claims which have vested in him, even though they never vested in the bankrupt.'* A surety who, by paying the principal's debt, has become subrogated to the latter's fights may, of course, avail himself of a set-off in favor of the principal. '° Such debts are then in the same right. g. Joint and several claims. — Here the general rule is that a joint claim, as that of a partnership, cannot be set off 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 prop- erty. Conversely, however, when the partnership is the debtor, their liability being in solida, a debtor of one of them may set off 27. In re Semmer Glass Co. (C. C. 100; Babbitt v. Read (Cir. Ct., N. A., 2d Cir.), 14 Am. B. R. 25, 135 Y.), 23 Am. B. R. 254, 173 Fed. Fed. 77. As to oflf-set of amount of 712. note not matured at the date of the 33. In re Lane, Fed. Cas. 8,043. adjudication, see Frank v. Mercantile Compare Boyd v. Mangles, 16 Mees Nat. Bank, 182 N. Y. 264, 14 Am. & W. 336. B. R. 125. 33a. In re Harper (D. C, N. Y.), 28. In re Shults (D. C, N. Y.), 23 Am. B. R. 918, 175 Fed. 412. 13 Am. B. R. 84, 132 Fed. 573. 34. In re Crystal, etc., (D. C, 29. West V. Fryer, 2 Ring. N. C. Vt.), 4 Am. B. R. 55, 104 Fed. 265. 455; Ex parte Bailey, 1 M. D. & D. 35. Compare Bankr. Act, §§ 16 263. and 57-i. See, also, In re Bingham 30. Bishop V. Church, 3 Atl. 691. (D. C, Vt.), 2 Am. B. R. 223, 94 31. In re Beeher (D. C, Pa.), 15 Fed. 796; also Morgan v. Wordell Am. B. R. 228, 139 Fed. 366. (Sup. a.. Mass.), 6 Am. B. R. 167. 32. In re Goodman Shoe Co. (D. 36. Gray v. Rollo, 18 Well 629- C, Pa.), 3 Am. B. R. 200, 96 Fed. Ex parte Twogood, 11 Ves. 516; Ex 949; Sawyer v. Hoag, 17 Wall. 610; parte Caldicott, 25 Ch. D. 716; In Jenkins v. Armour, Fed. Cas. 7,260; re Shults (D. C, N. Y.) 13 Am. In re Royce Dry Goods. Co. (D. C, B. R. 84, 132 Fed. 573. Mo.), 13 Am. B. R. 258, 133 Fed. Set-offs and CorNTEKCLAiMS. 797 § 68-b ( 1 ) . ] Debt Must be Provable. his indebtedness against such joint debt to him.^^ A further ex- oeption 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."*^ h. Waiver of set-off. — If a creditor proves his debt, without claiming set-off, he will generally be deemed to have waived it.*" 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.*^ n. WHEN NOT ALLOWED. a. Not provable against the estate. — Subdivision 1 of sub- section b 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 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 daims whose owners have been pre- ferred, the word " provable " was held to mean the same as " prov- able 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. Wardell, supra, the gen- eral rule is that no claims tainted with a preference may be as- serted by way of set-off, except those within the terms of § 60-e. The latter is new. It has already been discussed.*^ b. Purchased after bankruptcy or within four months before. — (1) In qeneeal. — Subsection 2 of subdivision h prevents the 37. Tucker v. Oxley, 5 Cranch, 34. (Ky.), 198; Standard Oil Co. v. 38. In re Crystal, etc., Co. (D. C, Hawkins, 74 Fed. 395. Vt.), 4 Am. B. R. 55, 104 Fed. 265. 42. See In re Dillon (D. C, 39. These words occur in the Eng- Mass.), 4 Am. B. R. 63, 100 Fed. 627. lish section on set-off. 43. Clark v. Iselin, 21 Wall. 360. 40. Russell V. Owen, 61 Mo. 185. 44. Morgan v. Wordell (Sup. Jud. 41. Cases under the law of 1867 Ct., Mass.), 6 Am. B. R. 167. Oom- are: Hunt v. Holmes, Fed. Cas. 6,890; pare In re Kingsley, Fed. Cas. 7,819. Brown v. Farmers' Bank, 6 Bush 45. See under Section Sixty of this work. 798 The Law and Peactice in Bankkuptcy. Purchased after Bankruptcy. [§ 68-b (3). 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 doc- trine 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 creditors, partly for cash and partly on credit, the amount due on the sale should not be off-set against the creditor's claim against the estate.*"* This pro- vision prevents the set-off, against the amount due by a bankrupt to a creditor, of orders issued by employes of such creditor within the four months' period directing the payment of a part of the wages earner by them on account of supplies furnished by the bankrupt.*' (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 in- corporated by the amendatory act of 1874, but only as to involun- tary cases; the words "with knowledge or notice," etc., to the end of the subsection, are new. The use of the conjunction "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 in- solvent, or had committed an act of bankruptcy.*' Such proof vnll not be difficult if the purchase antedates 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.*" 45a. In re White (C. C. A., 7th revg. 21 Am. B. E. 98; as to cir- Cir.), 24 Am. B. R. 197, 177 Fed. cumstances under which hurden of 194. proof is upon the claimant, see In 46. Western Tie & Timber Co. v. re Shults (D. C, N. Y.), 14 Am. Brown, 196 U. S. 502, 13 Am. B. R. B. R. 378, 135 Fed. 623. 447. 49. Hovey v. Insurance Co., Fed. 47. In re City Bank, Fed. Cas. Cas. 6,743; Hunt v. Holmes, Fed 2,742. Compare Hitchcock v. Rollo, Cas. 6,890; In re Perkins, Fed. Cas Fed. Cas. 6,535. 10,982; Bashore v. Rhoades, 16 N, 48. Tomlinson v. Bank of Lexing- B. R. 72. Compare also Smith v, ton (C. C. A., 4th Cir.), 16 Am. B. Hill, 8 Gray, 572; Smith v. Brinker R. 632, 145 Fed. 824; Mason v. Her- hoff, 6 N. Y. 305; also the numer kimer Co. Bank (C. C. A., 2nd Cir.), ous English cases on the same sub- 22 Am. B. R. 733, 172 Fed. 529, ject. SECTION SIXTY-NINE. POSSESSION OF PROFERTT. § 69. Possession of Property, — a A judge may, upon satisfao- tory proof, by affidavit, that a bankrupt against whom an involun- tary petition has been filed and is pending 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 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 bank- rupt 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, con- ditioned to turn over such property, or pay the value thereof in money to the trustee, in the event he is adjudged a bankrupt pur- suant to such petition. Aiialogoiui provialoiu: In U. S.: Act of 1867, § 40, R. S., S 6024. In Emg.: Act of 1883, none. Crosi referenees: To tbe law: §§ 2(3) (15), 3-e, 38-a(3). To tihe General Orders: X, XIX. To the Forms: Nos. 8, 9, 10. SYNOPSIS OF SECTION. . Seizure of Bankrupt's Property. a. Cross-references. b. Scope of section. c. Bond of petitioning creditors. d. Bonding the property hack. e. Remedy where property is claimed by a third person. f. The marshal's liability. g. Practice. I. SEIZUB£ 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 1. See under § 3, ante. 790 800 The Law and Peactiob in Bankeuptoy, Scope of Section; Bonding Property Back. [§ 69. diflBcult to conceive of a case within the terms of § 69 which is not also within those of the sections just mentioned. Furtiier, a seiz- ure 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 authorized 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 be 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 imder this section must satisfy the judge that an alleged involun- tary 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 deteri- orate 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 involutary cases, but not before the bankruptcy petition is filed or after the adjudication.^ The remedy is, therefore, provisional. Its purpose is clearly to pre- vent deterioration or waste in the often long interval between the filing of an involuntary petition and an adjudication or dismissal. c. Bond of petitioning creditors. — 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 indem- nify 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 section itself, are somewhat broader than those employed in § 3-e. It is thought that they mean sub- stantially the same thing. "Damages" doubtless includes "cos+^s" and "expenses." The discretion given the judge as to the sureties is no more than is allowed him by general statutes.* d. Bonding the property back.— This is equivalent to the re- claimer of a defendant in replevin. The judge has like discre- 2. Act of 1867, § 40, R. S., § 5024. "against whom an involuntary peti- 3. Thi» follows from the words tion has been filed and is pending." 4. See under S 3. Possession of Pbopebty. 801 5 69.] Where Property is Claimed by Third Person; Practice. tion 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 section applies only to cases -where the property is physically in the possession of the bankrupt or his agent® The remedy is summary, as is that where a bankrupt, after adjudica- tion, 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 is liable to that other.' It is elementary that his warrant is not operative outside of his district. g. Practice. — This remedy vrill rarely be resorted to. The re- quirement of a bond against damages will halt most petitioning creditors. Besides, there are the equivalent remedies of a Teceiver or an injunction, or the two combined.^" "When resort is had to it, the practice is simple. The application is made by motion based on affidavits, usually accompanying and perhaps referring to the . involuntary petition, but always separate and distinct from such petifion.-*^ The affidavits should be positive in their averments, not mere statements of opinions or conclusions, and establish all the 5. Compare In re Harthill, Fed. sidered under §§ 60, 67 and 70. A\1 Cas. 6,161. these remedies are really available 6. In re Eockwood (D. C, la.), 1 only after adjudication. Compare, for Am. B. R. 272, 91 Fed. 363; In re exceptional case. In re Bender (D. C, Kelly (D. C, Tenn.), 1 Am. B. R. Ark.), 5 Am. B. R. 632, 106 Fed. 873; 306, 91 Fed. 504. Matter of Andre (C. C. A., 2d Cir.), The flUng of a petition in bank- 13 Am. B. R. 132, 68 C. C. A. 374. ruptcy does not confer summary ju- 9. In re Muller, Fed. Cas. 9,912; In risdiction over property transferred re Marks, Fed. Cas. 9,095; Marsh v. to and in possession of a trustee for Armstrong, 20 Minn. 81. This doc- creditors. Morning Telegraph Pub. trine is subject to exceptions. In re Co. V. Hutchinson Co. (Sup. Ct., Vogel, Fed. Cas. 16,982; In re Hav- Mich.), 17 Am. B. R. 425. ens. Fed. Cas. 6,230. 7. In such a case, a recusant bank- 10. Compare Blake v. Valentine rupt is, however, reached by contempt (D. C, Cal.), 1 Am. B. R. 372, 89 process. Fed. 691. See, also, generally, § 8. See, generally, under § 23. Note, 2(3) (15) and § 11-a, ante. also, the method of avoiding prefer- 11. In re Kelly (D. C, Tenn.), 1 ences and fraudulent transfers con- Am. B. R. 306, 91 Fed. 504. 51 802 The Law and Peactice in Bankeuptoy. Practice. [S 69. essential facts.** In siiort, they sihould 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 re- claiming the property. It is thought that affidavits for the justi- fication 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 warrant 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 warrant of seizure will not be issued under this section except upon a compliance with all the conditions pre- scribed 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.** 12- H. 14. See Form No. 10. 13. In re Sarsar (D. C, Tenn.), 9 Am. B. B. 576, 120 Fed. 40. SECTION SEVENTY, TITUS TO PROPERTY. § 70. Title to Property. — a The trustee of the estate of a bank- rupt, upon his appointment and qualification, and his successor or successors if he shall have one or more, upon his or their ap- pointment and qualification, shall in turn be vested by operation of law with the title of the bankrupt, as of the date he was ad- judged a bankrupt, except in so far as it is to property which is exempt, to all (1) documents relating to his property; (2) in- terests in patents, patent rights, copyrights, and trade-marks; (3) powers which he might have exercised 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 might 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 repre- sentatives, 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 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 re- voked, the trustee shall, upon his appointment and qualification, 803 804 The Law and Pbactioe in Bankeuptcy. Synopsis of Section. [S 70. 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. e The trustee may avoid any transfer by the bankrupt of his property 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 prop- erty 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 jurisdictiov\ if bankruptcy had not intervened, shall have concurrent juris- diction.* f Upon the confirmation of a composition offered by a bankrupt, the title to his property shall thereupon revest in him. Analogoiu provisions: In U. S.: As to property in general passing to the trustee, Act of 1867, § 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, E. S., §§ 5062, 5062B, 5063, 5064, 5065, 5066; As to sales of incumbered prop- erty, Act of 1867, § 20, R. S., § 5075. In Eng.: As to property passing to the trustee, Act of 1883, 5§ 43, 44, 59; As to burdensome property. Act of 1883, § 55; Act of 1890, J 13; As to sales by the trustee, Act of 1883, §§ 56(1), 70. Croni references: To the law: §§ 1(13), 2(3) (7) (16), 3-e, 7(4) (5), 12, 13, 14, 15, 47-a(2), 60-b, 67-e, 69. To tie General Orders: XVIII, XXVIII. To tbe Forms: Nos. 13, 42, 43, 44, 45, 46. SYNOPSIS OF SECTION. TITIiE TO FROPEBTT. I. Section In General. a. Comparative legislation. b. Scope of section. c. Conflict between bankruptcy act and State law. II. Trustee Vested with Title of Bankrupt. a. In general. b. When title vests. • This sentence was added by the amendatory act of 1903. Title to Peopeett. 805 5 70.] Synopsis of Section. c. Bankrupt's title between petition filed and (1) ad- judication and (2) appoirdment of trustee. d. What vests. e. Subject to all claims, liens and equities. III. Title to Specific Property. a. In general. b. Documents relating to bankrupt's property. c. Patents, copyrights, and trade-marks. d. Personal powers. e. Property fraudulently transferred. (1) In qeneeal. (2) Effect of a general assignment. f. Property which might have been transferred or levied upon. (1) In general. (2) Kemaindees and inteeests in tettst. (3) DOWEE AND CUETESY EIGHTS. (4) Licenses, feanchises, and peesonal privi- leges. (5) Life insurance policies. (6) Property sold to the bankrupt on condi- tion. (7) Property affected by fraudulent repre- sentations. (8) Eeclamation proceedings. g. Bights of action. IV. Burdensome and Exempt Property. a. Burdensome property. (1) In geneeal. (2) Practice. b. Exempt property. (1) In general. (2) Conflict between § 6 and § 70-A (5). V. Appraisers and Appraisal. a. In general. b. Practice. VI. Sales of Property. a. In general. b. Illustrative cases. c. General Order XVIII. 806 TiiE Law and Peacticb in Bankeuptoy. Scope of Section. 18 70. d. Sales of incumbered property. e. Practice on sales. i. Resale— ^iJien granted. VII. Transfer of Trustee's Title to Purchaser. VIII. Title of Trustee where Composition is set aside or Dis- charged Revoked. IX. Transfers Fraudulent under State Laws may be Avoided by Trustee. a. In general. b. The saving clause. c. The amendment of 1903. I. SECTION IN GENERAL. a. Comparative legislation. — The analogous provisions of the English law are referred to in the Synopsis;. The main differ- ences are that title vests as of the date of the commission of the first act of bankruptcy,^ and. the property divisible among cred- itors includes not only what the debtor had at the commencement of the proceeding, but also what is acquired by or devolves on him before his discharge.^ Each of our laws has had clauses regulating the vesting of title and indicating what vests.* That of 1867 is most nearly like the section under discussion.* Specific differ^ ences are considered in appropriate paragraphs, post. The dif- ferences 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 (b) as adopting as a part of the bankruptcy system 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 bankrupt's property. Besides, it provides for the appointment and reports 1. Eng. Act of 1883, § 43. son v. Heaney, Fed. Cas. 9,098. 2. Eng. Act of 1883, § 44. 5. See under § 21, ante. Compare, 3. See " Analogous Provisions " at also, law of 1841, where the decree head of section. itself divested the bankrupt's title. 4. For cases under that law, see In 6. See post, under " Transfers re Eosenberg, Fed. Cas. 12,055; In Fraudulent Under State Laws May re Wynne, Fed. Cas. 18,117; Mark- be Avoided by Trustee." TiTLK TO Peopeety. 807 5 70-a.] Trustee Vested with Title. of appraisers. The other subdivisions, c, d, and f, have to do either with minor matters of practice or else refer directly to and would have been more appropriately incorporated in sections pre- viously discussed.''' i ' c. Conflict between bankruptcy act and state law. — ^Where the trustee in bankruptcy 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 ques- tion 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 regu- lates 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.* II. TRUSiTE(E 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 enumer- ated, " except in so far as it is to property which is exempt." b. When title vests. — Under the previous law, the trustee's title vested by relation as of the date of the commencement of the proceeding. This casts doubt on the validity even of hona 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 of the date he was adjudicated a bankrupt " seem to have been inserted to meet these difficulties.*" 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.** The filing of an involuntary petition does 7. As to d, see §§ 13, 15. As to f, against the latter eo nomine does not see § 12. make it void as against the former." 8. In re Littlefield (C. C. A., Ist 9. Compare Ex parte Foster, Fed. Cir.), 19 Am. B. R. 18, 155 Fed. 838, Cas. 4,960; Ex parte Newhall, Fed. holding that "although the rights of Cas. 10,159; In re Rust, Fed. Cas. a trustee in bankruptcy and those of 12,171. an assignee in insolvency under the 10. See House Report Ko. 1,228, statute of Massachusetts are defined 54th Congress. in similar language, yet a statute 11. In re Pease (Ref., N. Y.), 4 making a certain transfer void as Am. B. R. 578; In re Barrow (D. C, 808 The Law and Peactioe in Bankbuptct, Bankrupt's Title Between Adjudication and Appointment of Trustee. [§ 70-a. 3iot, ipso facto, take from the alleged bankrupt his dominion over his property; while his disposition of his property may be invali- dated 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 ap- propriate proceeding under § 3-e or § 69.^* The trustee must exercise his option to accept within a reasonable time or he wiU be held to have waived his rights.^* c. Bankrupt's title betv^een petition filed and (i) adjudication and (2) appointment of trustee. — It follows that, under the pres- ent 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 infringment 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 adjudication, fraud being absent, it may be transferred ; but, 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 commencement of the proceeding f*^ or shall vest " as of the Va.), 3 Am. B. R. 414, 98 Fed. 582; B. R. 692, 186 N. Y. 58, rev'g 12 In re Burka (D. C, Mo.), 5 Am. B. Am. B. R. 162; Fuller v. New York R. 12, 104 Fed. 326; In re Elmira ^*',«, I°«- 9°'}^^ ^^»^- ^^' (Gordon Steel Co. (D. C, N. Y.), 5 Am. B. I-J^^"^T'%1 ^I'^n^' ^"f ^^.f R. 484, 109 Fed. 456. Compare In re ^5 go 3^4. ' ' Harris (Ref., 111.), 2 Am. B. R. 359, 16.' Myers v. Callaghan, 5 Fed. and In re Mussey (D. C, Mass.), 3 726. Am. B. R. 592, 99 Fed. 71. 17. Hampton v. Rouse, 22 Wall. 12. In re LaPlume Condensed Milk 263, 22 L. Ed. 755. Co. (D. C, Pa.), 16 Am. B. R. 729, ^.^^^/'^J'^^ ''■.,^°7' ^ ^^- ^- ^■ 145 Fed. 1,013; American Trust Co. !„' / , p '^A ^; ^Hl ^^ Pickens v. Tir 11- //-I /-I A oj /-!• 1 11 A— Dent C. C. A., 4th Cir.), 5 Am. B. V. Wallis (C. C. A., 3d Cir.), 11 Am. ^ ^^l j^g j,^^ ggg '' B. R. 360, 126 Fed. 464. 19, i„ ^^ gngle (D. a, Pa.), 5 13. Smith V. Gordon, 6 Law Rep. Am. B. R. 372, 105 Fed. 893; State 313. Bank of Chicago v. Cox (C. 0. A., 14. Though the better view is that, 7th Cir.), 16 Am. B. R. 32, 143 after adjudication, it is in custodia ^ed. 91. Compare In re Corbett legis. Keegan v. King (D. C, Ind.), <°- %^'^-'>' ^ ^°'- ^- ^- 224, 104 3 Am. B. R. 79, 96 Fed. 758; March 20 In re Appel (D C N b) 4 V. Heaton, Fed. Cm. 9,061; In re Ro- Am. B. R. 722, 103 Fed. 931; FreAch jsenberg, Fed. Cas. 12,055. v. White, 18 Am. B. R. 905, 78 Vt. 15. Rand v. Railway Co., 16 Am. 89, 62 Atl. 35. See, also. In re Cramond (D. C, N. Y.), 17 Am. B. R. 22, 145 Fed. 966, 'hold- Title to Property. 809 § 70-a.] What Vests. date he was adjudicated a bankrupt."" The trustee takes no title to exempt property; the right to exemption is to be determined as of the date of the adjudication.^^ Illustrative cases under the former law, which, however, for reasons above stated, should be read with caution, will be found in the foot-note.^" d. What vests. — Here 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. But he acquires title only to that which the bankrupt had at that time. 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 proceeding or those who, for statutory reasons, are not affected by the discharge.^' A claim for a reward for in- formation 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 ing that the amount due to a bank- C, N. Y.), 5 Am. B. E. 593, 106 Fed. riiyit upon a paving contract with a city, when he files his petition, is properly paid to his trustee. Matter of Hooks Smelting Co. (D. C, Pa.), 15 Am. B. E. 83, 138 Fed. 954, hold- ing that trustee is entitled to combi- nation of safe belonging to bankrupt at time of filing petition. 21. Hiscoek v. Varick Bank, 18 Am. B. E. 1, 9, 206 U. S. 28, aff'g 15 Am. B. E. 362. ITpon the appointment and qualification of a tmstee, his title relates back to the time of the adjudication, and his rights and remedies as to property previously disposed of are definitely defined and limited by the bankruptcy act. In Te Letson (C. C. A., 8th Cir.), 19 Am. B. E. 506, 157 Fed. 78. 22. Matter of Fletcher (Eef., Ohio), 16 Am. B. E. 491. See, also. In re Letson (C. C. A., 8th Cir.), 19 Am. B. E. 506, 157 Fed. 78. 23. Connor v. Long, 104 U. S. 228; Chapman v. Brewer, 114 U. S. 168 ; Howard v. Compton, Fed. Cas. fi,758 ; Babbett v. Burgess, Fed. Cas. fi93; Miller v. O'Brien, Fed. Cas. S,586; In re Lake, Fed. Cas. 7,992; Stevens v. Bank, 101 Mass. 109. 24. Compare Act of 1867, | 14, E. S., § 5044. 25. In re Pease (Eef., N. Y.), 4 Am. B. E. 578; In re Burka (D. C, Mo.), 5 Am. B. E. 12, 104 Fed. 326. Por peculiar cases bearing on this general doctrine, see In re Meyer (D. 828; McFarland Carriage Co. v. So- lanas (D. C, La.), 6 Am. B. E. 221, 108 Fed. 532; Matter of Sherman Mfg. Co. (Eef., Mass.), 15 Am. B. E. 740; In re Driggs (D. C, N. Y.), 22 Am. B. E. 621, 171 Fed. 897, holding that wages or salary due at the time of filino' the petition belong to the trustee unless an exemption is claimed, and cannot be reached un- der an execution issued within the four months period; In re Peacock CD. C, N. Car.), 24 Am. B. E. 159, 178 Fed. 851. 26. In re Harris (Eef., 111.), 2 Am. B. E. 359. Iiegacies. — Where testator died in the morning of the day on which a legatee filed a petition and was ad- judicated a. bankrupt, the legacy vests in his trustee. In re McKenna D. C, N. Y.), 15 Am. B. E. 4, 137 Fed. 611. Otherwise where legacy takes effect after adjudication. In re Woods (D. C, Pa.), 13 Am. B. E. 240, 133 Fed. 82. 27. In re Eennie (Eef., Ind. Terr.), 2 Am. B. E. 182; In re Stoner (D. C, Pa.), 5 Am. B. E. 402, 105 Fed. 752. 28. See Bankr. Act, § 17. In re West (D. C, Greg.), 11 Am. B. E. 782, 128 Fed. 205. Text cited and approved in Whitlock'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. 810 The Law and Practice in Bankeuptcy. Subject to all Claims, Liens and Equities. [§ 70-a. his failure to oppose his bankruptcy does not estop him from insisting that the reward is his own property.^'* The trustee does not take title to money and property in possession of third persons which did not belong to the bankrupt prior to his adjudication. The question of ownership is one of fact.^° Thus, though the title may not vest in a trustee for months or even years, the line of cleavage as to divisible property is the date the petition is filed. The only excep- tions to this rule are stated in subdivision d, considered post. e. Subject to all claims, liens, and equities. — It is well settled that the trustee takes not as an innocent purchaser, but subject to all valid claims, liens, and equities.'" Thus, he has no better title than the bankrupt had,'^ and is affected with every equity which would aifect the bankrupt himself if he were asserting the same rights and 28a. Matter of Ghazal (C. C. A., chaser for value, but as the bank- 2d Cir.), 23 Am. B. E. 178, 174 Fed. rupt held the property, subject to 809. all valid claims, liens and equities. 29. Clay v. Waters (C. C. A., 8th Zartman v. First Nat. Bank, 216 U Cir.), 20 Am. B. E. 561, 161 Fed. S. 134, 23 Am. B. E. 635, aff'ff 189 oi = . ivf„+(-„. „* n,r„r.„_j /r. r, A jj^ y. 533, 82 N. E 1 126 31. In re N. Y. Econ. Pr. Co. (C. C. A., 2d Cir.), 6 Am. B. E. 615, 110 Fed. 514; In re Platteville Foundry & Machine Co. (D. C, Wis.), 17 Am. 815; Matter of McCord (C. C. A., 2nd Cir.), 23 Am. B. E. 164, 174 Fed. 820. 30. Chattanooga Nat. Bank v. Eome Iron Co. (C. C, Ga.), 4 Am. B. E. 441, 102 Fed. 755. The valid B. E. 291, 293,~ 147""Fed.''828r hold liens referred to are those valid as to ing that the trustee does not take creditors. In re Cramond (D. C, property sold to the bankrupt by N. y.), 17 Am. B. E. 22, 145 Fed. conditional sale with a reservation 966; Eeceivers, etc., v. Staake (C. of title in the vendor. The prop- C. A., 4th Cir.), 13 Am. B. E. 281, erty is subject to all equities im- 133 Fed. 717. This case was affirmed pressed upon it in the hands of the in 202 U. S. 141, 15 Am. B. E. 639. bankrupt. Compare In re Standard Laundry In Pennsylvania the vendee Co. (D. C, Cal.), 7 Am. B. E. 254, under a contract for a sale of land 112 Fed. 126; Crosby v. Miller (C. is regarded as the real owner and A., D. Col.), 16 Am. B. E. 805, 25 the vendor has no lien thereon aside E. I. 172; In re Kolin (C. C. A.,7th from his legal estate, or the remedy Cir.), 13 Am. B. E. 531, 134 Fed. which he has by reason thereof; so 557; In re Platteville F. & M. Co. where the vendee is adjudged a bank- (D. C, Wis.), 17 Am. B. E. 291, rupt before the purchase price is 147 Fed. 828; Godwin v. Murchison paid, the trustee succeeds to his in- Nat. Bank, 22 Am. B. E. 703, 145 terests and is entitled to the pro- N. C. 320, 59 S. E. 154. eeeds of the sale of certain removable Trustee takes property subject fixtures erected thereon by the ven- to equities, etc. — The trustee lakes dee. In re Clark & Co (DC Pa ) the property of the bankrupt, in 9 Am. B. E. 252, 118 Fed. 358 • Bush • cases unaffected by fraud, in the same v. Export Storage Co. (C Ct J plight and condition that the bank- Tenn.), 14 Am. B. E 138 136 Fed' * rupt himself held it, and subject to 918. i all the equities impressed upon it in Trade Fixtures may be removed the hands of the bankrupt, except in by trustee under a lease providins cases where there has been a convey- for surrender of premises in sood ance or encumbrance of the property order, with all improvements etc. which IS void as against the trustee Montello Brick Co v Trexler (C C by some positive provision of the act. A., 6th Cir.), 21 Am B R RQfi 167 Thompson v. Fairbanks, 13 Am. B. Fed. 482. ' E. 437. 445, 196 U. S. 516. The Title no better than that of trustee takes his interest of the bankrupt Mr Justice Ppnkh.™ bankrupt subject to such liens or in- speaking"^ for the supr^^e court Tn cumbrances as would have affected Security Warehousing Co. v. Hand it had no adjudication in bankruptcy 206 U. S. 415 19 Am R T! 9qi been made. Matter of Alden (Eef., aflf'g 16 Am. B. E. 49* snid "It Ohio), Ifi A,.,. B. E. 3fi2, 370. A is no new doctrine that tlea-i^nee trustee takes nt as a hona fide pur- or trustee in bankruptcy Varcsfn Title to Pkopebty. 8H § 70-a.] Subject to all Claims, Liens and Equities. interests.'^ A trustee in bankruptcy stands in the shoes of the bankrupt, and has no better title than he, in the absence of fraud, or of attaching or judgment creditors at the time of the filing of the petition.'" 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 trus- tee.'* It is the plain purpose of the statute that the title and the shoes of the bankrupt, and that the property in his hands, unless otherwise provided in the bankrupt act, is subject to all of the equities impressed upon it in the hands of the bankrupt. This has been the rule under former acts and is now the rule." See, also. In re Gebbie & Co. (D. C, Pa.), 21 Am. B. E. 694, 167 Fed. 609; Wood Co. v. Eubanks (C. C. A., 4th Cir.), 22 Am. B. R. 307, 169 Fed. 929. 32. In re Dow, Fed. Cas. 4,036, 6 N. B. E. 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 the creditors, yet stand in the place of the bankrupt, and they can take in no better man- ner than he could." 33. In re Blake (C. C. A., 8th Cir.), 17 Am. B. E. 668, 150 Fed. 279; In re Great Western Mfg. Co. (C. C. A., 8th Cir.), 18 Am. B. E. 259, 152 Fed. 123; In re Dunlop (C. C. A., 8th Cir.), 19 Am. B. E. 361, 367, 156 Fed. 945; In re Chant- ler Cloak & Suit Co. (D. C, R. I.), 18 Am. B. E. 498, 151 Fed. 952; Wrede v. Gilley (N. Y., Sp. T. Sup. Ct.), 21 Am. B. E. 170, revd. oa other grounds, 21 Am. B. E. 821, 132 N. Y. App. Div. 293. Whatever rights a third party had against the property of a bank- rupt before the adjudication, that party, in the absence of fraud, or fixed liens created by State statutes in favor of others, has against his estate in bankruptcy. Atchison, etc., Ey. Co. V. Hurley (C. C. A., 8th Cir.), 18 Am. B. E. 396, 153 Fed. 503. Stochs honght hy a bankrupt broker for a customer with the cus- tomer's money belong to the cus- tomer and the certificates cannot be retained by the trustee of the bank- rupt. In re Meadow, Williams & Co. (D. C, N. Y.), 23 Am. B. E. 124, 173 Fed. 694, aflf'd 24 Am. B. R. 251, 177 Fed. 1,004. Trustee takes property in same condition as banhrni't. — 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 bankrupt 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 bankrupt. The bankrupt's title is his title, whether it be to things in possession or to choses in action. His 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 bank- rupt himself. Davis v. Compton (C. C. A., 3d Cir.), 20 Am. B. R. 53, 158 Fed. 735. 33a. In re Martin (C. C. A., 8th Cir.), 23 Am. B. R. 151, 173 Fed. 597. 34. 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 was com- pleted and had been shipped, and thereupon were paid the price, it ap- pearing that no engine existed at the time it was represented as having been shipped, but that subsequently two were built, either of which would answer the contract, it was held that the bankrupt and his assignee were both estopped by the fraud of the bankrupt from denying that one of the engines then in their possession was the property of the parties who had thus been defrauded. In re Mc- Kay & Aldus, 3 N. B. R. 50, 1 Lowell, 345. Compare Kelley v. Scott, 49 N. Y. 595, citing , Mitchell v. Win- slow, 2 Story, 630. Where a party fraudulently induces an owner to part with his title to goods, the de- frauded party having the right to disaffirm the contract and to recover the goods, may assert that right against the trustee in bankruptcy as well as against the bankrupt him- self. Donaldson v. Farwell, 15 N. B. R. 277, Fed. Cas. 3,983, 5 Biss. 451, aff'd 93 U. S. 631; In re Gany (D. C N. Y.), 4 Am. B. R. 576, 103 Fed. 030. 812 The Law and Peactice in Bankeitptoy. Title to Specific Property. [§70-a. right to all things and rights which do not fall within the vesting words of § 70 shall remain in the bankrupt.*® If property is in the bankrupt's hands as bailee, the trustee holds it as such, and the bailor may recover the proceeds.^®^ If property is impressed with a trust in the hands of the bankrupt it passes to the trustee subject to the same trust.*® 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 trus- tee.* '^ The cases under the present law are already numerous.** They are, however, so dependent on their own facts as to make a summary impossible. The general rule is well stated and the cases reviewed in the Chattanooga National Bank case.*® in. TITLX: TO SPECIFIC fbopehty. a. In general — Subsection a specifies particularly the property to the title of which the trustee is vested upon the adjudication of the bankrupt. It was intended to classify in the several sub- divisions all the property of which the bankrupt might then be possessed, which should become a part of the bankrupt estate for administration and distribution as provided in the act. A care- ful consideration of these subdivisions will clearly indicate their comprehensiveness; everything belonging to the bankrupt which his creditors could reach by judicial process, everything which might be obtained by his creditors to aid in securing the payment of their claims, and all property rights which might have been subjected to such claims, become assets in the hands of the trustee ; except such as are herein expressly saved. Where there was an action to Cir.), 22 Am. B. R. 740, 171 Fed. foreclose a mortgage, and pro- -375. ceedings for the appointment of a 36. Taylor v. Plumer, 3 Maule & receiver of the renta and profits were Slew. 562. See, to the same effect, instituted before the adjudication of Cook v. Tullis, 18 Wall. 332; Haw- the mortgagor as bankrupt, and there kins v. Blake, 108 U. S. 422. was a deficiency on the sale of the 37. Matter of Berry & Co. (C. C. mortgaged premises it was held that A., 2d Cir.), 16 Am. B. R. 564, 146 the assignee in bankruptcy could not Fed. 623. claim the fund in the receiver's 38. For instance. In re Gfldman hands, as against the mortgagee. (D. C, N. Y.), 4 Am. B. R. 100, 102 Hayes v. Dickinson, 15 N. B. R. 350, Fed. 122; Morton v. Lumber Co. 9 Hun, N. Y. 277. (Ref., Ark.), 5 Am. B. R. 850; Spen- 35. In re Home Discount Co. (D. cer v. Dunplan Co. (C. C, Pa.), 7 C, Ala.), 17 Am. B. R. 168, 181, 147 Am. B. R. 563, 112 Fed. 638. Corn- Fed. 538. pare Marden v. Phillips (D. C, 35a. In re Reboulin File & Co. (D. Mass.), 4 Am. B. R. 566 103 Fed. C, N. J.), 21 Am. B. R. 296; Wood 190. See, also, sum nom. "Reclama- Co. V. Van Story (C. C. A., 4th tion Proceedings," post. 39. 4 Am. B. R. 441, 102 Fed. 755. Title to Peopeett. 813 J70-a.] Documents; Patents, etc.; Property Fraudulently Transferred. b. Documents relating to bankrupt's property. — Subdivision 1 vests the trustee with title to all " documents relating to his prop- erty." Documents include deeds, contracts, securities, bills receiv- able, notes, bank books, bills of exchange, account books and all papers and books Telating to the bankrupt's business.*" Docu- ment is defined as including " any book, deed, 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.** The similarity be- tween these classes of property and those known as " personal privileges " should be noted.*® d. Personal powers. — Subdivision 3 provides that powers which the bankrupt might have exercised in his own behalf pass to the trustee. This subdivision is expressive of a general rule of law. A power which is beneficial to a bankrupt donee vests in his trustee; not so a power in trust.*® 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) Iisr geneeal. — 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 trans- 40. In re Hess (D. C, Pa.), 14 (jonijjare In re McBride (D. C, N. Am. B. R. 559, 134 Fed. 109. See Y.), 12 Am. B. R. 81, 132 Fed. 285. Schedule B(6) in Form No. 1. 44. In re McDonnell (D. C, Iowa), 41. Bankr. Act, 5 1(13). 4 Am. B. R. 92, 101 Fed. 239; In re 42. In re Hess (D. C, Pa.), 14 Am. Dann (D. C, 111.), 12 Am. B. R. 27, B. R. 559, 134 Fed. 109; In re Mad- 129 Fed. 495. den (C. C. A., 2d Cir.), 6 Am. B. R. 45. See sub nom. "Licenses, Fran- 614, 110 Fed. 348. chises and Personal Privileges," post. 43. An assignment of a copy- 46. Compare subd. (5) discussed, right vests title in the assignee which post. passes to his trustee in bankruptcy. 47. Fisher v. Cushman (C. C. A., In re Howley-Dresser Co. (D. C, N. 1st Cir.), 4 Am. B. R. 646, 654, 103 Y.), 13 Am. B. R. 94, 132 Fed. 1,002. Fed. 860. 814 The Law and Practice in Bankbuptcy. Property which Might have been Transferred. [§ 70-a(5). ferred,** 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 trus- tee is vested not only with the title of the property, but also with the creditors' rights of action with respect to property of the bank- rupt 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 bank- rupt.** Where after the filing of an involuntary petition and be- fore 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 bankruptcy proceedings.*" It is ap- parent that this provision applies to all property transferred by the bankrupt at any time in fraud of his creditors.*^ The trustee's remedy when title is claimed adversely is, as has been seen, usually a suit in the proper court. This s.ubdivision should be read in connection with § 23, § 67-e, and § 70-e. (2) Effect of a geneeal assignjment. — A general assign- ment, 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 general assignee does not become an adverse claim- ant, but at most but an agent of the assignor. Property of the bankrupt in his possession or that of his agent can, therefore, be reached summarily by the method suggested in Bryan v. Bern- heimer.^* f. Property which might have been transferred or levied upon — (1) In general. — Subdivision 5 passes to the trustee all 48. In re Yukon Woolen Co. ( D. ulent conveyance at the time of the fll- C, Conn.), 2 Am. B. E. 805, 96 Fed. ing of the petition in bankruptcy, had 326; In re McNamara (Ref., N. Y.), filed their claims in the bankruptcy 2 Am. B. R. 566. See English v. Ross proceedings does not prevent the trus- (D. C, Pa.), 15 Am. B. R. 370, 140 tee from maintaining the action. Fed 630; In re Holbrook Shoe & 50. state Bank of Chicago v. Cox Leather Co. D. C, Mont. , 21 Am. /pp. 7+^ aw \ ir 4^^ d 00 B. R. 511, 165 Fed. 973. ly- l' T' J*** '^"■^' ^^ '*^™- ^- ^- 32. 49. In re Rodgers (C. C. A., 7th ^43 *ea. 91. Cir.), 11 Am. B. R. 79, 125 Fed. 169; 51. In re Kohler (C. C. A., 6th In re Butterwick (D. C, Pa.), 12 Cir.), 20 Am. B. R. 89, 159 Fed. 871. Am. B. R., 536, 131 Fed. 371 ; Thomas 52. See in re Gray, 3 Am. B. E. T. Roddy, 19 Am. B. R. 873, 876, 122 647, 47 N. Y. App. Div. 554. See &r„fe»U'l>,rL?. Lf F£ ft ^="" ^ "*■«»« „, i complaint shows, or facts are alleged _„ ™ , ~ from which it may be fairly inferred, °^- "®^* ^o. v. Lea, 174 U. S. 590, that at least some creditors who were in ^ Am. B. R. 463. a position to attack the alleged fraud- 54. 181 U. S. 188, 5 Am. B. R. 623. Title to Propekty. 815 § 70-a (5).] Property which might have been Transferred. " property 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 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 subdivisions are silent as to time. Here, however, there is a distinct reference to "the filing of the petition," and the idea ex- pressed 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. 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.'* 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 terms that he transfers it by law to the trustee ; that is to say, without consideration. A Federal home- stead 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 homesteaders's debts.'"'^ It 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."^ Whether or not the property, prior to the filing of the petition, could have been levied upon and sold under judicial process against the bankrupt, must be determined by the local law.'' It must appear that the property in posses- sion of the bankrupt is subject to claims or liens valid as against his creditors, otherwise it passes to his trustee.'* Where under a state statute a plaintiff's interest in a pending action is as- signable, 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 subdivi- 55. Compare In re Burka (D. C, A., 4th Cir.), 22 Am. B. R. 740, Mo.), 5 Am. B. E. 12, 104 Fed. 326. 171 Fed. 375. 56. Kizsie v. Winston, Fed. Cas. 58. Matter of Barker (Ref., Colo.), 7,835. 20 Am. B. R. 674; Godwin v. Mur- 56a. In re Cohn (D. C, No. Dak.), chison Nat. Bank, 22 Am. B. R. 22 Am. B. R. 761, 171 Fed. 568. 703, 145 N. C. 320, 59 S. E. 154. 57. In re Dunlop (C. C. A., 8th 59. In re Miller & Brown (D. C, Cir.), 19 Am. B. R. 361, 368, 156 Pa.), 14 Am. B. R. 439, 135 Fed. Fed. 945. See In re Reboulin Fils 868. And see Hewitt v. Berlin Ma- Co. (D. C, N. J.), 21 Am. B. R. chine Works, 11 Am. B. R. 709, 194 296; Wood Co. v. Van Story (C. C. U. S. 296. 816 The Law and Peactioe in Bankeuptcy. Property which Might have been Transferred. [§70-a(5). sion 6.'° The language of clause 5 is sufficiently 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 creditors.®^ 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.®^ The title to grain and flour in the posses- sion of a bankrupt 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.^^ The equity of an individual in copartnership property, which is his separate estate, passes to his trustee in bankruptcy.®^ Any further attempt to differentiate the cases would be useless. Those appropriate to the subjects dis- cussed in the next five paragraphs are there collated. Others o£ a miscellaneous character will be found in the foot-note.®^ 60. Cleland t. Anderson, 10 Am. B. R. 429 (Sup. Ct., Neb.); First Nat. Bank v. Staake, 202 U. S. 141, 15 Am. B. R. 639. 61. Chesapeake Shoe Co. v. Seld- ner (C. C. A., 4th Cir.), 10 Am. B. R. 466, 122 Fed. 593; In re Tweed (D. C, Iowa), 12 Am. B. R. 648, 131 Fed. 355. 62. 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. R. 842, 147 Fed. 659; aflf'd 209 U. S. 365, 19 Am. B. R. 717; 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. LeRoy (C. C. A., 1st Cir.), 8 Am. B. R. 20, 113 Fed. 212; In re Meadows, Williams & Co., (D. C, N. Y.), 23 Am. B. R. 124, 173 Fed. 694, aff'd 24 Am. B. R. 251, 177 Fed. 1004; In re Brown & Co., (D. C, N. y.), 22 Am. B. R. 659, 171 Fed. 254. 63. In re Melbourne Mills Co. (D. C, Pa.), 20 Am. B. R. 746, 162 Fed. 988, aff'd 22 Am. B. R. 442, 172 Fed. 177. 64. New York Institution for the Instruction of the Deaf and Dumb v. Crockett, 17 Am. B. R. 233, 242, 117 N. Y. App. Div. 269. 65. As to property of a partner- ship: In re Rudnick (D. C, Wash.), 4 Am. B. R. 531, 102 Fed. 750; In re Groetzinger (D. C, Pa.), 6 Am. B. R. 399, 110 Fed. 366. As to mort- gaged realty: In re Kellogg (D. C, N. Y.), 7 Am. B. R. 623, 113 Fed. 120; affirmed 10 Am. B. R. 7, 121 Fed. 333. As to the proceeds of a sale under a void execution still in the hands of the sheriff: In re Eas- ley (D. C, Va.), 1 Am. B. R. 715, 93 Fed. 419; In re Kenney (D. C, N. Y.), 2 Am. B. R. 494, 95 Fed. 427; on reargument, 3 Am. B. R. 353, 97 Fed. 554; affirmed, 5 Am. B. R. 355, 105 Fed. 897. Compare, also. In re Francis- Valentine Co. (D. C, Cal.), 2 Am. B. R. 188, 93 Fed, 953; In re Kimball (D. C, Pa.), 3 Am. B. R. 161, 97 Fed. 29, and Levor, Trustee, V. Seiter, 8 Am. B. R. 459, 69 N. Y. App. Div. 33. As to property vested in a receiver in the State court: In re Meyers & Co. (Ref., N. Y.), 1 Am. B. R. 347; In re Tyler (D. C, N. Y.), 5 Am. B. R. 152, 104 Fed. 778; Han- son v. Stephens (Sup. Ct., Ga.), 11 Am. B. R. 172. As to exercise of right to redeem; In re Goldman (D. C, N. Y.), 4 Am. B. R. 100, 102 Fed. 122: In re Novak (D. C, Iowa), 7 Am. B. R. 27, 111 Fed. 161. As to unpaid legacy: In re May (Ref., Minn.), 5 Am. B. R. 1. As to rents: In re Cass (Ref., Ohio), 6 Am. B. R. Title to Peopeety. 817 5 70-a(5).] Remainders and Interests in Trust. (2) Remaindees and inteeests in teust. — Considerable difficulty is often experienced in applying the test fixed by sub- division (5) to contingent interests. Reference must usually be iuad to the state statutes and decisions. The following summary is, however, thought to be quite generally applicable : Vested re- mainders,®® even if contingent, pass to a trustee;®^ but do not where the contingency is one both of time of vesting and of per- son.** Where the interest of the bankrupt depends on the exer- cise of a discretionary power in trust, it does not pass to his tnis- tee.*® Under the New York statute"* the surplus income derived from a trust to receive and apply the rests and profits of real prop- 721; In re Dole (D. C, Vt.), 7 Am. B. R. 21, 110 Fed. 926; In re Oleaon (D. C, Iowa), 7 Am. B. R. 22, 110 Fed. 796. As to a. wife's interest in property vested in her husband: In re Garner (D. C, Ga.), 6 Am. B. R. 596, 110 Fed. 123. Compare In re Rooney (D. C, Vt.), 6 Am. B. R. 478, 109 Fed. 601. As to title of stocks brought by broker for cus- tomer: In re Swift (C. C. A., 1st Cir.), 7 Am. B. R. 374, 112 Fed. 315. As to stocks pledged by bankrupt pledgee: Hutchinson v. LeRoy (C. C. A., lat Cir.), 8 Am. B. R. 20, 113 Fed. 212. As to delivery sufficient to pass title as against debtor's trustee: Al- len V. Hollander (C. C, Mass.), 11 Am. B. R. 753, 128 Fed. 159. As to delivery of locomotives remaining in possession of bankrupt vendor: In re Pease Car & Locomotive Works (D. C, 111.), 14 Am. B. R. 331, 134 Fed. 919. As to proceeds of property be- longing to another sold by a bank- rupt: In re Wood & Malone (D. C, Ga.), 9 Am. B. R. 615, 121 Fed. 599. As to shares of stock fraudulently carried in the name of the bankrupt as trustee, and in the names of other parties for the purpose of conceal- ment: Fowler v. Jenks (Sup. Ct., Minn.), 11 Am. B. R. 255. Right of trustee of bankrupt tenant to crops under leaae: In re Luckenbill (D. C., Pa. ) , 11 Am. B. R. 455, 127 Fed. 984. A» to money paid upon stock subscrip- tion, to be returned on certain condi- tions. In re North Carolina Car Co. (D. C, N. Car.), 11 Am. B. R. 488, 52 127 Fed. 178. As to bankrupt's inter- est in an un administered estate: Os- mun V. Galbraith ( Sup. Ct., Mich. ) , 9 Am. B. R. 339. Miscellaneous: In re Cobb (D. n., N. Car.), 3 Am. B. R. 129, 96 Fed. 821 ; In re Hanna & Kirk (D. C, Pa.), 5 Am. 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; reversing s. c, 7 Am. B. R. 663. 66. In re Woodard (D. C, N. Car.), 2 Am. B. R. 339, 95 Fed. 260; In re McHarry ( C. C. A., 7th Cir ) , 7 Am. B. R. 83, 111 Fed. 498. Com- pare In re Mosier ( D. C, Vt. ) , 7 Am. B. R. 268, 112 Fed. 138. 67. In re Shenberger (D. C., Ohio), 4 Am. B. R. 487, 102 Fed. 978; I-i re St. John (D. C, N. Y.), 5 Am. B. R. 190, 105 Fed. 234; In re Twaa- dell (D. C, Del.), 6 Am. B. R. 539, 110 Fed. 145. As to when a contin- gent remainder in realty passes to the trustee, see Belcher v. Bernard, 106 Mass. 230. 68. 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. 69. In re Wetmore (D. C, Pa.), 4 Am. B. R. 335, 102 Fed. 290; s. c. affirmed, 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. 70. N. Y. Real Property Law, { — . 818 The Law and Pbactioe in Bankeuptct. Bemainders and Interests in Trust. [5 70-a(5). erty is inalieiwible and does not pass to the trustee of the bankrupt beneficiary.''^ 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 convey to the real owner. ''^ 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. ''* But if there has been no ming- ling, the trustee of a bankrupt estate takes no title, though he has the right to possession and a quasi-interest until the beneficiaries prove their right.''* It is generally held that property devised in trust, so that it is inalienable by the cestui que trust and explicitly made not subject to the claims of his cerditors, will not pass to his trustee.''^ Property allotted to an Indian under an act of con- 71. McNaboe v. Marks, 16 Am. B. E. 767, 51 N. Y. Misc. 207; Butler v. Baudoine, 16 Am. B. R. 238n, 84 N. Y. App. Div. 215, affirmed 177 N. Y. 530. Contra: In re Baudoine (C. C. A., 2d Cir.), 3 Am. B. R. 651, 101 Fed. 574; Brown v. Barker, 8 Am. B. R. 450, 68 N. Y. App. Div. 592. Compare Smith v. Belden, 6 Am. B. R. 432, 35 N. Y. Misc. 113, for method of reaching such a surplus. 72. In re Davis (D. C, Mass.), 7 Am. B. R. 258, 112 Fed. 129. See, also, In re Coifin (D. C, Conn.), 16 Am. B. R. 682, 146 Fed. 181; In re Taft (C. C. A., 6th Cir.), 13 Am. B. R. 417, 133 Fed. 511. 73. In re Richard (D. C, Tenn.), -4 Am. B. R. 700, 104 Fed. 792; In re Marsh (D. C, Conn.), 8 Am. B. R. 576, 116 Fed. 396; In re Kurtz (D. C, Pa.), 11 Am. B. R. 129, 125 Fed. 992; In re Mulligan (D. C, Mass.), 9 Am. B. E. 8, 116 Fed. 715. Wliere money is entrnsted 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 he specifically identified, it ap- pearing that at all times the bank- rupt's account at the bank exceeded the amount entrusted to him. In re Boyea (D. C, Wash.), 16 Am. B. R. 141, 143 Fed. 182. 74. In re Cobb (D. 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. 75. Munroe v. Dewey (Sup. Ct., Mass.), 4 Am. B. R. 264. Termination of trust by banJt- rnptcy. — In the case of Nicholas v. Eaton, 91 U. S. 716, it appeared that real estate was devised to trustees who were directed to pay the income to one who was afterwards adjudged a bankrupt, and the devise contained the condition and proviso that if the said beneficiary should become bankrupt, the trust should cease; and thereafter the trustees in their dis- cretion were to apply the income to the support of the beneficiary and to his 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 terminated all of the bankrupt's legal and vested rights in and to the estate and left nothing to which his 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 tb" 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 Title to Peopeett. 819 § 70-a (5).] Licenses, Franchises and Personal Privileges. gress to be held in trust for such Indian by the TTnited 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 in- cumbrances, is not during the twenty-five years an alienable estate and does not pass to the trustee.'" A beneficial interest under a trust created by will or deed for the support of the cestui que tmst can be reached in equity so far as the surplus income is concerned. But this must be done by a plenary suit in equity.''^ Cases under former laws will be found in the foot-note.''* (3) Dower and curtesy rights. — Here also the state law controls. It is the general rule that, if the doweress 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 in- terest is, in most States, sufficiently vested to endure, and the hus- band's title passes to the trustee subject thereto f^ 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 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.*"* On the other hand, where the wife is the bankrupt, the husband is not entitled to have his curtesy initiate admeasured. These doctrines flow from well-recognized principles of real-estate law. Cases collaterally valuable will be found in the foot- note.*' (4) Licenses, franchises, and personal privileges. — Prop- erty rights which by their terms and either nonassignable or re- stricted 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 under no obligation to exercise in fa- Am. B. R. 248, 104 Fed. 973; In re vor of the bankrupt, confers such an Forbes (Ref., Ohio), 7 Am. B. R. 42; interest on the latter that he or his Porter v. Lazear, 109 U. S. 84; Mat- assignee can successfully assert it in ter of Hawkins (Ref., R. I.), 9 Am. a court of equity or in any other B. R. 598; Thomas v. Woods (C. C. court." A., 8th Cir.), 23 Am. B. R. 132, 173 76. In re Russie (D. C, Oreg.), 3 Fed. 585. But see Kelly v. Strange, Am. B. R. 6, 96 Fed. 609. Fed. Cas. 7,676. 77. In re Baudouine (C. C. A., 2d 82. In re Hester, Fed. Cas. 6,437. Cir.), 3 Am. B. R. 651, 101 Fed. 574. But see Bosteck v. Jordan, 54 Tenn. 78. Nicholas v. Eaton, 91 U. S. 370. The rule is different under the 716 ; Sanford v. Lackland, Fed. Cas. Arkansas statute. In re McKenzie (C. 12,312; Durant t. Hospital, etc., Co., C. A., 8th Cir.), 15 Am. B. R. 679, 142 Fed. Cas. 4,188. Fed. 383. 79. Compare In re Watterson, 95 82a. Matter of Acretelli (D. C, N. Pa. St. 312. Y.), 21 Am. B. R. 537, 173 Fed. 121; 80. Hesseltine v. Prince (D. C, Savage v. Savage (C. C. A., 4th Cir.), Mass.), 2 Am. B. R. 600, 95 Fed. 802; 15 Am. B. R. 599, 141 Fed. 346. Matter of Russell (Ref., Ohio), 13 83. Hawk v. Hawk (D. C, Ark.), Am B R 24 4 Am. B. R. 463, 102 Fed. 679; In re 81. In re Shaeffer (D. C, Pa.), 5 Garner (D. C, Ga.), 6 Am. B. R. 596, 820 The Law and Peactice in Bankeuptcy. Licenses, Frarnchises and Personal Privileges. [g70-a(5). opinion is that a bankruptcy, even if voluntary, is not a branch of a covenant not to assign.** The trustee of a bankrupt tenant is therefore entitled to the leased premises for the remainder of the term.®'' 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 manufacture 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 prem- iums on policies written prior to the agent's adjudication as a bankrupt, but unaccrued at that time, pass to his trustee as prop- erty which the bankrupt might have assigned without the consent of the company.** 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 construct 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 boen held to be assignable.*' It is already well settled that a bankrupt's interest in a license to sell liquors passes to his trustee ;*^ but this 110 Fed. 123; In re Eooney (D. C, C, N. Y.), 12 Am. B. R. 81, 132 Fed. Vt.), 6 Am. B. R. 478, 109 Fed. 601. 285. 84. For the English rule, see Doe 87. Jetter Brewing Co. v. Scollan, V. Bevan, 3 Maule & S. 353; Doe v. 15 Am. B. E. 300, 111 N. Y. App. Smith, 5 Taunt, 795 ; Dommett v. Bed- Div. 925. ford, 3 Ves. 148. For the American, 88. Matter of Wright (C. C. A., Starkweather v. Cleveland Ins. Co., 2d Cir.), 19 Am. B. R. 454, aflf'g 18 Fed. Cas. 13,308; Perry v. Lorillard, Am. B. R. 198, 157 Fed. 544, rev's 16 61 N. Y. 214. Am. B. R. 778. A tenant's covenant not to as- 89. Parsons on Contracts, Part II, sign his lease without the landlord's chap. 12, § 9; People v. Duncan, 41 permission in writing does not apply Cal. 507 ; Stewart t. Hargrove, 23 Ala. to an adjudication of the tenant's 429. bankruptcy. In re Bush (D. C, R. 90. People v. Duncan, 41 Cal. 507. I.), 11 Am. B. R. 415, 126 Fed. 878; 91. Stewart v. Hargrove, 23 Ala. Matter of Frazin & Oppenheim (D. 429. C, N. Y.), 23 Am. B. R. 289, 174 Fed. 92. In re Brodbine (D. C, Mass.), 713. 2 Am. B. R. 53, 93 Fed. 643; In re 85. In re Adams (D. C, Conn.), Fisher (D. C, Mass.), 3 Am. B. R. 14 Am. B. R. 23, 134 Fed. 142; In re 406, 98 Fed. 88; affirmed as Fisher v. Rubel (D. C, Wis.), 21 Am. B. R. Cushman (C. C. A., 1st Cir.), 4 Am. 666, 166 Fed. 131. B. R. 646, 103 Fed. 860; In re Becker 86. Matter of McBride & Co. (D. Title to Pkopebty. 821 §70-a(5).] Licenses, Franchises and Personal PriTiieges. question is dependent upon the statute under which the license is issued,'^ and whether it was granted before or after the bankrupt's adjudication."* A license to occupy a city market is property pass- ing from the bankrupt licensee, and the court will order an assign- ment 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."*" It has been held that the bankrupt may be ordered to transfer a seat in a stock exchange to his trustee."" But the 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 con- ditions contained in the by-laws or constitution of the exchange would not affect the question; the court may direct the bankrupt member (D. C, Pa.), 3 Am. B. E. 412, 98 Fed. 407; In re May (Ref., Minn.), 5 Am. B. E. 1; Matter of Weisel & Knaup (D. C, Pa.), 23 Am. B. E. 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. E. 89, 101 Fed. 231. 93. In re McArdle (D. C, Mass.), 11 Am. B. E. 358, 126 Fed. 442, in which case the court applied the ease of In re Fisher ( D. C, Mass. ) , 3 Am. B. E. 406, 98 Fed. 88, as limiting the right of a trustee to realize upon the value of a liquor license to a ease where the granting authority gave its assent thereto; it was there held that a bankruptcy court should not en- force the claim of a mortgagee to the proceeds of the bankrupt s liquor li- cense, where the granting power, on grounds of public policy and interest, declines to recognize any right in the licensee to mortgage his license, and any claim of the mortgagee therein. In re Olewine (D. C, Pa.), 11 Am. B. E. 40, 125 Fed. 840; Tracy v. Gins- berg, 16 Am. B. E. 792, 189 Mass. 260; Snyder v. Bougher, 16 Am. B. E. 792, 214 Pa. St. 453, holding that although a liquor license may not be sold by the trustee, yet the fixtures and furniture may be sold on condi- tion that the license shall be trans- ferred to the purchaser by the license court; Matter of Keller (Eef., Ga.), 16 Am. B. E. 727, arising under Georgia statute. 93a. Whitlock's License, 22 Am. B. E. 262, 39 Pa. Super. Ct. 34. 94. In re Emrich (D. C, Pa.), 4 Am. B. E. 89, 101 Fed. 231. 94p, In re Spitzel & Co. (D. C, N. Y.), 21 Am. B. E. 729, 168 Fed. 156. 95. In re Page (D. C, Pa.), 4 Am. B. E. 467, 102 Fed. 747; In re Gaylord (D. C, Mo.), 7 Am. B. E. 195, 111 Fed. 717; Matter of Hurl- butt (C. C. A., 2d Cir.), 13 Am. B. E. 50, 68 C. C. A. 216. 96. Burleigh v. Foreman (C. C. A., 1st Cir.), 12 Am. B. R. 88, 130 Fed. 13, reversing 9 Am. B. R. 237. Seat in stock exchange as property. — In the case of Page v. Edmunds, 187 U. S. 596, 9 Am. B. E. 277, affirming 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 mem- ber may sell his partnership pro- vided there is no unsettled contract, the claim against him by any other member of the exchange, arising out af the business of the exchange, sub- ject to the approval of the proper authorities, is property which prior to the filing of the petition the bank- rupt might have transferred, and which, therefore, passes to and vests in his trustee. See, also, Cohen v. Budd, 17 Am. B. R. 329, 52 N. Y. Misc. 217; Matter of Gregory (C. C. A., 2d Cir.), 23 Am. B. R. 270, 174 Fed. 629; Wrede v. Clark (Sup. Ct., N. Y.), 21 Am. B. E. 821, 132 App. Div. 293, holding that a prop- erty 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 supple- mentary proceedings is served prior to the four months period, the title of the receiver appointed in such proceedings relates back to the com- 822 The Law aito Pbactice in Bankbuptcy. Life Insurance Policies. [§70-a(5). to take such action as may be required to pass title."' Special prop- erty, by way of lien, in securities deposited with the bankrupt as a pledge, is not property within the meaning of the act which passes to the trustee.*' But the title to stock, deposited by a bankrupt with a creditor as collateral, previous to his adjudication, vests in the trus- tee, as of the date of the adjudication." (5) Life insurance policies. — These rights are akin to those personal privileges just considered. The bankrupt is obliged to enumerate such policies in Schedule B(3) accompanying his peti- tion. Here, also, the test is: was the interest of the insured trans- ferable or subject to levy? If the policy has an expressed cash surrender value, payable to the bankrupt, and enforceable by him, it is, of course, within the proviso, and unless the amount thereof is paid or secured as therein provided, it passes to the trustee."* This is so, even without the consent or assignment of the bene- ficiary, and the bankrupt may be ordered to execute any necessary papers to accomplish the transfer.^"^ And even though the cash surrender value is not expressed in the policy, if it appear that the company will pay a prescribed amount upon its surrender, the effect is the same and the bankrupt may retain the policy upon paying or securing the payment of such amount.^"^ Where, how- ever, there is no surrender value, as, for instance, in "ordinary life" policies,"* nothing passes to the trustee.^"* Where a policy mencement thereof, and is superior to the title of the trustee. 97. O'Dell V. Boyden (C. C. A., 6th Cir.), 17 Am. B. R. 751, 758, 150 Fed. 731; In re Hurlburt & Co. (C. C. A., 2d Cir.), 13 Am. B. R. 50, 135 Fed. 504. 98. Matter of Berry & Co. (D. C, N. Y.), 15 Am. B. K. 360, 146 Fed. 623. ' 99. French v. White, 18 Am. B. R. 905, 78 Vt. 89, 62 Atl. 35. 100. In re Boardman (D. C, Mass.), 4 Am. B. R. 620, 103 Fed. 783; In re Diack (D. C, N. Y.), 3 Am. B. R. 723, 100 Fed. 770; In re McDonnell (D. C, Iowa), 4 Am. B. R. 92, 101 Fed. 239; In re Moore (D. C, Tenn.), 23 Am. B. R. 109, 173 Fed. 679; In re Wolff (D. C, N. Y.), 21 Am. B. R. 452, 165 Fed. 984. 101. In re Diack (D. C, N. Y.), 3 Am. B. R. 723, 100 Fed. 770; In re Whelpley (D. C, N. Y.), 22 Am. B. R. 433, 169 Fed. 1019. For the duty of the trustee touching policies of life insurance, see In re Welling (C. C. A., 7th Cir.), 7 Am. B. R. 340' 113 Fed. 118. 102. Hiscock v. Mertens, 17 Am. B. R. 484, 205 U. S. 202, affirming 15 Am. B. R. 701, 142 Fed. 445, revers- ing 12 Am. B. R. 712, in which case the supreme court expressly states that the " cash surrender value " meant by this section is the amount which would have been paid by the company had the policy been surren- dered, even though no amount was stipulated in the policy. See, also, Holden v. Stratton, 198 U. S. 202, 14 Am. B. R. 94 (containing dicta to same effect) ; Matter of Phelps (Ref., N. Y.), 15 Am. B. R. 170; In re Coleman (C. C. A., 2d Cir.), 14 Am. B. R. 461, 136 Fed. 818; Clark v. Equitable Life Assur. Co. (C. C, Pa.), 16 Am. B. R. 137, 143 Fed. 175; Gould v. New York Life Ins. Co. (D. C, Ark.), 13 Am. B. R. 233, 132 Fed. 927; In re Buelow (D. C, Wash.), 3 Am. B. R. 389, 98 Fed. 86; In re White (C. C. A., 2d Cir.), 23 Am. B. R. 90, 174 Fed. 333; In re Hettling (C. C. A., 2d Cir.), 23 Am. B. R. 161, 175 Fed. 65. 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. R. 340, 113 Fed. 189; In re Sling- luff (D. C, Md.), 5 Am. B. R. 76, 106 Fed. 154, repudiating In re Hcr- nick (Ref., Md.), 1 Am. B. R. 713. See, also, In re Becker (D. C, N. Y.), 5 Am. B. R. 438, 106 Fed. 54. 103. Gould V. New York Life Ins. Co. (D. C, Ark.), 13 Am. B. R. 233, 132 Fed. 927. 104. In re Lange (D. C, Iowa), 1 Am. B. R. 189, 91 Fed. 361; In re Title to Peopekty, 823 < 70-a (5).] Property Sold to Bankrupt on Condition. 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.^"* This subsection does not include policies payable to the wife or kindred of the insured, but only applies to policies payable to the insured or his personal representatives.'"" But where a wife's in- terest in the husband's policy is contingent upon her surviving him, and in case of her predecease is payable to his estate, and he may surrender at any time and take a paid up policy or other value, the policy is property and passes to his trustee in bankruptcy.'""* In Pennsylvania a policy of insurance upon a bankrupt's life, taken out for the benefit of, or bona fide assigned to, his wife or children, vests in them free of all claims of the creditors of the bankrupt.'"^ The meaning and effect of the proviso clause in subdivision (5) is con- sidered in a later paragraph.'"' (6) Property sold to the bankrupt on condition. — Here also the interest of the bankrupt's trustee depends on the law of the State.'"" Where a conditional sale has been kept from record Buelow (D. C, Wash.), 3 Am. B. R. 389, 98 Fed. 86; In re McDonnell (D. C, Iowa), 4 Am. B. R. 92, 101 Fed. 239. 105. Meyers v. Josephson (C. 0. 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. 106. Pulsifer v. Hussey, 9 Am. B. R. 657, 97 Me. 434. 106a. Matter of White (C. C. A., 2d Cir.), 23 Am. B. R. 90, 174 Fed. 333; Matter of Hettling (C. C. A., 2d Cir.), 23 Am. B. R. 161, 175 Fed. 65. 107. In re Booss (D. C, Pa.), 18 Am. B. R. 658, 154 Fed. 949. Right to cliange beneficiary. — Where a policy of insurance upon a husband's life is payable to his wife, but under the contract he may, with the consent of the insurance com- pany, change the benficiary, the policy does not pass to his trustee in bankruptcy, and the fact that after his adiudication he applied in his own name for the surrender value of the policy, which was not paid to him, does not affect the rights of the wife thereunder. In re Pf anger (D. C., Kt.), 21 Am. B. R. 255. 108. Fire insurance policies are rarely an asset, unless a fire loss has occurred just prior to the bank- ruptcy. Compare In re Hamilton (D. C, Ark.), 4 Am. B. R. 543, 102 Fed. 683, 2 N. B. N. 959. See, also, Long V. Farmers' State Bank (C. C. A., 8th Cir.), 17 Am. B. R. 103, 147 Fed. 360. The bankruptcy of the insured is not such a transfer of titles as to render a policy void under a clause giving that effect to a change of ownership. Starkweather v. Cleve- land Ins. Co., Fed. Cas. 13,308. Com- pare Gordon v. Mechanics' & Traders' Ins. Co., 22 Am. B. R. 649, 120 La. Ann. 441, 45 So. 384. 109. In re Sheets Printing, etc., Co. (D. C, Ohio), 14 Am. B. R. 668, 136 Fed. 989. A leading case is In re Gareewich (C. C. A., 2d Cir.), 8 Am. B. R. 149, 118 Fed. 87, holding that where goods were sold to the bankrupt on credit, find with the un- derstanding that the title to such of them as should not be sold by them should remain in the vendor until the payment of the purchase price, the title thereto vests in the trustee. See, also. In re Burkle (D. C, Conn.), 8 Am. B. R. 542, 116 Fed. 766, and In re Howland (D. C, N. Y.), 6 Am. B. R. 495, 109 Fed. 869. In PennsylvBinia, property in the possession of a bankrupt on condi- tional sale can be levied upon and sold under judicial proceedings, and comes clearly within the definitiTi of property which passes to the trustee. In re Burt (D. C, Pa.), 19 Am. B. R. 123, 155 Fed. 267; In re Rinker, (D. C, Pa.), 23 Am. B. R. 62, 174 Fed. 490. In Ifebraska, a contract of con- ditional sale whereby the parties agree that the title shall remain in the vendor until the purchase price is fully paid is voidable by purchasers, 824 The Law and Practice in Bankruptcy. Property Sold to Bankrupt on Condition. [?70-a(5). by a fraudulent agreement, the trustee of the vendee takes title.^*" If the bankrupt was in possession under a contract invalid as to cred- itors, as, for instance, because not filed or recorded in accordance with that law, both possession and title pass to the trustee.^^^ But cred- itors are iiot purchasers or lienors."" The trustee in bankruptcy is neither a subsequent creditor without notice nor a purchaser or in- cumbrancer in good faith and for value.^'' In some jurisdictions the rule obtains that the delivery of goods, with the provision that the title shall not pass until the purchase price has been paid, is void as to the creditors of the party to whom they are delivered ; in such case goods found in the bankrupt's possession, delivered under such con- ditions, pass to the trustee.^" A statute requiring the filing of con- tracts for the conditional sale of property is not to be avoided by pretext; it will not be effectual to call a contract a "lease" which provides for the payment of rent for the use of an article for a prescribed time, with the right to pay the purchase price at the end of the term, all payments of rent to be applied thereon; such a contract is for a conditional sale and, unless duly filed, the property attaching creditors, and judgment creditors only, if not filed in the of- fice of the county clerk. It is valid against all other creditors though unfiled, and hence against a trustee in bankruptcy who represents no at- taching or judicial creditors. In re Great Western Mfg. Co. (C. C. A., 8th Cir.), 18 Am. B. E. 259, 152 Fed. 123. The title reserved by a vendor in a contract of conditional sale, free from fraud, until payment of the purchase money, is good against all the world, except as to creditors of the vendee who had acquired a lien by levy or attachment, upon the property while it was in the pos- session of the vendee, and under § 70-a(5) his trustee takes title, subject to the superior title of the vendor. Davis v. Crompton (C. C. A., 3d Cir.), 20 Am. B. R. 53, 158 Fed. 735. 110. In re Perkins (D. C, Me.), 19 Am. B. R. 134, 155 Fed. 237. 111. In re Yukon, etc., Co. (D. C, Conn.), 2 Am. B. R. 805, 96 Fed. 326; In re Frazier (D. C, Mo.), 9 Am. B. R. 21, 117 Fed. 575; Chesa- peake Shoe Co. V. Seldner (C. C. A., 4th Cir.), 10 Am. B. R. 466, 122 Fed. 593; In re Press-Post Publishing Co. (D. C, Ohio), 13 Am. B. R. 797, 134 Fed. 998; In re Smith & Shuck (D. C, Iowa), 13 Am. B. R. 103, 132 Fed. 301; McElvain v. Hardesty (C. C. A., 8th Cir.), 22 Am. B. R. 320, 169 Fed. 31. Compare In re Leigh Bros., 96 Fed. 806, affirming 2 Am. B. R. 606; In re Howlind (D. C, N. Y.), 6 Am. B. R. 495, 109 Fed. 869. 112. In re Bozeman (Ref., Ga.), 2 Am. B. E. 809; In re Kellogg (D. C, N. Y.), 7 Am. B. R. 270, 112 Fed. 52; In re Hinsdale (D. C, Vt.), 7 Am. B. R. 85, HI Fed. 502. Com- pare In re McKay (Ref., Ohio), 1 Am. B. E. 292. 113. In re Pierce (C. C. A., 8th Cir.), 19 Am. B. R. 664, 157 Fed. 757. 114. This is the rule in Pennsyl- vania. In re Tice (D. C, Pa.), 15 Am. B. E. 97, 139 Fed. 52; In re Rinker (D. C, Pa.), 23 Am. B. E. 62, 174 Fed. 490; In re Poore (D. C, Pa.), 15 Am. B. R. 174, 139 Fed. 862; In re Poore (D. C, Pa.), 15 Am. B. R. 407, 140 Fed. 786; Matter of Rodgers & Hite (D. C, Pa.), 16 Am. B. E. 401, 143 Fed. 594; Matter of Hess (D. C, Pa.), 14 Am. B. R. 635, 136 Fed. 988; In re Beihl (D. C, Pa.), 23 Am. B. E. 905, 176 Fed. 583, and also in other jurisdictions, see In re Franklin Lumber Co. (D. C, N. J.), 17 Am. B. R. 443, 147 Fed. 852; In re Builders Lumber Co. (D. C, N. Car.), 17 Am. B. R. 449, 148 Fed. 244; In re Bement (C. C. A., 7th Cir.), 22 Am. B. R. 616, 172 Fed. 98, revg. Mishawaka Woolen Mfg. Co. V. Smith, 20 Am. B. E. 317, 158 Fed. 885; In re Burke (D. C, Ga.), 22 Am. B. E. 69, 168 Fed. 994; In re Priegle Paint Co. (D. C, Ala.), 23 Am. B. R. 385, 175 Fed. 586; In re Gilligan (C. C. A., 7th Cir.), 23 Am. B. E. 668, 152 Fed. 605. Title to Pkopbety. 825 § 70-a (5).] Property Sold to Bankrupt on Condition. sold will vest in the vendee's trustee in bankruptcy for the benefit of his creditors.^^'* But if personal property vras actually leased and had not in any way been used as a basis of credit, the property should be surrendered to the lessor.""* Under a statute providing that an unrecorded contract of conditional sale is void only as against subse- quent purchasers, pledges or mortgagees in good faith, a failure to record such a contract prior to the adjudication in bankruptcy of the vendee does not affect the title of the conditional vendor as against the vendee's trustee.^^" Wliere seizure is necessary to establish the creditor's rights, title will not pass unless seizure is made before the bankruptey.^^' Where, however, the property is merely consigned for sale, the bankrupt is not a vendee on condition.'^^* And where a con- tract provides that the person to whom goods are consigned for sale shall hold the proceeds thereof in trust until all obligations of the consignee to the consignor are fully paid, the trustee in bankruptcy of the consignee does not acquire title to the proceeds of such sale in the hands of tne bankrupt at the time of his adjudication."" Such an agreement is not a contract of conditional sale and need not be recorded under the North Carolina Statute.^"* As to the avails of goods so consigned, but sold by him before the bankruptcy, the funds 115. Unitype Co. v. Long (C. C. A., 6th Cir.), 16 Am. B. R. 282, 143 Fed. 315, affirming 14 Am. B. R. 668, 136 Fed. 989. But if the vendor, on finding that the vendee is in finan- cial difficulties, refuses to deliver machinery unless it be agreed that it be held unler a lease, the title re- maining in the vendor, the title does not vest upon delivery. In re Nay- lor Mfg. Co. (D. C, Pa.), 14 Am. B. R. 284, 135 Fed. 206. Compare McEwen v. Totten (C. C. A., 5th Cir.), 21 Am. B. R. 3^6. 115a. Nylin v. American Trust & Sav. Bank (C. C. A., 7th Cir.), 21 Am. B. R. 533, 166 Fed. 276. 116. Hewitt v. Berlin Machine Works, 194 U. S. 296, 11 Am. B. R. 709; Matter of Cavagnard (D. C, N. H.), 16 Am. B. R. 320, 143 Fed. 668; York Mfg. Co. v. Casaell, 15 Am. B. R. 633, 201 U. S. 344, re- versing 14 Am. B. R. 52. Compare In re Tweed (D. C, Iowa), 12 Am. B. R. 648, 131 Fed. 355; First Nat. Bank v. Staake, 202 U. S. 141, 15 Am. B. R. 639; In re Dunlop (0. C. A., 8th Cir.), 19 Am. B. R. 361, 156 Fed. 945, holding that § 70-a (5) was not applicable to such a con- tract, for a trustee in bankruptcy is not a purchaser for value; Crucible Steel Co. V. Holt (C. C. A., 6th Cir.), 23 Am. B. R. 302, 174 Fed. 127 ; In re American Machine Works (C. C. A., 9th Cir.), 23 Am. B. R. 483, 174 Fed. 805, holding that where a state statute makes a contract for the conditional sale of personal nroperty void as to subsequent creditors, un- less registered, both the possession and title to property so sold pass to the trustee in bankruptcy of the vendee, in the absence of registra- tion. ^ 117. In re Ohio, etc., Co. (Ref., ; Ohio), 2 Am. B. R. 775. [ 118. In re Columbus Buggy Co. i (C. C. A., 8th Cir.), 16 Am. B. R. I 759, 143 Fed. 859; Deere Plow Co. V. McDavid (C. C. A., 8th Cir.), 14 Am. B. R. 653, 137 Fed. 802; In re Miller (D. C, Pa.), 14 Am. B. R. 439, 135 Fed. 868; In re Flanders (C. C. A., 7th Cir.), 14 Am. B. R. 27, 134 Fed. 560; In re Gait (C. C. A., 7th Cir.), 13 Am. B. R. 575, 56 C. C. A. 470; Franklin v. Stoughton Wagon Co. (C. C. A., 8th Cir.), 22 Am. B. R. 63, 168 Fed. 857; In re Bailey (D. C, So. Car.), 23 Am. B. R. 876, 176 Fed. 628. 119. Wood Co. V. Eubanks (C. C. A., 4th Cir.), 22 Am. B. R. 307, 169 Fed. 929. 119a. Corbitt Buggy Co. v. Ri- caud (C. C. A., 4th Cir.), 22 Am. B. R. 316, 169 Fed. 935, holding that such contract constitutes a trust, valid as against the vendee's trustee in bankruptcy; even if it were a con- ditional sale it would be good be- tween the parties, without registra- tion, and the trustee occupies the same relation to the vendor that the vendee did prior to his adjudication: John Deere Plow Co. v. Anderson (C. C. A., 5tn Cir.), 23 Am. B. R. 480, 174 Fed. 815; Matter of Gold- man (C. C. A., 6th Cir.), 23 Am. B. R. 497. 826 The Law and Peactice in Bankkuptcy. Property Affected by Fraudulent Representations. [§ 70-a (5). 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 bank- rupt's trustee.'^"* Where consigned goods are found among the assets and identified by the consignor, but not otherwise, the trustee should apply for an order permitting him to release them to the real owner. In actual practice, this is frequently done. Care should be taken to distinguish between goods sold on condition and goods consigned, and positive identification of the latter should be required.'^' The con- tract under which goods were sold to the bankrupt contained no limi- tation upon the right to sell and only prescribed the method of making payment, and contained a provision to the effect that the title and ownership of the goods purchased and the proceeds of the sale thereof should remain the property of the seller; such contract was held to create a secret lien constituting a fraud upon the creditors of the bankrupt, and was invalid as against his trustee in bankruptcy.^^" Goods delivered with an option to purchase or return within thirty days from delivery constitutes a contract of sale and return, and the title to goods, delivered within the thirty days immediately pre- ceding the bankruptcy of the vendee, does not pass to the trustee.^^^ Where machinery is sold on trial, and retained by the bankrupt vendee for a year without offer to return, expression of dissatisfaction, or demand by vendor, the sale is absolute and title is vested in the trustee.^^* (7) Property affected by fraudulent representations — Since the trustee takes the bankrupt's property charged with all claims and equities against it, his title to the same is inferior to that of one who was induced to sell on materially false repre- sentations. In such cases, the claimant usually proceeds as in replevin.^'"' But, where the property is in the custody of the 120. Compare Bills v. Sehliep (C. 123. In re Schindler (D. C, N. C. A., 2d Cir.), 11 Am. B. E. 607, Y.), 19 Am. B. R. 800, 158 Fed. 458. 127 Fed. 103. Sale or retorn. — Where a bank- 120a. In re Acheson Co. (C. C. rupt, during the month prior to his A., 9th Cir.), 22 Am. B. R. 338, 170 adjudication, • bought a pair of Fed. 427. horses, for which he was to pay a 121. Adams v. Meyers, Fed. Cas. certain price if they proved satis- 62. See In re Levin (D. C., Pa.), 11 factory after a trial, and, if not, to Am. B. R. 446, 127 Fed. 886. return them, and they came into the 122. In re Gait (D. C, 111.), 9 possession of the receiver, the trans- Am. B. R. 682, 120 Fed. 443; In re action presents a ease of sale or re- Carpenter (D. C, N. Y.), 11 Am. B. turn, and the title passes to the bank- R. 147, 125 Fed. 831, in which case rupt, subject to the exercise of the it was held that a similar agreement option to return. In re Landis (D. passed the title to the goods sold to C., Pa.), 18 Am. B. R. 483, 151 Fed. the vendee, to which title the trustee 896. in bankruptcy succeeded; that there 124. In re Downing Paper Co. was no purpose apparent therefrom to (D. C., Pa.), 17 Am. B. R. 121, 147 create an agency in the vendee, nor F ed. 8 58. could such agreement be sustained as Wbere madiinery sold for a conditional sale, a mortgage, or an casb was delivered to the buyer, a instrument attempting to create a corporation, at its request, and on lien in behalf of the seller. See, also, its promise to send a check for the In re Tweed (D. C, Iowa), 12 Am. price, and on his failure so to do, the B. R. 648, 131 Fed. 355; In re But- agent of the seller accept." in pa-- terwick (D. C, Pa.), 12 Am. B. R. ment for the machinery negotiable 536, 131 Fed. 371; Matter of Rasmus- vouchers, secured by bonds, the title sen (D. C, Or.), 13 Am. B. R. 462, to the machinery vests in the trustee 136 Fed. 704; In re Martin-Vernon in bankruptcy of the buyer. In re Music Co. (D. C, Mo.), 13 Am. B. Cullman Assn. (D. C, Ala.), 19 Am. R. 276, 132 Fed. 983: Matter of B. R. 259, 155 Fed. 372. Penny & Anderson (D. C, N. Y.), 125. See next paragraph. 23 Am. B. R. 115, 176 Fed. 141. Title to Pkopeety. 827 § 70-a(5).] Reclamation Proceedings. bankruptcy court, it is immune from replevin process in the state court.*^' It has been held that the false representation need not be the sole and exclusive consideration for the credit, but only a material consideration ; ^" also, that false representations to a mer- cantile agency are enough.^"* Other cases under the present law appear in the foot-note."* (8) Reclamation proceedings. — These may be in or out of the bankruptcy proceeding. A petition to reclaim consigned goods is an instance of the former ; ^^^ the proceeding in the nature of a bankruptcy replevin which, in most large trade centers, has of late been so common if not notorious, is an instance of the latter. The petition in such proceedings should contain allegations sufficient to sustain a complaint in trover and conversion, or such as are re- quired by the strictest practice in an affidavit for replevin.'^' The evils resulting from so-called " reclamation proceedings " are patent and hard to overcome.^'" In effect, estates are often dissipated, by greedy and not over-scrupulous creditors, who apply for pos- session, after recession, on the ground of alleged fraudulent repre- sentations, and are granted what they ask, without adequate judicial investigation of their right to it and before there is a court officer authorized to bond back the goods reclaimed.*^^ Their right to possession on a proper showing cannot be doubled.^'* For instance, it is well settled that false representations as to the • financial status of a buyer, made as a basis of credit, and but for 126. In re Russell (C. C. A., 2d 132. These are pointed out with Cir.), 3 Am. B. R. 658, 101 Fed. 248; great distinctness in an address de- In re Mertens (D. C., N. Y.), 12 Am. Hvered by Charles A. Hough, Esq., B. R. 698, 131 Fed. 507. of New York, printed in the proceed- 127. In re Gany (D. C, N. Y.), 4 ings of the Fourth Annual Conven- Am. B. R. 576, 103 Fed. 930. tion of the National Association of 128. In re Epstein (B. C, Ark.), Referees in Bankruptcy, at Mil- 6 Am. B. R. 60, 109 Fed. 878; In re waukee, in August, 1902. See, also, Roalswick ( D. C., Mont. ) , 6 Am. B. address on " The Merits and Defects R. 762, 110 Fed. 639; In re Weil (D. of the Bankrupt Law," by Mr. Ref- C, N. Y.), 7 Am. B. R. 90, 111 Fed. eree Holt, before the American Social 897. Science Association, at Washington, 129. In re Davis (D. C, N. Y.), 7 April, 1902. Am. B. R. 276, 112 Fed. 294; In re 133. See Matter of Murphy, etc., O'Connor (D. C, Ga.), 7 Am. B. R. Shoe Co. (Ref., Mo.), 11 Am. B. R. 428, 114 Fed. 777; Silvey v. Tift, 17 428, holding that the right to reclaim Am. B. R. 9, 123 Ga. 804, 51 S. E. goods should only be granted in cases 748. where it clearly exists, and that the 130. See sub nom. " Property Sold burden of proof is with the creditors to the Bankrupt on Condition" in to establish their right clearly and this section, ante. by a preponderance of evidence. 131. Levi V. Picard (D. C, N. 134. Goods obtained liy fraud. Y.), 17 Am. B. R. 430, 148 Fed. 654. —This follows from the rule that the 828-. The Law and Peactice in Bankruptcy. Reclamation Proceedings. [§ 70-a(5) which the sale would not have been made, was fraudulent, and entitled the seller to reclaim the goods thereby obtained.*'' He should exercise this right before he has of his own volition placed himself in the position 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 insisting on a return of the goods."' Where machinery or other articles are sold upon the condition that if they are not satisfactory the purchaser may re- turn 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 re- ceiver 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.*'^ Sc also reclamation trustee when appointed can have no greater title than the bankrupt had. The trustee holds the goods affected ■with the fraud of the bankrupt. Neither law nor morals will justify the trustee in holding goods obtained by the fraud of the bankrupt for the benefit of other creditors. Creditors have no right to profit by the fraud of the bankrupt to the wrong and in- jury of the party who has been de- ceived and defrauded. In re Hamil- ton Furniture, etc., Co. (D. C, Ind.), 9 Am. B. R. 65, 117 Fed. 774. 135. Matter of Patterson & Co. (D. C, Tex.), 10 Am. B. K. 748, 125 Fed. 562; In re Weil (D. C, N. Y.), 7 Am. B. R. 90, 111 Fed. 897; In re Epstein (D. C, Ark.), 6 Am. B. R. 60, 109 Fed. 878. False representation as to sol- vency. — In the case of In re Hamil- .ton Furniture, etc., Co. (D. C, Ind.), 9 Am. B. R. 65, 117 Fed. 774, the rule was laid down that where a party by fraudulently concealing his insolvency and his intent not to pay for goods, induces the owner to sell them to him on credit, the seller, if no innocent third party has acquired an interest in them, is entitled to disaffirm the contract and recover the goods. In re Hildebrant (D. C, N. Y.), 10 Am. B. R. 184, 120 Fed. 992; In re O'Connor (D. C, Ga.), 9 Am. B. R. 18, 114 Fed. 777; Silvey v. Tift, 17 Am. B. R. 9, 123 Ga. 804, 51 S. E. 748; Matter of Levi (D. C, N. Y.), 16 Am. B. R. 756, 148 Fed. 654, holding that in the absence of fraud in making the state- ment, reclamation should not be al- lowed. In re Rose (D. C, Pa.), 14 Am. B. R. 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. R. 439, 148 Fed. 654. 136. Standard Varnish Works v. Haydoek (C. C. A., 6th Cir.), 16 Am. B. R. 286, 143 Fed. 318. 137. In re Hill Co. (C. C. A., 7th Cir.), 12 Am. B. R. 221, note, 123 Fed. 866. Compare 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 com- plaint made that the machiiiery was unsatisfactory, a sale of the machin- ery was completed, and that the ven- dor upon the bankruptcy of the pur- chaser was not entitled to a return of the machinery upon a claim that it was never accepted. In re Froelich Rubber Refining 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 Title to Peopeety. 829 § 70-a (5).] Property Affected by Fraudulent Representations. should be permitted where the bankrupt was in possession of arti- cles being manufactured by him under contracts requiring pay- ments at stated periods which had been regularly made, it appear- ing that the trustee did not intend to complete the contract and de- liver the completed articles.^'' 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 per- formed, 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 re- served 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 rnade.^^'^ 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 de- termination upon principles already declared as to the validity of contracts for the conditional sale of personal property.^^®<= Most of the evils resulting from reclamation proceedings will be avoided if the claiming creditor is at least required in the first instance, always after a short notice to the receiver or creditor, to prove identity strictly, either before the judge or a referee sitting as special mas- ter.^*" The delay incident to such proof will check at the outset a practice which, under the state system, has fostered perjury and made " diligence " a word at which lawyer and layman were wont to blush. Nor is it thought that such a practice will be against the well- recognized principle that adverse claims to the bankrupt's assets must be settled in a plenary suit.^*^ Is the transaction whereby the bank- rupt became possessed of the property, a sale or a bailment? This question enters into the determination of nearly every case. If the property is consigned to be sold under terms and at prices fixed only passed to the bankrupt after Wagon Co. (C. C. A., 8th Cir.), 22 such time expired. Am. B. R. 63, 168 Fed. 857; In re liease with option to pnrchase. Agnew (D. C., Miss.), 23 Am. B. R. — Where a bankrupt failed to pur- 360. chase machinery at the end of the 139b. In re Burke (D. C, Ga.), term for which he had leased it with 22 Am. B. R. 69, 168 Fed. 994. the option to purchase, but continued 139c. See III, f, (6), pp. 824- to pay rent therefor, the lessor may 825, ante, and notes thereunder, reclaim the property from the lessee's 140. For eases where the claim trustee. McEwen v. Totten (C. C. was judicially investigated, see In re A.. 5th Cir.), 21 Am. B. 336. Weil (D. C, N. Y.), 7 Am. B. R. 90, 138. In re McDonald (D. C, 111 Fed. 897; In re Davis (D. C, N. Conn.), 14 Am. B. R. 797, 138 Fed. Y.), 7 Am. B. R. 276, 112 Fed. 294; 463. and Bloomingdale v. Empire Rubber 139. Southern Pine Co. v. Savan- Mfg. Co. (D. C, N. Y.), 8 Am. B. nah Trust Co. (C. C. A., 5th Cir.), R. 74, 114 Fed. 1,016. Read, also. In 15 Am. B. E. 618, 141 Fed. 802. re O'Connor (D. C, Ga.), 7 Am. B. 139a. Reardon v. Rock Island R. 428, 114 Eed. 777. Plow Co. (C. C. A., 7th Cir.), 22 Am. 141. In re Russell & Birkett (C. B. R. 26, 168 Fed. 654; In re Burke C. A., 2d Cir.), 3 Am. B. R. 658, 101 (D. C, Ga.), 22 Am. B. R. 69, 168 Fed. 248. Fed. 994; Franklin v. Stoughton 830 The Law and Practice in Bankeuptcy. Rights of Actions. [§ 70-a (6). by the consignor the contract is not one of sale, but is a bailment and the consignor may reclaim.'*'' Identity is the sine qua non of the right of possession. Proof of it is insisted on even in the far less important proceeding when a consignor creditor claims goods in the hands of the trustee. The court whose right to pos- session 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-examination by the adverse party, before yielding that which in bankruptcy cases is often more than "nine points of the law." This practice 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.'** g. Rights of action. — Under subdivision 6 all " rights of actions arising upon contracts or from the unlawful taking or detention of, or injury to," the bankrupt's property pass to the trustee. This subdivision is declaratory of the law. Causes of action for per- sonal injuries, such as assault and battery, slander, seduction, and the like, are not usually assignable.'*' Where the suit is to recover usurious interest paid by the bankrupt,'** and money lost in gam- ing,'*' and perhaps where the gravamen is deceit or fraud;'** so case of Wright v. First Nat. Bank of 142. In re Wells (D. C, Pa.), 15 Am. B. R. 419, 140 Fed. '?52; In re Tlce (D. C, Pa.), 15 Am. B. R. 97, 139 Fed. 52; In re Heckathorn (D. C, Pa.), 16 Am. B. R. 467, 144 Fed. 499; In re Wood (D. C, Pa.), 15 Am. B. R. 411, 140 Fed. 964; In re Gait (C. C. A., 7th Cir.), 13 Am. B. R. 575, 120 Fed. 61, 56 C. C. A. 470; In re Poore (D. C, Pa.), 15 Am. B. E. 174, 139 Fed. 862; Franklin v. Stoughton Wagon Co. (C. C. A., 8th Cir.), 22 Am. B. R. 63, 168 Fed. 857; In re Susquehanna Roofing Co. (D. C, Pa.), 23 Am. B. R. 5, 173 Fed. 150. 143. In re Coleman v. Sherman (Ref., N. Y.), 8 Am. B. R. 763. 144. In re Eliowich (D. C, N. Y.), 17 Am. B. R. 419, 148 Fed. 464. 145. Noonan v. Orton, 12 N. B. R. 405; Beckham t. Drake, 8 Mees. & W. 845 ; Howard v. Crowther, 8 Mees. & W. 601; Brewer v. Dew, 11 Mees & W. 625. 146. Tiffany v. Boatmen's Sav. Inst., 18 Wall. 375; Moore v. Jones, 23 Vt. 739. Recovery of usury. — In Wheel- ock V. Lee, 64 N. Y. 242, the trustee in bankruptcy was held to have the right to recover money exacted usuri- ously, but the court based its decis- ion upon the fact that independent of the statutory right of recovery there existed a right to recover upon prin- ciples of the common law. In the Greensburg, 18 N. B. R. 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 in- terest 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 re- cover such usurious interest. But in Bromley v. Smith, Fed. Cas. 1,922, 5 N. B. R. 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 bankruptcy 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. 147. Meech v. Stoner, 19 N. Y. 20. 148. 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 as- signee. But in Hyde v. Tufts, 45 Title to Peopebty. 831 § 70-a (6).] Sights of Actions. 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 unlawful taking or detention of or injury to his property.^**^ An action for conspiracy, whereby the plaintiff was "driven out of business as a dealer in lumber," is an action in tort 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.""* The right of a bankrupt corporation to sue for the recovery of unpaid subscriptions to capital stock passes to the trustee;^"' 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 a right of action exists against the 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 creditor 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 pro- ceedings.'"'*^ 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, because of which no trustee was appointed.^"* It seems that, after being Sup. Ct. N. Y. 56, where one who of the bankrupt's estate, and the sole afterwards became a bankrupt was result of the conspiracy is to turn induced by false representations to the bankrupt's property into money engage in a business venture in in his hands, for which he, himself, which, by reason of the false repre- failed to account to the trustee, sentations, he incurred great loss,' it Friedman v. Meyers, 19 Am. B. R. was held that the cause of action for 883, 30 Ohio Cir. Ct. 303. the fraud vested in his assignee in 150. In re Burnstine (D. C, bankruptcy. Mich.), 12 Am. B. E. 506, 131 Fed. 148a. Sibley v. Nason, 22 Am. B. 828. R. 712, 196 Mass. 125, 81 N. E. 887, 151. Allen v. Grant (Sup. Ct., 44 L. E. A. 180, note. Ga.), 14 Am. B. E. 340; Thrall v. 148b. Hansen Mercantile Co. v. Union Maid Tobacco Co., 22 Am. B. Wyman, Partridge & Co., 22 Am. B. E. 287, 54 Ohio Law Bull. 732; In re R. 877, 105 Minn. 491, 117 N. W. Eureka Furniture Co. (D. C, Pa.), 926; In re Harper (D. C, N. Y.), 22 Am. B. E. 395, 170 Fed. 485; Bab- 23 Am. B. R. 918, 175 Fed. 412. bitt v. Read (C. C, N. Y.), 23 Am. 149. Cleland v. Anderson (Sup. B. R. 254, 173 Fed. 712. Ct., Nebr.), 11 Am. B. R. 605. 151a. Hunsen Mercantile Co. v. Actions for conspiracy. — A Wyman, Partridge & Co., 22 Am. B. trustee in bankruptcy cannot main- R. 877, 105 Minn. 491, 117 N. W. t^in an action in tort for conspiracy 926. in assisting a bankrupt to place his 151b. In re Syracuse Paper & property beyond the reach of his Pulp Co. (D. C, N. Y.), 21 Am. B. creditors against persons who are R. 174. alleged to have performed their acts 151c. In re Beachy & Co. (D. C, of conspiracy during the pendency of Wis.), 22 Am. B. R. 538, 170 Fed. the bankruptcy proceedings, but be- 825. fore the adjudication therein, where 152. Rand v. Iowa Central Ry Co., no allestation is m-ide that anv of 12 Am. B. R. 164, 96 N. Y. App. Div. the defei-dants received any portion 413. 832 The Law and Peactice in Bankkuptcy. BurdeDSome Property. [§ 70. vested in the trustee, such rights of action may be carried to judg- ment by the bankrupt for his own benefit after a composition is con- firmed."*' 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.^°^* IV. BURDENSOME AND EXEMPT PROPERTY. a. Burdensome property. — (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.'^* 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 or take over contracts which are onerous and unprofitable, and which will burden, rather than benefit, the estate. In the execution of their trust they are confronted at the outset with the duty of electing whether to as- sume 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 conditions, in the same plight and condition that the bankrupt held it."° This doctrine is usually asserted as to leases,^" though it has been applied where property is mortgaged be- yond its value, in which ease the court may direct that the property be released and surrendered to the mortgagee upon such conditions as it may deem just.'^' The question is not one of jurisdiction or of right, but of discretion.^°' The doctrine has no application to prop- erty which the bankrupt has concealed, and of the existence of which the trustee has no knowledge, and has not therefore had the op- portunity to make an election.^"* 153. See Stone v. Morris (Sup. merous cases in this country; Matter Jud. Ct., Mass.), 4 Am. B. R. 568, of Frazier & Oppenheim (D. C, N 5V N. E. 1,002. Y.), 23 Am. B. R. 289, 174 Fed. 713; 153a. Hobbs v. Frazier (Sup. Ct., In re Eubel (D. C, Wis.), 21 Am Fla.), 22 Am. B. R. 684. B. R. 566, 166 Fed. 131, holding that 154. Eng. Act of 1883, § 55, as a trustee has a reasonable time after amended by Act of 1890, § 13. his appointment to determine whether 155. Atchison, etc., Railway Co. he will adopt a lease as an asset of V. Hurley (C. C. A., 8th Cir.), 18 the estate, and offer the same for Am. B. R. 396, 153 Fed. 503. Com- sale, or whether he will ignore it en- pare Glenny v. Langdon, 98 V. S. 20; tirely. Sparhawk v. Yerkes, 142 U. S. 1; In 157. Equitable Loan & Security re Scheermann, 2 N. B. N. Rep. 118, Co. v. Moss & Co. (C. C. A., 5th and cases cited. See, also, "Supple- Cir.), 11 Am. B. R. Ill, 125 Fed. mentary Forms," post. 609; In re Jersey Island Packing Co. The trnstee is not bonnd to (C. C. A., 9th Cir.), 14 Am. B. R. take property which may involve him 689, 138 Fed. 625. in litigation. Oldmixon v. Severance, 158. In re Cogley (D. C, Iowa), 18 Am. B. R. 823, 117 N. Y. App. 5 Am. B. R. 731, 107 Fed. 73; In re Div. 921, 104 N. Y. Supp. 1,042. Dillard, Fed. Cas. 3,912. 156. For instance, see Baldwin on 159. First Nat. Bank v. Lasater, Bankruptcy, 8th ed., pp. 281-291, and 13 Am. B. R. 698, 196 U. S. 115. General Rule (Eng.), 320; also nu- Title to Peopeety. 833 § 70-a (5).] Exempt Property. (2) Pbaoticb. — This is simple. The trustee, if satisfied, after appraisal or 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 estate, 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 reverts the title in the bankrupt.**" Leases should be accepted or disclaimed promptly, but a continuance in possession will not usually be construed an election to accept the burdens and obligations of the lease.*'* Another method of dispos- ing 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) Ik general. — 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.*"' This subject has been fully considered elsewhere.*"* (2) Conflict between § 6 and § 70-a (5). — The proviso clause in subdivision (5) has already been often considered by the courts. It was doubtless inserted to prevent the hardship which might re- sult 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, pro- vided he pays or secures to the estate the cash surrender value of the policy.*"** The practice is sufficiently 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 in- surance policies which are exempt under a state law; as to such 160. Sessions v. Eomadka, 145 U. Ohio), 17 Am. B. E. 895; In re Bailey S. 29. (D. C, Utah), 24 Am. B. R. 201, 161. See Section Seventeenof this 176 Fed. 628. work. 163. In re Fisher (D. C, Va.), 162. McKenney v. Cheney (Sup. 15 Am. B. R. 652, 142 Fed. 205. Ct., Ga.), 11 Am. B. R. 54; In re 164. See in § 6, ante. And com- Castleberry (D. C, Ga.), 16 Am. B. pare §§ 2(11) and 47-a(ll); also E. 159, 143 Fed. 1,018; In re Sulli- General Order XVII. van (D. C, Iowa), 16 Am. B. R. 87, 164a. In re Moore (D. C., Tenn.) 142 Fed. 620; In re Bender (Ref., 23 Am. B. R. 109, 173 Fed. 679. 834 The Law and Pkactice in Bankkuptcy. Appraisers and Appraisal. [§ 70-b. policies the state law must control regardless of whether they had a cash 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. V. APPRAISERS AND APPRAISAL, a. In general. — The only reference to appraisers occurs in sub- section 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 with- out 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 the referee. Such a practice will, it is thought, ch£e'k collusive 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.^'^ 165. Holden v. Stratton, 14 Am. of his trustee in bankruptcy to the B. R. 94, 198 U. S. 202, reversing 7 surrender value; such statute does Am. B. R. 615, 113 Fed. 141; Steele not give an exemption to the bank- v. Buel (C. C. A., 8th Cir.), 5 Am. B. rupt. In re Moore (D. C, Tenn.), R. 165, 104 Fed. 968, reversing 3 Am. 23 Am. B. R. 109, 173 Fed. 679. B. R. 549, 98 Fed. 78. See, also, ex- 166. Matter of Columbia Iron plaining effect of proviso, Hiscock v. Works (D. C, Mich.), 14 Am. B. R Mertens, 17 Am. B. R. 484, 205 U. S. 526, 142 Fed. 234, in which case it 202. The following cases are opposed was held that the appointment of an to this doctrine: In re Lange (D. C, appraiser upon the suggestion of a Iowa), 1 Am. B. R. 189, 91 Fed. creditor was not necessarily void. 361; In re Scheld (C. C. A., 9th Cir.), 166a. In re Fiddler & Son (D. C 5 Am. B. R. 102, 104 Fed. 870; In re Pa.), 23 Am. B. R. 16, 172 Fed. 632, Welling (C. C. A., 7th Cir.), 7 Am. holding that the trustee must justify B. R. 340, 113 Fed. 189. by special circumstances the payment The Tennessee statute which of more than $5 per day as fees to provides that life insurance effected appraisers. by a husband on his own life shall 167. In re Prager (Ref., Col.), 8 inure to the benefit of his widow and Am. B. R. 356. next of kin, does not affect the title Title to Pkopebty. 835 S 7« b.] Sales of Property. 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 consmlted 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 reason- ably identify the property in character and quantity, and give a fair idea of its value.*''* When made, it is reduced to writing,*''* signed by the appraisers, and filed vsdth 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. SAIJiS OF PBOFEBTY. In general — Subsection b also provides for the sale by the trustee of the bankrupt's real and personal property. The subject of sales is largely controlled either by rules or by the order of the court in each case. Here the present law differ 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 an.d 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 dis- tribute 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% of the appraised vaJue shall be made without such approval. Upon a true construction 168. Form No. 13. also, In re Grimes (D. C, N. Car.), 1®9- W- 2 Am. B. E. 730, 96 Fed. 529; In re 170. In re Gordon Supply, etc., Co. Jamieson (Kef., R. I.), 6 Am B E (D. C, Pa.), 13 Am. B. R. 352, 133 601. Fed. 798. 17,3. See "Analogous Provisions" 171. Form No. 13. at head of this section. 172. See, generally, 1 N. B. N. 179, 174. Bankr. Act, § 2(7) and Rule 13, Erie Co. (N. Y.) Dis- 175. Bankr. Act, § 47-a(2) trict in 1 N. B. N. 114. Compare, 836 The Law and Peactioe in Bankeuptoy. Sales of Property; Illustrative Cases. [§ 70-b. of this subsection, a sale of the bankrupt's property is in all cir- cumstances subject to the approval of the court when practicable, and any sale for which an approval was unquestionably practi- cable, conveys no title until it is confirmed, and a setting aside of the sale is equivalent to a refusal to confirm.^ ^® The confirma- tion is a matter of discretion ; 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 considerably more than the amount for which the property was sold.-^''^ This sub- section 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 proposed 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. Illustrative cases. — Under the present law, the following doctrines have been laid down : A referee has power to order and confirm a sale;^^^ but not before the adjudication.^^* Only perish- able property should be sold before the latter time, even by the court,**" though, if ordered, the trustee, when appointed, 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 certain circumstances, there being some foundation in fact upon which the trustee's claim to such interest is basbd.***^ Sales regularly and fairly made will not, as a rule, be disturbed on the ground of mere inadequacy of price, unless for fraud or the stifling of bids, or the like.^*^ An error as to the basis of 176. In re Shea (C. C. A., 1st (D. C, Wis.), 4 Am. B. R. 528, 102 Cir.), 11 Am. B. R. 207, 123 Fed. Fed. 747. 153; s. c, 10 Am. B. R. 481, 122 Fed. 181. In re Gutterson (D. C, 743. Mass.), 14 Am. B. R. 495, 136 Fed. 177. Matter of Mitchell (Ref., 698. Mass.), 15 Am. B. R, 735. 182. In re Thompson (Ref., Pa.), 178. In re Matthews (D. C, Ark.), 2 Am. B. R. 216; In re Groves, 6 Am. B. R. 96, 109 Fed. 603; In re 2 N. B. N. Rep. 30; In re Fisher & Co. (D. C, N. J.), 14 Am. Mhier (D. C, Wis.), 9 Am. B. R. B. R. 366, 135 Fed. 223. 160, 118 Fed. 107; Sturgis v. Corbin 179. In re Styer (D. C, Pa.), 3 (C. C. A., 4th Cir.), 15 Am. B. R. Am. B. R. 424, 98 Fed. 290. Compare 543, 141 Fed. 1, 72 C. C. A., 179. In re Kelly Dry Goods Co. (D. C, Compare In re Finday Bros. (D. C, Wis.), 4 Am. B. R. 528, 102 Fed. 747. N. Y.), 4 Am. B- R. 745, 104 Fed. 180. In re Kelly Dry Goods Co. 675, for case where application was Title to Peopeett. 837 § 79-b.] Sales of Property; General Order XVII. value, made in the trustee's circular inviting bids, will not war- rant a resale, where the purchaser had opportunity to ascertain the value, independently of the circular.*®^ A sale of the bank- rupt'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, according to promise, and the petitioner filed an agreement to bid three times the amount bid at the first sale.^** Where a trustee himself is a purchaser, and the land subsequent to the sale increases in vaJue, the Siale should be set aside and resold, compen- sation to be made to the trustee for the price paid by him for the land and for the cost of improvements made thereon.^*^ 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 can not be decided upon affidavits.^*' Cases where property has been sold subject to or clear of liens are collated in a subsequent paragraph. c. General Order XVIII. — This has been considered else- where.^*^ It 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 siales at public auction, unless otherwise ordered by the court. The second paragraph 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 made to set aside unfair sale made by who has no interest in the matter ex- it general assignee before bankruptcy, cept a desire to become a. bidder and 183. Owens v. Bruce (C. C. A., purchaser at a higher figure, es- 4th Cir.), 6 Am. B. R. 322, 109 Fed. peeially where all the creditors oppose 72; In re Fisher (D. C, N. J.), 17 the motion, and protest in writing Am. B. E. 404, 148 Fed. 907, holding against a resale. that where a resale is had, the ex- 185. In re Hawley (D. C, Iowa), penses should be paid out of the es- 9 Am. B. R. 61, 117 Fed. 364. tate. 186. Matter of Williams v. Bailey 184. In re Shea (D. C, Mass.), 10 (D. C, N. Y.), 19 Am. B. E. 470, Am. B. E. 481, 122 Fed. 742. Com- 156 Fed. 691. pare In re Belden (D. C, N. Y.), 9 187. See in § 58. Am. B. E. 679, 120 Fed. 524, where 188. Act of 1867, § 25, R. S., § the court refused to set aside a sale 6065. of the bankrupt's interest in his 189. See under § 58. father's estate, on the motion of one 838 The Law and Practice in Bankeuptct. Sales of Incumbered Property. [§ 70-b. public auction. At the same time, in the face of the mandatory provision of § 58-a(4), this rule will be cautioualy 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. — Sales free of incumbrances were authorized by the statute of 1867. ■'^" The present law has no such 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 ref- eree^^^ as well as by the judge.^^^ But they should not be ordered where it does not appear that they will be to the advantage of the bankrupt's estate,^** as where there is no equity of redemption, or a state court has already been invoked to foreclose the lien.^** An order merely directing the sale of property, without mention- ing liens, will be taken as a sale subject to any existing liens. ^*^ A court of bankruptcy has jurisdiction to order a sale of the prop- erty of a bankrupt upon which a lien is asserted, without first determining either the validity or amount of the lien.^®^ If the property is sold free of incumbrances and liens, provisions should be made for the protection of the rights of the several lien cred- itors in the fund derived from the sale, and such creditors may prosecute their claims to preference against such fund, even if 190. Act of 1867, § 20, R. S., § 97 Fed. 547; In re Utt (C. C. A., 7th 5075. Cir.), 5 Am. B. R. 383, 105 Fed. 754; 191. As to sale free of liens by In re Keller (D. C, Iowa), 6 Am. B. order of referee, see In re Waterloo R. 351, 109 Fed. 131. See In re Organ Co. (D. C, N. Y.), 9 Am. B. Wilka (D. C, Iowa). 12 Am. B. R. R. 427, 118 Fed. 904. 727, 131 Fed. 1,004, where it was held 192. In re Pittelkow (D. C, Wis.), that a referee may order personal 1 Am. B. R. 472, 92 Fed. 901; In re property to be sold free of liens, upon Etheridge Furniture Co. (D. C, Ky.), notice to lienors, although the prop- 1 Am. B. R. 112, 92 Fed. 329; In re erty, and a creditor having a mort- Worland (D. C, Iowa), 1 Am. B. R. gage thereon, are without the territo- 450, 92 Fed. 893; In re Sanborn (D. rial jurisdiction of tlie court. C, Vt), 3 Am. B. R. 54, 96 Fed. 507; 193. In re Styer (D. C, Pa.), 3 In re Southern, etc., Co. v. Benbow Am. B. R. 424, 98 Fed. 290; In re (D. C, N. Car.), 3 Am. B. R. 9, 96 Shaeffer, 5 Am. B. R. 248, 105 Fed. Fed. 514; Matter of New England 352; In re Goldsmith (D. C, Tex.), Piano Co. (C. C. A., 1st Cir.), 9 Am. 9 Am. B. R. 419, lis Fed. 763; In re B. R. 767, 122 Fed. 937; In re Keet Alden (Ref., Ohio), 16 Am. B. R. 362. (D. C, Pa.), 11 Am. B. R. 117, 128 194. Compare In re Gerdes (D. C, Fed. 661; In re Shoe & Leather Re- Ohio), 4 Am. B. R. 346, 102 Fed. 318. porter (C. C. A., Ist Cir.), 12 Am. B. 195. In re Platteville Foundry & R. 248, 129 Fed. 588; In re Prince & Machine Co. (D. C, Wis.), 17 Am. B. Walter (D. C, Pa.), 12 Am. B. R. 675, R. 291, 147 Fed. 828. 131 Fed. 546. See, also. In re Bar- 196. In re Littlefield (C. C. A., 1st ber (D. C, Minn.), 3 Am. B. R. 306, Cir.), 19 Am. B. R. 18, 155 Fed. 838. Title to Pkopekty. 839 § 70-b.] Sales of Incumbered Property. they did not file exceptions to the return of sale.^"^ The property being sold free of all liens, the court having lawful custody of the property to which liens attached may determine the relative prior- ities of conflicting claims to the fund realized from the sale."* Where a trustee sells mortgaged property of the bankrupt free of the mortgage, and the proceeds thereof are sufficient for that purpose, the mortgagee is entitled to the payment of the interest upon his mortgage debt as well as the principal, out of the proceeds in accordance with the terms of the note and mortgage.^"" The proceeds stand in place of the property mortgaged, and the mortgagee is entitled to distri- bution in full, without deduction of expenses of the sale or of ad- ministration of the bankrupt estate.^*"*. It is appropriate to sell the bankrupt's real estate free from the wife's inchoate right of dower, if she consents, in which case compensation to her should be made from the proceeds of the sale.'"" Sales can, of course, be made subject to incumbrances, and the purchaser then takes the property charged therewith. ^"^ The practice is not different from that on sales of unincumbered property, and is sometimes regulated by local rules. If the order of sale contains no special direction as to incumbrances, the purchaser under the rule of caveat emptor acquires only the rights of the bankrupt in the property, and the rights of those claiming an adverse interest therein are not affected. ^"^ Equity requires that the order should provide that the notice to the lienors be ample, and per- sonal rather than by rnail,^"^ and that a lienor, if the purchaser at the 197. Carroll & Bro. Co. v. Young Co. (D. C, Pa.), 23 Am. B. R. 273, (C. C. A., 3d Cir.), 9 Am. B. R. 643, 173 Fed. 658. 119 Fed. 576. Compare Chauneey v. 200. Savage v. Savage (C. C. A., Dyke Bros. (C. C. A., 8th Cir.), 9 4th Cir.), 15 Am. B. R. 599, 141 Fed. Am. B. R. 444, 119 Fed. 1; In re 346, 72 C. C. A. 494; Matter of Goldsmith (D. C, Tex.), 9 Am. B. Aeretelli (D. C, N. Y.), 21 Am. B. R. 419, 118 Fed. 763; In re Shoe & R. 537, 173 Fed. 121. Leather Reporter (C. C. A., 1st Cir.), 201. In re Gerry (D. C, Pa.), 7 12 Am. B. R. 248, 129 Fed. 588; In re Am. B. R. 459, 112 Fed. 957, 959. Prince & Walter (D. C, Minn.), 12 202. In re Mulhauser Co. (C. C. Am. B. R. 675, 131 Fed. 546; In re A., 6th Cir.), 10 Am. B. R. 236, 121 Saxton Furnace Co. (D. C, Pa.), 14 Fed. 669; In re Platteville F. & M. Am. B. R. 483, 136 Fed. 697. As to Co. (D. C, Wis.), 17 Am. B. R. 291, right of judgment creditor, whose 147 Fed. 828. judgment is unaffected by the bank- 203. Ray v. Norseworthy, 90 U. ruptey, to have his lien satisfied out S. 128; In re Taliafero, Fed. Cas. of the proceeds of the sale, see In re 13,736; In re Drewry, Fed. Cas. Vastbinder (D. C, Pa.), 13 Am. B. 4,081. The record should disclose R. 148, 132 Fed. 718. affirmatively that every creditor 198. Chauneey v. Dyke Bros. (C. whose lien will be disclferged by the C. A., 8th Cir.), 9 Am. B. R. 444, 119 sale has received due notice of the Fed. 1 ; In re Goldsmith ( D. C, N. application for an order of sale. In Y.), 21 Am. B. R. 845, 168 Fed. 779. re Saxton Furnace Co. (D. C, Pa.), 199. Coder v. Arts (C. C. A., 8th 1^ An. B. R. 483, 136 Fed. 697. Cir.), 18 Am. B. R. 513, 152 Fed. 943, Notice.— It seems to be settled mod'f'g 16 Am. B. R. 583, aff'd 213 that notice to the lien creditors of U. S. 223, 22 Am. B. R. 1 ; In re the application for sale must not only Stevens (D. C, Oreg.), 23 Am. B. R. be given, but the record must disclose 239, 173 Fed. 842; In re Allert (D. affirmatively that every creditor C, N. Y.), 23 Am. B. R. 101, 173 whose lien will be discharged bv the Fed. 691. sale has received due notice of the ap- 199a. In re Clark Coal & Coke 840 The Law and Peactice in Bankeuptcy. Practice on Sales. [§ 70-b. sale, may give a receipt to the amount of his lien in lieu of cash. Sales of this character often require the court of bankruptcy to de- termine the validity and priority of liens on the bankrupt's property — there was doubt as to its jurisdiction to do this prior to the amendatory act of 1903,^"* and important contests may arise on distribution.^"^ This method of sale is chiefly valuable in those States which provide a redemption period on mortgage fore- closures.^"® It has been little used elsewhere. It has been held that, where real property of the bankrupt is sold under a mortgage foreclosure in a state court, such court has jurisdiction to appoint an auditor to distribute the fund realized upon the sale.^"'' Cases under former laws will be found in the foot-note.^"* e. Practice on sales. — It will be seen that a trustee has the option (1) of disclaiming the* bankrupt's property, or (2) of sell- ing it. If the latter, (a) he may sell it immediately without notice, if it be perishable, in which, case the practice is indicated in Form No. 4:6 f°^ (b) he may sell it at public auction on notice using Form Wo. 42;2io or (c) he may sell it at private sale^" under General Order XVIII (2) with or without notice, as the court shall direct,^!^ jq which case Form Wo. 45, modified to fit the facts, should be used; or (d) he may sell it subject to liens, when the practice is not unlike that on a sale of unincum- bered 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 plication. In re Platteville Foundry 208. Houston v. City Bank, 6 How 6 Machine Co. (D. C, Wis.), 17 Am. 486; In re Bowie, Fed. Cas. 1728- In B. R. 291, 147 Fed. 828. re McGilton, Fed. Cas. 8,798. See, 204. Compare In re San Gabriel, also, Century Digest, " Bankruntcv " etc., Co. (C. C. A., 9th Cir.), 7 Am. §§ 358-366. B. R. 206, 111 Fed. 892. On recon- 209. This form is erroneous in bo sideration of s. c, 4 Am. B. R. 197, far as it recites a notice. 102 Fed. 310; In re Muhlhauser (C. 210. For a form of notice see 1 C. A., 6th Cir.), 10 Am. B. R. 236, 121 N. B. N. 117. Fed. 669. And see, also, in §§ 11 and 211. The "court may, under its ^\TJ^'^ t ^^°^^ powers, order a private sale of .i05. See In re Sanderline (D. C, either real or personal property be- N. Car.), 6 Am. B. E. 384, 109 Fed. longing to the estate. In re Edes (D 857, for order of distribution. Con- C, Me.), 14 Am. B R. 382 135 Fed suit, also, In re Gerry (D. C, Pa.), 595. 7 Am^ B^ R. 461, 112 Fed 957. 959. 212. As to when notice to creditors ,,^o-' fT^^'" ^ "^ ^" ^°- ^- ^■' """^ "'="°" °f '^ P"^^t« sale should 7th Cir.), 5 Am. B. R. 383, 105 Fed. be given, see Allgair v. Fisher (C. C. 754; In re Novak (D. C, Iowa), 7 A., 3d Cir.), 16 Am. B. R. 278 143 Am. B. R. 267, 111 Fed. 978. Fed. 962 207. Furth v. Stahl, 10 Am. B. R. 442, 205 Pa. St. 430. Title to Peopeett. 841 § 70-c.] Transfer of Trustee's Title to Purchaser. ■whidi Form No. 44, with the additional recitals and directions indicated in the last paragraph, may be adapted, or (f) he may redeem it from liens, as provided in General Order XXVIII, in which event Form No. 43 should be used ; or (g) he may sell un- converted assets as a part of the final meeting of creditors.^ ^* 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 is sufficient, at an auction sale of a bank- rupt'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.^^® Any method of converting a bankrupt's property into money fairly within the practice outlined above will, it is thought, accom- plish the purpose.^ *^ f. Resale — When granted. — The sale of a bankrupt's property by the trustee may be set aside upon the sole ground of inadequacy, but the difference between the price received and the real value of the property must be unconscionable.^^® Vn. TBANSFEB OF TRXTSTEE'S TITLE TO PUBCHASEB. Subsection c, relative to the transfer of title to the purchaser, is expressive of the law. On the report of sale being confirmed, an order is usually entered directing the trustee to make the trans- fer on receipt of the consideration. The instrument of transfer should always recite what interest, as, for instance, the bank- 21,3. See " Supplementary Forms," given by the attorney to stop, does not post. render the sale invalid or prevent its 214. Sturgis v. Corbin (C. C. A., confirmation. 4th Cir.), 15 Am. B. R. 543, 141 Fed. 217. For forms of notice and order 1, 72 C. C. A. 179. of sale, see " Supplementary Forma," 215. In re Benjamin (C. C. A., 2d post. Cir.), 14 Am. B. R. 481, 136 Fed. 175, 218. In re Shapiro (D. C, Pa.), 19 aflBrming 13 Am. B. R. 18. Am. B. R. 125, 154 Fed. 673, holding 216. In re Ketterer Manufacturing that where $3,400 has been realized Co. (D. C, Pa.), 19 Am. B. R. 638, upon the sale of a stock of goods ap- 166 Fed. 719, holding that the fact praised at $5,000, an offer to pay that the attorney of the purchaser at $3,800 is not enough to warrant set- an auction sale of a bankrupt's prop- ting aside the sale and ordering a re- erty by the trustee had a private ar- sale. As to the construction of an rangement with the auctioneer that order of resale, see In re Wylie (C. C. the bid of any other person should be A., 3d Cir.), 18 Am. B. R. 503, 153 raised $50 each time until a sign was Fed. 281, aff'g 17 Am. B. R. 404. 842 The Law and Peactice in Bankeuptct. Transfers Fraudulent Under State Laws. [S 70-d-e. rupt's or the latter's free of liens, is transferred, and as to cove- nants, should be adapted to the forms used by the assignee or receivers under State laws.*^* VIII. TITLE OF TRUSTEE WHERE COMPOSITION IS SET ASIDE OR DISCHARGE REVOKED. Subsection d, relative to vesting title of bankrupt's property in the trustee upon a composition being set aside or a discharge being revoked has been considered in appropriate places, ante.^^'' It constitutes the single exception to the American doc- trine that the cleavage day as to a bankrupt's property shall be the day the petition is filed by or against him. When a composition is set aside or a discharge revoked, property of the bankrupt which would otherwise be " after-acquired," vests in the trustee as of the date of the decree so setting aside or revoking. Thus far there are no cases construing this subsection. IX. TRANSFERS FRATTDVLENT UNDER STATE LAWS MAT BE AVOIDED BY TRUSTEE. a. In general. — Subsection e, relative to the powers of the trus- tee in respect to fraudulent transfers, has been referred to else- where.^^ ^ It is the corollary of § 67-b, and means simply that if a creditor could have avoided any transfer (not merely a lien) under the laws of the State, the trustee can do the same,^*^ and it is immaterial that the creditors of the bankrupt were not in 219. Section 15, Act of 1841, re- have not been filed, and because pos- quired the insertion in the deed of a session of the property has not been copy of the adjudication and order changed. Matter of Gerstman and appointing trustee. The dates of these Bandman (C. C. A., 2d Cir.), 19 Am. steps in the proceedings should be in- B. R. 145, 157 Fed. 550. In Man- serted now. Compare, also, section ning v. Evans (D. C, N. Y.), 19 Am. 47-c, added by the amendatory act of B. R. 217, 223, 156 Fed. 106 • 1903. Judge Lanning said: "It will 220. See in sections 13 and 15. be observed that in this section 221. See in sections 60 and 67. there is no four months limitation as Compare, also, in this section, sub in the other sections above referred to nom., "Property Fraudulently Trans- (60 and 67). Its eflTect is to subro- ferred." gate the trustee to the rights of credi- 222. Mueller v. Bruss, 8 Am. B. R. tors. Its distinguishing feature is 442, 112 Wis. 406. that it authorizes a trustee in bank- A trustee, on behalf of oredi- ruptcy to invoke the relief furnished tors, may attack bills cf sale or trust by State laws to creditors for an- agreements which are void as to the nulling transfers of property by their bankrupt's creditors because they debtors." Title to Propeety. 843 S 70-e.] Transfers Fraudulent Under State Laws. a position to attack the transfer.*''^ The trustee is subrogated to the rights of creditors, and may sue to avoid any conveyance, ■which a creditor could have avoided, although mad© more than four months prior to the adjudication of bankruptcy.''** Such trustee may proceed for such purpose by bill in equity, and -will not be required to seek his remedy at law.*'"' Such a suit may be maintained, although neither the trustee nor any creditor has re- duced the claim against the bankrupt to a judgment.*^* To hold that a trustee cannot attack a fraudulent conveyance made by the bankrupt more than four months before the filing of the petition, ■without &ho-wing that some creditor had obtained a judgment and issued execution thereon, so that he could maintain a similar ac- tion, ■would be simply to provide an easy and convenient method for a dishonest debtor to dispose of his property.**^ The presump- tion is that the trustee has complied with the provisions of the bankruptcy act, and is qualified to act.**^ ■^hen a trustee seeks to enforce rights or to recover property in another district outside of the territorial jurisdiction of the court which appointed him, he stands in the position of those whose rights he has acquired, and can resort only to the same courts, State or Federal, and is eon- fined to the same remedies.*** In many cases, the trustee will be able to sue under § 67-e or § 70-e. If under the latter, he must Nef,"-if ^rB^^tsI': ''"^- ^*- ?'/,«^-'' '' ^-- «• «• ««2' 147 224. In re Mullen (D C Mass ) 4 Am. B. R. 224, 101 Fed. 4i3; Lewis ^"Ale* chattel mortgage.— The V. Bishop, 47 N. Y. App. Div. 554, 62 ''°"''* °^ appeals of New York have re- N. Y. Supp. 618; Beasley v. Cogglns, ce^tly held that the present bank- o7, '?,■ \ ^- 2?^' *^ ^^*- 215, 57 So. ruptcy act arms the trustee in bank- P 'T?n",f^ ^.^F°''* l*"^^8e Co. (C. ruptcy with the right to assert the in- Fed 918- 'in re Gi^a 1 A ^^\ ^1^ ^^""^'^y of an unfiled chattel mort- 647, 47 N. Y. App. Div 55^62 N Y ^^^^ '" ^^''°'' °^ ^^^ creditors of the Supp. 618; Euhl-Koblegar'd Co' v ^°'^*'S^go^, even though their claims Gillespie, 22 Am. B. R. 643, 6l' w' ^^^ "°* '" judgment. Skilton v. Cod- Va. 554, 56 S. E. 898. ' ington, 15 Am. B. R. 810, 185 N. Y. 225, Wall V. Cox (C. C. A., 4th 80, cited in Dunn Salmon Co. v. Pill- ^ir.), 4 Am. B. R. 659, 101 Fed. 403; more, 19 Am. B. R. 172, 55 N Y ?« d J T.";- ^'^¥'=?' J^ ^'"^ ^- K- Misc. 546. E. 442, 112 Wis. 406; Beasley vCof: ^- «"' '22 N. Y. App. Div. 851, 107 gins, 12 Am. B. E. 355, 48 Fla. 215, ^- ^- ^"PP- ^^3. 57 So. 213; Thomas v. Roddy, 19 Am. ^28. Breckons v. Snyder, 15 Am. B. R. 873, 122 N. Y. App. Div. 851; B. R. 112, 211 Pa. St. 176. ^» o^' A^^^J?"^ '^- '^■' ^P- "T- Sup. 229. Hull V. Burr (C. C. A., 5th StrW^^Af t^' '^^^ *''"'*f.^ '" C"'")' 18 Am. B. R. 541, 550, 153 Fed. »d%t\Th»Lrtia?^at ?^rrVR^2'^rt«'"- '■' ^• though the claims of creditors a?e not ^•>' ^^ ^'"- ^- ^- 229, 235. in judgment. Mitchell v. Mitchell (D. 844 The Law and Peacticb in Bankeuptoy. Transfers Fraudulent Under State Laws. [§ 70-e, bring himself -within the elements of pleading and proof recog- nized by the statutes and decisions of his State.^^" The important diff'^rence is that, if the suit is based on the State law, the State statute of limitation applies. Thus, many fraudulent transactions, which could not be brought under § 67-e, will be timely if resting on § 70-e. The trustee should allege that the property of the bankrupt is not sufficient to pay his creditors in full.^^"* A mortgagee who knows that the mortgagor is selling mort- gaged chattels for his own use, and who consents to his doing so, is not a hona fide holder and the mortgagor's trustee in bank- ruptcy may avoid the chattel mortgage, and recover the property transferred thereby, or its value.^^* A trustee in bankruptcy of a mortgagor has the same rights as a creditor aarmed with an attach- ment or executon.^*^ Where the alleged fraudulent transfer is a mortgage, the bill, upon the issue of its priority of lien, should allege the names of the bankrupt's creditors other than the de- fendant, the amount of their debts, the character of the same and when created.^^* A trustee in bankruptcy may sue in trover for a conversion of goods occurring either before or after bankruptcy, and in a declaration may join a count upon the bankrupt's title, and a count upon the trustee's title.^^* The cases turn on the law of the State and a summary of their doctrines would be useless ; they are, therefore, merely cited in the foot-note.^^" 230. In re Gray, 3 Am. B. R. 647, ler v. Bruss, 8 Am. B. R. 442, 112 47 N. Y. App. Div. 554; Mueller v. Wis. 406; Barber v. Coit (C. C. A., Bruss, 8 Am. B. R. 442, 112 Wis. 6th Cir.), 16 Am. B. R. 419, 144 Fed. 406; Halbert v. Pranke (Sup. Ct., 381, holding that under the Ohio Minn.), 11 Am. B. R. 620. statute declaring that a creditor may 230a. Prescott v. Galluccio (D. C, sue to set aside fraudulent transfers, N. Y.), 21 Am. B. R. 229, 235. actual fraud need not be shown. Co- 231. Skillen v. Endelman, 11 Am. hen v. Wagar, 16 Am. B. R. 381, 183 B. R. 766, 39 Misc. 261, 79 N. Y. N. Y. 33; Lesser v. Bradford Realty Supp. 413. Co., 15 Am. B. R. 123, 47 N. Y. Misc. 232. Zartman v. First Nat. Bank, 463, as to sufficiency of complaint in 19 Am. B. R. 27, 189 N. Y. 267. action to set aside chattel mortgage 233. Teague v. Anderson Hardware made within four months' period. Co. (D. C, Ga.), 20 Am. B. R. 424, Breckons v. Snyder, 15 Am. B. R. 112, 161 Fed. 765. 211 Pa. St. 176, as to sufficiency of 234. Burns v. O'Gorman (Cir. Ct., evidence in action to recover preferen- R. I.), 17 Am. B. R. 815, 150 Fed. tial payment. Durham v. Wick, 14 226. Am. B. R. 385, 210 Pa. St. 128; 235. In re Brown (D. C, Oreg.), 1 Wright v. Skinner (D. C, N. Y.), 14 Am. B. R. 107, 91 Fed. 358; In re Am. B. R. 500, 136 Fed. 694, as to al- Grahs (Ref., Ohio), 1 Am. B. R. 465; legations as to citizenship in bill In re Phelps (Ref.. N. Y.), 3 Am. B. where jurisdiction depends upon di- R. 396; In re Mullen (D. C, Mass.), verse citizenship. Horskius t. Sander- 4 Am. B. R. 224, 101 Fed. 413; Muel- son (D. C, Vt.), 13 Am. B. R. 101, Title to Peopeety. 845 i 70-e.] Saving Clause; Amendment of 1903. b. The saving clause. — That dause in this subsection is similar to those found in" § 67-e and § 67-f, and ia 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 § 67-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 conditions imposed by § 23-b, that is, by the consent of the pro- posed defendants.**" 132 Fed. 415, as to jurisdiction over property within the district where the defendant resides elsewhere. In Netp Jersey an insolvent debtor may prefer any creditor either by a mortgage securing an antecedent debt or by a conveyance of property in sat- isfaction of such indebtedness, pro- vided 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 70e. Manning v. Evans (D. C, N. Y.), 19 Am. B. E. 217, 223, 156 Fed. 106. 236. In re Mullen (D. C, Mass.), 4 Am. B. R. 224, 101 Fed. 413. 237. Harrell v. Beale, 17 Wall. .190. Compare In re Lake, Fed. Cas. 7,a02. 238. For the time when this amendment became operative, see " Supplementary Section to Amenda- tory Act," post. 2,39. See in sections 60 and 67. 240. Gregory v. Atkinson (D. C, Mo.), 11 Am. B. R. 495, 127 Fed. 183, disapproved in Hurley v. Devlin (D. C, Kan.), 17 Am. B. R. 793, 149 Fed. 268, holding that the bankruptcy court, without the consent of the de- fendant, has jurisdiction of » suit by the trustee to set aside an alleged fraudulent transfer of property made by the bankrupt anterior to the four months period. A suit by the trustee cannot be brought under section 70-e without the consent of the defendant. Skewis V. Barthell (D. C, la.), 18 Am. B. E. 429, 152 Fed. 534. Consent of defendant. — Con- struing 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 bankrupt which any creditor of the bankrupt might have avoided, but that, although jurisdiction of the sub- ject-matter is conferred, it can only be exercised over the persons of the defendants by their consent." Hull v. Burr (C. C. A., 5th Cir.), 18 Am. B. E. 541, 547, 153 Fed. 945. SECTION SEVENTY-ONE. INDEXES AND SEARCHES OF CIJSEIKS. § 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 bank- ruptcy heretofore 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 heeru filed; and said clerks shall be entitled to receive for such certifi- cates the same fees as now allowed by law for certificates as to judgments in said courts: Provided, that said bankruptcy indexes and dockets shall at all times be open to inspection and exarw- ination by all persons or corporations without any fee or charge therefor* I. ADDITIONAI, DTTTEES 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 Committee of the House of Kepresentatives. 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 sub- division of § 51. Indeed, its neoeasity 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 pro- viso clause is perhaps aimed at the practice of excluding the public from the clerk's files and 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 afFeots only cases begun on or after February 5, 1903. 1. See House Report, No. 1,698, required. It also requires that these 57th Congress, first session. be kept open to inspection and exami- The last amendment is one gener- nation. It is frequently desirable to ally demanded, and is in the interest know whether a person has filed a pe- of all persons who deal with property, tition in bankruptcy, and also whether It requires the clerks to prepare and he has been discharged, and it is keep indexes of all petitions and dis- many times impossible within a rea- charges in bankruptcy and to issue sonable time to ascertain these facts certificates in relation thereto when in the absence of convenient indexes. * This section was added by the amendatory act of 1903. 846 SECTION SEVENTY-TWO. I.IMITATION 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 TT. 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, 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 prop- erty. Act of 1867, § 20, R. S., § 5075. In Eng.: As to property passing to the trustee. Act of 1883, §§ 43, 44, 59; As to burdensome property. Act of 1883, § 55; Act of 1890, § 13; As to sales by the trustee. Act of 1883, §§ 56(1), 70. 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, 42, 43, 44, 45, 46. SYNOPSIS OF SECTION". I. Limitation on Referees' and Trustees' Fees. a. Scope of section. b. Its effect. c. Additional compensation for conducting business. d. Fees of special masters. I. LIMITATION ON REFEREES' AND TRUSTEES' FEES. 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 XXX'V(3) (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 * This section was added by the amendatory act of 1903, and amended by the Amendatory Act of 1910. 847 848 The Law and Peactice in Bankbuptcy. Additional Compensation for Conducting Businass. [§ 72. already in force at the time the Supreme Court orders became operative. b. Its effect. — The purpose of the law-making power in enact- ing this section was to forestall any of those scandals due to the fee system for compensating the officers mentioned which first made the law of 1867 odorous and then pointed the way to its re- peal. Under the present law, the practice had grown up, and even in certain districts been ratified by rules, of permitting 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 oompensation, either through larger allowances to his attorney or by a per diem for extra work, as, for instance, in man- aging a going business, 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 rides in the future, has, in this section, riveted the rule that the same shall be full compensaition. 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.^ c. Additional compensation for conducting business " Addi- tional compensation " can only be construed in relation to the fact that where a trustee is authorized to conduct the bankrupt busi- ness 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 amend- 1. See Bankr. Act, §§40 and 48, A contract for extra compen- also § 2(3), all as amended by the sation has been held void as against Act of 1903. public policy. Devries v. Orem (Ct. 2. In re Wilcox (D. C, Mich.), 19 Appeals, Md.), 17 Am. B. E. 876, 65 Am. B. E. 241, 156 Fed. 685; In re AtL 430. Coventry-Evans Furniture Co. (D. C, 3. In re Screws (D. C Ga.), 17" N. Y.), 22 Am. B. E. 623, 171 Fed. Am. B. E. 269, 147 Fed. 989. 673. Limitation of Fees of Cebtaih Offioees. 849 § 72.] Fees of Special Masters. ment of 1903, the trustees 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 addi- tional compensation to a trustee for conducting the bankrupt busi- ness as a going oonsem.* d. Fees of special masters. — .Although this section does not allow the referee to receive any further compensation for his ser- vices than as expressly authorized in the act, yet it has been the practice to allow compensation for services in the nature of mas- ters' services outside of the duties of the referee.'' Here the rule of Fellows V. FrendenthaP still pertains. References to the ref- eree as such may, of course, be made under the authority of General Order XII (3). Such references are rare, for the rea- son that, the judicial service performed being by the statute lim- ited to the judge, there is no provision for compensating the junior oiScer. 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 train- ing is best qualified to pass on bankruptcy questions. The cases under the original law are, therefore, most of them still in point. 7 4. Matter of Hart & Co. (D. C, time and performed great labor, Hawaii), 17 Am. B. R. 480. showing the utmost fidelity to his Compeusation of referee for trust throughout. Bray v. Johnson, camdnct of bnsiness. — ^A referee who, without the express sanction of 21 Am. B. R. 383, 166 Fed. 57. ii. i. ii, • XL i i i 5- Matter of Hart & Co. (D. C, the court, authorizes the trustees, by Hawaii), 18 Am. B. R. 137. order, to continue the bankrupt's a t< n i-i jiii^. . . . ., , ^ . 6. Fellows V. Freudenthal, 4 Am. business, for the purpose of complet- g p ^qq jqo pgj 731 ing partly executed contracts of the v in n ' -ci j ii. i ,, . . . ..,, , , .7. Fellows V. Freudenthal, supra; bankrupt, is not entitled to a commis- _ ■., t^ ^ , . t. ^ ,,„ ,„. sion of one per cent, upon all funds ^^ '« ^"^"f' ^ Am. B. R. 110. 101 paid out by the trustees in the con- ^^^- 2*1 : Bragassa v. St. Louis Cycle, duct and administration of the busi- 5 Am. B. R. 700, 107 Fed. 77 ; In re ness ordered to be continued, though Grossman, 6 Am. B. R. 510, 111 Fed. in all that he did the referee was sup- 507. See, also, In re Todd, 6 Am. B. ported by the creditors and trustees E. 88, 109 Fed. 265. and their counsel, and expended much 64 TIME OF TAKING EFFECT. The Time When Act of 1908 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 in- voluntary bankruptcy shall be filed within four months of the passage thereof. 6 Proceedings commenced under State insolvency laws before the passage of this act shall not be affected by it. Analogons provisions: See § 51. Cross references: See § 51. The Time When Amendatory Act of 1903 Took Effect.- (§ 19 of Amendatory Act of 1903), — That the provisions of this amend- atory Act shall not apply to banhruptcy cases pending when this Act takes effect, but such cases shall be adjudicated and disposed of conformably 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 amend- atory 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 said Act approved July first, eighteen hundred and ninety-eight, as amended by said Act approved Febru- ary fifth, nineteen hundred and three, and as further amended by said Act approved June fifteenth, nineteen hundred and six. Analogous provisions: In XJ. S.: None. In Eng.: None. Cross references: To tbe law: §§ 14-b, 18, 40-a, 48-a, 59-a. To the General Orders: XII(3), XXXV(2) (3). To the Forms: None. SYNOPSIS. I. When the Act of 1898 Went into Effect. II. State Insolvency Laws. a. Effect of act on proceedings under State insolvency laws. b. Suspension of State insolvency laws. (1) In general. (2) Illustrative cases. I. WHEN THE ACT OF 1898 VHEiNT 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. Not so of the * The amendatory act of 1903 was approved by the President, February 5th, 1903, at 4.30 p. m. 850 Time of Taking Effect. 851 State Insolvency Laws. 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 meana the same as " ap- proval." Thus, the courts had power on July 1, 1898, to appoint referees and promulgate rules, and from and including that day all State insoivency laws were suspended.* It has even been held that the rights of 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 went into effect February 5, 1903. Ita effect on then pending proceedings is considered in the next section. II. STATE INSOLVENCY lAWS. a. Effect of act on proceedings under State insolvency lavvs. — Subsection b is not important now, more than nine years having elapsed since the passage of the act. The subsection is expressive of the rule of law that State insolvency laws continue in full oper- ation as to all eases begun thereunder before the baukruptcy law was approved.' But, though begun beforehand, if so long before- hand as to exclude the presumption that they are still pending,'' the Federal supersedes the State law. Illustrative cases under former laws will be found in the foot-note.' b. Suspension of State insolvency laws. — (1) In geneeal. — 'No bankruptcy law since that of 1800 has contained any provision 1. For the reason, see cases like: Also cases cited in foot-note 13, post. In re Horton, Fed. Cas. 6,708; Day 4. Westcott v. Berry, i Am. B. R. V. Bardwell, 97 Mass. 246, and Judd 264. Compare Kosches v. Libowitz, V. Ives, 4 Mete. 401, are no longer of 4 Am. B. R. 265, in note; Blake v. value. Valentine Co., 1 Am. B. R. 372, 89 2. Compare Leidigh Carriage Co. Fed 691. V. Stengel, 2 Am. B. R. 383, 95 Fed. 5. Ideal Clo. Co. v. Hazle, 6 Am. 637. And see In re Tonawanda St. B. R. 265. See, also, Ellis v. Hays, PI. Mill, 6 Am. B. R. 38. etc., Co., 8 Am. B. R. 109. 3. Palmenter Mfg. Co. v. Hamil- 6. Compare In re Mussey, 3 Am. ton, 1 Am. B. R. 39; In re Bruss- B. R. 592, 99 Fed. 71. Ritter Co., 1 Am. B. R. 58, 90 Fed. 7. In re Bates, 4 Am. B. R. 56, 100 651; In re Etheridge Furniture Co., Fed. 263. 1 Am. B. E. 112, 92 Fed. 329; In re 8. In re Holmes, Fed. Cas. 6,633; Curtis, 1 Am. B. R. 440, 91 Fed. 737; Lavender v. Gosnell, 43 Md. 163; Littlefield v. Gray, 8 Am. B. R. 409. Longis v. Creditors, 20 La. Ann. 15. 852 The Law and Peactice in Bankeuptcy. State Insolvency Laws. declaring the effect of such a law on analogous State laws. Tliat law, § 61, provided as follows: " This act shall not repeal or annul, or be construed to repeal or annul, the laws of any State now in force, or which may be here- after enacted, for the relief of insolvent debtors, except so far as the same may affect persons who are or may be within the purview of this act." So far as it goes, the clause quoted is doubtless still the law. There was no need to insert it in subeequent statutes, for ere the act of 1841 was passed, tbe supreme court had delivered two epoch- making decisions, which settled the law on the subject: (1) that, when Congress has exercised its constitutional power to enact a uniform bankruptcy law, all existing State insolvency laws apply- ing to the same persons are suspended,® but (2) that, this power not being exclusive, State laws are valid and continue operative so far as they do not conflict with the paramount Federal law.^" Since that time, the books have been filled with cases, yet few of them add much to Sturges v. Crowningshield and Ogden v. Saun- ders. The reported oases prior to the former law are not alto- gether uniform or always reconcilable;^^ the same is true of those under the latter law.^^ Indeed, the impossibility of phrasing rules always applicable is apparent. Some of those most generally recognized are stated in the next paragraph. (2) Illusteative cases. — Laws regulating general assign- ments,^^ not being insolvency laws, are not suspended. Likewise as to laws concerning the punishment of fraudulent debtors,^* or 9. SturgeB v. Crowningshield, 4 86, 114 Fed. 360; In re Hall Co., 10 Wheat. 122. Am. B. R. 88; In re Sievers, 1 Am. 10. Ogden v. Saunders, 12 Wheat. B. R. 117, 91 Fed. 366; affirmed as 213; Singer v. National Bedstead Davis v. Bohle, 1 Am. B. R. 412, 92 Mfg. Co., 11 Am. B. R. 276 (N. J. Fed. 325; also cases cited in foot- Ch. ) . notes 3 and 4. That State laws are 11. Shryock v. Bashore, 13 N. B. not suspended: In re Scholtz, 5 Am. R. 481. See, also. Collier on Bank- B. R. 782, 106 Fed. 834. ruptcy, Ist Ed., 427. 13- In re Sievers, supra; Duryea 12. That State laws are suspended, v. Guthrie, 11 Am. B. R. 234 (Wis.). In re Smith, 2 Am. B. R. 9, 92 Fed. Contra: In re Smith, 2 Am. B. R. 9, 135- Ketehum v. McNamara, 6 Am. 92 Fed. 135. But see Mayer v. Hell- B. R. 160; In re Macon Sash & Door man, 91 U. S. 496. And compare Co., 7 Am. B. R. 66, modified on ap- Thrasher v. Bentley, 1 Abb. N. C. (N. peal as Carling v. Seymour Lumber Y. ) 39, and Beck v. Parker, 65 Pa. St. Co., 8 Am. B. R. 29, 113 Fed. 483; 262. Scheuer v. Book, etc., Co., 7 Am. 14. Berthelon v. Betts, 4 Hill (N. B. R. 384, 112 Fed. 407. Note, also, Y.) 577; Scully v. Kirkpatrick, 7» I« re Stor'ck Lumber Co., 8 Am. B. R. Pa. St. 324. Time of Taking Effect. 853 State Inaolvency Laws. for the settlement of the estates of deceased insolvents.^' State laws may be suspended in part only, as where they refer to a class expressly excepted by the bankruptcy law, in which case they con- tinue operative as to that class.*® Thus a State law under which persons engaged chiefly in the tillage of the soil may be proceeded against by their creditors for the purpose of throwing them into bankruptcy has been held not to be superseded by the bankrupt aot.*^ Nor does the existence of a Federal law preclude the pas- sage of a State insolvency law; the latter merely remains inoper- ative while the former is in forca-** A State statute relating to insolvency and providing for proceedings having the same object as the bankrupt act is a^bsolutely inoperative as to the persons and property to which the bankrupt act applies.^® The discharge feature seems not necessarily a part of an insolvency law, and State laws lacking it have been held suspended by a national bank- ruptcy law.*" As to the effect of the latter on a State law regu- lating the distribution of the assets of insolvent corporations there is much conflict. The weight of authority under the act of 1867 was that they were suspended.^* It would seem that, if the pro- ceeding be purely one of distribution and the corporation be amen- able to bankruptcy under § 4 of the present law, the State law would be suspended ; otherwise, not.^^ As stated by Chief Justice Fuller : " The operation of the bankruptcy laws of the United States cannot be defeated by insolvent commercial corporations applying to be wound up under State statutes. The bankruptcy law is paramount, and the jurisdiction of the Federal courts in bankruptcy, when properly invoked in the administration of the affairs of insolvent persons and corporations, is essentially ex- 15. Hawkins v. Larned, 54 N. H. over bankruptcy, the exercise of such 333. power by Congress precludes legisla- 16. Herron Co. v. Superior Court, tion by a State over the subject. 8 Am. B. R. 492; Maltbie v. Hotch- 20. In re Smith, 2 Am. B. R. 9, 92 kiss, 38 Conn. 80. Compare Fisk v. Fed. 135; Boese v. Locke, 17 Hun (N. Montgomery, 21 La. Ann. 446. Y. ), 270. 17. Old Town Bank v. JTcCormick, 21. Shryock v. Bashore, ante; 10 Am. B. R. 767, 96 Md. 341. Thornhill v. Bank, Fed. Cas. 13,992; 18. Palmer v. Hixon, 74 Me. 447. Piatt v. Archer, Fed. Caa. 11,213. 19. Potts V. Smith Mfg. Co., 25 Pa. Contra: Chandler v. Siddle, Fed. Cas. Super. Ct., 206, 12 Am. B. R. 392, in 2,594. which case it was also held that since 22. See Piatt v. Archer, supra; the Constitution has left in the States also cases cited ante in this section, and in Congress concurrent power 854 The Law and Practice in Bankeuptcy. State losolvency Laws. elusive."^* The practitioner will do well to measure his facts by the rule of Sturges v. Crowningshield.^* 23. In re Watts, 190 U. S. 1, 10 Am. B. R. 113. See, also. Matter of Milbury Co., 11 Am. B. R. 523; Merry V. Jones, 11 Am. B. R. 625 (Ga. Sup. ) ; In re White Mountain Paper Co., 11 Am. B. R. 491, 127 Fed. 189; Matter of International Coal Mining Co., 16 Am. B. R. 309, 143 Fed. 665; IB re Salmon, 16 Am. B. R. 122, 143 Fed. 395; In re Standard Oak Veneer Co. (D. C, Tenn.), 22 Am. B. R. 883, 173 Fed. 103. 24. 4 Wheat. 122. The following are suggestive cases on this subject; Adams v. Storey, Fed. Cas. 66; Ex parte Fames, Fed. Cas. 4,237; Appeal of Gerry, 43 Conn. 289; Griswold v. Pratt, 50 Mass. 16; Steelman t. Mai- tiz, 36 K. J. I. 344. GENERAL ORDERS IN BANKRUPTCY ADOPTED BY THE SUPREME COURT OF THE UNITED STATES At the October Term, J898. Pbefatobt Note. — 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 construing 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. PREAMBLE. In pursuance of the powers conferred by the Constitution and Jaws upon the Supreme Court of the United States, and particu- larly 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 established 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 gen- eral orders established by this court under the bankrupt act of 1867 and with any general rules or special orders of the courts in bankruptcy, stand good, subject, however, to such further regula- tion by rule or order of those courts as may be necessary or proper to carry into force and effect the bankrupt act of 1898 and the general orders of this court. Cross references: To the laws § 30. To the General Orders: XXXVII, XXXVIII. To the Equity Rules: LXXXIX, XC. (See> also. Revised Statutes, §§ 913, 914.) 865 856 Geneeal Oedees in Bankeuptct. Docket; Piling Papers. [Gen. Ord. I, II. Effect aiid Constrnotlon of the Gemeral Orden. — The General Orders of the supreme court and the rules of the district courts in accordance there- with are as obligatory on officers of the court as the bankruptcy act itself. In re Cobb (D. C, N. C), 7 Am. B. E. 202, 112 Fed. 655. 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. E. 512, 137 Fed. 517. The General Orders are an amplification of the law with respect to procedure. Orcutt Co. v. Green, 17 Am. B. R. 72, 204 TJ. S. 96, rev'g 13 Am B. R. 512 j West Co. T. Lea, 174 U. S. 590, 2 Am. B. R. 463. 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 Soperand Slada (Ref., N. Y.), 1 Am. B. R. 193, 196. As to the furnishing and delivering of subpoenas, see In re Hemstreet (D. C, la.), 8 Am. B. E. 760, 117 Fed. 568; Matter of the Abbey Press (C. C. A., 2d Cir.), 13 Am. B. E. 11, 134 Fed. 51. I. DOCKET. The clerk shall keep a docket, in which the cases shall be en- tered 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 memoran- dum of all proceedings in the case except those duly entered on the referee's certified record aforesaid. The docket shall be ar- ranged in a manner convenient for reference, and shall at all times be open to public inspection. [Latter part of General Order I, 1867, with changes specifying more fully the entries to be made in the docket.] Cross references: To the lanr: As to commencement of proceedings, § 1(10) ; As to duties of the clerk, §§ 51, 71; As to duties of the ref- eree, §§ 29-c, 39-a(7), 42; As to duties of the trustee, §§ 29-c, 49. To the General Orders: II, IV. To the Equity Rales: 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, 1867, but not so full.] Cross references: To the law: §§ IS-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. Qeitebal Orders in BAjTKRrPTCT. 857 Gen. Ord. Ill, IV.] Process; Conduct of Proceedings. m. PROCESS. Aill process, siummoiis and subpoenas 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 applica- tion, be furnished to the referees. [General Order II, 1867, except the word " referees " is substituted herein for the word " registers."] Crosi references: To the latr: As to process in involuntary proceed- ings, § IS-a (and also under §§ 4 and 5) ; As to process to witnesses, § 21-a. To the General Orders: VIII. To the Official Forma; Nos. 6, 30. To the Equity Rules: VII to XVI, inclusive. Illustrative Cases: Matter of the Abbey Press (C. C. A.), 13 Am. B. R. 11, 134 Fed. 51. See those cited tmder 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 pro- ceedings by attorney, who shall be an attorney or counselor au- thorized to practice in the circuit court or district court. The name of the attorney or counselor, with his place of business, shall be en- tered 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, re- quired to be served on the party personally may be served upon his attorney. [Greneral 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, §§ 18-d, S9; As to notices, § 68. To the General Orders: VI, VIII, IX, XXIII. To the Supplementary Forms: For those in involuntary cases, Nos. 144, 145, 146, 147, 148, 149, 160, 151, 152, 153, 154, 165, 156; for appear- ances, Nos. 128, 138, 146, 147. See, also, generally, " Supplementary Forms," post. To the Equity Rules: IV, XVII, and, as to pleadings, generally. 858 Genekal Oedees inr Bankeuptcy. Frame of Petitions; Petitiona in Different Districts. [Gen. Ord. V, VI, 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 dis- trict court. Matter of Herzikopf (D. C, Col.), 9 Am. B. E. 90, 118 Fed. 1,016; In re Gasser (C. C. A., 8th Cir.), 5 Am. B. R. 32, 104 Fed. 537. "The petition in an involuntary bankruptcy proceeding may be made by the attorney in fact of the petitioning creditors." Rogers v. De Sota Placer Min- ing Co. (C. C. A., 9th Cir.), 14 Am. B. R. 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 afiSdavit to the schedules of a petitioning creditor. In re Blankfein (D. C, N. Y.), 3 Am. B. R. 165, 9T Fed. 191. V. FBAMX: OF PETITIONS. All petitions and the schedules filed therewith shall be printed or written out plainly, without abbreviation or interlineation, except where such abbreviation and interlineation may be for the purpose of reference. [First part of General Order XIV, 1867, without change.] Cross references: To the law: As to petitions, § 18-a-c; As to sched- ules, § 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. 143, 144. To the Equity Rules: XX to XXV. XTse of ditto marks and abbreviations. — 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. R. 699, 6 N. Y. Misc. 3, 99 N. Y. Supp. 905. The abbreviation of the residence of a creditor as "135 Bway" violates this rule. Sutherland v. Lasher, 11 Am. B. R. 780, 41 N. Y. Misc. 249. Use of printed blanhs. — In the eastern district of North Carolina a written or typewritten schedule will not be accepted. The printed blank con- taining 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. C), 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. Liesum 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. VT. PETITIONS IN DIFFEIbENT DISTRICTS. In case two or more petitions shall be filed against the same in- dividual in different districts, the first hearing shall be had in the General Oedees in Bankeuptcy. 859 Gen. Ord. VI.] Petitions in Different Districts. 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 allega- tion 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 imtil the same shall be closed. In case two or more petitions shall be filed in diiferent districts by different members of the same partnership for an ad- judication of the bankruptcy of said partnership, the court in which the petition is first filed, having jurisdiction, shall take and retain jurisdiction over all proceedings 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 transfen'ed to that court. [General Order XVI, 1867, without change, except that the last sentence of Rule VI under consideration, is new.] Cros* references: To the law: As to where petitions may be filed, § 1(2); As to partnership petitions, § 5; As to transfer of cases, i§ 2(19), 32; Also generally to §§ 2(19), 18. To the General Orders: IV, VII, VIII. The true 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 petitions is the court in which the first hearing should be had. In re Isaacson (D. C, N. Y.), 20 Am. B. R. 437, 161 Fed. 777. It may be asaimed that General Order No. 6 is 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. Under this general order, in the case 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 partnership that first filed shall have priority of 860 Geneeal Oedeks in Bankruptcy. Priority of Petitions. [Gen. Ord. VII. 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. K. 761, 132 Fed. 378. General Orders VI and VII are designed to relate simply to the consolidar tion of proceedings. In re Strait (Ref., N. Y.), 2 Am. B. E. 308. Corporations are -nithin the provisions of this order. In re Elmira Steel Co. (D. C, N. Y.), 5 Am. B. R. 484, 109 Fed. 456. The word "indi- vidual," 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 hear- ing 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 hankmpt'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 bank- ruptcy law, the proceeding is transferred and consolidated with % 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. An application for the transfer 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. E. 279, 112 Fed. 58. Thus, where a petition has been filed against a corpora- tion in the district of its domicile, and thereafter 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 retain jurisdiction until the proceedings are closed. In re Tybo Mining & Eeduction Co. (D. C, Me.), 13 Am. B. E. 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, 8. 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 bankruptcy petition may be amended so as to allege grounds of bankruptcy sub- sequently occurring notwithstanding the proyisions of this order. In re Hamrick (D. C. Ga.) 23 Am. B. E. 721, 175 Fed. 279. VII. PRIORITY OF PETITIONS. Whenever two or more petitions shall be filed by creditors against a common 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 bankruptcy against him on the petitions, that petition shall be first heard and tried which al- leges the commission of the earliest act of bankruptcy; and in case Geneeal, Orders in Bankruptcy. 861 Gen. Ord. VIII.] Proceedings in Partnership Cases. the several acts of bankruptcy are allied 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 pro- ceed to a hearing as upon one petition ; and if an adjudication of bankruptcy be made upon either petition, or for the commission of a single act of bankruptcy, it shall not be necessary to proceed to a hearing upon the remaining petitions, unless proceedings be taken by the debtor for the purpose of causing such adjudication to be annulled or vacated. [General Order XV, 1867, without change other than that " four months " appears in the new rule in place of " six months."] Cross reference: See those to General Order VI, immediately ante. Meaning and constraetion of order.^This order contemplates inde- pendent 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: First. Two or more petitions must be filed by creditors against a common debtor, alleging separate acts of bankruptcy committed by said debtor; and Second. The 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 bank- ruptcy, 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. Vin. FROCIUBDINGS IN FARTNXiBSHIF 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 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 peti- tioned against ; and he shall have the right to appear at the time fi^ed 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 862 Geneeal Oedees in Bankeuptcy. Proceedings in Partnership Cases. [Gen. Ord. VIII. 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 adjudica- tion of bankruptcy shall be made. [General Order XVIII, 1867, with no substantial change.] Cross references! To the lav: §§ 5, 18. To the General Orders: VI, VII. To the Official Forms: Nos. 2, 30. To the Supplementary Forms: No. 143. Meaning and application of order. — This order provides the only method of procedure in 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 of a defunct partnership, desires to go into a court of bankruptcy, he must bring the firm and the other partners into court with him. Matter of Freund (Eef., lo.), 1 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. R. 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 sec. 8 of the act. In re Ceballos & 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 indi- vidual who is a member of a firm to have himself and not the firm adjudi- cated a bankrupt. N. Y. Deaf and Dumb Institute v. Crockett, 17 Am. B. R. 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 (Ref., N. Y.), 1 Am. B. R. 689. The supreme court in this general order seems to recognize the same dis- tinction as it does in the prescribed forms, between an adjudication of a bankrupt and of an individual partner. In re Barden (D. C, N. Car.), 4 Am. B. R. 31, 101 Fed. 553. See, generally, In re Carleton (D. C, Mass.), 8 Am. B. R. 270, 115 Fed. 246. Notice of hearing; hov 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 cannot be had, then, upon filing before the judge (or the referee, if the case has been referred by the clerk) an afiidavit 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. Objecting partners; filing schedules. — The objecting partners, though they have committed no act of bankruptcy and can not be adjudicated indi- vidual bankrupts, must file a schedule of their individual debts and inven- tory their property, upon the adjudication of the partnership and the peti- tioning partner. In re Ceballos & Co. (D. C, N. Y.), 20 Am. B. R. 467, 161 Fed. 451. This general order provides for the filing of schedules on the part General OEUEiis in Bankeuptcy. 863 Gen. Ord. IX, X.] Schedules; Indemnity for Expenses. of a solvent partner. Matter of Solomon 4. Carvel (D. C, N. Y.), 20 Am. B. R. 488, 163 Fed. 140. The non-assenting partner must file schedules of his in- dividual 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.) 33 Am. B. K. 298, 169 Fed. 481. Detenae of non-joinliiE partners, — ^All that a non- joining partner may do imder this general order is to resist adjudication against the partnership as a separate entity. In doing so he can defend only against the allegations con- tained 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. E. 459, 465, 161 Fed. 445. 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 one of the partners to contest an adjudication against the firm, and to defeat it by showing that the firm is not insolvent, or, if insolvent, that it has not com- mitted an act of bankruptcy. In re Laughlin (D. C, la.), 3 Am. B. R. 1, 96 Fed. 589. IX. SCHXa>TJLE IN INVOIJTNTABT BANKRXJFTCT. In all cases of involuntary bankruptcy in which 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 cred- itors 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. 116; and by analogy. No. 143. 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 FOB 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 derk, marshal or referee may require 864 Geneeal Obdebs in Bankeuptct. Amendmenta. [Gen. Ord. XI. from the bankrupt or othea- person in whose behalf the duty is to be performed, indemnity for such expense. Money advanced for this purpose 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 tbe law: As to publishing and mailing notices, § 58; As to examinations 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. 173. 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 bankrupt act, but it is not the intent of the order that the bank- rupt 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 application for his discharge. In re Hatcher (D. C, Tex.), 16 Am. B. E. 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 Plimpton (D. C, Va.), 4 Am. B. R. 614, 103 Fed. 775. See, generally. Sellers v. Bell (C. C. A., 5th Cir.), 2 Am. B. E. 529, 552, 94 Fed. 801. XI. AMENDMENTS. The court may allow amendments to the petition and schedules on application of the petitioner. Amendments shall be 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 references. 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. 113, 114, 115. To the Eqnity Bnles: XXVIII to XXX. Geneeal Oedees in Bankeuptcy. 865 Gen. Ord. XII.] Duties of Referee. As to amendments to petitions, see discussion under section 18; as to amendments of schedules, see under section 7; and aa to intervention by other creditors, see under section 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 immaterial 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 amendments 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, Gleaaon 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 allega- tions 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 Milke Co., of Mobile (D. C, Ala.), 18 Am. B. R. 735, 154 Fed. 682. No time is specified within which ajnendments may be allowed under this order. Columbia Bank v. Bikett (Ct. App., N. Y.), 9 Am. B. R. 481, 486, aff'g 65 App. Div. 615. Otber 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 Daffy (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.), 14 Am. B. R. 31, 134 Fed. 562; In re Fisher (D. C, Va.). 15 Am. B. R. 653, 654, 142 Fed. 205; In re Goodman (C. C. A., 5th Cir.) 23 Am. B. R. 504, 174 Fed. 644. XII. DUTIES OF REFEBSE. 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 bankruptcy, and may receive from the ref- eree a protection against arrest, to continue until the final adjudi- cation on his application for a discharge, unless suspended or vacated by order of the court. A copy of the order shall fo^rth- with 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. 55 866 General Obdees in Banketjptcy, Duties of Keferee. ItJen. Ord. XII. 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 compo- sition, or for an injunction to stay proceedings of a court or officer 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 IV, 1867, with slight changes. Paragraph 2 is derived from General Order V, 1867. Paragraph 3 is new; its validity aa 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 by S 38-a(4).] Cross references: To tbe lair: 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, S 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, XXTV, XXV, XXVI, XXVII, XXIX, XXX, XXXIII, XXXV. To the Official Forms: Nob. 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 general. — ^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 Florcken (D. C, Cal.), 5 Am. B. R. 802, 107 Fed. 241. The last sentence of subdivision one 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 (Ref., Mass.), 7 Am. B. R. 35. This order, together with section 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. T.). 4 Am. B. R. 274, 103 Fed. 282. Section 9a and Gen. Ord. Nos. 13 and 30 are in pari materia and should be con- strued together. United States ex rel. Kelly v. Peters, 23 Am. B. R. 177, 166 Fed. 618. The preoeedlngB 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 these 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 General Obdees in Bankruptcy. 867 Gen. Ord. XII.] Duties of Referee. C. A., 2d Cir.), 13 Am. B. R. 11, 14, 184 Fed. 51; United States v. Liberman (D. C, N. Y.) 23 Am. B. R. 784, 176 Fed. 161. Slaeharge; 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. In re Eauchenplat (D. C, Porto Rico), 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 prejudiced thereby. In re McDuff (C. C. A., 5th Cir.), 4 Am. B. R. 110, 101 Fed. 241. 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. R. 245, 109 Fed. 967. Claims of intervening petitioners. — Ko proyision 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. Injnnctlons. — 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 b, subordinate official, unless for definitely described reasons action by the latter should be unavoidable." In re Berkowitz (D. C, Pa.), 16 Am. B. R. 251, 143 Fed. 598. Archbald, District Judge, in Re Benjamin (D. C, Pa.), 15 Am. B. R. 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 lead- ing works on bankruptcy . . . it is denied by rule in certain jurisdic- tions . . . 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 Re 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 Re Berkowitz (D. C, Pa.), 16 Am. B. R. 251, 255, 143 Fed. 598. 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. R. 348, 133 Fed. 781. Compensation of referee. — Where a contested application for a dis- charge is refused, as authorized by General Order 12, the court since the amendment to section 72 is without power to allow special compensation to the referee for his services in the matter. In re Wilcox (D. C, Mich.), 19 Am. B. R. 241, 156 Fed. 685. Where a case is referred to a referee to ascer- tain and report the facts upon an application for discharge, the referee is not 868 General Oedees in Bankeuptct. Appointment and Removal of Trustee. [Gfen. Ord. XIII. 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. Other caies citing this arder. — In re Huddleston (Kef., 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; Mueller v. Nugent, 7 Am. B. R. 224, 232, 184 U. S. 1, 46 L. Ed. 405; In re Gutman & Wank (D. C, N. Y.), 8 Am. B. R. 252, 255, 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. Garley (C. C. A., 3d Cir.), 12 Am. B. R. 119, 127 Fed. 686; Moulton v. Coburn (C. C. A., 1st Cir.), 12 Am. B. R. 553, 131 Fed. 201, aflf'g 11 Am. B. R. 212; In re Romine (D. C, W. Va.), 14 Am. B. R. 785, 138 Fed. 837; Matter of Mathews Consolidated Slate Co. (Ref., Mass.), 15 Am. B. R. 779; Matter of Adler (C. C. A., 2d Cir.), 16 Am. B. R. 414, 144 Fed. 659; In re Knopf (D. C., S. Car.), 16 Am. B. R. 432, 439, 144 Fed. 245; Matter of Sonnabend (Ref., Mass.), 18 Am. B. R. 117; Matter of Cohn (Ref., Cal.), 18 Am. B. R. 786, 792; Matter of Back Bay Automobile Co. (D. C, Mass.), 19 Am. B. R. 33, 36, 158 Fed. 679; Knapp & Spencer Co. v. Drew (C. C. A., 8th Cir.), 20 Am. B. R. 355, 160 Fed. 413; Matter of Berkowitz (D. C, N. J.), 32 Am. B. R. 227, 173 Fed. 1013. XIH. APPOINTMENT AND BXIMOVAI. OF TRUSTBE. The appointment of a trustee by the creditors shall be subject to be approved or disapproved by the referee or by 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, §§ 2(17), 44, 45, 56 ; As to removal of trustees, § 46. To the General Orders: XIV, XV, XVI, XVII, XXV. To the Official Forms: Nos. 22, 23, 24, 27, 52, 53, 54, 55. To the Supplementary Forms: No. 164. Meaning and application of order. — This provision means that a super- visory 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 judg- ment 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 not- withstanding the expressed desire of the majority in number and amount of the creditors, or even of all the creditors, would not be a. proper selection, ana 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 tiia referee to approve General Oedees in Bankkuptcy. 869 Gen. Ord. XIII.] Appointment and Removal of Trustee. the selection, always subject, of course, to a review of such action by the district judge. In re Henschel (Ref., N. Y.), 6 Am. B. R. 26. " 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 appointment by order, and should this be done at the time the appointment is made by the creditors it is probable tliat the creditors may proceed at once to appoint some other person . . .; but should they do this the matter should be reported to the judge, who 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 tliis 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. 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 iiifliience opposed to tl\e creditor's interest. In Falter v. Reinhard (D. C, Oliio), 4 Am. B. R. 782, 104 Fed. 292, tne 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 bankrupts 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 cas3 shows that a plan for the election of the bankrupts' candidate was conceived and carried out in the bankrupts' place of business, and tliat 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 business to give their proxies to one of the bank- rupts' 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 aflSrmed by the circuit court of appeals. 5 Am. B. R. 155, 106 Fed. 67. 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, wh:) 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 nominated in fact by the bankrupt or her attorney, and was therefore not a suitable person to act in the interest of creditors. The dis- trict court approved the referee's action. 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 trustee was 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 bank- 870 Genbkal Oedees iit Bankeuptcy. Appointment and Removal of Trustee. [Gen. Ord. XIII. rupt 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 this 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 of 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 cor- poration in the interest of the bankrupt. He refused to answer the question. Kotwithstanding 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 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.), H 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 la 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 candidate voted for had formerly been the attorney of the bankrupts. In the case of In re Gordon Supply & Manufacturing Co. (D. C, Pa.), 12 Ain. 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 corpora- tion. 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 afterwards received from creditors without his own solicitation or the procurement of the bankrupt. Otber oases citing this order. — In re McGill (C. C. A., 6th Cir.), 5 Am. B. R. 155, 106 Fed. 57; Matter of Cohen (D. C. Mass.), 11 Am. B. R. 439, 442, 181 Fed. 391 j In re Allert (D. C, N. Y.) 23 Am. B.R. 101, 105, 173 Fed! 691. Geneeal Orders in Bankruptcy. 8Y1 Gen. Ord. XIV-XVI.] Trustee, when Not Appointed; Notice of Appointment. xrv. NO OFFICIAL OR. GENERAL TRUSTEE. No oiScial trustee shall be appointed by the court, nor any gen- eral trustee to 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, 66. 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. 109. 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 banlcrupt 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. Smalley 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. NOTICE TO TRiirSTEE OF HIS APPOINTMENT. ~ It shall be the duty of the referee, immediately upon the ap- pointment and approval of the trustee, to notify him in person or by mail of his appointment ; and the notice shall require the trus- tee forthvtdth 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.] 872 General Oedees in Bankeuptcy. Duties of Trustee. [Gen. Ord. XVII. Cro» references: To the law: §§ 44, 50-a-j-k. To the General Orderi; XIII. To the Official Forma: Nos. 24, 25, 26. To the Supplementary Forms: Nos. 171, 172. XVII. DITTIES OF TRUSTEE. The truatee 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 rejiort to the court, within twenty days after receiving the notice of his appointment, of the articles set off 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 re- quire the exceptions to be argued before him, and shall certify them to the court for final determination 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 be due, it shall be the duty of the referee to make an order requii-ing 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 couse 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: Duties of trustees, in general, §S 47, 49; As to filing bonds, § 50; As to exemptions, §§ 6, 7(8), 47-a(ll), as perhaps limited by § 2(11) ; As to appraisals and sales, § 70-b. To the General Orders: XVIII, 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. 109, 110, 111, 112 on exemp- tions, and Nos. 165, 166, 167, 168, 169 as to reports and distribution; also generally. Meaning of order. — Remington, referee, in Ee Ellis (Ref., Ohio), 10 Am. B. R. 754, 756, distinguishing In re White (D. C, Vt.), 4 Am. B. R. 613, 103 Fed. 774, flays: "What the supreme court's General Order really means General Oedebs in Bankbuptct. 873 Gen. Ord. XVII.] Duties of Trustee. 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 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 truster's report they must file them within twenty days." Exemptions; setting; apart. — It is provided by this order that the trus- tee shall set apart the exemptions and make report of his action, and that thereafter the creditors 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 lan- guage of this order "and Form 47, as to the trustee's report of exempted property, indicates quite clearly that, without reference to any prior allow- ance of exemption by State officials, it is the duty of the trustee to set apart the bankrupt's exemption." In re Camp (D. C, Ga.), 1 Am. B. R. 165, 91 Fed. 745. See, also, In re Rung Bros. (Ref., N. Y.), 2 Am. B. E. 620. 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 determining the correct amount of such exemptions and setting them apart the trustee is entitled to the pos- session 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 off to the bankrupt by him, the bankrupt must comply with section 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. R. 701, 133 Fed. 821. 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 appoint- ment of a trustee. In re Smith (D. C, Tex.), 2 Am. B. R. 190, 93 Fed. 791. 874 Gbneeal Orders in Bankeuptcy. Sale of Property. [Gen. Ord. XVIII. 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. E. 723, 124 Fed. 417. 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. A trustee is a " creditor " within the meaning of the provisions of Gen- eral 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 bank- rupt's fraud. In re Rice (D. C, Pa.), 31 Am. B. R. 202, 164 Fed. 589. Time for filing 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 Tumbull (Ref., Mass.), 5 Am. B. R. 331. Exceptions filed more than twenty days after the filing of the report must be dismissed. Matter of Amos (Ref., (3a.), 19 Am. B. R. 804; Matter of Cotton & Preston (D. C, Ga.) 38 Am. B. R. 586, 588. Other cases citing this order.— In re "White (D. C, Mo.), 6 Am. B. R. 451, 454, 109 Fed. 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.) 23 Am. B. R. 868, 173 Fed. 116. XVIII. SAXE OF PROPERTY. 1. All sales shall be by public auction unless otherwise ordered by the court. 2. Upon application to the court, and for good cause shown, the trustee may be authorized to sell anj- 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 there- for, 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 immediatelv 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 1.] General Oedeks in Bankruptcy. 875 Gen. Ord. XIX-XXI.] Accounts of Marshall; Proof of Debts. 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. 183, 184, 185, 186, 187. 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 prop- erty will be accumulative if a sale is not ordered. In re Harris (D. C, Ala.), 19 Am. B. R. 635, 155 Fed. 216. Private sale. — " The discretionary power of the referee directing a private sale of a bankrupt 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. 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 cannot be held to be in derogation of the statute. In re.Edes (D. C, Me.), 14 Am. B. R. 383, 384, 135 Fed. 595. Real estate may be considered perishable within the meaning and intent of this order, when it consists of buildings, rapidly deteriorating and in a dilapida- ting 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. XIX. ACCOUNTS OF MARSHAI,. 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 there- for whenever practicable, and aJso with a statement 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 REFERENCC 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. XXI. 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 876 Geneeal Oedees in Bankeuptcy. Proof of Debts. [Gen. Ord. XXI. 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. Depositions to prove debts existing in open account shall state when the debt becama or will become due ; and if it consists of items maturing at differ- ent dates the average due date shall be stated, in default of which it shall not be necessary to compute interest upon it. All such depositions shall contain an averment that no note has been re- ceived for such account, nor any judgment rendered thereon. Proofs of debt received by any trustee shall be delivered to the referee to whom the cause is referred. 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 by the post-office box or street number, as he may appoint ; and thereafter, and until some other designa- tion shall be made by such creditor, all notices shall be so ad- dressed; and in other cases notices shall be addressed as specified in the proof of debt. 3. Claims which have been assigned before proof shall be sup- ported by a deposition of the owaer at the time of the commence- ment 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 satis- factory 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 original claimant of the filing of such proof of assign- ment; and, if no objection be entered within ten days, or within further time allowed by the referee, he shall make an order sub- rogating 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 un- known, such claim may be proved in the name of the party con- tingently liable; but no dividend shall be paid upon such claim, except upon satisfactory proof that it will diminish fro tanto the original debt. 5. The execution of any letter of attorney to represent a cred- itor, or of an assignment of claim after proof, may be proved or Geneeal Oedees in Bankeuptcy. 877 tien. Old. XXI.] Proof of Debts. 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 instrument 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 officer taking the proof or acknowledgment, his identity shall be established by sat- isfactory proof. 6. When the trustee or any creditor shall desire the re-exami- nation 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 diminished, 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 0£acial Forms: Nos. 20, 21, 31, 32, 33, 34, 35, 36, 37, 38, 39. To the Supplementary Forms: §§ 174, 175, 176. Title of conrt, 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. R. 36, 125 Fed. 619. A function of the oath required upon proof of a debt due to a partnership is to guard against 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., N. Y.), 3 Am. B. R. 738. The very fact that in subd. 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 subd. 1 should not be taken in place of the oath required by subd. 5. Proof of claim by agent; sufficient reason.— It seems that a corpora- tion may make proof in its claim by agent or attorney in fact when there is sufficient 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 878 Geneeai. Oedees in Bankeuptcy. Proof of Debts. [Gen. Ord. XXI. good and valid and sufficient reason. Matter of Beboulin Fils & Co. (Bef., N. J.), 19 Am. B. R. 215. Itemizing accountB. — While Order XXI does not directly provide that accounts made up of items shall be itemized, and would seem to relate to the fixing 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 con- sideration should be sufficiently 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. E. 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 sufficiently filed. Orcutt Co. v. Green, 17 Am. B. E. 72, 204 U. S. 96, rev'g 13 Am. B. E. 512. The provision that " proofs of debt received by any trustee shall be deliv- ered to the referee to whom the cause is I'eferred," 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. E. 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. E. 72, 204 U. S. 96, rev'g 13 Am. B. R. 512. As to Trhat constitntes an assigned claim, see In re Finlay (Eef., N. Y.), 3 Am. B. R. 738. Claims of sureties. — Subdivision four 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.), 30 Am B. R. 140, 145, affd. 23 Am. B. R, 250, 197 N. Y. 161. That is, it deals only with the claims of sureties. In re Ells (D. C, Mass.), 3 Am B. R. 564, 568, 98 Fed. 967. Fairer 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 case of the latter two cases the person executing the instrument shall make oath. In re Finlay) (Ref., N. Y.), 3 Am. B. R. 738. Oath contained in proof of debt.— The requirement of this order that the person executing a partnership letter of an attorney must make 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 th«r election of a trustee. In re Blue Ridge Packing Co. (D. C, Pa ) U Am B E. 36, 125 Fed. 619. • -. ■ , Proof of claims of foreign creditors.— The language of this subdivision General Obdees in Bankeuptcy. 879 Gen. Ord. XXI.] Proof of Debts. 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 affirming 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 Sugenheimer (D. C, N. Y.), 1 Am. B. R. 425, 91 Fed. 744. Re-ezamination ; ■wh.o may procure. — It is not within the contempla- tion of this order to permit the trustee and creditors concurrently 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 Lewen- sohn. (C. C. A., 2d Cir.), 9 Am. B. R. 368, 121 Fed. 1. This provision author- izes 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. K. 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. (Eef., R. I.), 6 Am. B. E. 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 official or any of the creditors refuse to take such action after demand made. Matter of Levy (Eef., N. Y.), 7 Am. B. E. 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 (Eef., N. Y.), 7 Am. B. E. 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. E. 368, 121 Fed. 1. Time of re-ezamination. — 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. E. 368, 121 Fed. 1. Notice of hearing on petition for re-ezamination. — A trustee is not required to give notice of a re-examination to all the creditors. Notice to the claimant is sufficient. In re Mammoth Pine Lumber Co. (D. C, Ark.), 8 Am. B. E. 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. E. 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 peti- tion for re-examination. At this hearing the referee shall take the examina- 880 General Oedees in Bankeuptcy. Taking of Testimony. [Gen. Ord. XXII. tion 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 (Eef., 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 Mam- moth Pine Lumber Co. (D. C, Ark.), 8 Am. B. E. 651, 660, 109 Fed. 308. What claims may be 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. R. 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. R. 49, 100 Fed. 619. Relief on re-examination. — This subdivision limits proceedings with reference to a reconsideration of claims to the mere matter of expunging or diminishing them. Fitch v. Richard (C. C. A., 1st Cir.), 16 Am. B. R. 835. 837, 147 Fed. 196. 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 order of the referee by the district court, or if through inadvertance 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. i^. R. 707. Other cases citing this order. — In re Soper and Slada (Ref., N. Y.), 1 Am. B. R. 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. v., N. Y.), 3 Am. B. R. 192, 96 Fed. 811; Hayer v. Comstock (Sup. Ct., la.). 7 Am. B. R. 493; In re Jones (D. C. Mich.), 18 Am. B. R. 206, 309, 151 Fed. 108; In re John Osborne Sons v. Co. (0. C. A., 2d Cir.), 24 Am. B. R. 65, 177 Fed. 184. XXII. TAKING OF TESTIMONY. The examination of witnesses before the referee may be con- duced 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 examination before a referee shall be taken down in writing by him, or under his direc- General Orders in Bankruptcy. 881 Gen. Ord. XXIII.] Orders of Referee. tion, in the form of narrative, unless he determines that the ex- amination 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(0), 21, 38-a(2); As to costs, § 2(18). To the General Orders: XXII. To the Official Forms: Nos. 29, 30, S6. To the Equity Bnles: LXVII to LXIX. Duty of referee in taking testimony. — It is the duty of the referee under this order to receive the evidence which is offered, to note objections and to record the evidence; and, if either party persists in offering incompe- tent 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 incom- petent, immaterial or irrelevant depositions or parts of them as may be just." The equity practice is to be followed by the referees. In re Sturgeon (C. C. A., 2d Cir.), 14 Am. B. R. 681, 139 Fed. 608. The referee, whether acting as such or as a special commissioner, must receive all the evidence offered upon a heariug before him, noting the objections made, and he may refuse to stop the proceedings and certify questions raised on objec- lious to testimony. Bank of Ravens wood v. Johnson (C. C. A., 4th Cir.), 16 Ain. 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 narra- tive 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, 188 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 examication of absent bank- rupts 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. 688, 543, 123 Fed. 321. XXm. ORDERS OF REFEREE. In all orders made by a referee, it shall be recited, according aa the fact may be, that notice was given and the manner thereof; or 66 882 Geneeal Oedees in Bankeuptcy. Accounts of Referee. [Gen. Ord. XXIV-XXVI. 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 tbe General Orders: IV, XII. To the Equity Rules: LXXXV, LXXXVI. See In re Russell Card Co. (D. C, N. J.), 33 Am. B. R. 300, 174 Fed. 203. It is the duty of referees to make their orders conform to this rule. Faulk & Co. v. Steiner (C. C. A., 5th Cir.), 31 Am. B. R. 633, 165 Fed. 861. XXIV. TBAITSMISSION OF PROVED CI^IMS TO CLERK. The referee shall forthwith transmit to the clerk a list of tlie claims proved against an estate, with iXi^ 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 rji.ely observed.] Cross references: To the lav: §§ 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 the ofBce of the clerk or the referee, as authorized by this order. Matter of Scott (Eef., 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 lair: 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: Kos. 52, 53, 54, 55. See In re Louis Lewensohn (D. C, N. Y.), 3 Am. B. R. 299, 303, 98 Fed. 576. XXVI. ACCOUNTS OF 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 performance of his duties in any case which may be referred to him ; and shall make return of the same under Gbneeal Obdees in Bankeuptcy. 883 Gen. Ord. XXVII.] Eeview by Judge. 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. E. 88, 91, 106 Fed. 265; In re Seott (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. K. 446, 449, 130 Fed. 597. XXVII. REVEE'W 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(10), 38-a, 39-a(5). To the General Orders: By analogy, XXXVI. To the OfBcial Forms: No. 58. To the Supplementary Forms: Nos. 162, 163, and, by analogy, Nos. 158, 159, 160, 161. Purpose of order. — The purpose of this General Order is to provide a simple and eflfective method of procedure for securing early hearings and a speedy determination of litigated questions. In re Koenig & Van Hoogen- huyze (D. C, Tex.), 11 Am. B. R. 617, 127 Fed. 891. It is intended to carry into effect the provisions of section 39 so as to avoid as far as possible the sending of the original proofs to the judge and to substitute therefor where 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. Wood- ford (C. C. A., 4th Cir.), 14 Am. B. R. 302, 306, 186 Fed. 34. This general order provides the only method of 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. There can be no review unless a petition is filed ; it is not sufficient for the referee to certify a question for review without a petition. Craddock-Terry Co. v. Kaufman (B. C, Tex.), 33 Am. B. R. 724, 175 Fed. 803. 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. 139, 135 Fed. 992. Review under section 38.— This General Order and section 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 disregard the findings of the referee entirely, and proceed de novo to reject them for reasons of law, or 884 Geneeal Oedees in Bankeuptcy. Review by Judge. [Gen. Ord. XXVII. refuse them or accept them in whole or in part without assigning reasons therefor. In re Pettingill & Co. (C. C. A., Ist Cir.), 14 Am. B. R. 757, 761, 135 Fed. 218. But a review under section 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 consent 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 bank- rupt 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. General review not intended. — This General Order provides for " review by the judge of any order 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 made by the referee will be confined to the error pointed out in the petition for review. Matter of Natelle De GoHardi (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 revieir; nrlien granted. — An application for a review of the decision of the referee will be dismissed when the party objecting has not complied with 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. C), 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 be 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 right to a review. Crin v. Woodford (C. C. A., 4th Cir.), 14 Am. B. R. 302, 306, 136 Fed. 34. If any 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. 11, 17, 134 Fed. 51. The rules 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. 428. 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 Reukauff Sons & Co. (D. C, Pa.), 14 Am. B. R. 344, 135 Fed. 251. A statement by the referee that " if the claimant and his attorney desire to appeal the case, they will have ten days from this date, on paying all casta General Okdees in Bankkuptcy. 885 Gen. Ord. XXVIII.] Redemption of Property ; Compoundiug Claims. 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 Cir.), 20 Am. B. R. 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 objections made to his rulings upon the testimony. In re Romine (D. C, W. Pa.), 14 Am. B. R. 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. R. 111. 164 Fed. 211; In re Marks, (D. C. Pa.) 22 Am. B. R. 568, 171 Fed. 281. Filing petition. — This General Order imperatively requires the referee to certify the question to the judge, not the next month nor the year fol- lowing, but forthwith, in order that there may be an early determination of the questions at issue. In re Koenig & "Van Hoogenfuyze (D. C, Tex.), 11 Am. B. R. 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, R. I.), 16 Am. B. R. 256, 143 Fed. 661. Although no time limit for filing a petition for the review of an order of the referee is fixed by the bankrupt act, or by the General Orders, still, it seems that such petition should be presented promptly. Thus, a petition presented after eighteen months should be dismissed. In re Chambers, Colder & Co. (Ref., R. I.), 6 Am. B. R. 709. 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. R. 302, 306, 136 Fed. 34. Such reasonable time may be fixed by a stand- ing rule. In re Foss (D. C, Me.), 17 Am. B. R. 439, 147 Fed. 790. The petition should be filed within twenty days. Matter of Maloney (Sup. Ct. D. C), 21 Am. B. R. 502, 37 Wash. L. Rep. 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. R. 568, 171 Fed. 281. An appeal may be taken to the circuit court of appeals from the de- cision of the judge where the amount of the claim is more than $500. Clendenlng v. Nat'l Bank (Supt. Ct., N. Dak.), 11 Am. B. R. 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, 112 Fed. 770; In re Hawley (D. C, Ja.), 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. 223; Bank v. Johnson (C. C. A., 4th Cir.), 16 Am. B. R. 206, 143 Fed. 463; Matter of Cohn (Ret, Cal.), 18 Am. B. R. 786, 792; Knapp & Spencer Co. v. Drew (C. C. A., 8th Cir.), 20 Am. B. R. 355, 359, 160 Fed. 413; In re Peacock (D. C, N. Car.), 24 Am. B. R. 159, 163, 178 Fed. 851. XXVIII. REDEMPTION OF PROPERTY AND COMPOUNDING OF CLAIMS. Whenever it may be deemed for the benefit 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 886 General Oedees in Bankeuptcy. Payment of Moneys Deposited. [Gen. Ord. XXIX said property from any conditional contract, and to tender per- formance of the conditions thereof, or to compound and settle any debts or other claims due or belonging to the estate of the bank- rupt, 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 interested 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. 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. R. 153, 122 Fed. 127; In re Grainger (C. C. A., 9th Cir.). 20 Am. B. R. 166, 173, 160 Fed. 69. XXIX. PAYMENT OF MONEYS DEPOSITED. No moneys deposited as required by the act shall be dravm from the depository unless by check or warrant, signed by the clerk of the court, or by a trustee, and countersigned by the judge of the court, or by a referee designated for that purpose, or by the clerk or his assistant under an order made by the judge, stating the date, the sum, and the account for which it is drawn; and an entry of the substance of such check or warrant, with the date thereof, the sum drawn for, and the account for which it is drawn, shall be forthwith made in a book kept for that purpose by the trustee or his clerk; and all checks and drafts shall be entered in the order of time in which they are drawn, and shall be numbered in the case of each, estate. A copy of this general order shall be fur- nished to the depository, and also the name of any referee or clerk auth.ori.'ied to countersign said checks. [Latter half of General Order XXVII, 1867, without material change.] Cross references: To the law: §§ 47-a, 61. To the Supplementary Forms: No, 169. This General Order is mandatory. — Huttig Manfg. Co. v. Edwards (C. C. A., 8th Cir.), 20 Am. B. R. 349, 354. And where the trustee has not deposited the money with a designated depository as required by this order the trustee will not be allowed the payment of money as an exemp- Genebal Okdees in Bankbuptcy. 887 Gen. Ord. XXX.] Imprisoned Debtor. tion. In re Hoyt (D. C, N. C), 9 Am. B. R. 574, 119 Fed. 987. See, also. In re Hoyt & Mitchell (D. C, N. C), 11 Am. B. R. 784, 127 Fed. 968. The referee has no authority to order the trustee to pay out funds belonging to the estate of a bankrupt. In re Cobb (D. C, N. C), 7 Am. B. R. 202, 112 Fed. 655. Money deposited as required by the act cannot be paid except by check or warrant drawn in accordance with the order and countersigned by the judge or some one designated by the judge for that purpose. These de- posits should therefore be made to the creditor by the court or judge, designating at the time of the deposit the estate to which such deposits belong. In re Cobb (D. C, N. C), 7 Am. B. R. 202, 112 Fed. 655. As the trustee must sign the checks, it would seem that the fund should be de- posited to the credit of the trustee, as such, designating the estate In bankruptcy. In re Carr (D. C, N. C). 9 Am. B. R. 58, 117 Fed. 5T2. XXX. ISIFBISONED DEBTOR. If, at the time of preferring his petition, the debtor shall be imprisoned, the court, upon application, may order him to be pro- duced upon habeas corpus, by the jailor or any officer in whose custody he may be, before the referee, for the purpose of testifying in any manner relating to his bankruptcy; and, if committed after the filing of his petition upon process in any civil action founded upon a claim provable in bankruptcy, the court may, upon like application, discharge him from such imprisonment. If the peti- tioner, during the pendency of the proceedings in bankruptcy, be arrested or imprisoned upon process in any civil action, the dis- trict court, upon his application, may issue a writ of haieas corpus to bring him before the court to ascertain whether such process has been issued for the collection of any claim provable in bank- ruptcy, and if so provable he shall be discharged; if not, he shall be remanded to the custody in which he may lawfully be. Before granting the order for discharge the court shall cause notice to be served upon the creditor or his attorney, so as to give him an oppor- tunity of- appearing and being heard before the granting of the order. [General Order XXVII, 1867, without substantial change.] Cross references: To the laxr: § 9-a. To the General Orders: XII (1). To the Supplementary Forms: None; but, by analogy, Nos. 117, 118. Discharge from imprisonment; iirhen granted. — This General Order provides for cases where the bankrupt is in custody under an arrest made both before and after the initiation of the bankruptcy proceedings; but it is only in cases where the bankrupt has been arrested or committed after the filing of his petition, that the court is authorized to grant a discharge from imprisonment, even though the debt be provable. In re Claiborne (D. C, N. Y.), 5 Am. B. R. 812, 109 Fed. 74. The district court is re- quired to discharge on habeas corpus a bankrupt imprisoned upon process in any civil action for the collection of a claim provable in bankruptcy. 888 General Okdees in Bankbuptcy. Opposition to Dischai-ge on Composition. [Gen. Ord. XXXI, XXXII. Matter of Adler (C. C. A., 2d Cir.), 16 Am. B. R. 414. 144 Fed. 659. This General Order extends to claims provable in bankruptcy. In re Hilton (D. C, N. Y.), 4 Am. B. R. 774, 104 Fed. 981. A bankrupt arrested under a judgment entered upon an action for breach of promise is entitled to a discharge from custody under this General Order. In re Fife (D. C, Pa.), 6 Am. B. R. 258, 109 Fed. 880. Where a bankrupt is imprisoned upon a judgment for the support of a bastard child the court will not release him from imprisonment by a writ of habeas corpus. In re Baker (D. C, Kas.), 3 Am. B. R. 101, 96 Fed. 954. Test of legality of bankrupt's iicprisoniuent. — The order must yield to the terms of the suit, and the test of the legality of the bankrupt s imprisonment is not whether the claim or demand upon which it is based is provable against the bankrupt's estate, but it is whether his discharge in bankruptcy would operate as a release of the claim or demand. In re Baker (D. C, Kas.), 3 Am. B. R. 101, 96 Fed. 954. The decision of the courts under the act of 1867 fully sustain this view. In re Robinson, 6 Blatch. 253; In re Patterson, 2 Ben. 155; In re Whitehouse, 1 Lowell, 429. Compared with section 9 of the act. — It seems that there is nothing in the provisions of this order necessarily inconsistent with section 9 of the act, and if there are, the provisions of the act must prevail. People ex rel. Taranto v. Brlanger (D. C, N. Y.), 13 Am. B. R. 197, 132 Fed. 883. It is presumably limited in its operation to the same period of time as General Order XII, and thereby becomes practically compatible with sec- tion 9-a, subd. 2. In re Lewensohn (D. C, N. Y.), 3 Am. B. R. 594, 598, 99 Fed. 73. Bail. — Where a bankrupt makes application, under General Order No. 30, for his release from arrest, the court, neither under section 2(15) nor under section 9b, is authorized to require the bankrupt to give baiL United States ex rel. Kelley v. Peters (D. C, 111.), 22 Am. B. R. 177, 16S Fed. 613. Other cases citing this order. — Knott V. Putnam (D. C, Vt.), 6 Am. B. R. 80, 107 Fed. 907; Barrett v. Prince (C. G. A., 7th Cir), 16 Am. B. R. 64, 143 Fed. 302. XXXI. PETITION FOB I>ISCARGE. The petition of a bankrupt for a discharge shall state concisely, in accordance with the provisions of the act and the orders of the court, the proceedings in the case and the acts of the bankrupt. [This General Order is new.] Cross references: To the la>w: §§ 14, 18-C. To the General Orders: XXXII. To the Official Forms: No. 57. To the Equity Rules: XX to XXV. ' Cases citing this order. — In re Soper and Slada (Ref.), 1 Am. B. R. 193, 196; In re Glass (D. C, Tenn.), 9 Am. B. R. 391, 394, 119 Fed. 509. XXXII. OPPOSITION TO DISCHARGE OR COMPOSITION. A creditor opposing the application of a bankrupt for his dis- General Oedees in Bankeuptcy. 889 Gen. Ord. XXXI, XXXII.] Opposition to Discharge on Composition. charge, or for the confirmation of a composition, shall enter his appearance in opposition thereto on the day when the creditors are required to show cause, and shall file a specification in writing of the grounds of his opposition within ten days thereafter, unless the time shall be enlarged by special order of the judge. [General Order XXIV. 1867, In part] Cross references: To the law: §§ 12, 14. To the General Orders: IV, XXXI. To the Official Forms: Nob. 58, 69. To the Supplementary Forms: As to opposition to discharge, Nos. 138, 139, 140, 141, 142, and, by analogy, Nos. 133, 134, 135, 136, 137. As to opposition to confirmation of a compensation, Nos. 128, 129, 130, 131, 132, and, by analogy, Nos. 124, 125, 126, 127. Intent and pnrpose of order. — It is evident from the language of this general order that it was intended the appearance of objecting creditors, or other persons Interested, should be entered on the day upon which they were required to show cause as upon that day the court passes upon the right of the petitioner to be discharged, and will enter such a decree if no objecting creditor appears. In re Ginsburg (D. C, Pa.), 12 Am. B. R. 459, 130 Fed. 627. Compliance with order. — This general order should be strictly com- plied with, and failure so to do will only be excused when excellent reasons therefor are shown to the court. In re Clothier (D. C, Pa.), 6 Am. B. R. 203, 108 Fed. 199. The exceptions to be filed in ten days should be filed before the judge. Mahoney v. Ward (D. C, N. Car.), 3 Am. B. R. 770, 100 Fed. 278. Appearance of creditors opposing discharge. — The appearance of a creditor opposing a bankrupt's discharge must be entered on the day when the creditors are required to show cause. In re Grant (D. C, Pa.), 14 Am. B. R. 398, 135 Fed. 889. A failure to enter an appearance on the return day precludes objecting creditors from filing exceptions to a discharge thereafter, even though they be filed within the ten days. In re Ginsburg (D. C, Pa.), 12 Am. B. R. 459, 130 Fed. 627. A creditor opposing a discharge has the duty of alleging sufficiently specified grounds of such opposition, and the burden of proving such grounds. In re Holman (D. C, la.), 1 Am. B. R. 600, 92 Fed. 512. Opposing creditors should be required to enter their appearance and file specifications in writing of the ground of opposition, except in the rare cases where the facts may warrant the court in ordering an investigation of suspicious circumstances of Its own motion. Adler ▼. Jones (C. C. A., 6th Cir.), 6 Am. B. R. 245, 109 Fed. 967. If the time within which speci- fications of opposition to a discharge may be filed is not extended by the court as required by this order, a subsequent application will be dismissed upon motion. In re Albrecht (D. C, Pa.), 5 Am. B. R. 223, 104 Fed. 974. Enlargement of time. — 'The district judge may, in his discretion, ex- tend the time within which a creditor may enter his appearance in op- position to a bankrupt's discharge, even after the expiration of the time limit as provided In this order. In re Levin (C. C. A., 1st Cir.), 23 Am. B. R. 845. 176 Fed. 177. 890 General Oeders in Bankruptcy. Costs in Contested Adjudications. [Gen. Ord. XXXIII, XXXIV. Other cases citing this order. — In re Quackenbush (D. C, N. Y.), 4 Am. B. R. 274, 102 Fed. 282; In re Gasser (C. C. A., 8th Cir.), 5 Am. B. R. 32, 104 Fed. 537; In re Glass (D. C, Tenn.), 9 Am. B. R. 391, 119 Fed. 509; In re Henschel (Sp. Com., N. Y.), 12 Am. B. R. 31, 34; In re Levey (D. C, N. Y.), 13 Am. B. R. 312, 133 Fed. 572; Matter of Alex (D. C, Pa.), 15 Am. B. R. 450. XXXIII. ARBITRATION. Whenever a trustee shall make application to the court for au- thority to submit a controversy arising in the settlement of a de- mand against a bankrupt's estate, or for a debt due to it, to the determination of arbitrators, or for authority to compound and settle such controversy by agreement with the other party, the application shall clearly and distinctly set forth the subject-matter of the controversy, and the reasons why the trustee thinks it proper and most for the interest of the estate that the controversy should be settled by arbitration or otherwise. [Part of General Order XX, 1867.] Cross references: To the law; §§ 26, 58-a(7), and, by analogy, § 27. To the General Orders: By analogy, XXVIII. Cases citing this order.— In re Hixon (D. C, la.), 1 Am. B. R. 610, 93 Fed. 440. XXXIV. COSTS IN CONTESTED ADJUDICATIONS. In cases of involuntary bankruptcy, when the debtor resists an adjudication, and the court, after hearing, adjudges the debtor a bankrupt, the petitioning creditor shall recover, and be paid out of the estate, the same costs that are allowed to a party recovering in a suit in equity; and if the petition is dismissed the debtor shall recover like costs against the petitioner. [Part of General Order XXXI, 1867, without change.] Cross references: To the law: §§ 2(18), 3-e. To the General Orders: By analogy, X. Application of order. — This order is confined in its terms to involun- tary bankruptcy, and contested adjudications. In re Barrett (D. C, Tenn.), 12 Am. B. R. 626, 635, 113 Fed. 107. Effect of order, see In re Halsey Electric Generator Co. (D. C, N. J.), 23 Am. B. R. 401, 413, 163 Fed. 118. Power to award costs. — The district court, sitting in bankruptcy, has power to award costs against a creditor who fails to substantiate his specifications of objection in opposition to the bankrupt's discharge. This power is inherent in the district court. In re Wolpert (Ret, N. Y.)), 1 Am. B. R. 436. But the court has no power to award costs where a peti- tion in bankruptcy against a corporation is dismissed for want of juris- diction. The rule which denies to a court the power to award costs, when a case is dismissed for want of jurisdiction (Citizens Bk. v. Canon, 164 U. S. 319), prevails in a court of bankruptcy. In re Philadelphia & Lewes Transportation Co. (D. C, Pa.), 11 Am. B. R. 444, 127 Fed. 896. Costs; amount or items. — Where an application is contested, either at Geneeal Oedees in Bankeuptct. 891 Gen. Ord. XXXV.J Compensation of Clerks, Referees and Trustees. the outstart, or afterwards on motion to vacate, the costs include all that could be recovered under similar circumstances, if the case vs^ere in equity. Selkregg v. Hamilton Bros. (D. C, Pa.), 16 Am. B. R. 474, 144 Fed. 556. But counsel fees, expenses and damages vpill not be granted in addition to the costs, unless the property has been seized pursuant to section 3-e of the act. In re Ghiglione (D. C, N. Y.), 1 Am. B. R. 580, 93 Fed. 186. See, also. In re Hines (D. C, Or.), 16 Am. B. R. 538, 144 Fed. 147. XXXV. COMPENSATION OF CliERKS, REFEREES, AND TRUSTEES. 1. The fees allowed by the act to clerks shall be in full com- pensation for all services performed by them ;n regard to filing petitions or other papers required by the act to be filed with them, or in certifying or delivering papers or copies of records to refer- ees or other officers, or in receiving or paying out moneys; but shall not include copies furnished to other persons, or expenses necessarily incurred in publishing or mailing notices or other papers. 2. The compensation of referees, prescribed by the act, shall be in full compensation for all services performed by them under the act, or under these general orders; but shall not include expenses necessarily incurred by them in publisiiing or mailing notices, in traveling, or in perpetuating testimony, or other expenses neces- sarily incurred in the performance of their duties under the act and allowed by special order of the judge. 3. The compensation allowed to trustees by the act shall be in full compensation for the services performed by them; but shall not include expenses necessarily incurred in the performance of their duties and allowed upon the settlement of their accounts. 4. In any case in which the fees of the clerk, referee, and trus- tee are not required by the act to be paid by a debtor before filing his petition to be adjudged a bankrupt, the judge, at any time during the pendency of the proceeding in bankruptcy, may order those fees to be paid out of the estate; or may, after notice to the bankrupt, and satisfactory proof that he then has or can obtain the money with which to pay those fees, order him to pay them within a time specified, and, if he fails to do so, may order his petition to be dismissed. He may also, pendinp- such proceedings, both in voluntary and involuntary cases, order the commissions of referees and trustees to be paid immediately after such com- missions accrue and are earned. [This General Order is new. The last sentence of subd. 4 was added in September, 1906.] 892 General Oedees in Bankkuptcy. Compensatiou of Clerks, Referees and Trustees. [Gen. Ord. XXXV. Cross References: To the law: As to compensation of clerks, §§ 51, 71. As to compensation of referees, §§ 40, 72. As to compensation of trustees, §§ 48, 72. As to pauper cases, § 51-a (2). To the General Orders: X, XII, XVII, XIX, XXVI. XXIX. To the Supplementary Forms: Nos. 170', 173. Fees of clerh. 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. 869. Compensation of referee; no special alloirance: 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. B. R. 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 Wilcox (D. C, Mich.), 19 Am. B. R. 241, 243, 156 Fed. 685. Addi- tional compensation not allowed where business of bankrupt is continued by trustee. Bray v. Johnson (C. C. A., 4th Cir.), 21 Am. B. R. 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. Car.), 9 Am. B. R. 541, 547, 119 Fed. 531. The referee has no authority for charging a per diem in war case whatsoever. In re Pierce (D. C, Colo.), 6 Am. B. R. 747, 111 Fed. 516. Compensation of referees; irhen 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. R. 258, 98 Fed. 869. Allowance for expenses: The provision "in regard to expenses of mailing notices, traveling and perpetuating testimony, refers to actual ex- penses; but a referee may make a general charge, which should be a uni- form 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 Pierce (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. C, Cal.), 8 Am. B. R. 145, 114 Fed. 675. Compensation of trnstee: This order limits the compensation of the trustee and is conclusive. In re Carolina Cooperage Co. (D. C, N. Car.), 3 Am. B. R. 154, 96 Fed. 920. Additional compensation will not be allowed to General Oedeks in Bankruptcy. 893 Gen. Ord. XXXVI ] Appeals. a trustee for services In Investigating the bankrupt's disposition of prop- erty and the loss of his stock by Are. In re Screws (D. C, Ga.), 17 Am. B. R. 269, 147 Fed. 989. An allowance of $250 to the trustee for his serv- ices as a lawyer not only violates this general order, but also the bank- ruptcy act itself. In re Felson (D. C, N. Y.), 15 Am. B. R. 185, 194, 139 Fed. 281. Application of anbdivision 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, before 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. R. 529, 554, 94 Fed. 801. Application under panpers' oatb: The application of a party to pro- ceed under the paupers' oath will be denied and his petition will be dis- missed 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. Other cases citing this order: In re Thoth (D. C, Ohio), 4 Am. 6. R. 780, 104 Fed. 291; In re Epstein (D. C, Ark.), 6 Am. B. R. 191, 109 Fed. 878; In re Scott (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, la.), 12 Am. B. R. 446, 130 Fed. 597; In re Dunn Hardware & Fur- niture Co (D. C, N. Car.), 14 Am. B. B. 186, 134 Fed. 997. 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 the 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 bankruptcy 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. 894 General Oeders in Bankruptcy. Appeals. [Gen. Ord. XXXVI. 3. In every ease 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, and 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 judg- ment or decree, the finding of facts, and the conclusions of law. [This General Order is practically new. Compare, however. General Order XXVI, 1867.] Cross references: To the laws §§ 24, 25. To the General Orders: By analogy, XXVII. To the Official Forms: None. To the Supplementary Forms: Nos. 158, 159, 160, 161, and. hy analogy, Nos. 162, 163. Subdivision 2; effect of. The requirement, that appeals to the supreme court shall be taken within thirty days after judgment, has the same effect as if written in the statute. Conhoy v. Nat. Bank, 203 TJ. S. 147, 16 Am. B. R. 775. Where an appeal to this court was 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 suflicient compliance 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 hring. The statutes (R. S., i 1008, and the Act of March 3, 1891, ch. 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 30 days for appeals, and upon the further ground that no bill of exceptions was filed will be denied. Grant 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 de- termine 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 ap- peal 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. Knapp v. Mil- waukee Trust Co. (C. C. A., 7th Cir.), 20 Am. B. R. 671, 673, 162 Fed. 675, affg 19 Am. B. R. 491. See also Crucible Steel Co. v. Holt (C. C. A., 6th Cir.), 23 Am. E. R. 302. 174 Fed. 127. General Ordees in Bankkuptcy. 895 Gen. Ord. XXXVII.] General ir-iovjaioufl. 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. 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; Jaquith v. Alden, 9 Am. B. R. 773, 189 U. S. 78; 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. XXXVII. GENERAL PROVISIONS. In 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 nearly as may be. In proceedings at law, instituted for the same purpose, the practice and procedure in cases at law shall be fol- lowed as nearly as may be. But the judge may, by special order in any case, vary the time allowed for return of process, for ap- pearance 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 General Order XXXII, 1867, without material change.] Eqnity practice < The district court, being a court of equity in bank- ruptcy matters, is a court of equity for all purposes in such matters, and all the principles and rules of equity apply. In re Huddleston (Ref., Ala.), 1 Am. B. R. 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. R. 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. R. 187, 192, 133 Fed. 281. Application of order . Shulte v. Patterson (C. C. A., 8th Cir.), 77 Am. B. R. 99, 102, 147 Fed. 509; Matter of Fleischer (D. C, N. Y.), 18 Am. B. R. 194, 197, 151 Fed. 81. Other cases citing this orders In re Keisler (Ref., Wis.), 2 Am. B. R. 79; In re Strait (Ref., N. Y.), 2 Am. B. R. 308; In re Lipset, Levittan & Co. (Ref., N. Y.), 9 Am. B. R. 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, 896 General Oedeks in Bankeuptcy. Forms. [Gen. Ord. XXXVIII. 543, 123 Fed. 321; In re Henschel (Spec. Com., N. Y.), 12 Am. B. R. 31; In re Barrett (D. C, Tenn.), 12 Am. B. R. 626, 636, 132 Fed. 362; In re Kenney & Co. (D. C, Ind). Am. B. R. 611. 615, 136 Fed. 451. XXXVIII. FOBMS. The several forms annexed to these general orders shall be ob- served and used, with sneh alterations as may be necessary to suit the circumstances of any particular case. Canstrnctioii of statute: orders and forma. 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 (Ret, 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 ha.3 been held that the failure of a bankrupt to precisely 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. R. 31, 134 Fed. 562. The brackets used in Form No. 1 for a 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 (Ref., N. Y.), 1 Am. B. R. 480. OFFICIAL FORMS AS FBSfiCBIBKD BY THE SUPREME COURT OF THE UNITED STATES AT THE OCTOBER TERM OF 1898. 897 IT FORMS IN BANKRUPTCY/ [N. B. — Oaths required by the act, except upon hearings in court, may be administered 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. Bankrupt Act of 1898, c. 4, t aa] Form No. i. 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'], respect- fully represents: That he 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 de- sires to obtain the benefit of the acts of Congress relating to bankruptcy. That the schedule* hereto annexed, 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 are required by the provisions of said acts: That the schedule hereto annexed, marked B, and verified by your petitioner's oath, contains an accurate inventory of all his property, 1. For the validity of these forms, 3. Strike out some or all the words see Section Thirty, ante. in brackets, as the facts may be. S. Consult Sections Two, Four, 4. § 2 (i). Eighteen, and Fiftv-nine. See also 6. $ 7-a(8). General Orders IV, V, VI, VII. 899 900 Forms in Bankruptcy. Debtor's Petition. [No. I. both real and personal, and such further statements concerning said property as are required by the provisions of said acts : Wherefore your petitioner prays that he may be adjudged* by the court to be a bankrupt^ within the purview of said acts. ., Attorney. United States of America, District of ss. : I, the petitioning debtor mentioned and de- scribed in the foregoing petition, do hereby make solemn oath that the statements contained therein are true according to the best of my knowledge, information, and belief. , Petitioner. Subscribed and sworn to before me, this ... day of , A. D. i8. .. [OMcial character.] ,. . >t, on 7. If partners petition, use Form tions if all join. 6' § i8-g. No. 143, PO*t> omitting certain allega- ■■ - ■ if i ■ " Forms in Bankruptcy. 901 No. I. Schedule A. (i).] Creditors Entitled to Priority. i i < (f I «» hi Hi g;3 •1 S.'S s - hi M ^ U 1 sg •if 1 V S o Hi ClaiKs which hare pri- ority. Taxes and debts due and owing to the United States. Taxes due and owing to the State of , or to any county, district or municipality thereof. JfSgga ■sas-a.s „j!a*as . 0MU •CI Qi U ■Sfr 1 « p. n V o rO u <> tn (X vt r) M 13 i> bfi n >M •a -o f« o a ° It „ o 2 * 1=) '5 -.2 ■o ;^ 4 COT OS 902 Forms in Bankruptcy. Creditors Holding Securities. [No. i. Schedule A. (2). •• .a SI & e s s S o ^ S S a sfr %_• 8 •uS, !rt « 2 < a C3 2 .33 n Jt "2 -3 u TJ »* (A ;$ 3 !» ^ s & >r B S c ScS S " ■2 -o •S 9 ■^ •r * B 2 ** o • V a .S ■2 «-o • ^ s si * F ^ « n « s *» Co— ^ o . - *■ " h-ra ** 12 S a JO S^j ft u C W . ^ i> *• o *M O O N o». u a a^M h n .oja « - S 0-5* ■OJ3 * g J Is "St rt 3 « ".ti a *^^.5 - w a 0*5 o 1 o H a M X a c o o tic B o 904 Forms in Bankruptcy. Liabilities to be Paid by Others. [No. i. Schedule A. (4). 2 S o o «- " ET ^ i u H I s S 2 - is:! s b •« u u I ? ■a I ■s « o - o « " ° ^ M »- ** o a it S .M " o ... J5 .00::: B •S ja •> ~ I « s ■5 "^ * M O .-3 a o "s t: .a » ° .2 S t IS « " -a I £ « ■S-5 u O n o So a Si * k C.13 .S a - •_3_o " •s »«•"• u a " Id 0,ii _^ a a .■22S 03 Forms in Bankruptcy. 905 Mo. I. Schedule A. (s).] Accommodation Paper. 2 . s si? 3 9 ■S-2 D U «# " H -ii IB a " o S-s E ja '3 • S s ■s -S s S O TJ " s'1 •I o X .I S.-S ' 3 8 S S u S ' ^ * .fl a ' Ji S S -a 3 i o " f* K ; S a >. J JS •« a j3 "o •o .2 ja X •" J > S.O ■o E •5 -.si M « " (M U S 2 a « O S ■5 -a ^ « o £ rt 1 << Hugo. I -^ ■* S 1 M 4} O, m S ■£ -a • -a u- "3 2 a o !: <=! s « g £i8 a u 4» Whether liability was contracted as partner or joint contractor, or with any other person; and, if Bo, with whom. i Is S8 Ml « o a d-^ a 15 Residences (it un- known that fact must be stated). il la s-g u s u o a k a :2 a r.g, r— 1 ■J rson worn Con y>-~° lis ■l r *. «* ^ : £ « O :'«5 '""' '. 1) . E5 : x'S . 43 U , 00 . E u ° 3 ■? tT 6 < ^ s ^ *4-4 •B J-. w Ih •a O • ^ y g § to 41 this . . . in and e the sa t« •o in o -t-» biO "5 0) C 1) CM c ^ +J J3 3 'S O c -0 rt W 13 O i) •J3 -a "H 906 Forms in Bankruptcy. Real Estate. [Na I. Schedule B. (i). H < o >^ w Ph o Ph ^ O H 12; N H < H W P 5 H V5 ■s . ■11 u «► i 1 "a o u •> "II F 1 i a . 11 il u a .a 2 V 2 1 1 i =a o a ! a 1 O Q Forms in Bankruptcy. 907 No. I. Schedule B. (2).] Personal Property. I I 0, ** - } •0 a J 1 : § : -s :l >. 9 "S s 1 i M M s ll 11 1 • a s •a > V Ji Ifl M V d 5 1 .2 1 •* 1^ 1 N i i \ s : • J3 : S : H : So • B u : 1j : 5» : ^•S : S's : IS Is . SI » 1 •> s 1 I •o c rt 2 a •c B .- n 1. • i ! 1 9 a :^ M 1 s ■'• .d in It •s s n ^1 > \ i *c J3 a 1 s b e 1 1 ■ ■« I *> U 1 t > t •V s 1 is 1 •*• 3 1 .a a i M 9 1 .IS s'-s 11 n 2" N v ■ tl a 1 •i f 1 t) C 14 1 •n g u s « 1 J 1 ■s i 1 ■E i» ■0 u V M >i e: II 1 X « s •0 •8 o 908 Forms in Bankruptcy. Chotes in Action. [No. i. Schedule B. (j). a 5 ■2 1 o n » o .8.; .2 a J3 •SJ! go o a ° B p Forms in Bankruptcy. 909 No. I. Schedule B. (4).] Property in Reyersion, etc. fl !> r f I I •O D. U3 O, «1 a IS 3 a s ' s ■3 S. p o 2 a • ■" -C «■' 5 -a S S 'TS Ji ■S-2 2 £ ^ i ►- " « B V M « " ^ ^ 41 M «i O ^ 41 H *J « S .. a V E^ - U O T3 a S S jg -a ». y •> s 8 -a S •* •* (J •" - ja ° B* a " O t! ~ •=■•3 8 o. <> u ■C b S So* ' S.S |i| M^ '. » *• a E § j3 a ^ • •s.a »■ it II S2-0 |S8 <> «» «» i 1 i u 1 i i a s a. i a 5 i ft c i ■a 1 a u Pi « ^ 1 ; a 3 .: & ll . !? if ' i 1 ll £ i3 Prtftriy htrtto/are ctnveyd/iir itntfil c/crtdUm. What portion of debtor's property has been conveyed by deed of assignment or otherwise, for benefit of creditors; date of such deed, name and address of party to whom con- Teyed: amount realized therefrom, and disposal of same, so 1 *-° 25 Is 11 n o"« it U hi V 11 li 1 1 n B B o U 910 Forms in Bankruptcy. CQ H u Go § § ^ ». V *^ ^ ^ J- •^ ■*^ •s 1 ■■s P f i: •tN 1 1 e cs ^ •^ a ■a .^ ^ i V -*? . •^ 1 g ^i ? g i •a ^ '^ p s s ^ I Ji ^ Q ^ ^ 1 •^ 1 1 9 *^ "ff i ,1 41 1 >< t •»^ ^ k s ■**. J "^ *» 1 V •5 ■1 Exempt Property. [No. i. Schedule B. (S). Is a u o 9 .5S irir_ S3J as.S ^ fl 5? 1 SSS a B oSM o .500 .•S rt K « ■3. H^ a Forms in Bankruptcy. 911 Mo. I. Schedule B. (6).] Books, Papers, etc. Schedule B. (6)**> books, papers, deeds, and writings relating to bankrupt's business and estate. Tke following la a true Hit of all boolci, papers, deeds, and writing! relating to my trade, buli- B«sa, dealings, estate, and efiects, or any part thereof, which, at the date of this petition, are in ■y polsvaaion or under my custody and control, or which are in the possession or custody of any person in trust for me, or for my use, benefit, or advantage; and also of all others which have b««B 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 custody •f the I Books. Deeds. PapM*. -, Petitioner. Oath to Schedule B.*^ United States of America, District of , ss. : On this .... day of , A. D. i8 . . , 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. [OMcial character.] "Conmlt foot-note to Schedule B (i). " THit oath is perhaps unnecessary, the petition, which refers to the schedules, being rerified. If used it should be changed into the fornx of an affidavit (•■ is that at the end of the petition itself), to be signed by the affiant, with the proper jurat to be signed by the officer administering the oath. 912 Forms in Bankruptcy. Summary of Debts and Assets. [No. 1. V w V o ■a - in •OtO ■a « "2 rtT5 ^•353 J> S o D O y ■a-a ■3-= J I' .5 m a u in C V V "1 « rtU S Sj o.s-S > B*" o " B « o • => o !2 t E S^ " S^ o.H : o o o S S:5 « rt-S « 0-3 13 ii ** m'S V ^ e w e R K . 5 « *> « ^ Iw £ i'^2 2 o, , S O.S u JJ •I i5 &£-° ff i s t »' I M C* fO -*■ W> M VT V7 ^V-Ti"- ? M V7 r <■<•<•«! ■g=: V V V V t) •3 ■33-3 V U U V U v' - 5 Jjajaua ja^ tflWWtfl wco 's'a'a V U V U U U Forms in Bankruptcy. 913 No. a.] Partnership Petition. Form No. 2. Partnership Petition." To the Honorable , Judge of the District Court of the United States for the .... District of : The petition of respectfully represents : That your petitioners and have been partners un- der the firm name of , having their principal place of business at , in the county of , and district and State of , for the greater portion of the six months next im- mediately preceding the filing of this petition ; that the said part- ners owe debts which they are unable to pay in full; that your petitioners are willing to surrender all their property for the benefit of their creditors, except such as is exempt by law, and desire to obtain the benefit of the acts of Congress relating to bankruptcy. That the schedule hereto annexed, marked A, and verified by .... oath, contains a full and true statement of all the debts of said partners, and, as far as possible, the names and places of resi- dence of their creditors, and such further statements concerning said debts as are required by the provisions of said acts. That the schedule hereto annexed, marked B, verified by .... oath, contains an accurate inventory of all the property, real and personal, of said partners, and such further statements concerning said property as are required by the provisions of said acts. And said further states that the schedule hereto annexed, marked C, verified by his oath, contains a full and true statement of all his individual debts, and, as far as possible, the names and places of residence of his creditors, and such further statements concerning said debts as are required by the provisions of said acts; and that the schedule hereto annexed, marked D, verified by his oath, contains an accurate inventory of all his indi- vidual property, real and personal, and such further statements 22. Consult Sections Four, Five, ders V, VI, VII, VIII. In the and Fifty-nine, if all partners join. " Supplementary Forms," post, Form If one or more do not, consult Sec- No. 143 will be found useful when all tions Five and Eighteen. See, gen- the partners do not join in a volun- erally, Section Two for the place to tary petition; also, by way of sttg- file and Section Seven for the gestion, when they do. schedules. Read also General Or- 58 914 Forms in Bankruptcy. Partnership Petition, Continued. [No. 2. concerning said property as are required by the provisions of said acts. And said further states that the schedule hereto annexed, marked E, verified by his oath, contains a full and true statement of all his individual debts, and, as far as possible, the names and places of residence of his creditors, and such further statements concerning said debts as are required by the provisions of said acts ; and that the schedule hereto annexed, marked F, veri- fied by his oath, contains an accurate inventory of all his individual property, real and personal, and such further statements concern- ing said property as are required by the provisions of said acts. And said further states that the schedule hereto annexed, marked G, verified by his oath, contains a full and true statement of all his individual debts, and, as far as possible, the names and places of residence of his creditors, and such further statements concerning said debts as are required by the provisions of said acts; and that the schedule hereto annexed, marked H, verified by his oath, contains an accurate inventory of all his indi- vidual property, real and personal, and such further statements con- cerning said property as are required by the provisions of said acts. And said further states that the schedule hereto annexed, marked J, verified by his oath, contains a full and true statement of all his individual debts, and, as far as possible, the names and places of residence of his creditors, and such further statements concerning said debts as are required by the provisions of said acts, and that the schedule hereto annexed, marked K, veri- fied by his oath, contains an accurate inventory of all his individual property, real and personal, and such further statements concerning said property as are required by the provisions of said acts. Wherefore your petitioners pray that the said firm may be ad- judged by a decree of the court to be bankrupts within the pur- view of said acts. Petitioners. ., Attorney. Forms in Bankruptcy. 916 No. 3.] Creditors' Petition for Involuntary Bankruptcy. , the petitioning debtors mentioned and described in the foregoing petition, do hereby make solemn oath that the statements contained therein are true according to the best of their knowledge, information, and belief. Petitioners. Subscribed and sworn to before me, this .... day of A. D. 18. . . [Official character.] [Schedules to be annexed corresponding with schedules under Form No. i.] Form No. 3. Creditors' Petition." 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 , has for the greater portion of six months next preceding the date of filing this petition, had his prin- cipal place of business, [or resided, or had his domicile] at , in the county of and State and district aforesaid, and owes debts to the amount of $1,000. That your petitioners are creditors of said , having provable claims amounting in the aggregate, in excess of securities held by them, to the sum of $500. That the nature and amount of your petitioners' claims are as follows : 23. This form is demurrable. The against a partnership), Eighteen, and use of Form No. 144, post, is sug- Fifty-nine. See also General Orders gested. V, VI, VII, IX, XI, and Equity 34. For the necessary allegations Rules XX to XXV, XXVIII to in a creditors' petition consult Sec- XXX. See also Mather v. Coe, i tions Two, Three, Four, Five (if Am. B. R. 504, 92 Fed. 333. 916 Forms in Bankruptcy. Creditors' Petition, Continued. [No. 3. And your petitioners further represent that said is insolvent, and that within four months next preceding the date of this petition the said committed an act of bank- ruptcy, in that he did heretofore, to wit, on the day of Wherefore your petitioners pray that service of this petition, with a subpcEna, may be made upon , as provided in the acts of Congress relating to bankruptcy, and that he may be adjudged by the court to be a bankrupt within the purview of said acts. Attorney. Petitioners. United States of America, District of , ss. : , , , being three of the petitioners above named, do hereby make solemn oath that the statements contained in the foregoing petition, subscribed by them, are true. Before me, , this .... day of , 189. . . [OMcial character.^ [Schedules to be annexed corresponding with schedules under Form No. i.] Forms in Bankruptcy. 917 No. 4.] Order to Show Cause upon Creditors' Petition. Form No. 4. Order to Show Cause upon Creditors' Petition.*" In the District Court of the United States for the District of In the Matter of In Bankruptcy. Upon consideration of the petition of that be declared a bankrupt, it is ordered, that the said do appear at this court, as a court of bankruptcy, to be holden at , in the district aforesaid, on the day of , at ... o'clock in the noon, and show cause, if any there be, why the prayer of said petition should not be granted; and It is further ordered that a copy of said petition, together with a writ of subpoena, be served on said ,« by delivering the same to him personally or by leaving the same at his last usual place of abode in said district, at least five days before the day aforesaid. Witness the Honorable , judge of the said court, and the seal thereof, at , in said district, on the day of A. D. 18... f S«al of 1 1 the court, f Clerk. 86. This form is archaic. It is an ders. It is now rarely used. Form adaptation from Form No. 57, under No. 5 is enough. Consult Section the law of 1867, and does not fit either Eighteen of this work. the present law or the general or- 918 Forms in Bankruptcy. Sulqtoena to Alleged Bankrupt. [No. 5. Form No. 5. Snbpcsna to Alleged BKokrapt.* United States of America, .... District of To , in said district, greeting : For certain causes offered before the District Court of the United States of America within and for the .... district of , as a court of bankruptcy, we command and strictly enjoin you, laying all other matters aside and notwithstanding any excuse, that you personally appear'" before our said District Court to be holden at , in said district, on the .... day of , A. D. 189. ., to answer*® to a petition filed by in our said court, praying that you may be adjudged a bankrupt; and to do further and receive that which our said District Court shall consider in this behalf. And this you are in no wise to omit, under the pains and penalties of what may befall thereon. Witness the Honorable judge of said court, and the seal thereof, at this day of , A. D. 189. . f Seal of 1 J the court, f '_'"'„ » ae. This is always issued and is see Equity Rale XII. Consult also tested by the clerk. See General for process and service. Equity Rules Order III. For method of service, see VII to XVI. Section Eighteen, ante, and note 29. For " Order Directing Service that the time within which to appear by Publication," see Form No. 145; has been shortened by the amenda- for " General Appearance," see Form tory act of 1903, as has the time for No. 146; for "Appearance by Inter- service by publication. vening Creditor," see Form No. 147; 27. For methods of appearance, and for other forms useful in invol' see Section Eighteen. untary proceedings, see " Supple- ^8. For the memorandum to be mentary Forms," post put at the bottom of this subpoena. Forms in Bankruptcy. 919 Na&] Denial of Bankruptcy. Form No. 6. Denial of BankFuptey.^ In the Difttrict Court of the United States for liie of Divtrict Ik the Matter of In Bunkruptcjr. At , in said district, on the .... day of A. D. i8. . . And now the said appears, and denies** that he has committed the act of bankruptcy set forth in said petition, or that he is insolvent, and avers that he should not be declared bankrupt for any cause in said petition alleged; and this he prays may be inquired of by the court,*" [or, he demands that the same may be inquired of by a jury.]" Subscribed and sworn to before me, this .... day of A. D. i8. .. [OMcial characier.] 30. Consult for available defenses to a creditors' petition, Sections Two, Three, Four, Five (if against a part- nership). Eighteen, and Fifty-nine; for time to file denial (answer), see I i8-b, as amended by the act of 1903. See also Mather v. Coe, i Am. B. R. 504, ga Fed. 333. 81. For form of "General An- swer," see Form No. 149; for "An- swer Alleging More than Twelve Creditors," see Form No. 150; and for other useful forms in involuntary cases, see " Supplementary Forms," post. , 82. For pleadings in equity, see Equity Rules generally. 88. The demand for a jury trial is often in a separate paper; see Form No. 148. 920 Forms in Bankruptcy. Order for Jury Trial; Warrant to Marshal. [Nos. 7, S. Form No. 7. Order for Jury Trial." In the District Court of the United States for the District of In the Matter of In Bankruptcjr. At , in said district, on the .... day of , 18. . . Upon the demand in writing filed by , alleged to be a bankrupt, that the fact of the commission by him of an act of bankruptcy, and the fact of his insolvency may be inquired of by a jury, it is ordered, that said issue be submitted to a jury." f Seal of 1 1 the court, f ' Clerk. Form No. 8. Special Warrant to Marshal." In the District Court of the United States for the District of In the Matter 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. 18. ., filed against , of the 34. This follows as a matter of jury trial in the method suggested course the timely filing of a denial by Forms Nos. 148 and 149. in the shape of Form No. 6, provided 36. For practice on jury trials the denial puts at issue either insol- consult Section Nineteen, ante. See vency or the commission of an act also General Order III. For costs in of bankruptcy ; or, if such an issue is contested adjudications, see General made by an answer and demand of Order XXXIV. 86. This form is somewhat of an Forms in Bankruptcy. 921 No. 8.] Warrant to Marshal, Continued. 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 de- teriorate in value], you are therefore 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 fur- ther 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. 189... C Seal of 1 I the court, j ' Clerk. RETURN BY MARSHAL THEREON. 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. Marshal [or Deputy Marshcd]. Ftes and Expenses. X. Service of warrant ■. Necessary travel, at the rate of six centi a mile each way. 3. Actual expenses In custody of property aad other services, afl follows. [Here state the particulars.] Marshal [or Deputy Marshal]. inheritance from the law of 1867. It property under § 2 (15). Sec the ap- is useful in seizures of property au- propriate Sections of this work; also thorized by §§ 3-e and 6g. It is sug- General Orders III, X, XIX, and gestive when a receiver is appointed Equity Rule XV. The oath at the under { 2 (3) and given power to end of the form may be taken before take possession of the bankrupt's any of the officers mentioned in 8 20. 922 Forms in Bankruptcy. Bond of Petitioning Creditor. [No. 9. District of A. D. 18. .. 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 Petitioning Creditor.ir Know all men by these presents : That we, , as principal, 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 administrators, jointly and severally, by these presents. Signed and sealed this .... day of , A. D. 18. .. The condition of this obligation is such that whereas a petition in bankruptcy 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 prop- erty of said subject to the further orders of said district court. Now, therefore, if such a warrant shall issue for the seizure of said property, and if the said shall indemnify the said for such damages as he shall sustain in the event such seizure shall 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.] [seal.] [seal.] Approved this .... day of A, D. 18. .. District Judge. 87. This bond seems to conform be used also in seizures under § 3-e. to the requirements of 8 69. It can See foot-note to Form No. 8. Forms in Bankruptcy. 923 No. 10.] Bond to Marshal. Form No. io. Bond to Marshal.09 Know all men by these presents : That we, , as principal, 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 payment, 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. 189. . . The condition of this obligation is such that whereas a petition in bankruptcy has been filed in the district court of the United States for the district of against the said , and the said court has 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 accord- ingly 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. 189. .. District Judge. 38. See foot-notea to Forms Nos. 8 and 9. This bond seems to apply onlj to 8 69. 924 Forms in Bankruptcy. Dismissal of Petition for Adjudication. [No. II. Form No. ii. Adjudication that Debtor is Not Bankrupt." In the District Court of the United States for the of District In the Matter of - In Bankruptcy. At , in said district, on day of , A. D. i8. ., 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 bank- ruptcy, and [here state the proceedings, whether there was no oppo- sition, 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 there- fore 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. i8... ( Seal of I 1 the court. J 80. This form is the converse of Form No. 12. See, generally. Sec- tions Two, Three, Four, Five (if against a partnership), Eighteen, and Fifty-nine; General Orders IV, V, Clerk. VI, VII, XXXIV; and compare Equity Rules LXXXV and LXXXVI. Numerous forms in point by analogy will be found in " Supplementary Forms," post. Forms in Bankruptcy. 925 No. 12.] Adjudication of Bankruptcy. Form No. 12. Adjudieatlon of Bankruptcy.^) In the District Court of the United States for the of District In the Matter or Bankrupt In Bankruptcy. At , in said district, on the day of A, D. 18. ., 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. 18... f Seal of 1 1 the court, j Clerk. 40. The use of this form is quite universal. When the adjudication is made by the referee (i 38-a (i)), it should follow the framework of the numerotis referee orders in " Supple- mentary Forms," post, note the ab- sence of_ the judge from the district or the division, the receipt of an or- der of reference from the clerk certify- ing that fact (§ i8-f-g; Form No. 15), and omit the teste clause, but other- wise follow the above phraseology. See, generally, in Sections Eighteen and Thirty-eight. 41. If the adjudication is of a part- nership and the partners, see Section Five, ante, for the proper words here, and insert the same in the title. 926 Forms in Bankruptcy. Appointment, Oath, and Report of Appraisers. [No. 13. Form No. 13. Appointment, Oath, and Report of Appraisers.^ In the District Court of the United States for the District of In the Matter of Bankrupt In Bankrupicy. It is ordered that , of of , and , of , three disinterested persons, be, and they are hereby, appointed appraisers to appraise the real and personal property belonging to the estate of the said bankrupt set out in the schedules now on file in this court, and report their appraisal to the court, said appraisal to be made as soon as may be, and the appraisers to be duly sworn. Witness my hand this .... day of , A. D. 18. .. Referee in Bankruptcy.*^ .... District of , ss. : Personally appeared the within-named and sever- ally made oath that they will fully and fairly appraise the afore- said real and personal property according to their best skill and judgment. Subscribed and sworn to before me, this .... day of A. D. 189. .. [Official character.] 40. See Section Seventy and com- 43. The appraisers can be sworn io pare General Order XVII. before any officer mentioned in 8 20. Forms in Bankruptcy. 927 No. 14.] Order of Reference After Adjudication. We, the undersigned, having been notified that we were ap- pointed to estimate and appraise the real and personal property aforesaid, have attended to the duties assigned us, and after a strict examination and careful inquiry, we do estimate and ap- praise the same as follows :** In witness whereof we hereunto set our hands, at , this day of , A. D. 18... Form No. 14. Order of Beferenee.<' In the District Court of the United States for the District of In the Matter of Bankrupt . In Bankruptc/. Whereas , of , in the county of and district aforesaid, on the day of , A. D. 18. ., was duly 44. The schedule here is much too short It is thought that there should be at least two schedules, one [or real estate and the other for per- sonal property, and that the ap- praisers should set out the various Items with much of the particularity- required of a bankrupt (I 7 (8)). A statement of the basis of valuation, as " at cost," or " 25 % off cost," and of the incumbrances, if any, will also prove valuable to the officers and the creditors. At the end of the sched- ules there should also be a " sum- mary statement." 45. This order is discussed in the 928 Forms in Bankruptcy. Order of Reference in Judge's Absence. [No. 15. adjudged a bankrupt upon a petition filed in this court by [or, against] him on the .... day of , A. D. 189. ., 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 proceedings 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. 18... f Seal of 1 J the court, j ' Clerk. Form No. 15. Order of Reference In Judge's Absence.^ In the District Court of the United States for the Diatrict of In the Matter of In Bankruptcy. Whereas on the day of A. D. 18. ., a petition was filed to have , of , in the county 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 bankruptcy, 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 cred- itors], it is thereupon ordered that the said matter be referred to text. See Sections Eighteen and 46. See foot-notea to Form No la. Twenty-two. Consult also General Order XII. Forms in Bankruptcy. 929 No. 16.] Referee's Oath of Office. , 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. 189.., at Witness my hand and the seal of the said court, at in said district, on the day of , A. D. 189. .. f Seal of 1 1th«court.j ' Clerk. Form No. 16. Referee's Oath of OfQoe.^'' 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. 18... Form No. 17. Bond of Referee.^ District Judge. 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 dol- lars, 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 ourselves, our heirs, executors, and administrators, jointly and severally, by these presents. Signed and sealed this day of , A. D. 189. . . 47. See Section Thirty-six. This 48. This bond it required by 8 so. oath can be taken before any officer mentioned in § 20. 59 930 Forms in Bankruptcy. Notice of First Meeting of Creditors. [No. l8. The condition of this obligation is such that whereas the said has been on the .... day of , A. D. i8. ., appointed by the Honorable , judge of the district court of the United States for the district of , a ref- eree 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 faithfully discharge 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 — [l. ?.J [L- S.] [L. S.] Approved this day of , A. D. 189. . »...., District Judge. Form No. 18. Notice of First Meeting of CFedltops.« In the District Court of the United States for the District of In the Matter 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. 18. . , the said was duly adjudicated bankrupt ; and that 49. The use of this form is quite in " Supplementary Forms," post, universal. With some changes it can For proofs of mailing and of publica- be adapted to fit all of the notices tion, see Forms Nos. 180, 181. For given by the referee, and not by the notices given by the clerk in the clerk. See Forms Nos. 177, 178, 179, form of orders to show cause, see Forms in Bankruptcy. 931 No. 19.] List of Debts Proved at First Meeting. the first tneeting of his creditors will be held at in , on the day of , A. D. 18. ., 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. .,i8. Referee in Bankruptcy. Form No. 19. List of Debts Proyed at First Heetingr.i") 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. 18 . . , before referee in bankruptcy. The following is a list of creditors who have this day proved their debts : Namei of creditors. Residence. Debts proved. Dolls. Cts. Forms Nos. 127, 136, 155. Consult also Section Fifty-eight, generally, and General Order XXI (2). 50. This form is archaic. It does not fit the present law or practice, and Referee in Bankruptcy. is rarely, if ever, .^sed. See General Order XXIV, which is also practi- cally a dead letter, and Sections Thirty-nine and Fifty-seven of thi« work. 932 Forms in Bankruptcy. General Letter of Attorney. [No. JO. Form No. 20. General Letter of Attorney in Fact when Creditor Is not Represented by Attorney at Law.^' In the District Court of the United States for the District of In the Matter of In Bankruptcy. Bankrupt . 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 such meeting or meetings, or at which such meeting or meetings, or any adjournment 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 bankruptcy; 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 Bl. See Si i (9), 57, and General law representing a creditor in a bank- Orders IV and XXI (s). Consult ruptcy proceeding, in Section Fifty- also discussion of the necessity of six, ante, power of attorney to an attorney in Forms in Bankruptcy. 933 No. 21.] Special Letter of Attorney. therein for any of the purposes aforesaid ; also to accept any com- position proposed by said bankrupt in satisfaction of his debts, and to receive payment of dividends and of money due me under any composition, and for any other purpose in my interest what- soever, with full power of substitution. In witness whereof I have hereunto signed my name and affixed my seal the day of , A. D. 189. . . [L-S.] Signed, sealed, and delivered in presence of — 9 Acknowledged before me, this day of , A. D. 189. . • • » [Official character.] Form No. ai. Speelal Letter of Attorney In Faot." In the Matter of Bankrupt . In Bankruptcy. To I hereby authorize you, or any one of you, to attend the meeting of creditors in this matter, advertised or directed to be holden at , on the .... day of . . . ., before , or any adjourn- ment thereof, and then and there for and in name to vote for or against any proposal or resolution that may be lawfully made of passed at such meeting or adjourned meeting, and 68. See foot-note to Form No. aa nejr it not given general authority. Thi* form ii for use when the attor- It is rarely uaed. 934 Forms in Bankruptcy. Appointment of Trustee by Creditors. [No. 22. in the choice of trustee or trustees of the estate of the said bankrupt. [i-s.] In \vitness whereof I have hereunto signed my name and affixed my seal the day of , A. D. 189. . Signed, sealed, and delivered in presence of — Acknowledged before me, this .... day of A. D. 18. . » [OMcial character.] Form No. 22. Appointment of Trustee by Creditors."* In the District Court of the United States for the District of In the Matter of Bankrupt . - In BankrHpt^. At , in said district, on the day of , A. D. 18. ., before , referee in bankruptcy. This being the day appointed by the court for the first meeting of creditors in the above bankruptcy, and of which due notice has been given in the [here insert the names of the newspapers in which notice was published], we, whose names are hereunder written, being the majority in number and in amount of claims of the cred- itors of the said bankrupt, whose claims have been allowed, and who are present at this meeting, do hereby appoint , 08. Cross-references: For who ap- may vote at such meetings, § 56; for points trustees, {I 2 (17), 44; for notices of meetings of creditors qualifications of trustees, § 45 ; for I 58-a-b. See also General Orders meetings of creditors, i 55; for who XIII, XIV, XV Forms in Bankruptcy. 935 No. 23.] Appointment of Trustee by Referee. of , in the county of and State of . . trustee . . of the said bankrupt's estate and eflfects. , to be the Signatarel of creditors. Residence of clie same. Amount of debt. Doili. Cts. Ordered, that the above appointment of trustee . . be, and the same is hereby approved.** Referee in Bankruptcy. Form No. 23. Appointment of Trustee by Referee." 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. 18 . . , 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 the [here insert the name 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 64. This form is also somewhat archaic. It is not often used. Ref- erees having the right to approve or disapprove the choice of creditors (General Order XIII), a brief order of approval and fixing the bond, but without requiring the signatures of creditors, is suggested as a substitute. See Form No. 164. For order dis- pensing with the appointment of trustee (General Order XV), see Form No. 27 and compare Form No. 109. 55. See foot-note to Form No. 22. Form No. 164 can easily be adapted to fit the facts outlined above. 936 Forms in Bankruptcy, Notice to Trustee of His Appointment. [No. 24. to such notice, to take the proof of debts and for the choice of trus- tee under the said bankruptcy; and 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. t Referee in Bankruptcy. Form No. 24. Notice to Trustee of His Appolntment.>« In the District Court of the United States for the , District of In the Matter of Bankrupt . In Bankruptef. To , of , in the county of , and district aforesaid : I hereby notify you that 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. 18. ., and I have approved said appointtment. 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. 18. . . •••••• ••••••, Referee in Bankruptcy. 58- This form seems to be required ever, little used. As to die trustee's by General Order XVI. It is, how- bond, see i 50. Forms in Bankruptcy. 937 No. 25.] Bond of Trustee. Form No. 25. Bond of Trustee." 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 administrators, jointly and severally, by these presents. Signed and sealed this .... day of , A. D. 189. . . The condition of this obligation is such, that whereas the above- named was, on the day of , A. D. 189 .. , 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 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 said trustee, then this obHgation to be void; otherwise, to remain in full force and virtue. Signed and sealed in presence of — , [seal.] [seal.] [seal.] 57. The court must " receive " evi- sons this can best be done by adding dence of the actual value of the se- an affidavit as to property to the curities. Where they are natural per- bond. Thus see Form No. 171, post, 938 Forms in Bankruptcy. Order Approving Bond; That No Trustee be Appointed. [Nos. 26, 2f. Form No. 26. Orr'-^ip Approving Trustee's Bond.™ At a court of bankruptcy, held in and for the District of , at , , this .... day of , 189. . Before referee in bankruptcy, in the District Court of the United States for the .... District of In the Matter of Bankrupt . ' In Bankruptcy. It appearing to the Court of , and in said district, has been duly appointed trustee of the estate of the above- named bankrupt, and has given a bond with sureties for the faith- ful 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. f Referee in Bankruptcy. Form No. 27. Order that No Trustee be Appointed.^ In the District Court of the United States for the of District In the Matter 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 58. This order is not so phrased as Sections Twenty-one and Fifty of this to give certain important facts when work. recorded in a record office (f 21-e). 69. See General Order XV and Hence Form No. 172, post. See also foot-notes. Consult also Sections Forms in Bankruptcy. 939 No. 28.] Order for Examination of Bankrupt. that the appointment 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 cred- itors be called. Referee in Bankruptcy. Form No. 28. Order for Examination of Bankrupt.^ In the District Court of the United States for the District of Ik the Matter of Bankrupt In Bankruptcy. At , on the day of , A. D. 18. . Upon the application of , trustee of said bankrupt [or creditor of said bankrupt], it is ordered that said bankrupt attend before , one of th« 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 bankruptcy, and that a copy of this order be delivered to him, the said bankrupt, forthwith. (Six and Forty-seven. If this form is used it may, perhaps, be supple- mented as to the bankrupt's exempt property by Form No. 109. 60. See Sections Seven and Twenty-one, also Section Twelve. Referee in Bankruptcy. Compare General Order XII (i). This form is rarely used ; the bank- rupt appears without a formal order. Where the testimony of one not the bankrupt is desired Form No. 30 li used. 940 Forms in Bankruptcy. Examination, etc. ; Summons to Witae*s. [Nos. 29, 30. Form No. 29. Examination of Bankrupt or Witness." In the District Court of the United States for the of District In the Matter of Bankrupt . In Bankmptcjr. At , in said district, on the day of , A. D. 18. ., before , one of the referees in bankruptcy of said court , of , in the county of , and State of , being duly sworn and examined at the time and place above mentioned, upon his oath says : [Here insert substance of examination of party.^ Ref^ee in Bankruptcy. Form No. 30. Summons to Witness.*^ To : Whereas , of , in 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 ref- fll. This is archaic. The bankrupt or the witness is sworn and his ex- amination taken down by a stenog- rapher and transcribed, and the testi- mony, after being read over and signed, is made a part of the referee's record-book. Consult General Order XXII; also §§ 7 (9), 21, 38-a (2), 41-a. 68. Cross-references: To the law. §§ 7 (9), 21, 52-b; to the General Orders, III, XXII; to the Forms, No. 28. See also, for designation of persons other than the marshal to serve subpcenas, Equity Rule XV, though the phrasing of the Return, supra, seems to indicate that any per- son may serve a subpoena without specific designation. Forms in Bankruptcy. 941 No. 30.] Return of Summons to Witness. erees in bankruptcy 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. 189. . Clerk. Retom of Sommona to Witness. In the District Court of the United States for the District of In the Matter of Bankrupt - In Bankruptcy. On this day of , A. D. 18 . . , before me come , of , in the county of and State of , and makes oath, and says that he did, on , the day of A. D. 189.., personally serve , of , in the county of and State of , with a true copy of the sum- mons hereto annexed, by delivering the same to him ; and he fur- ther 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 .... day of A. D. 18. .. 942 Forms in Bankruptcy. Proof of Unsecured Debt. [No. 3X. Form No. 31. Proof of Unsecured Debt.* In the District Court of the United States for the of District In the Matter of Bankrupt - In Banlcruptcjr. At , in said district of , on the .... day of , A. D. 189.., came of , in the county of , in said district 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 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 1: and that deponent has not, nor has any person by his order, or to 63. Consult Section Fifty-seven. See also General Order XXI. This form does not fit the latter and special clauses must usually be added. Thus (l) that no note is held to or judg- ment entered on the debt, and (a) concerning the average due date on an account maturing at different times, and (3) if on open account, when such account became or will become due, and (4) if by a corpora- tion (see Form No. 33) why the clain is not verified by its treasurer, and (s) if the claim has been assigned af- ter the bankruptcy, certain other al- legations as to the assignment. For these special clauses see Form No. 174- Forms in Bankruptcy. 943 No. 32.] Proof of Secured Debt. his knowledge or belief, for his use, had or received any manner of security for said debt whatever. Creditor. Subscribed and sworn to before me, this .... day of A. D. 18... [Official character.] Form No. 32. Proof of Secured Debt." In the District Court of the United States for the District of Ik the Matter of Bankrupt ■ In Bankitiptcjr. At in said district of , on the .... day of , A. D. 189.., came , of in the county of , in said district 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 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 J ; that there are no set-offs or counterclaims to the same [except ] ; 84. This can be sworn to before the laws of the State where the same persons " authorized to administer are to be taken." See 1 ao. oaths in proceedings before the 86. See foot-notes to Form No. 31. courts of the United States, or under 944 Forms in Bankruptcy. Proof of Debt Due Corporation. [No. 33. 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. 18... [OMciai character.] Form No. 33. Proof of Debt Due Corporation.^* In the District Court of the United States for the District of In the Matter of - In Bankruptcy. Bankrupt . At in said district of , on the .... day of A. D. 189.., 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 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 66. See foot-notes to Form No. 31. Forms in Bankruptcy. 945 No. 34.] Proof of Debt by Partnership. said corporation in the of said debt is as sum of . . . follows : . . . . dollars ; that the considera- that no part of said debt has been paid [except ] ; that there are no set-offs or counterclaims to the same [except J ; and that said corpora- tion has not, nor has any person by its order, or to the knowledge or belief of said deponent, 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. i8... [OfUcid character.'] Form No. 34. Proof of Debt by Partnership.'' In the District Court of the United States for the District of In the Matter or Bankrupt . ' In Bankruptcy. At , in said district of , on the .... day of , A. D. 189. ., 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 petition for adjudication of bankruptcy has been filed, was at and before the filing of said petition, and still is, justly and 67. See foot-notes to Form No. 31. 60 946 Forms in Bankruptcy. Proof of Debt by Agent or Attorney. [No, 35. truly indebted to this deponent's said firm in the sum of dollars; that the consideration of said debt is as follows: that no part of said debt has been paid [except J ; that there are no set-ofifs 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 knowl- edge or belief, for their use, had or received any manner of se- curity for said debt whatever. Creditor. Subscribed and sworn to before me, this day of A. D. 18... [Official character.] Form No. 35. Proof of Debt by Agent or Attorney. «* In the District Court of the United States for the District of In the Matter of ► In Bankruptcy. Bankrupt . At , in said district of , on the .... day of A. D. 189 .. , came of , in the county of and State of , attorney [or authorized agent] of , in the county of , and State of , and made oath ^nd 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 con- 88. See foot-notes to Form hfo. 31. Forms in Bankruptcy. 947 No. 36.] Proof of Secured Debt by Agent. sideration of said debt is as follows : f that no part of said debt has been paid [except 1: 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 or re- ceived any manner of security for said debt whatever. 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 affi- davit, 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. 18... [OMcial character.] Form No. 36. Proof of Seeured Debt by Agent.<» In the District Court of tfie United States for the District of In the Matter of Bankrupt • In Bankruptejr. At , in said district of on the day of , A. D. 189. ., came , of , in the county of , e*. See foot-notes to Form No. 31. 948 - Forms in Bankruptcy. Proof of Secured Debt by Agent [No. 36. 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 consid- eration of said debt is as follows : • • • •• •■••..., that no part of said debt has been paid [except ]; that there are no set-oflfs or counterclaims to the same [except .'...'.'.*..'..' ]; and that the only securities held by said for said debt are the following •••• ..•...■.••. a.... • , 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 deposi- tion, 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, i8... [OMcial character.] Forms in Bankruptcy. 949 No. 37.] Affidavit of Lost Bill, or Note. Form No. 37. Affidavit of Lost BiU, or Note.™ In the District Court of the United States for the of District In the Matter of Bankrupt • In Bankruptcy. On this day of , A. D. 18. . , at , came , of , in the county of , and State of , and makes oath and says that the bill of exchange \or note], the par- ticulars whereof are underwritten, has been lost under the follow- ing 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. Bill or note above referred to. Date. Drawer or maker. Acceptor. Subscribed imd twom to before me, this .... day of A. D. 18. .. f {O^ciai choracier.] TO. See foot-notei to Form No. 31. 950 Forms in Bankruptcy. Order Reducing Qaim. [No. 3& Form No. 38. Order Redaeiogr Claim." In the District Court of the United States for the of District Iw THi Matter or - In Bankruptqr. Bankrupt At , in said district, on the .... day of , A. D. 18. . Upon the evidence" submitted to this court upon the claim of against said estate [and, if the fact be 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 [if with interest, with interest thereon from the .... day of A. D. 18..]. Referee in Bankruptcy. Tl. See, generally, Section Fifty- 73. For forms for petition and no- «even, ante. Read also i 3 (a), and tice on an application to reduce or General Order XXI (6). expunge, see Forms Nos. 175 and 176, post. Forms in Bankruptcy. 951 No. 39.1 Order Expunging Claim. Form No. 39. Order Expunging Claim." In the District Court of the United States for tiie District of In the Matter of Bankrupt . In Bankruptcr. At , in said district, on the .... day of , A. D. 18. . Upon the evidence submitted to the court upon the claim of against said estate [and, if the fact be so, upon hearing counsel thereon], it is ordered that said claim be disallowed and expunged from the list of claims upon the trustee's record in said case. Referee in Bankruptcy. T8. See foot-note to Form No. 38, 952 Forms in Bankruptcy. Dividend Sheet. [No. 40. Form No. 40. List of Claims and Dividends to be Recorded by Referee and by him Delivered to Trustee." In the District Court of the United States for the District of In the Matter of - In Bankruptejr. Bankrupt At , in said district, on the .... day of , A. D. 18 . . A list of debts f roved and claimed under the bankruptcy of with dividend at the rate of per cent this day declared thereon by , a refetee in bankruptcy. No, Creditors. [To be placed alphabetically, and the names of all the parties to the proof to be care- fully set forth.] Sum proved. Dividend. Dollan. Cents. Dollars. Cents 74. This form fits into i 39-a (i). 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 Referee in Bankruptcy. 168 for use of a part Of the form in connection 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. Forms in Bankruptcy. 953 No. 41.] Notice of Dividend. Form No. 41. Notice of Dividend.™ In the District Court of the United States for the of District In the Matter of Bankrupt ■ In Bankruptcy. At , on the day of , A. D. 18. . To Creditor of , bankrupt : I hereby inform you that you may, on application at my office, on the .... day of , or on any day thereafter, be- tween 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. Creditor's Letter to Trustee. To , Trustee in bankruptcy of the estate of , bank- rupt : Please deliver to the warrant for dividend payable out of the said estate to me. •••••" • i Creditor. 76. This form is an inheritance from the law of 1867. It is rarely used. Consult, generally, Sect-ions Thirty-nine and Fifty-seven, and for the notice now required, Section Fifty-eight. See also 8 65 and Gen- eral Order XXIX. For nO'tice of final meeting, see Form No. 177, which, by the sub- stitution of the dividend clause in Form No. 178, can be adapted to a notice for the declaration and pay- ment of a dividend. Compare «l»o Forms Nos. 166, 168, and 169. 9^4 Forms in Bankruptcy. Petition and Order for Sale at Auction. [No. 4a. Form No. 42. Petition and Order for Sale by Auction of Beal Estate.''^ In the District Court of the United States for the District of In the Matter of - In Bankruptcy. Bankrupt Respectfully represents , trustee of the estate of said bank- rupt, that it would be for the benefit of said estate that a certain portion of the real estate of said bankrupt, to wit: [here describe it and its estimated value] should be sold by auction, in lots or par- cels, and upon terms and conditions, as follows : Wherefore he prays that he may be authorized to make sale by auc- tion of said real estate as aforesaid. Dated this day of , A. D. 18. . "••••• •■••«., 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 oppo- sition thereto], it is ordered that the said trustee be authorized toi sell the portion of the bankrupt's real estate specified in the fore-l 76. Read Section Seventy, ante, adaptation of this form to the frame- and consult General Order XVIII on work of Forms Nos. 185 and 186, or sales. See also for notice § s8-a (4) if after notice, to Forms Nos. 185 and and the sale clause in Form No. 187, will be more in accord with 178, when inserted, as there explained, modern methods and the practice in Form No. 177. outlined in the law and the general It is also suggested that an orders. Forms in Bankruptcy. 965 No. 43.] Petition and Order for Redemption from Lien. going 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. 189. . . Referee in Bankruptcy. Form No. 43. Petition and Order fop Redemption of Property from lien." In the District Court of the United States for the District of In the Matter of Bankrupt - In Bankruptcy. Respectfully 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 the mortgage], or to a con- ditional contract [describing it], 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. 18. . Trustee. The foregoing petition having been duly filed and having com« T7. The redemption of property present law. This form, however, fits trom Hens is not common under the into General Order XXVIII, which 956 Forms in Bankruptcy. Petition and Order for Sale Subject to Lien. [No. 44. 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 opposition thereto] , it is ordered that the said trus- tee 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. 189. . Referee in Bankruptcy. Form No. 44. Petition and Order for Sale Subject to Lien.''9 In the District Court of the United States for the District of In the Matter of Bankrupt . - In Bankruptcy. Respectfully 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 mortgage], or to a conditional contract [describe it], 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 said estate that said property should be sold, subject to said mortgage, lien, or other incumbrance. Wherefore he prays that he may be is an inheritance from the law to notice, see § s8-a (7). See also of 1867. See, generally, Sections foot-note to Form No. 42. twenty-seven and Sixty-seven. As 78. See foot-notes to Forms Nos. 42 and 43. Forms in Bankruptcy. 957 No. 45.] Petition and Order for Private Sale. authorized to make sale of said property, subject to the incum- brance thereon. Dated this day of , A. D. 189. . 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 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. 189. . Referee in Bankruptcy. Form No. 45. Petition and Order for PrlTate Sale." In the District Court of the United States for the District of In the Mattkr of ' In BankFuptejr. Bankrupt Respectfully represents . . . . , , duly appointed trustee of the estate of the aforesaid bankrupt. That for the following reasons, to wit, 70. See sections of the statute and and 44. See also General Order Sections of this work, referred to in XVIII (a), the foot-notes to Forms Noa. 42, 43, 968 Forms IN Bankruptcy. Petition etc., for Sale of Perishable Property. [No. 46. it is desirable and for the best interest of the estate te sale a certain portion of the said estate, to wit : . to sell at Wherefore he prays that he may be authorized to sell the said property at private sale. Dated this day of , A. D. 189. . 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 specified in the foregoing petition, at private sale, keeping an accurate account of each 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. 189. . Referee in Bankruptcy. Form No. 46. Petition and Order for Sale of Perishable Property.* In the District Court of the United States for the District of In the Matter of Bankrupt - In Bankruptcy. Respectfully represents the said bankrupt, [or, a creditor, or the receiver, or the trustee of the said bankrupt's estate]. 80. See foot-notes to Forms Nos. tions Fifty-eight and Seventy ante 4a. 43, 44. and 45, and, as to sales and General Order XVIII {3)' of perishable property generally, Sec- Forms in Bankruptcy. 959 No. 47.] Trustee's Report of Exempted Property. 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. 189. . 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. 189. . Referee in Bankruptcy. Form No. 47. Trustee's Report of Exempted Property.'^ In the District Court of the United States for the District of In the Matter of Bankrupt In Bankruptcjr. At , on the day of , 18. . The following is a schedule of property designated and set apart to be retained by the bankrupt aforesaid, as his own property, 81. See, generally, Sections Six, suit also §1 2 (11) and 70-b of the Seven, and Forty-seven, ante. Con- statute. This form fits into General f ' 960 FoRMb IN Bankruptcy. Trustee's Return of No Assets. [No. 48. under the provisions of the acts of Congress relating to bank- ruptcy. General head. Particular description. Value. Military uniform^ armt, and Dolls. Ctt. Property exempted by state Trustee. Form No. 48. Trustee's Return of No Assets.^ 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. 18. . 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 and sworn to before me at , this day of Referee in Bankruptcy.^ Order XVII, but should be verified XVII. See also, for the other form* and specify the state statute under for trustees' reports, Forms No*. 165 which the exemptions are set apart, and 167. For other useful forms on exemp- 88. This return should be signed by tions, see Nos. 109, no, in, and 112. the trustee and verified, but not 82. Consult, generally, Section necessarily before the referee- see Forty-seven; also General Order § ao. ' Forms in ±5ankruptcy. 961 No. 49.] Account of Trustee. a u g a tn a o 2 Hi •3 s •0 •0 P.'O a V c4 1) M ca P. 1 «a fffl> t4 ,4 o< u n *^ B. I1> 111 (A 3 tS ai U3 ,ja ' a 41 u a .a M ► H ti T3 e 1 lA a M K^ u ■3 .a u .a '■3 to M a V ja u ■9 H rt V 8 U) s (11 ja h M 61 Forms in Bankruptcy. Oath to Final Account of Trustee. [No. JO. Form No. 50. Oath to Final Account of Trustee.^ In the District Court of the United States for the District of In the Matter of Bankrupt In Bankruptcy, On this .... day of , A. D. 18 . . , before me comes , of , in the county of and State of , and makes oath, and says that he was, on the day of A. D. 18. ., 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 be made to any prior account Hied by 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 dis- trict of , this day of A. D. 18. . • » [Official character.] 86. This form seems hardly neces- See the practice outlined in Forms sary, save when used as suggested Nos. 167 and 166. in the foot-note to Form No. 49. Forms in Bankruptcy. 963 Nos. SI, 53.] Order Discharging Trustee ; Petition for Removal of Tmste^ Form No. 51. Order Allowing Account^ and Dlseharglngr Tmstofl. In the District Court of the United State* for the Dlttrict of In the Matter or y In Bankruptcy. Bankrupt 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." In the District Court of the United States for the District of In the Matter 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 bank- rupt, respectfully represents that it is for the interest of the estate 86. When the practice outlined in and the foot-notes to Forms Nos. 49 Forms Nos. i^ and 168 is followed, and 50. this form will not be used. It is to 87. This form fits into General the same effect as a clause in Form Orders XIII and XVII. Trustees No. 168. See Section Forty-seven being rarely removed it is not im- portant. See S§ a (17), 44 asd 46. 964 Forms in Bankruptcy. Notice of Petition for Removal of Trustee. [No. 53. 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 ivhtch such removal is requested.^ Wherefore pray that notice may be served upon said , trustee as aforesaid, to show cause, at such time as may be fixed by the court, why an order should not be made removing him from said trust. Form No. 53. Notlee of Petition for Removal of Trustee.^ In the District Court of the United States for the District of In the Matter of Bankrupt . • In Bankntptcjr. At , on the day of , A. D. 18. . To , Trustee of the estate of , bankrupt : You are hereby notified to appear before this court, at , on the .... day of ^ A. D. 18. ., 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 of A. D. 18. ., in which it is alleged [here insert the allegation of the petition]. Clerk. 88. See foot-note to Form No. 5J. Forms in Bankruptcy. 965 No. 54] Order for Removal of Trustee. Form No. 54. Order for Removal of Trustee.^ In the District Court of the United States for the District of In the Mattkr of Bankrupt . ' In Bankruptcy. Whereas , of did, on the day of , A. D. 18 . . , present his petition to this court, praying that for the reasons therein set forth, , the trustee of the estate of said , banlcrupt, 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 evidence 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 [or, 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. 18.. r Seal of I I the court, f ••-•., Clerk. 80. Se« foot-note to Form No. sa. 966 Forms in Bankruptcy. Order, etc., New Trustee; Certificate by Referee to Judge. [No*. 55, 56. Form No. 55. Order for Otaolee of New Tnutee."> In the District Court of the United States for the District of In the Matter or r In Bankmptcjr. Bankrupt At , on the day of , A. D. 18. . 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 oifice 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. 18. ., for the choice of a newr 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 Form No. 56. Certificate by Referee to Judge.'^ In the District Court of the United States for the District of In the Matter of Bankrupt ' In Bankniptey. I, one of the referees of said court in bankruptcy, do hereby certify that in the course of the proceedings in said cause 80. See foot-note to Form No. 52. for the practice under the present 91. This form ti hardly sufficient law. Now the referee rarely certifies Forms in Bankruptcy. 967 No. 57.] Bankrupt's Petition for Discharge. before me the following question arose pertinent to the said proceed- ings: [Here state the question, a summary of the evidence r dat- ing 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. i8. . Referee in Bankruptcy. Form No. 57. Bankrupt's Petition for Disoharge.<* In the Matter or Bankrupt • In Bankruptcjr. 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 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 said acts and of the orders of the court touching his bankruptcy. Wherefore he prays that he may be decreed by the court to have questions to the judge for decision, by the bankrupt may be used. But It suggests, however, the certificate the order, at least in so far as it re- on review. For certificates for ref- quires the clerk to send to the cred- erees in various matters, including itors copies of the petition, is clearly reviews, see Forms Nos. 126, 134, wrong. See, generally, Sections 137, 157, 163, 170, 173, in " Supple- Fourteen and Fifty-eight, ante. See mentary Forms," post. See also also suggested " Order to Show tS 2 (10), 39-a (s) and General Order Cause," being Form No. 126. For XXVII. On reviews, consult Sec- other forms in discharge proceedings, tion Thirty-nine, ante. see Forms Nos. 133, 134, 13s, 136, 92. This form and the " Order of 137, 138, 139, 140, 141 and 142 in Notice Therein " following it has " Supplementary Forms," post Con- caused much confusion. The petition suit also §§ 17, 38-a (4) and itself is within the law (see also Gen- s8-a (2)-b. eral Order XXXI), and if verified 968' Forms in Bankruptcy. Order of Notice on Discharge. [No. 57. 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. 189. . Bankrupt. Order of Notiee Thereon. District of , ss. : On this .... day of , A. D. 189. ., on reading the fore- going petition, it is — Ordered by the court, that a hearing be had upon the same on the .... day of ,A. D. 189. ., 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. 189.. f Seal of ] ) the court. { Clerk. .... hereby depose, on oath, that the foregoing order was pub- lished in the on the following days, viz. : On the day of and on the .... day of in the year 189. . District of 189.. Personally appeared and made oath that the fore- going statement by him subscribed is true. Before me, , [OUHcial character.] I hereby certify that I have on this .... day of A. D. 189. ., sent by mail copies of the above order, as therein directed. •••'• » Clerk. Forms in Bankruptcy. 969 Specification of Objection to Discharge; Discharge of Bankrupt [Nos. S8i S0> Form No. 58. Speelfleatlon of Grounds of Opposition to Bankrupt's Dlsehargre.>* In the District Court of the United States for the District of In the Matter of Bemkrupt . In Bankmptey. , of , in the county of and State of , a party interested in the estate of said , bank- rupt, do hereby oppose the granting to him of a discharge from his debts, and for the grounds of such opposition do file the following specification: [Here specify the grounds of opposition.] Creditor. Form No. 59. Discharge of Bankrupt.^^ District Court of the United States, District of Whereas, of in said district, has been duly adjudged a bankrupt, under the acts of Congress relating to bank- ruptcy, and appears to have conformed to all the requirements of law in that behalf, it 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. 189. ., on which day the petition for 98. This form should have a verifi- ante. See also General Order cation. See, for another form, XXXII. Form No. 139, post. For grounds 94. This differs from the discharg;e of objection to discharge and the certificate under the law of 1867. The practice, consult Section Fourteen, use of this form is universal. For ef- fect, consult Section Fourteen, ante. 970 Forms in Bankruptcy. Petition for Meeting to Consider Composition. [No. 60. 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. 189. . r Seal of 1 1 th« court. I 'Z. , '■ ^ Clerk. Form No. 60. Petition for Me«tin«r to Consider Compositlon.<« District Court of the United States for the District of In the Matter or Bankrupt . In Baakraptcjr. To the Honorable , Judge of the District Court of the United States for the .... District of : The above-named bankrupt respectfully represent that a compo- sition of per cent, upon all unsecured debts, not entitled to a priority in satisfaction of .... debts has been pro- posed by .... to ... . creditors, as provided by the acts of Congress relating to bankruptcy, and verily believe that the said compo- sition 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. OT. This form is never used. It doet not fit the practice on composi- tion. See Section Twelve, ante. Forms in Bankruptcy. 971 No. 6i.] Application for Confirmation of Composition. Form No. 6i. Applleation for Conflnnation of Compoaltlon.>* In the District Court of the United States for the District of In the Matter 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. 189. ., now comes , the 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 re- quired 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 considera- tion to be paid by the bankrupt to his creditors, the money neces- sary 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. 96. This form, when verified by 125, 126, 127, ia8, 129, 130, 131 and the bankrupt, is sufficient to bring 132 for a complete practice on com- a proposed composition before the position. See also § 58-a (2) and court. Consult Section Twelve, gen- General Order XXXII. erally. See also Form« Nos. 124, 972 Forms in Bankruptcy. 1^ ' ■ Order Confirming Composition. CNo. fe. Form No. 63. Order Confirming Composition.*' In the District Court of the United States for the District of In the Matter of In Bankruptcjr. 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 per- form 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 acta of Congress relating to bankruptcy: It is therefore hereby ordered that the said composition be, and it hereby is, confirmed. Witness the Honorable , judge of said court, and the seal thereof, this day of , A. D. 189. . f Seal of 1 1 the court, j t Clerk. 97. For another form adapted to a Form No. 13a, post Coasult See- refusal to confirm, and containing tion Twelve, generally, also directions for distribution. See Forms in Bankruptcy. 973 No. 63.] Order of Distribution on Cotnpoiition. Form No. 63. Order of Distribution on Compoaitlon.M United States of America: In the District Court of the United States for the District of In the Matter of Bankrupt - In Bankruptcy. The composition ofifered 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: ist, 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. 189.. f Seal of 1 j the court. J ' Clerk. 08. It is thought this order should No. 62, and compare Form No. 133, be combined with that confirming the post, composition. See foot-note to Form PRKKAXORY NOXE TO SUPPLEMENTARY FORMS. These forms are in no sense ofiicial. They are merely Ka^jSS- tions based upon the author's experience. No effort has ibeen made to supply forms for every contingency that may arise in a bankruptcy proceeding ; but simply to afford the profession hints ^s to the more common steps and, largely, where no forms are noi/' 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. 975 LIST OF SUPPLEMENTARY FORMS. SECTION TWO. FoBM Na loi.— Petition for Appointment of Receiver before Adjudication. FoKM No. 102. — Order Appointing Receiver before Adjudication. F(»M No. 103. — Petition for Appointment of Receiver after Adjudication and Reference. Form No. 104. — Order Appointing Receiver after Adjudication and Reference. Form No. 105. — Petition for Injunction other than against Suits. Form No. 106. — Referee's Stay and Show Cause other than against Suits. Form No. 107. — Referee's Order that Writ of Injunction Issue. Form No. 108. — Order that Writ of Injunction Issue, after Referee's Stay and Show Cause. SECTION SIX. Form No. 109. — Order Determining Exemptions when no Trustee Ap- pointed. Form No. iio. — Exceptions to Trustee's Report Setting off Exemptions. Form No. hi. — Order Determining Exemptions after Trustee's Report. Form No. 112. — Petition by Bankrupt for Review of Referee's Order oa Exemptions. SECTION SEVEN. Form No. 113. — Petition for Order Amending Schedules. Form No. 114. — Order to Show Cause on Amendment of Schedule*. Form No. 115. — Order Amending Schedules. Form No. 116. — Affidavit to Schedule of Creditors, when Bankrupt can- not to be Found SECTION NINE. Form No. 117. — Petition for Order of Protection. Form No. 118. — Order of Protection. SECTION ELEVEN. Form No. 119. — Petition for Stay of Pending Suit. Form No. 120. — Referee's Stay and Show Cause on Pending Suit. Form No. 121. — Stipulation that Show Cause be Heard by Referee. Form No. 122.— Decision and Report of Referee on Application for Stay Stipulated before Him. Form No. 123. — Order that Writ of Injunction Issue. 976 Supplementary Forms. 977 List Arranged by Sections. SECTION TWELVE. Form No. 124. — Offer of Composition. Form No. 125. — Acceptance of Composition. Form No. 126. — Referee's Certificate in Composition. Form No. 127. — Order to Show Cause in Composition. i Form No. 128. — Appearance of Objecting Creditor in Composition. Form No. 129. — Specification of Objection in Composition. Form No. 130. — Order of Reference to Special Master in Composition. Form No. 131. — Report of Special Master in Composition. Form No. 132. — Order Confirming (or Refusing to Confirm) Composition. SECTION FOURTEEN. Form No. 133. — Petition for Extension of Time to Apply for Discharge. Form No. 134. — Referee's Certificate on Application for Extension o£ Time. Form No. 135.- Form No. 136.- FoRM No. 137.- FoRM No. 138.- FoRM No. 139.- FoRM No. 140.- FoRM No. 141.- FoRM No. 142.- Master. SECTION EIGHTEEN. Form No. 143. — Voluntary Petition of Partnership, all Pirtners not Joining. Form No. 144. — Involuntary Petition by Three Creditors. Form No. 145. — Order Directing Service by Publication. Form No. 146. — General Appearance in Involuntary Case. Form No. 147. — Appearance by Intervening Creditor. Form No. 148. — Application for Jury Trial in Involuntary Case. Form No. 149. — General Answer in Involuntary Case. Form No. 150. — Answer Alleging more than Twelve Creditors. Form No. 151. — Order of Reference to Special Master in Involuntary Cases. Form No. 152. — Report of Special Master in Involuntary Case. Form No. 153. — Exceptions to Report of Special Master in Involuntary Case. Form No. 154. — Petition of Petitioning Creditors for Dismissal in In- voluntary Case. Form No. 155. — Order to Show Cause on Petition for Dismissal in In- voluntary Case. Form No. 156. — Order of Dismissal on Petition of Petitioning Creditors and after Notice in Involuntary Case. Order Extending Time to Apply for Discharge. , — Order to Show Cause on Application for Discharge. Referee's Certificate of Conformity on Discharge. Appearance by Objecting Creditor on Discharge. , — Specification of Objection to Discharge. Order of Reference to Special Master on Discharge. . — Report of Special Master on Discharge. , — Order Denying Discharge, after Reference to Special 978. Supplementary Forms. List Arranged by Sections. SECTION TWENTY-TWO. FwiM No. 157.— Referee's Certificate of Disqualificatloa. SECTION TWENTY-FOUR. Form No. 158.— Petition to Revise in Matter of Law. Form No. 159.— Order of District Court Allowing Petition for Revision in Matter of Law. Form No. 160. — Notice to Respondent on Revision. Form No. 161. — Order of Circuit Court of Appeals on Revisioo. SECTION THIRTY-NINE. Form No. 163. — Petition for Review of Referee's Order. Form No. 163. — Referee's Certificate on Review. SECTION FORTY-FOUR. FcHUi No. 164. — Order Approving Appointment of Trustee. SECTION FORTY-SEVEN. Form No. 165. — Trustee's First Report. Form No. 166. — Order Declaring and Ordering First Dividend Paid. Form No. 167. — Trustee's Final Report and Account. Form No. 168. — Final Order of Distribution. Form No. 169. — Trustee's Combined Dividend Check and Receipt SECTION FORTY-EIGHT. Form No. 170. — Referee's Certificate of Fees Payable. SECTION FIFTY. Form No. 171. — Bond of Trustee, with Justification of Sureties. FcaiM No. 17a. — Order Approving Trustee's Bond. SECTION FIFTY-ONE. Form No. 173. — Certificate of Referee as to Falsity of Pauper Affidavit SECTION FIFTY-SEVEN. Form No. 174. — Special Clauses for Proofs of Debt (to Conform to Gen- eral Order XXI). Form No. 175. — Petition for Reconsideration and Rejection of Claim. Form No. 176. — Notice of Petition for Reconsideration and Rejection of Claim. Supplementary Forms. 979 List Arranged by Sections. SECTION FIFTY-EIGHT. 'Fca.u No. 177. — Notice of Final Meeting. Form No. 178. — Special Clauses for Notices to Creditors. Form No. 179. — Combined Notice to Creditors. F<»M No. 180.— Affidavit of Publication of Notice. Form No. 181. — Affidavit of Mailing of Notice. SECTION SIXTY-TWO. Form No. iBs. — Order Appointing Attorney for Trustee. SECTION SEVENTY. Form No. 183. — Petition for Instruction as to Burdensome Property. Form No. 184. — Order on Petition as to Burdensome Property. Form No. 185.— Petition for Sale under General Order XVIII (a). Form No. 186.— Order for Sale under General Order XVIII (2). Form No. 187. — Order Confirming Sale after Notice to Crediton. SUPPLEMENTARY FORMS. Form No. ioi. Petition for Appointment of Reeelver Before Adjudleation.* 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 : 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 stilt 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, in whose possession it is and whether ante. And compare §§ 3-e and 59 there are any adverse claimants. with Forms Nos. 8, 9, and 10. 3. Or a specified part of it, stat- 2. Here recite the property, under ing it. the two general heads of real and 4. Here state the reasons, as, for personal, in sufficient detail, showing instance, (i) that " the bankrupt h»» 980 Supplementary Forms. 981 No. loi.] Petition for Receiver before Adjudication. That your petitioners file herewith the bond of in $ , 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 , in said district, be continued until the hearing and decision on the petition for adjudication herein, for the follow- ing reasons : That no previous application h.ns 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 business, and for such other order as shall be just and lawful. Dated, , ...., , ...., 19... Petitioners^ State of , -> County of , [ss.: City of ,j 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. absconded and abandoned the same; " 5. For bond, see Form No. 9, or (2) that " the bankrupt is selling changing recitals to fit this kind of the same at prices much less than an application and the condition such property is worth, to wit , clause to fit § 3-e. or has threatened or is liable so to 6. Omit this paragraph if the re- do; " or (3) that "the bankrupt is ceiver is to be a custodian only, neglecting such property and the 6%. Or a specified part of it, stat- jame is deteriorating or liable so ing it. to do." •• This application can be maH» 982 Supplementary Forms. Order Appointing Receiver before Ajudication. iNo. 102. Form No. 102. Order Appointing Reeelver Before Adjudleatlon.* In the District Court of the United States for the District of In the Matter of Bankrupt In Bankruptcy No. Whereas, a petition for adjudication of bankruptcy was, on the day of , 19.., filed against , of the of , in said district, and said petition is still pending, and whereas it satisfactorily app«ars that it is absolutely necessary for the preservation of the estate of said bankrupt that a re- ceiver 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 re- ceiver take charge of and hold such estate until further order. I by one petitioner only. If made by 8. This order follows Form No. attorney, show in affidavit of verifica- loi. See foot-notes to same, tion why petition was not made by 0. Or a specified part of it, stat- the creditors. ing it. Supplementary Forms. 983 No. 103.] Petition for Receiver after Adjudication. 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, w^ith the powers herein conferred, until the appointment and qualification of a trustee of said bankrupt. 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 I the court, j Clerk. Form No. 103. Petition for Appointment of Receiver After Adjudleatlon and Reference." In the District Court of the United States for the .... District of In the Matter of ■ In Bankruptcy No. Bankrupt 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. 10. Omit this paragraph, if the re- 18. This form is chiefly valuable in ceiver is to be custodian only. voluntary cases to protect assets un- 11. Here add any limitations as, til a trustee can be appointed. It for instance, concerning the borrow- can, of course, be made by a cred- ing of money, the buying of new itor as well as the bankrupt. See, goods, etc. generally. Section Two, ante. 984' Supplementary Forms. Petition for Receiver after Adjudication. [No. 103. That your petitioner's estate consists of and is worth substan- tially 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 ■}* That^^ it wrill be for the best interests of your petitioner's credit- ors 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, with^^ power to continue said business, and for such other order as shall be just and lawful. Dated , , , , 19... Petitioner. State of , ^ County of , (.ss.: City of ,J I) , the petitioner mentioned and described in the foregoing petition, do hereby make solemn oath that the state- ments of fact therein contained are true, according to the best of my knowledge, information, and belief. Subscribed and sworn to before me, this .... day of 19. Consent of Creditors." We, the undersigned, creditors of said bankrupt, holding un- secured claims in the amounts set opposite our names, do hereby 13. Here recite the property under and should be sold at once; " or the two general heads of real and (2) that " such property is without personal, m sufficient detail, show- protection from theft or the elements ing in whose possession it is, and and not insured." whether there are any adverse claim- 16. Omit this paragraph, if the re- *"*^- ^^ , , ceiver is to be custodian only. • Here state the reasons, as, for 16. So also this clause may be instance, (i) that a portion of said omitted estate is perishable, to wit 17. While not essential to secure Supplementary Forms. 985 No. 104.] Order Appointing Receiver after Adjudication. join in the annexed petition, and do nominate •! the of , in said district, for receiver. Dated, , , , , 19... ,$ Form No. 104. Order Appointing Receiver After Adjudication and Reference.i^ 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 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 application 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 sufificient sureties, to be approved by this court. That** said receiver continue the business of said bankrupt, at No street, in the of , in said district. the consent of creditors, the practice 18. This form follows Form No. is advised. See " Practice " on re- 103. See foot-notes to same. ceivenhips in Section Two, ante. 18- Omit this paragraph, if re- ceiver is to be custodian only. 986 Supplementary Forms. Petition for Injunction other thac Against Suits. [No. 105. That*' said receiver have power also to That said receiver continue as such until the appointment and qualification of a trustee herein. Referee in Bankruptcy. Form No. 105. Petition for Injunction other than Against Sults.^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 he is the receiver^ herein. That the above-named bankrupt was duly adjudged herein on the .... day of , 19 . . , and, thereafter, the following proceed- ings were had :** That** 20. Use only when the receiver is 24. Recite the previous steps in the given special powers. proceeding briefly. 31. For the validity of injunctions 25. Here give the name and resi- f ranted by referees, see, generally, dence of the person sought to be en- ections Two, Eleven and Thirty- joined, and the facts making the in- eight. Read also General Order junction necessary, as an imminent XII, which, however, refers only to sale on a foreclosure where the equity injunctions against proceedings or of redemption is substantial; or, the officers. See also Mueller v. Nugent, giving of a voidable preference as 184 U. S. I, 7 Am. B. R. 224. defined in § 60, and proceedings by 22. If before adjudication, address the creditor preferred which may re- to the judge. suit in the property getting into the 23. Or 'the bankrupt;" or "the hands of an innocent holder for trustee;" or "a creditor of the bank- value, in this case specifying whether ™Pt" or not the property is in the posses- Supplementary Forms. 987 No. io6.] Referee's Stay, etc., other than Against Suits. 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, forbidding the said , his attorneys, agents, and ser- vants, from*® and for such other order as shall be just and lawful. Dated, , , , , 19... Petitioner. [Add verification as in Form No. 103.] Form No. 106. Referee's Stay and Show Cause other than Against Suits." At a Court of Bankruptcy, held in and for the Dis- trict of , at , this day of , 19... Present : , Esq., Referee. In the Matter of Bankrupt ~ In Bankruptcy No. Application having been made for a writ of injunction directed to of the of , in said district, re- »ion of the bankrupt or an adverse 27. The referee may, it is thought, claimant, and, if the latter, by what grant an injunction without a show kind of a transfer and with what no- cause. See Mueller v. Nugent, 184 tice, if any, of the bankruptcy he U. S. i, 7 Am. B. R. 224, and consult holds. See, generally, "Injunctions generally "Injunctions other than other than against Suits," in Section against Suits " in Section Two, ante. Two, ante, and cases cited. If a show cause is not thought neces- 88. Here state briefly the acts or sary use Form No. 107, or if the transactions which the petitioner local practice does not call for the >eeks to prevent. issuance of the writ of injunction, 988 Supplementary Forms. Referee's Stay, etc., other than Against Suits. [No. 106. Straining 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 de- cision of the show cause hereinafter ordered. That the said show cause, before the Hon. , District Judge, at the United States District Court Room, 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 de- livery to him personally of a copy of the same and of the petition on which it is granted within .... days previous to tbe day last hereinbefore mentioned, be sufficient.** Referee in Bankruptcy. draw a referee's order restraining 31. Or "on , Esq., his at- and enjoining the person named as torney of record," if any; or "on suggested by the words of this form, either or both the said and 88. Make this recital fit the prayer , his attorney," as the court of the petition. may direct. 29. Here state the acts or trans- 32. Service should never be by actions which are enjoined. mail, or on any person other than 30. Or until a time certain, specify- here specified, ing it, or " until further order." Supplementary Forms. 989 No. 107.] Referee's Order that Writ of Injunction Issue. Form No. 107. Referee's Order that Writ of Injunction .Issue." At a Court of Bankruptcy, held in and for the Dis- trict of , at , this .... day of , 19... Present : , Esq., Referee. In the Matter of Bankrupt - In Bankruptcy No. 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 ;*" 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 f rom^* , 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. 38. See foot-note 27, Form No. 106. 86. Strike out to end of paragraph 84. See foot-note 7&, to same form, if there is no appearance in oppo- 36. If brought on before the ref- sition. eree by stipulation (see Form No. 87. See General Order III. I2l) strike out this clause and sub- 38. Here state the acts or trans- stitute for it, " and the same being actions enjoined. now moyed by stipulation before the 39. Or until a time certain, specify- referee instead of before the judge." ing it, or " until further order. 990 Supplementary Forms. Order that Writ of Injunction Issue. [No. io8. Form No. io8. Srder that 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 Matter of f In Bankruptcy No. Bankrupt . I J 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 1 1 the court. J 40. To be used only in cases where the referee grants a temporary injunction with show cause. See Form No. 106 and foot-note 27. Com- pare also Form No. 107. 41. Or recite the duration of the injunction as shown in the referee's order. 48. Strike out to end of paragraph if there is no appearance in opposi- tion. Clerk. 48. If application is denied, strike out balance of form and add: "That such application be and the same hereby is denied, and such tem- porary injunction herein is vacated." 44. For form of writ, see works on Federal Practice. 46. Here state the acts or trans- actions enjoined. 46. See foot-note 41. Supplementary Forms. 991 No. 109.] Order Determining Exemptions, no Trustee. Form No. 109. Order Determining Kxemptlons When no Trustee Appolnted.^^ At a Court of Bankruptcy, held in and for the Dis- trict of , at , this .... day of , 19... Present: , Esq., Referee. In the Matter of - In Bankruptcy No. Bankrupt An order having been entered herein dispensing with a trustee, as provided 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 b« determined as follows : That he is entitled, under of the laws of the State oi , to the following property :** and that the same be delivered to him forthwith. Referee in Bankruptcy. 47. Consult, generally. Sections _ 48. Here say " that claimed by him Six and Forty-seven. And see Gen- in his said Schedule B (s)," or, if eral Order XV and Form No. 27. all of same are not set off to htm. See also (§ 2 (11), 38 (4). Forms specify those that are set off. Nos. no. III, 113 should also be noted. 992 Supplementary Forhs. Exceptions to Trustee's Report on Exemptiona. [No. iia Form No. iio. Exceptions to Trustee's Report Setting: off Exemptloni.<* In the District Court of the United States for the District of In the Matter 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 bankrupt's exceptions, filed herein on the .... day of , 19. .j"^ in that such report"* sets off to said bankrupt the follow- ing:"* for the following reasons :" 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... 48. See, generally. Sections Six and Forty-seven, and for trustee's report on exemptions, Form No. 47, which, however, it is thought, should be veri- fied and should specify the state stat- ute under which the exemptions are set apart. The practice on exceptions will be found in General Order XVII. If the bankrupt is the party aggrieved he must ask a review. See Form No. 112. 50. If the exceptions are made by attorney add : " by , of the of , in said dis- trict, his attorney, duly authorized to that end." For the authority required if the exceptions are not filed by a creditor, see § i (9). Excepting Creditor.'* 51. Or, if the exceptions are to the referee's order, strike out this clause and substitute: "and excepts to the order of , Esq., referee in bankruptcy herein, determining said bankrupt's claim to exemptions, entered on the .... day of , 19. ." 5S. " Or order," as the case may be. 53. Here copy in the set-off ob- jected to, or phrase it in words so that the exception will be clearly in- dicated. 64. Here insert words showing the error excepted to. 55. If by an attorney, add "by his attorney, addres* No Supplementary Forms. 993 No. III.] Order Determining Exemptions After Report. Form No. hi. Order Determining Exemptions After Trustee's Report." At a Court of Bankruptcy, held in and for the Dis- trict of , at , this day of , 19... Before Esq., Referee : In the Matter of y In Bankruptcy No. Bankrupt 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. 56. See foot-note 49. This form can also easily be changed to fit a case where exceptions have been taken (Form No. no) and argued. 57. If exceptions have been taken, change to fit the facts; if the report of the trustee is not to be confirmed Referee in Bankruptcy. in whole or in part, here give the reasons. 58. Or, in case such report is not confirmed, in whole or in part, stop here and insert words indicating the decision. ■ 63 994 Supplementary Forms. Petition for Review on Exemptions. [No. ii2. Form No. 112. Petition by Bankrupt for Review of Referee's Order on Exemptions.^ 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 he was adjudged a bankrupt herein on the .... day of , 19. ., and that a trustee of his estate was in such proceed- ing subsequently appointed. That such trustee, on the .... day of , 19. ., filed a report of 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.*' 91 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 re- viewed, as provided in the bankruptcy law of 1898 and General Order XXVII. Dated, , , . . . . , 19 . . . [Add verification as in Form No. 103.] Bankrupt. 59. If granted, for Referee's Cer- either in whole or in part here state tificate on Review, see Form No. the substance of the referee's order. 163. See, generally, for practice on 61. Or, if the referee's order modi- reviews, Section Thirty-nine, ante. A fied the trustee's report, strike out creditor can, of course, ask for a re- " as stated in such report," and sub- view. If so, see Forms Nos. 162 and stitute " as follows: . : " 62. Here indicate the reasons con- confirmation was refused stituting the error complained of. 163. 60. If Supplementary Forms. 995 No. 113] Petition for Order Amending Schedules. Form No. 113. Petition for Order Amending Sehedales.<* In the District Court of the United States for the of District '1 In the Matter of ■- In Bankrtq>tc]r No. Bankrupt . J 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 there- from.®* That such names and facts are as follows f That** the above-mentioned creditors have not been regularly notified of said first meeting of creditors. 63. This petition can be adapted to a case where the petition and not the schedules needs amendment. See Section Eighteen, ante. Com- pare, generally, General Order XI, and Sections Seven and Eighteen. 64. If the meeting has been held, change to fit the facts. 65. Or give any other reason bringing the case within General Order XI. 86. Or state what was the act or omission which makes the amend- ment necessary. 67. If an amendment of Schedule A is desired, give the name of the cred- itor, his residence, when and where the debt was contracted, and its con- sideration and amount, and if se- cured, etc., with the same particu- larity required by the appropriate page of Schedule A of Form No. i. 68. Omit this, if notice has been sent them, 996 Supplementary Forms. Order to Show Cause on Amendment. [No. 114. 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 :™ That no previous application has been made for the order here- inafter 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... [Add verification as in Form No. 103.] Petitioner. Form No. 114. Order to Show Cause on Amendment of Schedules.''' At a Court of Bankruptcy, held in and for the Dis- trict of , at , this .... day of 19. .. Present : , Esq., Referee. In the Matter of Bankrupt . In Bankruptcy No. . On reading and filing the petition of , the bank- rupt herein, wherein he prays for an order amending his schedules in certain particulars, now, on motion of , Esq., his attorney, Tt is ordered : That the creditors hereinafter named show cause before the undersigned, at , in the of in said district, on 69. Use; this paragraph only when the appropriate page of Schedule B the amendment of Schedule B is of Form No. I. desired. 71. If notice has been given, stop 70. Here give a sufficient descrip- here. tion to show all the facts required by 78. This form fits into Form No. 113. See foot-note 63 to same. Supplementary Forms. 997 No. 115.] Order Amending Schedules. 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, herein- after mentioned, should not be amended by adding to Schedule A ^* the names and facts hereinafter set forth :''* and''" by adding to Schedule B ''' the following statement of facts as to property :" 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 No. 115. Order Amending SehedHles.'^o At a Court of Bankruptcy, held in and for the . . . . . District of , at , on the .... day of 19... Present : , Esq., Referee. In the Matter of Bankrupt In Bankruptcy No. Application having been heretofore made *or an order amending Schedule®" , previously filed herei), .^d an order to show 78. Here insert (i), (2), (3), (4), or trustee, and this paragraph changed (S), dependent on the page of Sched- accordingly. Hie A sought to be amended. 79. This order should be in tripli- 74. See foot-note 66, Form No. 113. cate, one for the clerk, one for the 75. See foot-note 69, Form No. 113. trustee, and one for the referee. 76. Here insert (i), (2), (3), (4), Compare Forms Nos. 113 and 114. (S). or (6), dependent on the page of See also, generally. Sections Seven Schedule B sought to be amended. and Eighteen, ante, and General Or- 77. See foot-note 70, Form No. 113. der XI. 78. If Schedule B only is to be 80. Here insert, for instance, amended, notice ■■''ould be given the "A (3)" or "B (2)," to fit the peti- tion. 998 Supplementary Forms. Affidavit to Schedule, Bankrupt Absent. [No. Il6. 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 ."^ That®* Schedule B ( ) be amended by adding thereto the fol- lowing words :* Referee in Bankruptcy. Form No. 116. Affldavlt to Sehedule of Creditors When Banlo'apt Cannot be Found." In the District Court of the United States for the District of In the Matter of f In Bankruptcy No. Bankrupt . State of , \ County of , I ss.: City of ,J , of being severally duly sworn, depose and say that they*^ are the petitioning creditors in the above pro- 81. Recite whether there was ap- 84. Use only if Schedule B is to pearance in opposition, and if so by be ■ amended. what creditor or the trustee, and by 85. See foot-note 83, and indicate what attorney represented. columns of appropriate page of Sa. See foot-note 80. Schedule B, as there indicated. 83. Indicate the columns on the 86. This practice is outlined in appropriate page of Schedule A by General Order IX. See also Sec- numeral as if in Schedule A (3) thus: tions Seven and Thirty-nine, (i) page 25, (2) John Smith, (3) 650 87. One petitioner acquainted with Broadway, New York, (4) New York, the facts can make this affidavit; if so (S) Merchandise, (6) $5,203.69." change the form accordinglv. Supplementary Forms. 999 No. ii6.] Affidavit to Schedule, Bankrupt Absent ceeding ; 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, ac- cording 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. . Schedule A.** Unmewred Credlton. Names. Restdcncu. Amounts. Dolls Cti. Creditors Holding' Seenrltiei. Namah Rctldencei. Securities. Values. Amounts. Dolls. Cts. DolU. Cts. 88. Attach this schedule to the affi- amounts, etc., with as much accuracy davit, 6]ling in names, residences, as possible. 1000 Supplementary Forms. Petition for Order of Protection. [No. 117. Form No. 117. Petition fOF Order of Proteetlon.w In the District Court of the United States for the .... District of , In the Matter of - In Bankruptcy No. Bankrupt . .J To , Esq., Referee 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 dis- charge 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. Wherefore, your petitioner prays for an order of protection from arrest, as provided in said § 9-a and General Order XII (i). Dated, , , 19... Petitioner. \Add verification as in Form No. 103.J 89. See, generally, Section Nine, junction against further proceedings ante. Consult also General Order in a suit, on the theory that a body XII (i). The application often takes execution is a step in a suit. See the form of a petition for an in- Forms Nos. 119, lao, 121, 122, 123. Supplementary Forms. 1001 No. 118.] Order of Protection. Form No. 118. Order of Proteetlon.«> 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 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 beer- discharged herein, now, on motion of , Esq., attorney for said bankrupt, It is ordered: That all persons and officers be and they hereby are prohibited from arresting the said bankrupt on civil process, save in the cases specified in subdivisions (i) and (2) of § 9-a of the bank- ruptcy law of 1898, until twelve 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. 90. This fits into Form No. ■117. suit, generally. Section Nine and See foot-note 89 to that form. Con- General Order XII (a). 1002 Supplementary Forms. Petition for Stay of Pending Suit. [No. iig. Form No. 119. Petition for Stay of Pending Suit.'' In the District Court of the United States for the of District In the Matter of y In Bankruptcy No. Bankrupt. To , Esq., Referee 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 91. See, generally, . Section Eleven, and compare Section Two and Forms Nos. lOS, 106, 107, and io8, and the foot-notes to such forms, especially foot-note 21 to Form No. 105. Appli- cation 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 2 (15). If such an ap- plication is to be made this form can easily be adapted to fit 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. 92. This petition can also be made by the petitioning creditors if before adjudication, and, if after, by the trustee, and, if the latter, the allega- tions 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. Supplementary Forms. 1003 No. 120.] Referee's Stay, etc., on Pending Suit. same is still pending therein f^ and that, if such** is allowed to proceed, injury will be done your petitioner,** for the following reasons :"* 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 ^ ii-a ol said law, in particular, ^^ ) and for such further order as shall be just and lawful. Dated , ..... 19... [Add verification as in Form No. 103.] Petitioner. Form No. 120. Referee's Stay and Show Cause on Pending Suit.i 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 No. Application having been made for an order staying further pro- ceedings in a certain suit in the Court of , entitled 93. Or in a proper case add :" that 06. Set out the reasons carefully such suit has resulted in a judgment and clearly. against your petitioner and that there 97. Or, as the facts may be. is now pending before , 98. Here specify the particular Esq., as referee, a proceeding supple- act to which the stay is mainly di- mentary to execution," or as the facts rected. may be. !• Consult foot-note 91 of Form 94. " Suit '' or " proceeding." No. 119 and see foot-note 37 to Form 95. Or " your petitioner's estate in No. 106 for cross-references, bankruptcy." 1004, Supplementary Forms. Referee's Stay, etc., on Supplementary Suit. [No. 120. V , and it appearing that the same should be heard and decided by the judge and such proceedings be stayed mean- while ; now, on motion of , Esq., attorney for the applicant. It is ordered : That , the plaintiff in said action, and his attor- neys, agents, and servants, be, and they are and each of them is, hereby stayed from any further proceedings therein, in particular f rom^ until the hearing and decision of the show cause hereinafter ordered. That* the said , the plaintiff in such action, show cause before the Honorable , District Judge, at the United States District Court Room, 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 this stay should not be 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 discharge, 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. 2. Here specify the particular act 4. If a writ is not asked for, stop to which the stay is mainly directed, this paragraph here. 3. If a show cause is not thought 5. Or " on , Esq., his necessary use Form No. 123, or if attorney of record," if any ; or " on the local practice does not call for either or both the said the issuance of the writ of injunction, and , his attorney," as draw a referee's order restraining and the court may direct. enjoining the person named, as sug- 6. Service should never be by mail, gested by the words of this form. or on any person other than one here specified. Supplementary Forms. 1005 No. 121.] Stipulation that Referee Hear Show Cause. Form No. 121. Stipulation that Show Cause be Heard by RefereeJ In the District Court of the United States for the District of , In the Matter of y In Bankruptcy No. Bankrupt 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., Referee in Bankruptcy, who granted the same, instead of said judge; and that the same may be moved 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 7. This form will be found useful Section Eleven and Forms Nos. 119, when the residence of the judge is in 120, 122, and 123, and the foot-notes another division or county from that thereto, of the bankrupt. Consult, generally, 1006 Supplementary Forms. Decision of Referee on Stay. [No. 122. Form No. 122. Deelslon and Report of Referee on Application for Stay Stipulated Before Him.e In the District Court of the United States for the .... District of In the Matter of - In Bankruptcy No. Bankrupt . To the Hon , District Judge : Application having been made for a stay directed to , plaintiff, in an action in the Court of , en- titled V , and a temporary stay having been pre- viously 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, ap- pearing by Esq., his attorney ; It is hereby found and recommended that an order be entered^ directing a writ of injunction to issue to restrcining and enjoining him from further proceedings in said suit in par- ticulari" ) until twelve months after the date of the adjudication herein, un- less the said bankrupt shall, previous to that time, apply for a 8. This form fits into Form No. the continuance of the stay, stop 121, which, and the foot-notes here, and add: "denying such appli- thereto, see. Compare also Forms cation and vacating the temporary Nos. 119, 120, and 123. Consult, gen- stay previously granted herein." erally, Section Eleven. 10. Here specify the particular act 9. If the recommendation is against to which the stay is mainly directed. Supplementary Forms. 1007 No. 133.] Order that Writ of Injunction Issue. discharge, and then until the question of such discharge shall be determined. Herewith are handed up the petition and other papers used on such application and show cause. Respectfully submitted, Referee in Bankruptcy. Dated , , , 19... Form No. 123. Order that Writ of Injunetlon Issue." In the District Court of the United States for the .... District of In the Matter of Bankrupt In Bankruptcy No. 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 ; 11- To be used only in cases where the referee grants a temporary in- junction with show cause. See Form No. 120, foot-note i. It is thought also that the referee can on a stipu- lation bringing the show cause on be- fore him, issue an order directing the clerk to issue the writ, thus avoid- ing the circumlocution resulting from Form No. 122. If so, Form No. 123 can be adapted to the usual form of a referee's order; see Form No. 107. Consult, generally, Section Eleven. 12. Or " against the continuance." 18. Strike out to end of paragraph if there is no appearance in oppo- sition. 1008 Supplementary Forms. Offer of Composition. [No. 124. It is ordered :^* That such report and recommendation be approved, and that a writ^^ of injunction issue, directed to , restrain- ing and enjoining him from further proceedings in such suit, in particular form,^^ until twelve months after the date of the adjudication herein, un- less the said 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,. f Seal of 1 ( the court, f » Clerk. Form No. 124. Offer of Composition.17 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, and the creditors of , a bankrupt : The undersigned, who was adjudicated a bankrupt herein on the tlay of , 19. ., and whose schedules of creditors 14. If the application is denied, of 1867, but does not under that of follow foot-note 43, Form No. 108. 1898. See, generally, Section Twelve, 15. For Form of writ, see works on Form No. 61, together with Forms Federal Practice Nos. 124, 125, 126, 127, 128, 129, 130, 16. Here specify the particular act 131, and 132, are thought to outline *°,^"'£{!P^='3y's directed. a complete practice on this increas- 17. This is the first step in com- ingly important branch of bankruptcy position. The practice suggested by law. For substitute for Forms Nos Form No. 60 applied under the law 62 and 63, see Form No 132 Supplementary Forms. 1009 No. 125.] Acceptance of Composition. and property have been previously filed at , ..... with , Esq., the referee in bankruptcy in charge, and who was examined in open court herein on the .... day of , 19..,*® does hereby ofler 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 undersigned in open court, as provided in § 12-a of the bank- ruptcy law of 1898. Dated, , , 19. .. State of , ) Bankrupt. County of , v ss.: , City of , ) '■ On this .... day of , 19. ., the above-named appeared before me and acknowledged the execution of the fore- going offer of composition. Form No. 125. Aeeeptanee of Composition.'^ In the District Court of the United States for the District of In the Matter of Bankrupt In Bai^ruptcy No. 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 18. If the examination has not 19- Omit this if the bankrupt has been held but is to be, specify the already been examined, date and then use the paragraph re- 20. See foot-notes to Form No. 124, ferred to in foot-note 19. and consult, generally, Section Twelre. 64 1010 Supplementary Forms. ■ f — ' — — ^ Acceptance of Composition. [No. 125. set out, do hereby accept the offer of composition at per cent. {. . . .f) made herein by , the above-named bankrupt, on the . .. , day of , 19. . ; this" acceptance, how- ever, to be effective only after such bankrupt shall be examined in open court. Dated, , , , 19,.. signatures of creditors.' Residences. Debts allowed. Dolls. Cts. State of , \ County of , v ss.: City of , ) On this day of , 19. and and appeared before me and severally acknowledged the execution of the foregoing acceptance of offer of composition. the above-named 31. Strike this clause out if bank- rupt has already been examined. 32. The creditors should sign here, using their business names, and, in case of partnerships, corporations, and the like, the person who aotuaKy signs should add his own name: thus, " Smith & Co., by John Smith, one of such partnership." Supplementary Forms. 1011 No. 126.] Referee's Certificate in Composition. Form No. 126. Referee's Certificate in Composition.^* 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, , one of the referees in bankruptcy of your court, do hereby certify as follows : First: That , the bankrupt herein, was duly ad- judicated 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 stenog- rapher, reduced to writing, and forms a part of the record-book handed up herewith. Third: That, at such first meeting of creditors, claims of cred- itors, aggregating dollars ($....) in amount, and (....) in number, were duly allowed, and that the names and resi- dences of such creditors and the amounts at which their claims were allowed, are set forth in Schedule A hereto annexed and made a part of this report. Fourth: That, at such first meeting of creditors, claims of cred- itors entitled to priority, amounting to dollars ($....) in amount, and (••••) in number, were duly allowed, and that the names and residences of such creditors and the S3. Since the referee cannot con- certificate is necessary. See, generally, firm a composition, and jiractically all Section Twelve. the papers are on file with him, this ]^012 Supplementary Forms. Referee's Certificate in Composition. [No. 126. 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 allow- ance, 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. Sixth: That the cost of this proceeding, as shown by said record- book, is, to this date, dollars ($....). Sez'enth: That appraisers were appointed herein and have filed a report, showing the value of the assets of said bankrupt to be dollars ($....), 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. (. . . .)f), 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 bank- rupt's offer of composition; all as 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 by 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 : (i) The record-book of this proceeding to the date of this cer- tificate. (2) All claims allowed or refused allowance. (3) The appraisal, above mentioned. 24. For instance : Sixty per cent, fied to fit the facts, and should) not be of cost, or cost price, or, as the facts inserted if the referee is in doubt on may be. any of the matters mentioned therein. 35. This paragraph may be modi- See S 12-d. Supplementary Forms. 1013 No. 126.] Referee's Certificate in Composition. (4) The offer of composition. (5) The acceptances of creditors. (6) All other papers filed with me herein. Respectfully submitted, Dated, Referee in Bankruptcy. , 19... Schedule A. Claims Allowed. Names of creditor!. Residences. Amount allowed. Dolls. Cts. Schedule B. PFiorlty Claims Allowed. Name* of creditors. Residences, Amount allowed. Dolls, Cts. Schedule C. Claims Kot Yet Allowed. Names of creditors. Residences. Amount scheduled. Dolls. Cts. L014 Supplementary Forms. Order to Show Cause in Composition. [No. 127. Form No. 127. Order to Sbow Cause In Composition.** In the District Court of the United States for the District of In the Matter of Bankrupt ■ In Banlo-uptcy No. 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: 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 as soon thereafter as such hearing is called, why such application should not be granted. That notice of such hearing 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. 88. The application for this order generally. Section Twelve, ante. See may be made by Form No. 6l, which, also forms just ante and post, however, should be verified. Consult, Supplementary Forms. 1016 No. 138.] Appearance in Composition. 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 district, on the .... day of ,19. .. C Seal of ) I the court | ' Clerk. Form No. 128. Appearance of Objeeting Creditor in Composition.^ 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 attor- ney for , of , . . . . , a creditor of , the above-named bankrupt, who desires to file a specifica- tion of objection to the confirmation of his proposed composition herein. Dated, , , , , 19... Attorney for , Objecting Creditor. Address 27. Or, if that is the local practice, XXXII, for time within which this by the clerk. appearance must be entered, and con- 28. Consult, generally. Section pare Equity Rule XVII. Twelve. See also General Order 1016 Supplementary Forms. Specification of Objection in Composition. [No. 139. Form No. 129. Spedfleation of Objection in Composition." In the District Court of the United States for the District of In the Matter of \- In Bankrtiptcjr Ma Bankrupt . Now comes , of , . . . . , a creditor and per- son 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 r** That** such confirmation is not and will not be for the best inter- ests of the creditors of said bankrupt because of the following facts, which the undersigned charges to be true, viz. :** Wherefore, objection is made to such confirmation and a hearing and the judgment of the court is asked thereon. [by Objecting Creditor. » kis attorney. State of , \ Address, County of , v .? j. .• City of , ) I, , the objecting creditor mentioned and de- scribed in the foregoing specification of objection, do hereby 2Q. Consult for available objections 31. Or specify any other objection Section Twelve, ante. See also Gen- mentioned in S 12-d. eral Order XXXII. 32. Here set out facts as in any SO. There may, of course, be more other pleading, showing them in than one objection- sufficient detail to give the bankrupt Supplementary Forms. 1017 No. 136.] Reference to Special Master in Composition. make solemn oath that 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 , I9- ■• Form No. 130. Order of Reference to Special Master in Composition. s^ In tlie District Court of the United States for the District of In the Matter of Bankrupt 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 , i9- •• {th^cLl} 'clerk. proper notice of the issue he must is acquainted with the facts ; also that Jijegt he is authorized by the creditor to S3. If the specigcation is made by file the specification and verify for the creditor's attorney, the latter's affi- him ... ^ ^ ., davit should show why the creditor 84. This form will not be used if does not verify and how the attorney the judge determines to hear the mat- 1018 Supplementary Forms. Report of Special Master in Composition. [No. 131. Form No. 131. Report of Special Master In Composition.s° In the District Court of the United States for the . . . of District Iw THE Matter of Bankrupt In Bankniptcy No. To the Honorable District Judge : I , special master, appointed herein by an order of your cotirt, 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 fol- lowing additional appearances : That, thereafter, the proceedings were as indicated in the record- book of such reference, which, with the testimony taken and the depositions used, is handed up herewith. That, in accordance with such proceedings, and after due con- sideration, I do find the facts to be as follows :** ter himself. See Section Twelve, generally, and the foot-notes to forms just ante and post. 35. See foot-note 34 to Form No. 130. This form can also be used for the several reports by a special master referred to in the text and post. 36. For practice on references to special masters, see Equity Rules LXXIII to LXXXIV. 37. If there were no additional ap- pearances strike this out. 38. The referee usually prepares his own findings. They should .be Supplementary Forms. 1019 No. 132.] Order Confirming, etc., Composition . That, on mend, that such facts, it is my opinion .88 and I do. therefore, recom- My fees on such reference are dollars ($....), and my disbursements are dollars ($. . . .), a total of dollars ($....), which have been paid to me by the petitioning bank- rupt." I hand up herewith : (i) The record-book on this reference, including the testimony of witnesses 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... Respectfully submitted, Special Master. Form No. 132. 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. {. . . .fi), offered by the bankrupt to his cred- stated with sufficient particularity to 30. Here state_ the conclusion and inform the judge as to the issue, and, recommendation in a single sentence, if possible, refer to the testimony by 40. Or "the objecting creditor," as page number and to depositions by the case may be. name of deponent and date. 41. This form accomplishes the 1020 Supplementary Forms. Order Confirming, etc., Composition. [No. 132. iton, has been made herein, and it appearing that such composi- tion has been accepted by a majority in number of all of the cred- itors whose claims have been allowed, and that such number rep- resents 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 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 aJl 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 pro- ceeding*^ 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 de- posit until twelve months from this date, subject to such subse- quent orders as may be granted herein during that period, and then, if any of said consideration shall remain, that the same be dis- tributed by the person above designated pro rata among such cred- sarae as Forms Nos. 62 and 63, and 43. If confirmation is denied, change also formally dismisses the proceeding, this recital to fit the facts. Consult, generally, Section Twelve, 44. In that event also stop here and and for effect of confirmation, see add : " confirmation of such composi- S§ 14-C, 2i-f-g, and 70-f. See also tion be and the same hereby is re- General Orders XII (3), XXIX, and fused; and the referee in charge is XXXII. directed to proceed with the adminis- 42. Or if a specification of objec- tration of said estate," concluding tions was filed, strike out this clause with the teste clause at the end of the and substitute " and a specification form. of objection having been filed by 45. Or by the referee or the clerk, , and the same having been as the court may order. duly heard," reciting the reference to 46. See § 64-a-b. the special master, if any, and the filing 47. See S§ 62 and 64-b (3). of his report and its recommendation ; 48. See i 57. for such redtals, see Form No. 142. Supplementary Forms. 1021 No. 133.] Petition for Extension of Time in Discharge. iters 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 the city of , in said district, on the day of ,19. .. r Seal of } I tke court, j Clerk. Form No. 133. Petition for Extension of Time to Apply for Discharge.^ In the District Court of the United States for the District of In the Mattkr of Bankrupt ■ In Bankruptcy No. To the Honorable , District Judge : Your petitioner respectfully shows : That he is the bankrupt herein. That more than twelve and less than eighteen months have elapsed since the .... day of , I9- •, when he was adjudicated bankrupt. That he was unavoidably prevented from filing an application for a discharge within twelve months 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. 49. See S 66. 51. Here give reasons as, for in- 50. Consult Section Fourteen, gen- stance, lack of funds to pay expenses, erally. illness, absence, etc. See § 14-a. 1022 Supplementary Forms. Referee's Certificate on Application for Extension. [No. 134. 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. 103. J Form No. 134. Referee's Certificate on Application for Extension of Time.^^ In the District Court of the United States for the District of In the Matter of Bankrupt In BaDkruptcy No. To the Honorable , District Judge : I, referee in bankruptcy in charge of this pro- ceeding, 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 in- formation 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. 53. This certificate is not required, ing of the petition or any fact* which but is often applied for, the referee should be brought to the attention of having all the facts before him. the judge exist, state them here. Coq- 53. Or, if reasons against the grant- suit Section Fourteen. Supplementary Forms. 1023 No. 135.] Order Extending Time to Apply for Discharge. Form No. 135. Order Extending Time to Apply for Dlseharge."^ 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 dis- charge, 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 proceeding ; 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 ex- piration 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, f Clerk. 54. This order usually follows the Nos. S7, S8, and 59, as supplemented petition and certificate. Forms Nos. by Forms Nos. 136, 137, 138, 139, 140, 133 and 134. Consult Section Four- 141, and 142. See also General Order teen, ante; and for otl^r forms on XXXI. proceedings for a discharge, see Forms 1024 Supplementary Forms. Order to Show Cause on Dischu-ge. [No. 136. Form No. 136. Order to Show Cause on Application for Mschargre.^s In the District Court of the United States for Objecting Creditor, [by his Attorney,^ Address, • •• » ] [Add verification as in Form No. 129.] Form No. 140. Order of Reference to Speelal If aster on Dlseharge.''o 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 bank- rupt 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 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, 60. See foot-note 33 to Form No. and post. This form will not be used 122- if the judge determines to hear the <0. Consult, generally, Section matter nimself. Fourteen, and the forms just ante S.UPPLEMENTARY FoRMS. 1029 Nos. 141, 14a.] Report of Special Master ; Order Denying Discharge. and the seal thereof, at the city of , in said district, on the .... day of , 19. .. {.bet:/..} Clerk. Form No. 141. Report of Special Master on Dischar8re.''i See Form No. 131, and the foot-notes thereto. Such form ia equally available in a proceeding for discharge. Form No. 142. Order Denying Disehargre, After Reference to Special Master.^ 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 bank- rupt, 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 71. For practice, consult Section awarding costs, etc., can, it is tho-ight, Fourteen, and the forms just ante be adapted to it. Consult, generally, and post. Section Fourteen, ante. 72. This order is the converse of 73. If no exceptions were filed, Form No. 59, and, in cases of hearings leave this clause out. For practice before a special master resulting in a on exceptions, see Equity Rules report recommending a discharge and LXXXIII and LXXXIV. 1030 Supplementary Forms. Voluntary Petition of Partnership. [No, 143. 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 the bankrupt for'"' dollars ($ ), being dollars ($ ), less costs, and dollars ($ ), his dis- bursements 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. .. ith^oulj Clerk. Form No. 143. 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 part- ners under the style of , which partnership has had its principal 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 ($i,ooo). That your petitioners as individuals each owes debts which he is unable to pay in full. • 74. If costs are allowed, add this. No. 2, if desired. Consult, generally, 76. The disbursements should be Sections Five and Eighteen, and see shown by affidavit at time application General Orders VI, VII, and VIII for costs is made. 77. If the petition is filed in the 76. This form can be adapted to district of the domicile or residence a case where all the partners join, and of one of the partners, here add an then used as a substitute for Form allegation to show the fact. Supplementary Forms. 1031 No. 143.] Voluntary Petition of Partnership. That such partnership and your petitioners are willing to sur- render its and their property for the benefit of its and their cred- itors, respectively, except such as is exempt by law, and desire to obtain the benefits of the bankruptcy law of 1898, 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. 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 ascer- tain) 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 petitioners' oaths, contains an accurate inventory of all of the property of said partnership, both real and personal, and such fur- ther statements™ concerning 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 statements concerning said property as is required by said law.®* Wherefore, your petitioners pray that such partnership and your petitioners as individuals may be adjudged bankrupt within 78. If there has been a dissolution, to such claim here. See Section Six, use this clause, modifying slightly the ante. previous allegations to fit ; if not, leave 80. Repeat the last two paragraphs it out. See § S-a. as to each partner, numbering the 70. If exemption is claimed in the schedules, Schedule E and F, G and partnership assets, insert a reference H, etc. 1032 Supplementary Forms. Involuntary Petition by Three Creditors. [No. 144. 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 for Petitioners. State of , \ County of , {. ss.: City of , j We, and , the petitioning debtors mentioned and described in the foregoing petition, do severally make solemn oath that the statements of fact contained therein are true, according to the best of our knowledge, information, and belief. Subscribed and sworn to before me, this .... day of ,19. [Attach schedules and summary statements for each the part- nership and the petitioning partners, using those suggested by Form No. I, but changing their lettering to correspond to the allegations of the petition.] Form No. 144. Involuntary Petition by Three Creditors.ai To the Honorable , Judge of the District Court oi the United States, for the District of : The petition of , of , and , of . and , of , , respectfully shows :** 81. This form should be executed Fifty-nine, and the forms for involun- m duplicate. It is intended as a sub- tary proceedings, immediately post stitute for Form No. 3, which is 82. If petitioners are corporations, clearly demurrable. See Sections indicate under what laws; if copart- Three, Four, Five, Eighteen, and nerships, set out the firm name and Supplementary Forms. 1033 No. 144.] Involuntary Petition by Three Creditors. 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.) (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 that 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 § 6o-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 , 19. .,** the said , while insolvent, committed an act of bankruptcy in that he did*" add : " composed of and 86. Use only if petition is by one ," etc. creditor. 83. Or " resided " or " had his 87. Or as the case may be. See domicile," as the case may be. § sp-b. 84. If the bankruptcy of a partner- 88. Set out sufficient facts to in- ship is asked, modify this paragraph form the court as to amount, consider- and those preceding so as to show the ation, and the like, jurisdictional allegations as to the 89. If the act of bankruptcy was partnership and the individuals com- evidenced by an instrument that was posing it, suggested by Form No. 143. required to be recorded or might be 86. If the alleged bankrupt is a cor- recorded, see § 3-b (i), and modify poration, insert this paragraph, modi- this allegation to fit the facts. fying the previous allegations where 90. Here set out the act of bank- necessary, ruptcy clearly, giving sufficient facts 1034 Supplementary Forms. Involuntary Petition by Three Creditors. [No. 144. (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 stibpcena 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 ad- judged bankrupt within the purview of such law. , Petitioners. Attorney for Petitioners. State of , \ County of , l ss.: City of , ) and and ,<» the peti- tioning creditors mentioned and described in the foregoing petition, do hereby severally make solemn oath that the statements 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. as to time, place, transaction, etc., to that it will ask adjudication of both show unequivocally the commission the partnership and the individuals, of an act or acts bringing the case See Form No. 143. within one of the subdivisions of 83. If verified by members of a S 3-a- partnership or officers of a corpora- Bl. Use only when order of publi- tion, describe the affiants properly cation is to be asked. Change facts 94. If, for any reason, this verifi- •n form to fit the facts of each case. cation is made by attorney, change to 88. If the bankruptcy of a partner- fit the facts, and bring it within the ship is desired, modify this clause so cases cited on p. 218, ante Supplementary Forms. 1035 No. I4S.] Order Directing Service by Publication. Form No. 145. Order Directing Service by Publloatlon.« In the District Court of the United States for the . . of District In the Matter of Bankrupt In Bankruptcy No. Whereas, a petition was, on the day of , 19 . . , filed herein for an adjudication of bankruptcy against , and it appears therefrom that said bankrupt is not within the dis- trict and that personal service of the subpoena herein cannot be made on him therein; now, on motion of Esq., at- torney for said petitioner. It is ordered : That service of such subpoena be made by publishing this order, together with said subpoena, in , a newspaper published at , in said district, once a week for two consecutive weeks, the last of such publications to be on the .... day of , 19. . ; and by mailing a copy of this order and said petition and subpoena to the last known place of abode of the said , in said district, on or before the day of the first publication. 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 7 the court, f Clerk. 96. This form is thought to be in Eighteen. The subpoena should be accordance with the new method of made returnable at least "ten days service by publication, provided by the after the last publication." amendatory act of 1903. See Section 1036 Supplementary Forms. General Appearance in Involuntary Case. [No. 146. Form No. 146. 0«nerai Appearance In InTOlontarj Case.** In the District Court of the United States for die Diitrict of lie THE Matter of Bankrupt - In Bankrtq>tc]r No. To the District Court of the United States, for the District of : The clerk of this court will please enter my appearance as at- torney 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, 96. This appearance must now be 97. Or "a creditor of the alleged filed within five days after the return bankrupt," if a creditor, and not the day. See § i8-b, as amended. Consult bankrupt, appears. Section Eighteen, ante, and see Gen- eral Order IV and Equity Rule VII. Supplementary Forms. 1037 No. 147.] Appearance by Intervening Creditor. Form No. 147. Appearance by Intervening Creditor."* 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 No. . . 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 , Iss.: City of , J On this .... day of , 19. ., before me appeared , the intervening creditor above mentioned, and acknowl- edged the execution of the above. 88. Consult, generally, Sections involuntary cases immediately ante and Eighteen and Fifty-nine, especially the post, latter. See also numerous forms for 1038 Supplementary Forms. Application for Jury Trial in Involuntary Case. [No. 148. Form No. 148. Application for Jury Trial In Involuntary Case.' 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 bank- ruptcy law of 1898. Dated, , ...., , 19... Answering Bankrupt* 1. Consult, generally, Sections For the time within which it must be Eighteen and Nineteen. See also filed, see 5 19-a. Form No. 6. This application can be 2. This application should be made made only by the alleged bankrupt, by the alleged bankrupt, and not by his attorney. Supplementary Forms. 1039 No. 149.] General Answer in Involuntary Case. Form No. 149. General Answer in Involuntary Case.* In the District Court of the United States for the . of District 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 herein,* and does hereby controvert such petition and file the fol- lowing answer:' I. That' the said did not commit an act of bank- ruptcy as alleged in such petition, but, on the contrary, the under- signed 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 ($500), but, on the contrary, the undersigned charges the facts to be : that* 8. This form supplements Form No. 6. Consult, generally, Section Eigh- teen; and for available grounds for an answer see 55 3-a-b, 4, 5, and 59. For form lOr adjudication, see Form No. 12; for dismissal, see Form No. II. See also, generally, the Equity Rules. 4. Or " a creditor of , against whom," showing clearly the possession of a provable debt (I 63, as interpreted by i 57). 8. There may, of course, be several counts in the answer. Careful plead- ing seems to require one for at least each material fact at issue. 6. The two objections here sug- gested are but samples. Each answer should be adapted to the facts relied on. 7. Here the facts relied on by the answering bankrupt or creditor should be pleaded. 8. Id. 1040 Supplementary Forms. Answer Alleging More Than Twelve Creditors. [No. 150. 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 , ] [Add verification as in Form No. 129, changing to fit the facts, as, for instance, substituting " answer " for " specification of ob- jection," therein.] Form No. 150. Answer AUegring More Than Twelve Creditors. « 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 herein,i3 and does hereby controvert such petition and file the fol- lowing 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 ?n°A"""^'','- ,- "^"y- Sections Fifty-nine and Eigh- 10. Or creditor. teen. See foot-notes just ante and 11- bee foot-note 33 to Form No. post. "10 /-> 1 ■,,.,. , . ^''- See foot-note 4 to Form No. i». Only available where the peti- 149. tion is within § sp-d. Consult, gen- Supplementary Forms. 1041 No. ISO.] Answer Alleging More Than Twelve Creditors. 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 I his Attorney, Address , ] list of Oedltors and Addresses. The following is the list of the creditors and their addresses, referred to in the foregoing answer: Namet of crcdttora. Addreisu. Answering Bankrupt}'^ State of , j County of , \ ss.: City of , ) I the answering bankrupt** mentioned and de- scribed 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 14. A jury trial cannot be demanded 16. See foot-note 33 to Form No. on the issue raised by this answer. lag. 18. Or " creditor." 66 1043 Supplementary Forms. Order of Reference in Involuntary Case. [No. 151. 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. 151. Order of Reference to Special Master In Involuntary^ Case." In the District Court of the United States for the District of In the Matter of Bankrupt . ' In Bankruptcgr No. Whereas, a petition has been filed herein asking an adjudication in bankruptcy of the above-named bankrupt, and the sai J bankrupt," having appeared by , Esq., his 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 1 I the court. ( Clerk. 17. If the affidavit is made by an 130. Consult, generally, Section Eigh- answering creditor, his efforts to as- teen, and the forms just ante and certain the names and addresses of post. the creditors should be given. 19. Or "a creditor of such bank- 18. See foot-note 34 to Form No. rupt." Supplementary Forms. 1043 Nos. 152, 153.] Report of Special Master ; Exceptions to Report. Form No. 152. Report of Special Master In Involuntary Case.*> See Form No. 131, and the foot-notes thereto. With slight changes in the recitals, such form is equally available on a reference in an involuntary case. Form No. 153. Exceptions to Report of Special Master In Involuntary Case.^t In the District Court of the United States for the District of In the Matter of Bankrupt - In Bankruptcy No. Now comes of , . . . . ,^ who previously filed herein an answer to the petition for an adjudication in bank- ruptcy 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 :^ 20. For practice, consult Section torney, as is usual, add "by Eighteen, and the forms just ante and , his attorney herein." post. 23. Or if the exceptions are taken 21. For practice, see Equity Rules by the petitioning creditor, change to LXXXIII and LXXXIV. Consult, fit the facts. generally, Section Eighteen. For form 24. Here state the error or errors for adjudication, see Form No. 12; excepted to. for dismissal, see Form No. 1 1 ; for 25. Here give the grounds of the costs, see General Order XXXIV exceptions, that the court and the op- and § 2 (18). posing attorney may know fully the 28. If exceptions are filed by at- issue to be determined on the hearing; on the exceptions. 1044 Supplementary Forms. Petition for Dismissal of Involuntary Case. [No. 154. And prays that the same may be heard, as provided in Equity Rule LXXXIII. Dated, , , , 19... Excepting Creditor. [or Attorney for Excepting Address , ] Form No. 154. Petition of Petitioning Credltops for Dismissal In Involuntary Case.^* In the District Court of the United States for the District of In the Matter of In Bankruptcy No. Bankrupt . J 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. 26. Consult, generally, Sections for want of prosecution, and if so Fifty-mne, Fifty-eight, and Eighteen, the allegations should be changed to ■i"- This petition can, of course, be fit the facts, made by the bankrupt, with the con- 28. Here give a brief summary of sent of the petitioning creditors, or the steps in the proceeding to date Supplementary Forms. 1045 No. 154.] Petition for Dismissal of Involuntary Case. That no previous application has been made for the order here- inafter asked. Wherefore, your petitioners pray that such proceeding and peti- tion be dismissed, and that notice be given such creditors as is provided by § 58-a (8) of the bankruptcy law of 1898. PetiHoners. list of Creditors and Addresses. The following is the list of the creditors and their addresses referred to in the foregoing petition : Names of creditors. Petitioners.^ State of , "| County of , V ss., City of , J We, , and , the peti- tioners mentioned and described in the foregoing petition, do hereby severally make solemn oath that the statements of fact con- tained 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 comprises all of the creditors of the 88. This petition cannot be made by See, generally, Section Eighteen, and the attorney, save when the petition Form No. 144. for an adjudication can be so made. 1046 Supplementary Forms. Order to Show Cause on Petition for Dismissal. [No, 155. aaid and gives their addresses, so far as they arc known or can be ascertained. Subscribed and sworn to before me, this day of , 19. •• Form No. 155. Order to Show Cause on Petition for Dismissal in Involuntary Case.*> In the District Court of the United States for the District of In the Matter of Bankrupt - In Banknqttcy 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 ' ^* ' 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 thf°oo?„X"th?e™ ''°- ''' ''"' X ^'^ ^-'-'^^ 56 to Form No. 31- See foot-note 27 to Form No. 154- Supplementary Forms. 1047 No. 156.] Order of Dismissal in Involuntary Case. 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. .. ( Seal of ) 1 tha court, f ' Clerk. Form No. 156. Order of Dismissal on Petition of Petitioning Creditors and After Notice In Involuntary Case." In the District Court of the United States for the District of In the Matter of Bankrupt . In Bankruptcy No. 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 pro- ceeding 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 , 83. I s8-b. 36. Or, if a creditor appeared, note 84. See Forms Nos. 154 and 155 appearance and the facts. and the foot-notes thereto. 87. Or, if the application is to be 38. Or, if by the bankrupt, or for refused, " denied." want of prosecution, state the facts. 1048 Supplementary Forms. Referee's Certificate of Disqualificatior. [No. 157. 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, ou the .... day of , 19. .. f Seal of 1 / the court, j » Clerk. Form No. 157. Referee's Certlfleate of I>l8quallfleatlon.» In the District Court of the United States for the District of In the Matter of Bankrupt In Bankmptcjr 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. I>ated, , , , 19... Referee in Bankruptcy. 38. Or, if the application for dis- missal is refused, change to conform to the order made. 39. For general disqualification, see S 35 ; for what referees may not do, S 39-b ; for reference of case after ad- judication, see § 22. 40. Or the disqualification may ex- ist as to a portion of the proceeding, as in a contest on a certain claim. 41. Here insert reasons, as rela- tionship, relation of attorney and client with bankrupt, or any other reason (see i 22). Supplementary Forms. 1049 No. 158.] Petition to Revise in Matter of Law. Form No. 158. Petition to Revise in Matter of Law." In the District Court of the United States for the . of District Ik the Mattkr ©f Bankrupt . ' In Bankruptcy No. To** the Honorable, the Judges of the Circuit Court of Ai^eals 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 Uiiited 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 :*'' 42. Consult, generally, Sections Twenty-four and Twenty-five, and General Order XXXVI, though the latter seems to refer to appeals only. 43. If the petition is to the District Court in the first instance, this form should be addressed to the District Judge. 44. Or specify how he is interested in the proposed revision. 45. Here recite steps leading up to the ruling or order complained of. 46. Here state specifically the erro- neous order or ruling of which re- vision in law is sought, as, " enjoining and restraining your petitioner from disposing of the following described property, viz. : ;" or, "re- quiring your petitioner to deliver to the said trustee in bankruptcy certain property, viz. : ;" or as the facts may be. 47. Here give the equivalent of an assignment of error on an appeal in equity. 1050 Supplementary Forms. Order Allowing Revision. [No. 159. 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 rules and practice in such case provided.* Petitioner. [Add verification as in Form No. 103.J Form No. 159. Order of District Court Allowing Petition for Reylslon in Matter of Law." In the District Court of the United States for the District of In the Matter of Bankrupt . In BankruptCT 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 deter- mined 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 peti- tioner. 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 Cir- 48. See Section Twenty-five, ante, once docketed and the clerk gives foot-note II. notice of the pendency of the petition 49. Use this form only in case ap- for revision to the respondent. See plication is made to the District Court Section Twenty-five, foot-note 11. in the first instance. If application is 50. Certain orders cannot be re- made to the Circuit Court of Appeals, viewed at all, others only by appeal, a formal order allowing the review is Consult, generally, Section Twenty- often not entered, but the case is at five, ante. Supplementary Forms. 1061 No. l6o.] Notice to Respondent on Revision. cuit Court of Appeals of the Circuit of the United State*, 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 (he 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 Seid of 1 ^ I the court ( Clerk. Form No. 160. Notle* to Respondent on RoTlslsn." In the District Court of the United States for the Diatriet of In the Matter of Bankrupt In Bankruptcy No. To ,of , and of . . . . , his attorney : Please take notice" that a petition, a copy of which is served on you herewith, is pending in the Circuit Court of Appeals of the Circuit of the United States, and that you are required toj answer, demur, plead, or move to dismiss the same within" I •1. See Sections Twenty-four and tice. It is thought to combine both Twenty-five, ante, and the forms just the features of a mere notice and the ante. more formal elements of an order to 58. In the First Qrcuit, this notice show cause. Compare Section takes the form of an order to show Twenty-five, foot-note ii. cause entered as of course. This form 63. This time is usually fixed by can be easily modified to fit that prac- rule. 1052 Supplementary Forms. Order of Circuit Court of Appeals on Revision. [No. i6i. days from the date of this notice, or, in case of your defauU, the same may be granted and a mandate issued accordingly. Witness, the Honorable, the judges of the Circuit Court of Ap- peals of the Circuit, and the seal of said court, at , in said Circuit, this .... day of , 19. .. ( Seal of 1 1 the court, j Clerk. Form No. 161. Order of Circuit Court of Appeals on Bevlslon.^ At a session of the Circuit Court of Appeals for the Circuit, held at the city of , in the Dis- trict of , on the .... day of 19 . . . Present — The Hon , Circuit Judge ; The Hon , Circuit Judge, and The Hon , Judge. In the Matter of Bankrupt ■ In Bankruptcy No. A petition having been filed herein by of on the .... day of 19. ■ , asking for revision in mat- ter of law of the order of the District Court of the United States for the District of , in bankruptcy, made and en- tered in the above-entitled case, and due notice of such petition having been given the respondent, and the same having been regu- larly heard,"* , Esq., appearing for the petitioner, and Esq., for the respondent, and this court being satisfied that :"* B4. See, generally, Sections Twenty- 56. Here recite briefly the decision four and Twenty-five. as to whether or not error in law was 00. Here specify how, as and sub- committed by the court below mitted on briefs without oral argu- ment;" or as the facts may be. Supplementary Forms. 1053 No. 162.] Petition for Review of Referee's Order. It is ordered : That the said petition of for a revision be, and the same hereby is, dismissed,'"'' with costs. That the mandate of this court issue to said District Court accordingly. Witness, the Honorable, the Judges of the circuit court of ap- peals of the Circuit, and the seal of said court, at , in said Circuit, this day of , 19. .. ( Seal of ) I the court, f ' Clerk. Form No. 162. Petition for Review of Referee's Order.* In the District Court of the United States for the District of In the Matter of Bcmhrt^t - In BMikruptey Ko. To , Esq., Referee in Bankruptcy : Your petitioner respec'^fuUy shows : That your petitioner is a x^reditor** of die 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'° 87. Or "granted;" or, if in part only, "granted in so far as it refers to " B8. See, generally. Section Thirty- nine, ante. Consult also General Order XXVII. Note 5§ 2 (10) and 38-a. Compare also Form No. ii2, and the foot-notes thereto. 50. Or "the trustee" or otherwise, as the facts may be. See General Order XXVII. 60. Here give the equivalent of an assignment of error in an appeal in equity, or a concise statement of the error relied on. 1054 Supplementary Forms. Referee's Certificate on Review. [No. 163. 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. 103.] Form No. 163. Referee's Oertifleate on Review." In the District Court of the United States for the ...... District of In the Matter of Bankrupt In Bankrt^cy No. 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 :® 81. This form is of more general 62. If a question is to be certified application than Form No. 56, which without decision, use Form No. 56. savors more of the practice under the 63. Here recite the facts leading up law of 1867. Consult, generally, Sec- to the order, perhaps calling attention tion Thirty-nine. See also General to the pages of the record-bock and Order XXVII, See Form No. 162 the document"; handed up. See G«i- for petition, eral Order XXVII. Supplementary Forms. 1055 No. 164.] Order Approving Appointment of Trustee. That the question presented on this review is :•* I hand up herewith, for the information of the judge, the foUow- bg papers : (i) 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 khis review. Dated , , i9-- Respectfully submitted. Referee in Bankruptcy. Form No. 164. Order Approving Appointment of Trustee." At a Court of Bankruptcy, held in and for the Dis- trict of , at , this day of 19... Present : , Esq., Referee. In the Matter of Bankrupt In Bankruptcy No. This being the day appointed for the first meeting of creditors herein, and due notice thereof having been given as provided by the bankruptcy law of 1898, and having been ap- pointed trustee herein by a majority vote in number and amount of claims of all the creditors of said bankrupt previously allowed and present at such meeting, and they having fixed the amount of his 64. Here phrase the question in- 05. This is a substitute for Forms volred into an interrogation, if pos- Nos. 22 and 23. Consult, generally, sible limiting it to a single sentence. Section Forty-four, as affected by See General Order XXVlI. I 2 (17) and General Order XIII. See also U 45, 46, 50, 55, and 56. 1056 Supplementary Forms. Trustee's First Report. [No. 165. bond at $ ; now, on motion of Esq., attorney for , It is ordered: That the appointment of be, and the same is hereby, approved,*^ and that he be and become trustee herein, on filing a bond, with sufficient sureties, in $ , as provided in § 50-b of the bankruptcy law of 1898, to be approved by this court. » Referee in Bankruptcy. Form No. 165. Trustee's First Report.*' In the District Court of the United States for the District of In the Matter of Bankrupt . • In Bankruptcjr No. To , Esq., Referee in Bankruptcy : I, , the trustee in this proceeding, do hereby re- port as follows : 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, upon entering on such duties, I prepared a complete in- ventory of all the property of such bankrupt,*® which showed such property to consist as follows :*® 66. In case approval is denied, month after the trustee is appointed change the recitals and the order, See § 47-a (10). The form here is and where a new meeting is necessary, merely a suggestion. Reports of this insert the clause calling such meeting kind differ greatly in each case. and directing the giving of notice. 68. If an appraisal has been taken, 67. Consult, generally, Section it should also be referred to here, rnd Forty-seven, See, for penalty if re- a summary of it given. port not filed. General Order XVII. 69. State briefly the kind, location, This report must be filed within one value of, and incumbrances, if any, on Supplementary Forms. 1057 No. 165.] Trustee's First Report. That™ I have caused a certified copy of the order approving such bond and of the adjudication herein to be filed for record in the offices where conveyances are recorded in the county of , in said district." That the following is a brief detailed statement of the steps in such proceeding to this date, not hereinbefore mentioned :''^ That I desire instruction as to the following matters :™ That I have on hand in cash dollars ($ ), which is deposited in the Bank, the designated depository of this court,''* and that said sum is sufficient^" for a first dividend of .... per cent. {. . . .^, for the declaration and payment of which I do hereby apply. 1 Dated, , , 19... Respectfully submitted, Trustee. State of , -j County of , \-ss.: 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. the property, or refer to the inven- ing in suits, whether suits to set aside tonr or the appraisers' report on file, alleged preferences or fraudulent "TO. Use this paragraph only where transfers shall be brought, whethw there is real estate. there shall be an immediate sale of 71. See §§ 2i-e and 47-e. the property or a part of it, etc., as 73. Here set out briefly the more the facts of each proceeding suggest, important steps of the proceeding to 74. Stop here, if there is not the date of this report. enough on hand for a first dividend. 73. Ask such instruction or order 76. See i 6s-b, as amended by act as the facts warrant, as to interven- of 1903. 67 1058 Supplementary Forms. Order Declaring, etc., First Dividend. [No. i66. Form No. i66. Order Deolarlng and Ordering First Dividend Pald.^^ At a Court of Bankruptcy, held in and for the Dit- trict of , at , this .... day of 19... Present : , Esq., Referee. In the Matter of Bankrupt In Bankruptcy No. Application having been heretofore made for the declaration of a first dividend of not less than per cent. (. . . .fC) 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 having 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. 76. Consult, generally, Sections have not been paid, add a paragraph Forty-seven and Sixty-five. See also directing their payment and specifying General Order XXIX, and §t 39-a(i), the names of the priority claimants 5^L^_(S\- and the amounts at which their 77. If debts entitled to priority claims have been allowed. Supplementary Forms. 1059 No. 167.] Trustee's Final Report and Account. DiTldend Sheet. No. Dr. Sam allowttd. Cr. Referee in Bankruptcy. Form No. 167. Trustee's Final Report and Aecount.'^* 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: I, , the trustee in this proceeding, do hereby make my final report and account as follows : 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. .. 78. This form is merely a sugges- This report must be on file fifteen tion. It is impossible to give more days before a meeting can be held, than a skeleton of a report which Compare also Form No. 165, and see must vary widely with each case. Form No. 168. For the account, see Consult, generally, Section Forty- Form No. 49. If there are no assets, seven, also General Order XVII. Form No. 58 should be used. 1060 Supplementary Forms. Trustee's Final Report and Account. [No. 167. 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 divi- dend to creditors was declared, and said estate is now ready to be closed. That annexed hereto is my final account, duly verified.^ Dated, ,...., , 19 • • • Respectfully submitted. Trustee. Final Aoeount.8s [See and use Form No. 49.] State of , , County of , (. -f-y-- City of ,j I, , the trustee herein, do hereby make solemn oath that the statements of fact contained in the foregoing report are true, according 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 received by me as such trustee, and 79. Here set out briefly the more and the probable value, if any, of such important steps of the proceeding assets. since the last report, among other 83. See § 65-b, as amended by the things, showing the cash on hand at act of 1903. that time and the total of receipts and 84. See § 47-a(8) and Form No. disbursements since. 49. 80. If all in the form of cash, stop 85. Arrange with breaks and bal- ^%\ ances corresponding to the different 81. If any property remams unsold, dividend periods, so as to permit the sP|'Jjfy„!t here. making of the summary statement at: 04. Give reasons for a sale, speci- the end of Form No. 168. fying whether there are any offers Supplementary Forms. i061 No. i68.] Final Order of Distribution. 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 , I9- •• Form No. i68. Final Order of Distribution." At a Court of Bankruptcy, held in and for the Dis- trict of , at , this .... day of , 19... Present : Esq., Referee. Ik the Matter of Bankrupt . - In Bankruptcy No. A final report and account having been filed by , the trustee herein, and due notice having been given of said 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 ;*" now, 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. 86. This oath is an adaptation of other matter included in the notice for Form No. SO- the meeting. 87. Consult, generally, Section 89. If the notice included one for Forty-seven, and see §§ SS-f, s8-a (s) a proposed sale of assets recite that (6) , 62, 64 and 65, and General Order fact here. XXIX. 90. In case of sale, add: "or to 88. If for a sale of remaining as- such proposed sale." sets, recite the fact here, and also any 1062 Supplementary Forms. Final Order of Distribution. [No. i68. That** That the trustee disburse from the money on of administration, ♦■Vip folln-wincr r" hand, for expense* which sums are hereby allowed, and retain in his handfl 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 ($....), which sum is hereby allowed to him for the services of such attorney, as a part of the expenses of administrtition herein. That*'' said trustee pay the previous dividend of per cent. (. . . .;0 to the following creditors, entitled thereto : That, from the balance remaining on hand, said trustee retain his commissions, which are hereby fixed at the maximum amount specified in § 48 of the bankruptcy law of 1898, as amended, viz. : dollars ($ ), and pay to the undersigned referee his 91. If a sale was also had, insert a been found entitled in a schedule in clause approving such sale here. the body of the form, similar to that 82. Here add the items, something in Form No. 19.' as follows: "To_ for 96. Use only in involuntary cases. • •' ? ' The items are 96. Use only where the trustee has usually the expenses of givmg notice found it necessary to employ and hat of the meetmg, stenographer's fees, or employed an attorney the filmg fees and expenses of peti- 97. Use only when claims have tionmg creditors in involuntary cases, been proven since the first dividend, iJ c ' Vi compare § 64-b (3). setting out (i) name, (2) amount of 93. See i 64-b (4) (5). claim proven, and (3) amount of y*. Here set out the names of dividend in a schedule in the body of priority creditors whose claims have the form, similar to the Dividend been a lowed and not previously paid, Sheet at the end of this form. with the amounts to which they have Supplementary Forms. 1063 No. i68.] Final Order of Distribution. 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. (....;0i 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. Dividend Sheet. [See Form No. 166, and copy in same matter. \ Summary Statement. Total cash collected by trustee $ Disbursed prior to or at time of first dividend : For $ For priority claims For first dividend of 4 Total $. Balance on hand 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) 98. Tills is not required, but is suggested as a safe and courteous practice. 1064 Supplementary Forms. Trustee's Dividend Check and Receipt. 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 [No. 169 Form No. 169. Trustee's Combined Dividend Cheek aod Receipt." In the District Court of the United States for the Diatrict of In the Matter of ■ In Bankruptcy Now Bankrupt . No. The National Bank of ., 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, I Referee in Bankruptcy. Trtutee. 99. This form is of course merely generally, Section Forty-seven. See a suggestion to trustees who wish to also § 65 and General Order XXIX. do their work thoroughly. Compare, Supplementary Forms. 1065 No. 170.] Referee's Certificate of Fees Payable. Receipt. (Do not detach. If detached, the check will not be honored.) $ No ■ ) • • • • » ..... ...., 19... Received of , the trustee of , a bank- rupt, being in full of the dividend of per cent. {. . . .jf) on claim allowed in the proceeding of such bank- rupt, by order dated , 19. . . {Creditor's Signature.) Form No. 170. Referee's Certificate of Fees Payable.' In the District Court of the United States for the District of In the Matter of Fees in Pro- ceedings IN Bankruptcy Referred to Referee in Bankruptcy. To Clerk of the United States District Court, for the District of : I, , the referee in bankruptcy to whom the pro- ceedings in bankruptcy hereinafter mentioned were referred, do hereby certify that the following cases are closed and the fees now payable as follows: To trustees : 1. Consult, generally, Section Fifty- amended by the act of 1903; also one. See also §S 40 and 48, as General Orders XXIX and XXXV. 1066 Supplementary Forms. Bond of Trustee, with Justification. [No. 171. To bankrupts (no trustee having been appointed) ; No. Name of bankrupt. To the referee : No. case. Name of bankrupt. Dated, , , ,19. Referee in Bankruptcy. Form No. 171. Bond of Trustee, with Justification of Sureties.* In the District Court of the United States for the District of In the Matter of Bankrupt - In Bankruptcy No. Know all men by 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 unto the United States of America in the sum of^ dollars ($ ), in lawful money" 2. Consult, generally. Section Fifty, bond can be adapted to that required See also Form No. 25, for which this of a receiver. is a substitute, the former containing 3. See f so-c. no justification; note I so-d-f. This Supplementary Forms. 1067 No. 171.] Bond of Trustee, with Justification. of the United States, to be 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 pertaining thereunto; Now, therefore, if the said , trustee as aforesaid, shall obey such orders as said court may make in relation to said trust, and sha,ll faithfully and truly account for all the moneys, iBssets, 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. [L. S.] Signed, sealed, and delivered, in the presence of [L. S.] [l. s.] State of , \ 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 , I ss.: City of , ) and , respectively, the sureties in the foregoing bond, being each severally duly sworn, deposes and 4. This ie not eMential, but i« thought good practice. 1068 Supplementary Forms. Order Approving Trustee's Bond. [No. 17a. says that he is a resident of and a holder within the of , in said district, and is worth in property, at its actual yalue, dollars^ ($■■••) over all the debts and liabilities which he owes or has incurred, and exclusive of property exempt by law from levy and sale under an execution. Subscribed and sworn to before me, this .... day of , 19. .. Form No. 172. Order Approving Trustee's Bond.° At a Court of Bankruptcy, held in and for the Dis- trict of , at , this day of , 19... Present : Referee. In the Matter of Bankrupt In Bankruptcy No. The petition for the adjudication of the above-named banicrupt, , having been filed herein on the .... day of , 19.., and , having been appointed trustee herein on the .... day of , 19. ., and he having given a bond for the faithful performance of his official duties in the amount of dollars ($....), as provided by the order appointing him; now, on motion of , Esq., attorney for , It is ordered : That said bond be, and the same is hereby, approved. Referee in Bankruptcy. B. See 8 so-i. Fifty. See also § 47-c, added by the 8. For reasons for this, consult, amendatory act of 1903, and § 70-a. generally, Sections Twenty-one and Supplementary Forms. 1069 No. 173.] Certificate of Referee as to Pauper Affidavit. Form No. 173. Oertlfleate of Referee as to Falsity of Pauper Affidavit.^ In the District Court of the United States for the District of In the Matter of Bankrupt ■ In Bankruptcy No. 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 bank- ruptcy 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, when 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. 7. Consult, generally. Section Fifty-one, and compare General Ord> .- XXXV U)- 1070 Supplementary Forms. Special Clauses for Proofs of Debt [No. 174. Form No. 174. Special Clauses for Proofs of Debt.' [To conform to General Order XXL] 1. Insert at the end of all proofs of debt, not resting on a note or judgment, the following averment : " That no note has been received for such debt' (except ) nor has any judgment been rendered thereoni"* (ex- cept )." 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 " author- ized to make this proof," the following averment : " That the same is not made by the treasurer of such cor- poration, 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 8. See, generally, Section Fifty- 10. If a judgment has been entered, seven, ante, and General Order XXI. prove on the judgment, attaching a See also Forms Nos. 31, 32, 33, 34, 35, transcript, and specifying how much 3D, 37, 38, and 39; also Forms Nos. of the costs, if any, were earned be- I7S and 176. fore the petition in bankruptcy was 8- If so, prove on the note, or sur- filed; see 5 63-a (2) (3). render it and prove on the debt, add- lOj/^. Here give the rea«on why ing an explanation here. the proof is not made by the treasurer, as absence, illness, etc. Supplementary Forms. 1071 No. 175.] Petition for Reconsideration, etc., of Claim. annexed, such debt has been assigned to the affiant; and that annexed hereto is a deposition by said , as pro- vided by General Order XXI (2)." Form No. 175. Petition for Reconsideration and Rejection of Claim." 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 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 11. Consult, generally, Section with the general orders, or secured. Fifty-seven and General Order XXI or the claimant preferred and his (6) ; and see Forms Nos. 176, 38, and preference not surrendered, or want 39. of consideration, or many other rea- 18. A creditor may make this peti- sons. The reasons should be set forth tion ; if so, he should show the allow- as in a pleading, so that the claimant ance of his claim. may have proper notice of the issue _ IS. As, for instance, because tech- he must meet, nical'" imperfect, or not in accordance 1072 Supplementary Forms. Notice of Reconsideration, etc., of Gaim. [No. 176. 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. 103.] Form No. 176. Notice of Petition for Reconsideration and Rejeetion of Claim.» In the District Court of the United States for the District of ^ In the Matter of Bankrupt In Bcuikrnptcy 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. -t at .... o'clock, . . . M. Dated, , 19... Referee in Bankruptcy. 14. This form can be adapted to a by Form No. 39; if merely reduced case where the application is to reduce by Form No. 38. ' but not reject in toto. 16. If made by a creditor, change IB. Consult, generally. Section to fit the fact. Fifty-seven. See, for practice. Gen- 17. Or "reduced to $ " It eral Order XXI (6). If claim is re- may be suggested that a copy of the jected, the proper order is suggested petition should be mailed with this notice. SUFPLEMBNTAKY FoRMS. 1073 No. 177.] Notice of Final Meeting. Form No. 177. Kotloe of Final Heetlng.'' In the District Court of the United States for the District of In the Matter of Bankrupt In Bankrtq>tc]r 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 above-named bankrupt at , in the of , in said district, /o** examine and pass upon the final report and account of , the trustee herein, which was Hied in the ofUce of the undersigned at , in said district, on the .... day of , 19. ., and shows $ on hand for dis- tribution,^ and to transact such other business as may properly come before such meeting. Dated , ,19... Referee in Bankruptcy. •••••• •••.•-, Attorney for the Trustee. 18. Consult, generally, Section convenience of reference in substi- Fifty-eight. See also §§ 47-3(8), tuting clauses for other notices. See SS-f, and 65. Compare Forms Nos. 18 Form No. 178. and 179. See also for notices given by 20. When the meeting is also for the clerk. Forms Nos. 53, 57, 137, 136, the declaration and payment of a nd ISS- 18. The italics are used only for and^iSS. _ _ final dividend, see Form No. I7g. m 1074: Supplementary Forms. Special Clauses for Notices to Creditors. [No. 178. Form No. 178. Special Clauses for Notices to Creditors. »i 1. Where the notice is for a hearing on an application for a dis- charge or composition (§ 58-a (2)), or the proposed dismissal of the proceedings (§ s8-a (7)), as previously suggested in Forms Nos. 127, 136, and 155, the order to show cause should be used. 2. Where the notice is for the examination of the bankrupt (§ 58-a (i)), at a meeting called for that purpose, substitute for the words in italics in Form No. 177, 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. 177, the words : "To consider a proposed sale of the following described property, viz. :^ f 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 :* y 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. 177, 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 con- troversy (§ 58-a (6)), substitute in the same place in Form No. 177, the words : " To pass upon a proposition to compromise a controversy between the trustee herein and , concerning** by** ' " 21. Consult generally, Section 23. Here insert terms as to down Fifty-eignt. See also Form No. 177 payment, etc. *"oo*''tt^°°*'"°''' thereto. 34. Here indicate the question at >oZ. Here insert description and issue. give appraised value and the incum- 26. Here indicate the proposed brances, if any. compromise. Supplementary Forms. 1075 No. 179J Combined Notice to Creditors. 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. 177, the words: " For the purpose of* " Form No. 179. Combined Notice to Creditors.*' In the District Court of the United States for the District of In the Matter of Bankrupt . In Bankruptcy Na 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 cred- itors 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 prop- erty, viz. :* , 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 divi- dend herein ; 26. Here describe briefly the pur- 28. Here insert description and pose of the meeting. give appraised value and the incum- 27. See, generally. Section Fifty- brances, if any. eight, and the forms just ante, with their foot-notes. 1076 Supplementary Forms. Affidavit of Publication of Notice. [No. i8o. IV. To transact such other business as may properly come be- fore said meeting. Notice* is also 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... Esq., Attorney for Trustee. Referee in Bankruptcy. Form No. 180. Affidavit of PubUoatlon of Motlce.» In the District Court of the United States for the District of In the Matter of Bankrupt In Bankruptcy Na State of I [Attach slip here.] County of , }.«.: City of J , 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 bank- rutpcy 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. as. This clause should also be SO. See Section Fifty-eight, ante, added to the notice of the first and note Form No. 180 dividend. 31. Or "foreman," or "cleric," m the case may be. Supplementary Forms. 107Y No. i8i.] Affidavit of Mailing of Notice. Form No. i8i. Affidavit of MalUngr Notice." In the District Court of the United States for the District of In the Matter of Bankrupt In Bankruptcy Ko. [Attach notice here.] State or , ^ County of , ^ss.: 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 cor- porations mentioned in the schedule of names and addresses hereto annexed, by depositing such notices in sealed, postpaid envelopes,^ in the general post-office, at the of , in the district aforesaid. Subscribed and sworn to before me, this day of 19. 82. See Section Fifty-eight, ante, 88. Or, if the notice is mailed by and Form No. 181. The original the referee, add words indicating notice, the affidavit of publication, and that an " official busineM " envelope this affidavit should be bundled to- was used, gether before being filed. 1078 Supplementary Forms. Order Appointing Attorney for Trustee. iNo. 182. Form No. 182. Order Appointing Attorney for Trustee." At a Court of Bankruptcy, held in and for the Dis- trict of , at , this day of , 19... Present : , Esq., Referee. In the Matter of Bankrupt . In Bankruptcy No. Application having been made for the appointment of an attor- ney for the trustee herein, and it appearing that the services of an attorney are and will be required, and that the appointment here- inafter made is acceptable to such trustee;" 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. 34. See, generally, Section Sixty- 38. Or, "that , the ^^oi T/r L ... . trustee, be authorized to employ 30. If the choice has been submitted of the , of to creditors, here recite their action, in said district, as his attorney herein." Supplementary Forms. 1079 No. 183.] Petition as to Burdensome Property. Form No. 183. Petition for Instruction as to Burdensome Property.*^ 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 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 ind 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 :ourt 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. 103.] 87. See Section Seventy, and com- 30. Or, if actually burdensome to pare the forms immediately ante. See the bankrupt's estate, state that fact, also Forms Nos. 42, 43, 44, 45, and 46. 40. Here give the reasons on which 38. Here describe the property. the order is asked, showing condition, incumbrances, etc. 1080 Supplementary Forms. Order as to Burdensome Property. [No. 184. Form No. 184. Order on Petition as to Burdensome Property. At a Court of Bankruptcy, held in and for the Dis- trict of , at , this .... day of , 19... Present : , Esq., Referee. In the Matter of Bankrupt In Banknipt^ Na Application having been made for an order permitting the trus- tee 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. 41. See Form Na 183, and iu 42. Here describe the propertv foot-notei. 48. Or "burdensome." Supplementary Forms. 1081 No. 185.] Petition for Sale under General Order XVIII (a). Form No. 185. Petition for Sale under General Order XVIII (2).*' In the District Court of the United States for the District of In the Matter of - In Bankruptcy No. Bankrupt To , Esq., Referee 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 it will be to the advantage of the estate that such property be sold forthwith, 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 for an order permitting him to sell said property in the way and on the terms above specified. Trustee. [VcriUcation same as in Form No. 103.] 44. See Section Seventy and Gen- eral Order XVIII (2). Though such sales are of doubtful validity, they are common. This form can be adapted to a sale of personal property, or one at public auction under the same gen- eral order. See also Forms 42, 43, 44, 45, 46, 183, 184, 186, and 187. 46. Here insert description of prop- erty, giving its location, appraised value, the incumbrances, if any, etc. 48. Here give the reasons, as, for instance, a cash offer of 7S% of the appraised value, giving name of per- son making the offer, etc., or the necessity of vacating the premises in which the property is, or any of the numerous reasons which require prompt action on sales of a bankrupt's assets. 1082 Supplementary Forms. Order for Sale under General Order XVIII (2). [No. 186. Form No. 186. Order for Sale under General Order XVIII (2).« At a Court of Bankruptcy, held in and for the Dis- trict of , at , this .... day of , 19... Present : , Esq., Referee. In the Matter of Bankrupt . - In Bankruptcy No. Application having been made by the trustee herein for an order permitting 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. 47. See foot-note 44 to Form No. transfer of title by an instrument 185, and the references therein. transferring only the trustee's right, 48. Here copy the description of title, and interest, and in no way the property from the petition. amounting to a warranty. See Form 49. Or, as the terms may be, usu- No. 187. ally adding a clause directing the Supplementary Forms. 1083 No. 187.] Order Confirming Sale, after Notice. Form No. 187. Order Confirming Sale, after Notice to Creditors.* At a Court of Bankruptcy, held in and for the Dis- trict of , at ....... this .... day of , 19... Present : , Esq., Referee. In the Matter of Bankrupt In Bankruptcy No. 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 pro- vided 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 trans- ferring to such purchaser all his right, title, and interest in said property, and delivering the same to such purchaser. Referee in Bankruptcy. 60. See Sections Seventy and Fifty- sale on notice in Form No. 178. See eight. This form can be adapted to also Forms Nos. iBs and i86, and any sale, whether public or private, compare Forms Nos. 42, 43, 44, 45, on notice, and should always be en- and 46. tered, for the protection of the pur- 61. See foot-note 45 to Form No, chaser's title. See special clauses for 185. IISTDEX TO GENEEAL ORDEES, OFFICIAL FOEMS AND SUPPLE- MENTAEY FOEMS. [For General Index, see p. 1259.] A. PAQE AUbreviatlon. general orders : when permitted 858 Aoconnt. forms : affidavit to 962 of trustee 961 order approving 963 general orders : referee to audit 872 {See also Dividend, Meetings of Cbeditobs, Kefobt, Etc.) Adjudication. forms : denying bankruptcy 934 dismissing petition on petition of petitioning creditors 1047 of bankruptcy. . , 707 {See also Answeb, Appeabance, Juky Trial, Petition, Refesbences to Special Masteb, Subpoena.) Affidavit. forms: of creditors to schedules, where bankrupt cannot be found. 999 of lost bill or note 949 of mailing notice to creditors 1077 of publication of notice to creditors 1076 to account of trustee 962 {See also Oath.) Agent. forms : proof of debt by 946 general orders : proof of debt by, what to contain 870 Amendment. forms : petition to amend schedules 995 order amending schedules 997 order to show cause 996 general orders : practice on 864 when earlier act of bankruptcy to be added by amendment. . . 647 Answer. forms : alleging more than twelve creditors 1040 denying the commission of an act of bankruptcy 919 general answer 1039 objecting to confirmation of composition 1016 objecting to discharge 1027 {See also Specifications.) [1085] 1086 Index to Geneeal Oedees and Foems. PAGE AppUoation. {/See Petition.) Appeal. forms : petition to revise in matter of law 1049 notice to respondent 1051 order allowing 1050 order and decision of Circuit Court of Appeals 1052 petition for review of referee's order 1053 certificate on review 1054 another form 966 general orders: practice, when to Circuit Court of Appeals 893 when to Supreme Court 893 (See also Review.) Appearance, forms : by intervening creditor, in same 1037 by objecting creditor on composition 1015 by objecting creditor on discharge 1026 general, in involuntary case 1036 general orders : to be recited in orders 857 by the party or his attorney 857 Appointment. forms: of appraisers, see Appraisal. of trustee, see Tbusteb. Appraisal. forms : order appointing, oath and report of appraisers 926 Arbitration. general orders : practice on 890 Arrest. forms: see Peotection. general orders : protection from, by order of referee 865 release from 887 testimony by imprisoned debtor 887 Assignment of Claim. forms : clause for 1070 general orders : after allowance, practice on 876 before allowance 876 how proved 876 if by partnership 876 Attachment. general order : to compel bankrupt to file schedules 863 Attomey-at-Latr. forms : appearance by, on composition 985 on discharge 1026 in involuntary case 1036 order appointing attorney of trustee 1078 general orders : admitted in District or Circuit Court 857 notices to 857 practice on appearance by 857 Attorneys in Fact. forms : proof of claim by 945 power of attorney to, general 932 special '.[\ 933 Index to Geneeal Oedebs and Foems. 1087 B. PAQE BMLkmpt. forms: see Dischabgb, EXAMINATION, Exemption, Notice, Obdeb, Petition, Pbotbction, Etc. general orders: attendance before referee, by 865 conduct of proceedings by 857 petition for compounding of debts, etc 885 petition for a discharge 888 petition for review 883 petition for sale of perishable property 874 production of, by habeas corpus, if imprisoned 887 protection from arrest of 865 subsequent payment after pauper affidavit by 891 when allowed costs 890 Boad. forms : of petitioning creditors 922 of trustee 937 order approving same 938 another form 1068 with justification of sureties 1067 order approving same 1068 of referee , 929 of marshal 923 general orders: notice to trustee to specify penal sum of 871 Baxdensome Property. forms : petition as to 1079 order on such petition 1080 C. Certificate. forms : by referee, general 966 in discharge 1025 of disqualification 1048 of falsity of pauper affidavits 1069 of fees payable 1065 on composition 1011 on review 1054 Circuit Court of Appeals. (See Appeal, Review, Supeeme Coubt.) Claims. [See Agent, Coepoeation, Ceeditoe, Paetnebship, Power op Attoenet, Peoop op Debt, Etc.) Clark. form, see Obdeb. general orders : compensation of 891 extra fees of 89 1 may require indemnity 863 to forward and deliver orders of referee 865 to furnish blank process to referee 857 to indorse papers filed 856 to issue process 857 to keep docket 856 to sign checks 886 1088 Index to Geneeai, Oedees and Foems. PAGE OonLposition. forms : acceptance of 1009 appearance for objecting creditor on 1015 certificate by referee on 1011 offer of 1008 order confirming , . . . . 972 another form 1019 order of distribution on 973 another form 1019 order of reference to special master on 1017 order to show cause on 1014 petition for confirmation of 971 petition for meeting to consider 970 report of special master 1018 specification of objection on 1016 general orders : may be referred to the referee 866 specification of objection, when to be filed 889 Compoanding Debts. general orders : practice on 885 (See also Abbiteation.) Conditional Contract. general orders : redeeming property from 833 Corporation. forms : proof of claim by 944 general orders : by whom proof of claim made 876 Costs. general orders : for irrelevant, etc., depositions 881 in contested adjudications 890 Creditor. forms : see Notice, Petition, Poweb of Attobney, Pboof op Debt, Schedules, Specification, Trustee, Etc. general orders : can manage only individual interest 857 costs to petitioning creditors 890 choice of trustee by, subject to approval 868 may conduct proceeding without attorney 857 may petition for sale, etc 874 names and addresses to be transmitted to clerk 882 notices to 876 petition to redeem property 885 petition for compounding of debt 885 petition for review 883 proof of debts by, see Agent, Cobpobation, Pabtnebship, Proof of Debts, Etc. proof of debts by persons contingently liable 876 powers of attorney by 876 re-examination of claims of 877 specification of objections to discharge by 888 when assignee subrogated to original claimant 876 when to file bankrupt's schedule 863 Index to Genbeal Oedebs and Foems. 1089 PAOB D. Debtor. (See Bankrupt, Dischaboi:, Examination, Exemption, Petition, Etc.) Denial of Bankraptioy. (See Anbweb.) Deposition. general order : practice on 880 (&'ee also Examination.) Depositories. general order : how moneys withdrawn from 886 Discharge. forms : appearance by objecting creditor on 1026 certificate of referee on 1025 certificate of referee on application for extension of time 1022 order denying, after reference 1029 order extending time to apply for 1023 order for hearing on application for 968 another form 1024 order granting 969 order of reference to special master on 1028 order to show cause on 1024 petition for extension of time to apply for 1021 petition of bankrupt for 967 report of special master on 1029 specifications in opposition to 969 another form 1027 general orders : may be referred to the referee .....' 866 petition for, what to state 888 specifications, when to be filed 889 Distribution. {See Dividend.) Dividend. forms : lists of claims entitled to 952 notice of 953 notice of declaration and payment of 1074 order declaring and ordering first, paid 1058 order of distribution, final 1061 trustee's combined dividend check and receipt 1064 general orders : payment of, how made 886 when not paid on claims of persons contingently liable. 876 Docket. general orders : open to public inspection 856 to be kept by clerk 856 open to public inspection 856 E. Equity Proceedings. general orders : equity rules to be followed in 894 may be modified by court in 894 Examination. forms : for examination of bankrupt or witness 940 69 1090 Inbex to Geneeal Obdebs and Fobms. PAGE Exemption. forms : exceptions to trustee's report setting off 992 order determining, after trustee's report 991 when no trustee appointed 991 petition for review of referee's order on 994 report on 959 general orders : exceptions to trustee's report on 872 trustee's report on 872 practice on 872 Expenses. general orders : indemnity for, may be required 863 of marshal, account of 875 of referee, account of 882 P. Fees. forms, referee's certificate of fees payable 1065 referee's certificate of falsity of pauper afiidavit 1069 general orders : of clerk 891 of referee, limited 891 of trustee, limited 891 when pauper affidavit may be investigated 891 Filing. general orders : of papers after reference, where 875 of proved claims with clerk 882 time of, to be indorsed on papers 856 Forms- general orders : official, to be used, etc 895 General Orders. general orders: to take efltect January 2, 1899, Preamble. prior to that, proceedings pursuant to Bankruptcy Act and General Orders of 1867, validated. Preamble. I. Imprisonment. (See Abeest and Pbotection.) Indemnity. general orders : for expenses, may be required 863 Injunction. forms : order that writ issue after referee's stay other than against s"it 990 on pending suit 997 petition for, other than against pending suit 987 against pending suit 1002 referee's stay and show cause other than against suits 987 order that writ issue other than against suits 989 stay and order to show cause on pendinc; suit 1003 report of referee on stay stipulated before him \ 100& stipulation that show cause be heard by referee 1005 general orders: limitation on granting of, by referees , , , 865 (See also Stay.) Indes to General Oedeks and Foems. 1091* PAGK Interest. general orders : when computation of, unnecessary 878 Inventory. forms : of appraisers 926 general orders : by trustee, when to be taken 872 (See also Appraisal and Trustee.) J. Judge. general orders : may refer certain applications to referee 866 power to approve choice of trustee 868 to fix time and place for referees to act 866 Jurisdiction. general orders : in which district, when several petitions filed 859 Jury Trial. forms : application for, in involuntary case 1038 order for, in involuntary case 920 I.. Ijetter of Attorney. (See also Attobnets in Fact and Poweb of Attobney. ) Iiien. forms : petition and order for redemption from 955 general orders : practice on redemption from 885 M. Marshal. forms : bond to 923 special warrant to 920 general orders : accounts of 875 indemnity may be required by 863 Meetings of Creditors. forms : notice of first meeting 930 notice of final meeting 1073 combined notice for 1075 special clauses for notices for 1074 general orders : special, when called 882 when may be dispensed with 871 Mortgage. general orders : redeeming property from 885 N. Note. forms: see Affidavit. general orders : averment in claim that no note has been received necessary 876 1092 Index to General Oedees and Foems. PAGE Notloe. forms : of application for discharge 968 another form 1024 combined 1075 of dividend 953 of final meeting 973 of first meeting 930 of meetings for other purposes 1074 of meetings for several purposes 1075 of petition for removal of trustee 964- of petition for re-examination of claim 1072 to respondent in revision 1051 to trustee of his appointment 936 general orders: indemnity may be required for expense of 863 mode of giving, to be recited in order 881 of appointment of trustee, contents 551 of re-examination of claim, procedure on . ._ 877 of petition to compound debts, same 886 of petition to redeem property 886 to bankrupt to file schedules 863 to claimant, of assignment filed 876 to creditors, of bankrupt's application for release from arrest. 887 where to be addressed 876 service of an attorney, when sufficient 857 (See also Affidavit and Obder.) O. Oatli, forms : of appraisers 926 of referee 929 of trustee to final account 962 (/See also Affidavit.) Order. forms : allowing revision in matter of law 1050 amending schedules 997 appointing appraisers 926 appointing attorney for trustee 107S appointing receiver before adjudication 982 appointing receiver after adjudication 986 appointing trustee, by creditors 934 by referee 935 approving appointment of trustee 1055 approving trustee's bond 938 another form 1068 confirming composition 972 another form 1019 declaring and ordering first dividend paid 1058 declaring and ordering final dividend paid, and of distribution 1061 denying discharge, after reference to special master 1029 determining exemptions, after trustee's report 993 where no trustee 991 j directing service by publication 1035 discharging trustee 963 expunging claim 1051 extending time to apply for discharge 1023 for choice of new trustee 963. Index to General Oedees and Foems. 1093 PAGE Order — Continued. for examination of bankrupt or witness 940 for jury trial 920 for private sale 957 for public sale 954 for redemption of property from lien 955 for removal of trustee 965 for sale, after notice to creditors 1083 for sale of perisliable property 958 for sale of real estate by auction 954 for sale subject to lien 956 for sale under General Order XVin(2) 1082 granting discharge 969 of adjudication of bankruptcy 925 of Circuit Court of Appeals on revision 1052 forms : of dismissal, in voluntary case 1047 of distribution on composition 1073 another form 1019 of instruction as to burdensome property 1080 of protection 1001 of reference, general 927 in judge's absence 928 to special master 1017, 1028, 1042 reducing claim 950 that debtor is not bankrupt 924 that no trustee be appointed 938 to shovf cause, on amendment of schedules 996 on application for discharge 968 another form 924 on composition 1014 on creditor's petition 917 on petition for dismissal of involuntary case 1044 on referee's stay, as to pending suit 1003 general orders : bankrupt subject to 865 of referee, what to recite 881 of service on attorney, when sutHcient 857 when to contain attorney's name 857 Papers. general orders : after reference, when filed 875 to be indorsed 857 with time of filing 856 transmission of proved claims to clerk 882 FartKership. forms: petition for adjudication of, with schedules 913 all partners not joining 1030 proof of debt by 945 general orders: assignment of claim by, what to state 876 power of attorney by, what to state 876 practice when two or more petitions filed by or against 859 proof of debt by, what to state 876 right of nonjoining partner to resist petition by others 861 Payment «f Money. {See Defositobies. ) 1094 Index to Geneeal Oedees and Foems. PAGE Petition. forms : for amendment of schedules 985 for appointment of receiver, before adjudication 982 after adjudication 983 for confirmation of composition . 971 for dismissal of petition in involuntary case ' 1044 for extension of time to apply for a discharge 1021 for injunctions other than against suits 986 for injunctions against pending suit 1002 for instruction as to burdensome property 1079 for meeting to consider composition 970 for order of protection 1000 for private sale 957 for redemption from lien 955 for removal of trustee 963 for sale by auction 954 for sale of perishable property 958 for sale subject to lien 956 for sale under General Order XVIII(2) 1081 of bankrupt for discharge 967 of creditors for adjudication of debtor 915 another form 1032 of debtor, with schedules 899 of partnership, with scliedules 913 . all not joining 1030 to reconsider and reject claim 1071 to review referee's order, general 1053 ' on exemptions 934 1 to revise in matter of law 1049 general orders : amendment of 864 abbreviations in, etc 858 docket to show date of filing 856 for discharge, what to state for redemption of property on compounding of debts 885 for review, filed with referee 883 frame of 858 partnership, right of nonjoining partner to resist adjudication. 861 practice, where two or more 858 priority of, in that case 859 Fledge. general orders : how redeemed 885 Power of Attorney. forms : general 932 special 933 general orders : by whom executed 876 how execution proved 876 Process. forms: subpoena to alleged bankrupt 918 summons to witness 940 I general orders : how issued, sealed, and tested 857 time of return may be modified 894 {See also Summons and Subpoena.) Index to Geneeal Okdebs and Forms. 1095 PAGE Proof ot Oebt. forms: affidavit of loat bill or note 949 by agent or attorney 946 by corporation 944 by creditor, with security 943 ■ without security 942 by partnership 945 of secured debt 943 by agent 947 of unsecured debt 942 list of dividends 952 notice of petition for re-examination of claim 1072 order expunging claim 951 order reducing claim 950 petition for re-examination of claim 1071 special clauses for 1070 general orders : after reference, where filed 875 practice on, in general 876 transmission to clerk of names of creditors whose claims are approved 882 Protection. forms : petition for order of 1000 order of 1001 general orders : referee's power to grant 865 practice where bankrupt is imprisoned 887 (/See also Aebest and Imprisonment.) Receiver. forms: petition for appointment of, before adjudication: 980 after adjudication 983 order appointing, before adjudication 992 after adjudication 985 general orders: may petition for sale of perishable property 874 Kedemption of Property. general orders : practice on 885 Referee. forms : adjudication by 925 bond of 929 certificate by, see Certificate. lists by, of claims allowed and entitled to dividends 952 creditors who have proved their debts 931 notice by, see Notice. oath of 929 orders by, see Oedeb. orders of reference to, by judge 927 in judge's absence ' 928 orders to show cause by, see Obdeb. reviews of orders by, see Review. 1096 Index to Geneeal Oedees and Foems. PAGE general orders : compensation of 891 duties, in general may apply for blank process signed and under seal 865 may disapprove appointment of trustee 868 may grant protection to bankrupt from arrest on civil process. 865 may hear certain applications referred by the judge 866 may hear exceptions to trustee's report on exemptions 872 may hear testimony and pass upon objections 880 may order imprisoned debtor to bo produced for examination or release 887 may require indemnity for expenses 863 may require trustee to show cause why he should not be re- moved 872 must account for expenses 882 must countersign checks 886 must indorse papers with time of filing and statement of char- acter 857 must give notice if assignment of proved claim is filed 878 must give trustee notice of appointment 871 must audit trustee's account 872 must transmit certified copies of records to clerk 850 must transmit to clerk list of proved claims 882 orders of, what to recite 881 how reviewed 883 proceedings before 865 Reference. forms: see Ordee. Iteference to Special Master. forms: see Oedee. Removal. forms: see Tbustee. general orders : power to remove 868 Reports. forms : of appraisers 926 of trustee, account ggj oath to same 962 final report and account 1059 first report 1056 of exempted property 959 of no assets 9gQ general orders : trustee's, of sale of property 874 inventory 372 on exemptions 372 Review. form : certificate of referee on, general 9gg another form 1054 petition for, general 1053 on exemptions 1054 general orders : practice on ggo Index to General Obdees and Fobms. 1097 PAGB S. Sales. forms : by auction, petition and order, for 1054 confirming, order after notice to creditors 1083 notice of proposed 1074 of perishable property, petition and order for 958 private, petition and order for 957 subject to lien, petition and order for 956 under General Order XVIII(2), petition for 1081 order for 1082 general orders: practice on 874 of perishable property 874 Schednles. forms : with voluntary petition 901 of partnership 915 general orders : abbreviations in 858 amendment of 864 in involuntary cases, bankrupt absent 863 must be printed or v^ritten 858 Specifications. forms : of opposition to composition 1016 of opposition to a discharge 969 another form 1027 general orders : of opposition, when to be filed 889 (See also Answee.) Stay. forms: see Injunction. general orders : where petitions filed in different districts 859 granted only by the judge in certain cases 866 (See also Injunction.) Subpoena. forms : to alleged bankrupt 918 to witness 940 general orders : to be issued and tested by the clerk 857 blanks to be furnished to the referee 857 Summons. forms : see Pbecess and Subpoena. general orders: id. Supreme Court. general orders: see Appeals, Cibcuit Coubt of Appeals, Review, Etc. T. Testimony. forms : examination of bankrupt or witness 940 general orders : how taken 880 production of imprisoned bankrupt 887 {See also Deposition and Examination.) 1098 Index to Genekal Obdees and Foems. PAGE Trial. forms : application for jury 1038 when combined with answer 919 order for jury 920 general orders : in proceedings in equity 894 (See also Jury Tbial.) Trustee. forms : account of 961 oath to 962 appointment of, by creditors , 934 by referee 935 order approving 1055 attorney of, order appointing 1078 bonds of, see Bonds. combined check and receipt 1064 notice to, of appointment 936 notices by, see Notice. orders concerning, see Ordbe. petitions by, see Petition. reports by, see Reports. sales by, see Blbdensome Property, Sales, Etc. general orders : accounts of, to be audited by referee 872 appointment of, subject to approval 868 check of, to be countersigned 886 choice of, to fill vacancy 882 compensation of 891 duties of, in general 872 no official or general 871 none appointed in certain cases 871 notice of appointment to 871 notification of acceptance by 871 petition by, for review 883 to compound debts 885 removable only by judge 868 removable for failure to file reports 872 general orders : sales by 874 sales by 874 to keep books, etc 886 to make reports 872 to report on exemptions 872 to take inventory 552 V. Verificatioii. general orders : of amendments g64 (See also Depositions, Examinations, Oath, Etc.) W. Warrant. forms : to marshal 92o Witness. forms : examination of g^i^, summons to g^y general orders : indemnity for expense of procuring attendance .... 863 RULES OF FRj^OTIOE. FOR THE COURTS OF EQUITY OF THE UNITED STATES-* PRELIMINARY REGULATIONS. Rule I. — The Circuit Courts, as courts of equity, shall be deemed always open for the purpose of filing bills, answers, and other plead- ings, for issuing and returning mesne and final process and commis- sions, and for making and directing all interlocutory motions, orders, rules, and other proceedings, preparatory to the hearing of all causes upon their merits. Rule II. — The clerk's office shall be open, and the clerk shall be in attendance therein, on the first Monday of every month, for the pur- pose of receiving, entering, entertaining, and disposing of all motions, rules, orders, and other proceedings, which are grantable of course, and applied for, or had by the parties, or their solicitors, in all causes pending in equity, in pursuance of the rules hereby prescribed. Rule III. — Any judge of the Circuit Court, as well in vacation as in term, may, at chambers, or, on the rule days, at the clerk's office, make and direct all such interlocutory orders, rules, and other pro. ceedings, preparatory to the hearing of all causes upon their merits, in the same manner and with the same effect as the Circuit Court could make and direct the same in term, reasonable notice of the • " In proceedings in equity instituted for the purpose of carrying into effect the provisions of the [Bankruptcy] Act, or for enforcing the rights and remediei given by it, the rules of equity practice established by the Supreme Court of th< United States shall be followed as nearly as may be." .... See General Order in Bankruptcy, No. XXXVII., November, 1898, 1099 1100 U. S. EQUITY RULES. application therefor being first given to tiie adverse party, or his ■olicitor, to appear and show cause to the contrary at the next rule day thereafter, unless some other time is assigned by the judge for the hearing. Rule IV. — All motions, rules, orders, and other proceedings made and directed at chambers, or on rule days, at the clerk's office, whether special or of course, shall be entered by the clerk in an order book, to be kept at the clerk's office, on the day when they are made and directed; which book shall be open, at all office hours, to the free inspection of the parties in any suit in equity, and their solicitors. And except in cases where personal or other notice is specially required or directed, such entry in the order book shall be deemed sufficient notice to the parties and their solicitors, without further service thereof, of all orders, rules, acts, notices, and other proceed- ings entered in such order book, touching any and all the matters in the suits to and in which they are parties and solicitors. And notice to the solicitors shall be deemed notice to the parties for whom they appear and whom they represent, in all cases where personal notice on the parties is not otherwise specially required. Where the solici- tors for all the parties in a suit reside in or near the same town or city, the judges of the Circuit Court may, by rule, abridge the time for notice of rules, orders, or other proceedings, not requiring per- sonal service on the parties, in their discretion. Rule V. — All motions and applications in the clerk's office for the issuing of mesne process and final process to enforce and execute decrees, for filing bills, answers, pleas, demurrers, and other plead- ings; for making amendments to bills and answers; for taking bills fro confesso; for filing exceptions, and for other proceedings in the clerk's office, which do not, by the rules hereinafter prescribed, require any allowance or order of the court, or of any judge thereof, shall be deemed motions and applications, grantable of course by the clerk of the court. But the same may be suspended, or altered, or rescinded, by any judge of the court, upon special cause shown. Rule VI. — All motions for rules or orders and other proceedings, which are not grantable of course, or without notice, shall, unless a different time be assigned by a judge of the court, be made on a rule day, and entered in the order book, and shall be heard at the rule day next after that on which the motion is made. And if the U. S. EQUITY RULES. 1101 adverse party^or his solicitor, shall not then appear, or shall not show good cause against the same, the motion may be heard by any judge of the court ex parte, and granted as if not objected to, or refused, in his discretion. FB0CES8. Rule VII. — The process of subpoena shall constitute the proper mesne process in all suits in equity, in the first instance, to require the defendant to appear and answer the exigency of the bill; and unless otherwise provided in these rules, or specially ordered by the Circuit Court, a writ of attachment, and if the defendant cannot be found, a writ of sequestration, or a writ of assistance to enforce a delivery of possession, as the case may require, shall be the proper process to issue for the purpose of compelling obedience to any inter- locutory or final order or decree of the court. Rule VIII. — 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 Circuit 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 conveyance 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 of a judge thereof, 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.* Rule IX. — When any decree or order is for the delivery of pos- session, upon proof made by affidavit of a demand and refusal to obey the decree or order, the party prosecuting the same shall be flQtitled to a writ of assistance from the clerk of the court. * See Rule XCII. 1102 U. S. EQUITY RULES. Rule X. — Every person, not being a party in aay cause, who has obtained an order, or in whose favor an order shall have been made, shall be enabled to enforce obedience to such order by the same process as if he were a party to the cause ; and every person, not being a party in any cause, against whom obedience to any order ci the court may be enforced, shall be liable to the same process for enforcing obedience to such order as if he were a party in the cause. SEBTICE OF PBOCESS. Rule XI. — No process of subpoena shall issue from the clerk's office in any suit in equity until the bill is filed in the office. Rule XII. — Whenever a bill is filed, the clerk shall issue the pro- cess of subpoena thereon, as of course, upon the application of the plaintiif, which shall be returnable into the clerk's office the next rule day, or the next rule day but one, at the election of the plaintiff, occurring after twenty days from the time of the issuing thereof. At the bottom of the subpoena shall be placed a memorandum, that the defendant is to enter his appearance in the suit in the clerk's office, on or before the day at which the writ is returnable; other- wise, 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, except in the case of husband and wife defendants, or a joint subpoena against all the defendants. Rule XIII. — The service of all subpoenas shall be by a delivery of a copy thereof by the officer serving the same 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 is a member or resident in the family. Rule XIV. — Whenever any subpoena shall be returned not exe- cuted as to any defendant, the plaintiff shall be entitled to another subpoena, toties quoties, against such defendant, if he shall require it, until due service is made. Rule XV. — The service of all process, mesne and final, shall be by the marshal of the district, or his deputy, or by some other per- son specially appointed by the court for that purpose, and not other- U. S. EQUITY RULES. 1103 wise. In the latter case, the person serving the process shall make affidavit thereof. Rule XVI. — Upon the return of the subpoena as served and exe- cuted upon any defendant, the clerk shall enter the suit upon his docket as pending in the court, and shall state the time of the entry. AFPEABANCE. Rule XVII. — The appearance day of the defendant shall be the rule day to which the subpoena is made returnable, provided he has been served with the process twenty days before that day ; other- wise, his appearance day shall be the next rule day succeeding the rule day when the process is returnable. The appearance of the defendant, either personally or by his solicitor, shall be entered in the order book on the day thereof by the clerk. BILLS TAKEN PRO CONFESSO. Rule XVIII. — It shall be the duty of the defendant, unless the time shall be otherwise enlarged, for cause shown, by a judge of the court, upon motion for that purpose, to file his plea, demurrer, or answer to the bill, in the clerk's office, on the rule day next succeed- ing that of entering his appearance. In default thereof, the plaintiff may, at his election, enter an order (as of course) in the order book, that the bill be taken pro confessoj and thereupon the cause shall be proceeded in ex parte, and the matter of the bill may be decreed by the court at any time after the expiration of thirty days from and after the entry of said order, if the same can be done without an answer and is proper to be decreed; or the plaintiff, if he requires any discovery or answer to enable him to obtain a proper decree, shall be entitled to process of attachment against the defendant, to compel an answer; and the defendant shall not, when arrested upon such process, be discharged therefrom, unless upon filing his answer, or otherwise complying with such order as the court or a judge thereof may direct, as to pleading to or fully answering the bill, within a period to be fixed by the court or judge, and undertaking to speed the cause. Rule XIX. — When the bill is taken pro eonfesso, the court may proceed to a decree at any time after the expiration of thirty days 1104 U. S. EQUITY RULES. from and after the entry of the order to take the W\ pro conftsso, and such decree rendered 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 of the defendant. And no such motion shall be granted, unless upon the payment of the costs of the plaintiff in the suit up to that time, or such part thereof as the court shall deem reasonable, and unless the defendant shall undertake to file his answer within such time as the court shall direct, and submit to such other terms as the court shall direct, for the purpose of speeding the cause. FBAXE OF BILLS. Rule XX. — Every bill, in the introductory part thereof, shall contain the names, places of abode, and citizenship, of all the parties, plaintiffs and defendants by and against whom the bill is brought. The form, in substance, shall be as follows: " To the judges of the Circuit Court of the United States for the district of : A. B., of , and a citizen of the State of , brings this his bill against C. D., of , and a citizen of the State of , and E. F., of , and a citizen of the State of . And thereupon your orator complains and says, that," etc. Rule XXI. — The plaintiff, in his bill, shall be at liberty to omit, at his option, the part which is usually called the common con- federacy clause of the bill, averring a confederacy between the defendants to injure or defraud the plaintiff; also what is com- monly called the charging part of the bill, setting forth the matters or excuses which the defendant is supposed to intend to set up by way of defence to the bill; also what is commonly called the juris- diction clause of the bill, that the acts complained of are contrary to equity, and that the plaintiff is without any remedy at law; and the bill shall not be demurrable therefor. And the plaintiff may, in the narrative or stating part of his bill, state and avoid, by counter aver- ments, at his option, any matter or thing which he supposes will be insisted upon by the defendant, by way of defence or excuse, to the case made by the plaintiff for relief. The prayer of the bill shall ask the Sf)ecial relief to which the plaintiff himself supposes himself entitled, and also shall contain a prayer for general relief; and if an injunction, or a writ of tu exeat regno, or any other special order pending the suit is required, it shall also be specially asked for. U. S. EQUITY RULES. 1105 Rule XXII. — If any persons, other than those named as defend» ants in the bill, shall appear to be necessary or proper parties thereto, the bill shall aver the reason why they are not made parties, by show- ing them to be without the jurisdiction of the court, or that they cannot be joined without ousting the jurisdiction of the court as to the other parties. And as to persons who are without the jurisdic- titjn and may properly be made parties, the bill may pray that pro- cess may issue to make them parties to the bill if they should come within the jurisdiction. Rule XXIII. — The prayer for process of subpoena in the bill shall contain the names of all the defendants named in the introductory part of the bill, and if any of them are known to be infants under age, or otherwise under guardianship, shall state the fact, so that the court may take order thereon as justice may require, upon the return of the process. If an injunction, or a writ of ne exeat regno, or any other special order, pending the suit, is asked for in the prayer for relief, that shall be sufficient without repeating the same in the prayer for process. Rule XXIV. — Every bill shall contain the signature of counsel annexed to it, which shall be considered as an affirmation on his part, that upon the instructions given to him and the case laid before him, there is good ground for the suit, in the manner in which it is framed. Rule XXV. — In order to prevent unnecessary costs and expenses, and to promote brevity, succinctness, and directness in the allega- tions of bills and answers, the regular taxable costs for every bill and answer shall in no case exceed the sum which is allowed in the State court of chancery in the district, if any there be ; but if there be none, then it shall not exceed the sum of three dollars for every bill or answer. SCANDAL AND IMPERTINENCE IN BILLS. Rule XXVI. — Every bill shall be expressed in as brief and suc- cinct terms as it reasonably can be, and shall contain no unnecessary recital of deeds, documents, contracts, or other instruments, in hmc fKrba, or any other impertinent matter, or any scandalous matter not relevant to the suit. If it does, it may on exceptions be referred 70 1106 U. S. EQUITY RULES. to a master by any judge of the court for impertinence or scandal; and if so found by him, the matter shall be expunged at the expense of the plaintiff, and he shall pay to the defendant all his costs in the suit up to that time, unless the court or a judge thereof shall other- wise order. If the master shall report that the bill is not scandalous or impertinent, the plaintiff shall be entitled to all costs occasioned by the reference. Rule XXVII. — No order shall be made by any judge for referring any bill, answer, or pleading, or other matter, or proceeding depend-' ing before the court for scandal ^^r impertinence, unless exceptions are taken in writing and signed by counsel, describing the particular passages which are considered to be scandalous or impertinent; nor unless the exceptions shall be filed on or before the next rule day after the process on the bill shall be returnable, or after the answer or pleading is filed. And such order, when obtained, shall be con- sidered as abandoned, unless the party obtaining the order shall, without any unnecessary delay, procure the master to examine and report for the same on or before the next succeeding rule day, or the master shall certify that further time is necessary for him to complete the examination. AMENDMENT OF BILLS. Rule XXVIII. — The plaintiff shall be at liberty as a matter of course, and without payment of costs, to amend his bill in any matters whatsoever, before any copy has been taken out of the clerk's office, and in any small matters afterwards, such as filling blanks, correcting errors of dates, misnomer of parties, misdescription of premises, clerical errors, and generally in matters of form. But if he amend in a material point (as he may do of course) after a copy has been so taken, before any answer or plea, or demurrer to the bill, be shall pay to the defendant the costs occasioned thereby, and shall, without delay, furnish him a fair copy thereof , free of expense, with suitable reference to the places where the same are to be inserted. And if the amendments are numerous, he shall furnish in like manner, to the defendant, a copy of the whole bill as amended; and if there be more than one defendant, a copy shall be furnished to each defendant affected thereby. Rule XXIX. — After an answer, or plea, or demurrer is put in. U. S. EQUITY RULES. 1107 and before replication, the plaintiff may, upon motion or petition, without notice, obtain an order, from any judge of the court, to amend his bill on or before the next succeeding rule day, upon pay- ment of costs or without payment of costs, as the court or a judg6 thereof may in his discretion direct. But after replication filed, the plaintiff shall not be permitted to withdraw it and to amend his bill, except upon a special order of a judge of the court, upon motion or petition, after due notice to the other party, and upon proof by affi- davit that the same is not made for the purpose of vexation or delay, or that the matter of the proposed amendment is material, and could not with reasonable diligence have been sooner introduced into the bill, and upon the plaintiff's submitting to such other terms as may be imposed by the judge for speeding the cause. Rule XXX. — If the plaintiff, so obtaining any order to amend his bill alter answer, or plea, or demurrer, or after replication, shall not file his amendments or amended bill, as the case may require, in the clerk's office, on or before the next succeeding rule day, he shall be considered to have abandoned the same, and the cause shall pro- ceed as if no application for any amendment had been made. DEMURRERS AND PLEAS. Rule XXXI. — No demurrer or plea shall be allowed to be filed to ar>" bill, unless upon a certificate of counsel, that in his opinion it is well founded in point of law, and supported by the affidavit of the defendant, that it is not interposed for delay; and if a plea, that it is true in point of fact. Rule XXXII. — The defendant may, and any time before the bill is taken for confessed, or afterwards, with the leave of the court, demur or plead to the whole bill, or to part of it, and he may demur to part, plead to part, and answer as to the residue; but in every case in which the bill specially charges fraud or combination, a plea to such part must be accompanied with an answer fortifying the plea, and explicitly denying the fraud and combination, and the facts on which the charge is founded. Rule XXXIII. — The plaintiff may set down the demurrer or plea to be argued, or he may take issue on the plea. If, upon an issue, the facts stated in the plea be determined for the defendant, they ■ball avail him, as far as in law and equity they ought to avail him. 1108 U. S. EQUITY RULES. Rule XXXIV. — If, upon the hearing, any demurrer or plea is overruled, the plaintiff shall be entitled to his costs in the cause up to that period, unless the court shall be satisfied that the defendant had good ground in point of law or fact to interpose the same, and it was not interposed vexatiously or for delay. And upon the over- ruling of any plea or demurrer, the defendant shall be assigned to answer the bill, or so much thereof as is covered by the plea or demurrer, the next succeeding rule day, or at such other period as, consistently with justice and the rights of the defendant, the same can, in the judgment of the court, be reasonably done; in default whereof, the bill shall be taken against him, pro confesso, and the matter thereof proceeded in and decreed accordingly. Rule XXXV. — If, upon the hearing, any demurrer or plea shall be allowed, the defendant shall be entitled to his costs. But the court may, in its discretion, upon motion of the plaintiff, allow him to amend his bill upon such terms as it shall deem reasonable. Rule XXXVI. — No demurrer or plea shall be held bad and be overruled upon argument, only because such demurrer or plea shall not cover so much of the bill as it might by law have extended to. Rule XXXVII. — No demurrer or plea shall be held bad and over- ruled upon argument, only because the answer of the defendant may extend to some part of the same matter, as may be covered by sr.ch demurrer or plea. Rule XXXVIII. — If the plaintiff shall not reply to any plea, or set down any plea or demurrer for argument, on the rule day when the same is filed, or on the next succeeding rule day, he shall be deemed to admit the truth and sufficiency thereof, and his bill shall be dismissed as of course, unless a judge of the court shall allow him further time for the purpose. ANSWEKg. Rule XXXIX. — The rule, that if a defendant submits to answer he shall answer fully to all the matters of the bill, shall no longer apply in cases where he might by plea protect himself from such answer and discovery. And the defendant shall be entitled in all cases, by answer, to insist upon all matters of defence (not beingf matters of abatement, or to the character of the parties, or matters U. S. EQUITY RULES. 1109 of form) in bar of or to the merits of the bill, of which he may be entitled to avail himself by a plea in bar; and in such answer he shall not be compellable to answer any other matters than he would be compellable to answer and discover upon filing a plea in bar, and an answer in support of such plea, touching the matters set forth in the bill, to avoid or repel the bar or defence. Thus, for example, a bona fide purchaser for a valuable consideration, without notice, may set up that defence by way of answer instead of plea, and shall be entitled to the same protection, and shall not be compellable to make any further answer or discovery of his title than he would be in any answer in support of such plea. Rule XL. — A defendant shall not be bound to answer any state- ment or charge in the bill, unless specially and particularly interro- gated thereto; and a defendant shall not be bound to answer any interrogatory in the bill, except those interrogatories which such defendant is required to answer; and where a defendant shall answer any statement or charge in the bill, to which he is not interrogated, only by stating his ignorance of the matter so stated or charged, such answer shall be deemed impertinent. Ordered (December term, 1850), that the fortieth rule, heretofore adopted and promulgated by this court as one of the rules of practice in suits in equity in the Circuit Courts, be and the same is hereby repealed and annulled. And it shall not hereafter be necessary to interrogate a defendant specially and particularly upon any state- ment in the bill, unless the complainant desires to do so to obtain a discovery. Rule XLI. — The interrogatories contained in the interrogating part of the bill shall be divided as conveniently as may be from each other, and numbered consecutively i, 2, 3, &c. ; and the interroga- tories which each defendant is required to answer shall be specified in a note at the foot of the bill, in the form or to the effect follow- ing; that is to say — " The defendant (A. B.) is required to answer the interrogatories numbered respectively i, 2, 3, &c. ; " and the office copy of the bill taken by each defendant shall not contain any interrogatories except those which such defendant is so required to answer, unless such defendant shall require to be furnished with a copy of the whole bill. If the complainant, in his bill, shall waive an answer under oath, 1110 U. S. EQUITY RULES. or shall only require an answer under oath with regard to certain specified interrogatories, the answer of the defendant, though under oath, except such part thereof as shall be directly responsive to such interrogatories, shall not be evidence in his favor, unless the cause be set down for hearing on bill and answer only; but may neverthe- less be used as an affidavit, with the same effect as heretofore, on a motion to grant or dissolve an injunction, or on any other incidental motion in the cause ; but this shall not prevent a defendant from becoming a witness in his own behalf under section 3 of the act of Congress of July a, 1864.* Rule XLII. — The note at the foot of the bill, specifying the interrogatories which each defendant is required to answer, shall be considered and treated as part of the bill ; and the addition of any such note to the bill, or any alteration in or addition to such note after the bill is filed, shall be considered and treated as an amend- ment of the bill. Rule XLIII. — Instead of the words of the bill now in use, preced- ing the interrogating part thereof, and beginning with the words " To the end, therefore," there shall hereafter be used words in the form or to the effect following: " To the end, therefore, that the said defendants may, if they can, show why your orator should not have the relief hereby prayed, and may, upon their several and respective corporal oaths, and according to the best and utmost of their several and respective knowledge, remembrance, information and belief, full, true, direct, and perfect answer make to such of the several interrogatories hereinafter numbered and set forth, as by the note hereunder written, they are respectively required to answer; that is to say — "1. Whether, &c. " 2. Whether, &c." Rule XLIV. — A defendant shall be at liberty, by answer, to decline answering any interrogatory or part of an interrogatory, from answering which he might have protected himself by demurrer; and he shall be at liberty so to decline, notwithstanding he shall answer other parts of the bill, from which he might have protected himself by demurrer. *See Rev. Stat. §858. U. S. EQUITY RULES. 1111 Rule XLV. — No special replication to any answer shall be filed. But if any matter alleged in the answer shall make it necessary for the plaintiff to amend his bill, he may have leave to amend the same with or without the payment of costs, as the court, or a judge thereof, may in his discretion direct. Rule XLVI. — In every case where an amendment shall be made after answer filed, the defendant shall put in a new or supplemental answer, on or before the next succeeding rule day 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 cases of an omission to put in an answer. PARTIES TO BILLS. Rule XL VII. — In all cases where it shall appear to the court that persons, who might otherwise be deemed necessary or proper parties 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 their dis- cretion, 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 VIII. — Where the parties on either side are very numer- ous, and cannot, without manifest inconvenience and oppressive delays in the suit, be all brought before it, the court, in its discre- tion, may dispense with making all of them parties, and may pro- ceed in the suit, having sufficient parties before it to represent all the adverse interests of the plaintiffs and the defendants in the suit properly before it. But in such cases the decree shall be without prejudice to the rights and claims of all the absent parties. Rule XLIX. — In all suits concerning real estate, which is vested in trustees by devise, and such trustees are competent to sell and give discharges for the proceeds of the sale, and for the rents and profits of the estate, such trustees shall represent the persons bene- ficially interested in the estate or the proceeds, or the rents and profits, in the same manner, and to the same extent, as the executors 1112 U. S. EQUITY RULES. or administrators in suits concerning personal estate represent the persons beneficially interested in such personal estate; and in such cases it shall not be necessary to make the persons beneficially interested in such real estate, or rents and profits, parties to the suit; but the court may, upon consideration of the matter on the hearing, if it shall so think fit, order such persons to be made parties. Rule L. — 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 LI. — In all cases in which the plaintiff has a joint and several demand against several persons, either as principals or sure- ties, it shall not be necessary to bring before the court as parties to a suit concerning such demand, all the persons liable thereto; but the plaintiff may proceed against one or more of the persons severally liable. Rule LIT. — Where the defendant shall, by his answer, suggest that the bill is defective for want of parties, the plaintiff shall be at liberty, within fourteen days after answer filed, to set down the cause for argument upon that objection only; and the purpose for which the same is so set down shall be notified by an entry, to be made in the clerk's order book, in the form or to the effect following, (that is to say:) " Set down upon the defendant's objection for want of parties." And where the plaintiff shall not so set down his cause, but shall proceed therewith to a hearing, notwithstanding an objec- tion for want of parties taken by the answer, he shall not, at the hearing of the cause, if the defendant's objection shall then be allowe.d, be entitled as of course to an order for liberty to amend his bill by adding parties. But the court, if it thinks fit, shall be at liberty to dismiss the bill. Rule LIII. — If a defendant shall, at the hearing of a cause, object that a suit is defective for want of parties, not having by plea or answer taken the objection, and therein specified by name or description the parties to whom the objection applies, the court (if it shall think fit) shall be at liberty to make a decree saving the rights of the absent parties. U. S. EQUITY RULES. 1113 NOMINAL PARTIES TO BILLS. Rule LIV. — 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 not appear and answer the bill, unless the plaintiff specially requires him so to do by the prayer of his bill ; 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, unless the court shall otherwise direct. Rule LV. — Whenever an injunction is asked for by the bill to stay proceedings at law, if the defendant do not enter his appearance and plead, demur, or answer to the same within the time prescribed therefor by these rules, the plaintiff shall be entitled as of course, upon motion without notice, to such injunction. But special injunc- tions shall be grantable only upon due notice to the other party by the court in term, or by a judge thereof in vacation, after a hearing, which may be ex parte, if the adverse party does not appear at the time and place ordered. In every case where an injunction, either the common injunction or a special injunction, is awarded in vaca- tion, it shall, unless previously dissolved by the judge granting the same, continue until the next term of the court, or until it is dissolved by some other order of the court. BILLS OF EEVIVOR AND SUPPLEMENTAL BILLS. Rule LVI. — Whenever a suit in equity shall become abated by the death of either party, or by any other event, the same may be revived by a bill of revivor, or a bill in the nature of a bill of revivor, as the circumstances of the case may require, filed by the proper parties entitled to revive the same; which bill may be filed in the clerk's office at any time; and upon suggestion of the facts, the proper process of subpoena shall, as of course, be issued by the clerk, requiring the proper representatives of the other party to appear and show cause, if any they have, why the cause should not be revived. And if no cause shall be shown at the next rule day which shall occur after fourteen days from the time of the service of the same process, the suit shall stand revived, as of course. 111-1 U. S. EQUITY RULES, Rule LVII. — Whenever any suit in equity shall become defective, from any event happening after the filing of the bill, (as, for example,, by change of interest in the parties,) or for any other reason a sup- plemental bill, or a bill in the nature of a supplemental bill, may be necessary to be filed in the cause, leave to file the same may be granted by any judge of the court on any rule day, upon proper cause shown, and due notice to the other party. And if leave is granted to file such supplemental bill, the defendant shall demur, plead, or answer thereto on the next succeeding rule day after the supplemental bill is filed in the clerk's office, unless some other time shall be assigned by a judge of the court. Rule LVIII. — It shall not be necessary 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. ANSWERS. Rule LIX. — Every defendant may swear to his answer before any justice or judge of any court of the United States, or before any commissioner appointed by any Circuit Court to take testimony or depositions, or before any master in chancery appointed by any Circuit Court, or before any judge of any court of a State or Terri- tory, or before any notary public. AMENDMENT OF ANSWERS. Rule LX. — After an answer is put in, it may be amended as of course, in any matter of form, or by filling up a blank, or correcting a date, or reference to a document or other small matter, and be re-sworn, at any time before a replication is put in, or the cause is set down for a hearing upon bill and answer. But after replication, or such setting down for a hearing, it shall not be amended in any material matters, as by adding new facts or defences, or qualifying or altering the original statements, except by special leave of tha court or of a judge thereof, upon motion and cause shown after due notice to the adverse party, supported, if required, by affidavit. And in every case where leave is so granted, the court, or the judge granting the same, may, in his discretion, require that the same be separately engrossed and added as a distinct amendment to the original answer, so as to be distinguishable therefrom. U. S. EQUITY RULES. 1115 EXCEPTIONS TO ANSWERS. Rule LXI. — After an answer is filed on any rule day the plaintiff shall be allowed until the next succeeding rule day to file in the clerk's office exceptions thereto for insufficiency, and no longer, unless a longer time shall be allowed for the purpose, upon cause shown to the court or a judge thereof; and if no exception shall be filed thereto within that period, the answer shall be deemed and taken to be sufficient. Rule LXII. — When the same solicitor is employed for two or more defendants, and separate answers shall be filed, or other pro- ceedings had by two or more of the defendants separately, costs shall not be allowed for such separate answers or other proceedings, unless a master, upon reference to him, shall certify that such separate answers and other proceedings were necessary or proper, and ought not to have been joined together. Rule LXIII. — Where exceptions shall be filed to the answer for insufficiency within the period prescribed by these rules, if the defendant shall not submit to the same and file an amended answer on the next succeeding rule day, the plaintiff shall forthwith set them down for a hearing on the next succeeding rule day thereafter, before a judge of the court, and sha'' enter, as of course, in the order book, an order for that purpose. And if he shall not so set down the same for a hearing, the exceptions shall be deemed abandoned, and the answer shall be deemed sufficient: Provided, however. That the court, or any judge thereof, may, for good cause shown, enlarge the time for filing exceptions, or for answering the same, in his discretion, upon such terms as he may deem reasonable. Rule LXIV. — If at the hearing the exceptions shaU be allowed, the defendant shall be bound to put in a full and complete answer thereto on the next succeeding rule day; otherwise, the plaintiff shall, as of course, be entitled to take the bill, so far as the matter of such exceptions is concerned, as confessed, or, at his election, he may have a writ of attachment to compel the defendant to make a better answer to the matter of the exceptions; and the defendant, when he is in custody upon such writ, shall not be discharged there- from but by an order of the court, or of a judge thereof, upon hia 1116 U. S. EQUITY RULES. putting in such answer and complying with such other terms as the court or judge may direct. Rule LXV. — If, upon argument, the plaintiff's exceptions to the answer shall be overruled, or the answer shall be adjudged insuffi- cient, the prevailing party shall be entitled to all the costs occasioned thereby, unless otherwise directed by the court, or the judge thereof, at the hearing upon the exceptions. REPLICATION AND ISSUE. Rule LXVI. — Whenever the answer of the defendant shall not be excepted to, or shall be adjudged or deemed sufficient, the plain- tiff shall file the general replication thereto on or before the next succeeding rule day thereafter; and in all cases where the general replication is filed the cause shall be deemed to all intents and pur- poses at issue, without any rejoinder or other pleading on either side. If the plaintiff shall omit or refuse to file such replication within the prescribed period, the defendant shall be entitled to an order, as of course, for a dismissal of the suit; and the suit shall thereupon stand dismissed, unless the court, or a judge thereof, shall, upon motion for cause shown, allow a replication to be filed nunc pro tunc, the plaintiff submitting to speed the cause, and to such other terms as may be directed. TESTIMONY— HOW TAKEN. Rule LXVII. — After the cause is at issue, commissions to take testimony may be taken out in vacation as well as in term, jointly by both parties, or severally by either party, upon interrogatories filed by the party taking out the same in the clerk's office, ten days' notice thereof being given to the adverse party to file cross-inter- rogatories before the issuing of the commission; and if no cross- interrogatories are filed at the expiration of the time, the commission may issue ^x/ar/i". In all cases the commissioner or commissioners may be named by the court, or by a judge thereof; and the presid- ing judge of the court exercising jurisdiction may either in term time or vacation vest in the clerk of the court general power to name commissioners to take testimony. Either party may give notice to the other that he desires the evidence to be adduced in the cause to be taken orally, and thereupon all the witnesses to be examined U. S. EQUITY RULES. 1117 shall be examined before one of the examiners of the court, or before an examiner to be specially appointed by the court, the examiner, if he so request, to be furnished with a copy of the pleadings; such examination shall take place in the presence of the parties or their agents, by their counsel or solicitors, and the witnesses shall be sub- ject to cross-examination and re-examination, all of which shall be conducted as near as may be in the mode now used in common-law courts. The depositions taken upon such oral examination shall be reduced to writing by the examiner, in the form of question put and answer given; provided, that, by consent of parties, the examiner may take down the testimony of any witness in the form of narrative. At the request of either party, with reasonable notice, the depo- sition of any witness shall, under the direction of the examiner, be taken down either by a skillful stenographer or by a skillful type- writer, as the examiner may elect, and when taken stenographically shall be put into typewriting or other writing; provided, that such stenographer or typewriter has been appointed by the court, or is approved by both parties. The testimony of each witness, after such reduction to writing, shall be read over to him and signed by him in the presence of the examiner and of such of the parties or counsel as may attend ; pro- vided, that if the witness shall refuse to sign his deposition so taken, then the examiner shall sign the same, stating upon the records the reasons, if any, assigned by the witness for such refusal. The examiner may, upon all examinations, state any special mat- ters to the court as he shall think fit; and any question or questions which may be objected to shall be noted by the examiner upon the deposition, but he shall not have power to decide on the competency, materiality, or relevancy of the questions, and the court shall have power to deal with the costs of incompetent, immaterial, or irrele- vant depositions, or parts of them, as may be just. In case of refusal of witnesses to attend, to be sworn, or to answer any question put by the examiner, or by counsel or solicitor, the 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. Notice shall be given by the respective counsel or solicitors to the opposite counsel or solicitor!: or parties of the time and place of the 1118 U. S. EQUITY RULES. examination for such reasonable time as the examiner may fix by order in each cause. When the examination of witnesses before the examiner is con- cluded, the original depositions, authenticated by the signature of the examiner, shall be transmitted by him to the clerk of the court, to be there filed of record in the same mode as prescribed in section 865 of the Revised Statutes. Testimony may be taken on commission in the usual way by written interrogatories and cross-interrogatories, on motion to the court in term time, or to a judge in vacation, for special reasons satisfactory to the court or judge. Where the evidence to be adduced in a cause is to be taken orally, as before provided, the court may, on motion of either party, assign a time within which the complainant shall take his evidence in sup- port of the bill, and a time thereafter within which the defendant shall take his evidence in defence and a time thereafter within which the complainant shall take his evidence in reply; and no fur- ther evidence shall be taken in the cause, unless by agreement of the parties or by leave of court first obtained, on motion for cause shown. The expense of the taking down of depositions by a stenographer and of putting them into typewriting or other writing shall be paid in the first instance by the party calling the witness, and shall be imposed by the court, as part of the costs, upon such party as the court shall adjudge should ultimately bear them. Upon due notice given as prescribed by previous order, the court may, at its discretion, permit the whole, or any specific part, of the evidence to be adduced orally in open court on final hearing. Rule LXVIII. — Testimony may also be taken in the cause, after it is at issue, by deposition, according to the acts of Congress. But in such case, if no notice is given to the adverse party of the time and place of taking the deposition, he shall, upon motion and affidavit of the fact, be entitled to a cross-examination of the witness either under a commission or by a new deposition taken under the acts of Congress, if a court or a judge thereof shall, under all the circumstances, deem it reasonable. Rule LXIX. — Three months, and no more, shall be allowed for the taking of testimony after the cause is at issue, unless the court U. S. EQUITY RULES. 1119 or a judge thereof shall, upon special cause shown by either party, enlarge the time ; and no testimony taken after such period shall be allowed to be read in evidence at the hearing. Immediately upon the return of the commissions and depositions, containing the testi- mony, into the clerk's office, publication thereof may be ordered in the clerk's office, by any judge of the court, upon due notice to the parties, or it may be enlarged, as he may deem reasonable under all the circumstances. But, by consent of the parties, publication of the testimony may at any time pass into the clerk's office, such con- sent being in writing, and a copy thereof entered in the order books or indorsed upon the deposition or testimony. TESTIMONY DE BENE ESSE. Rule LXX. — After any bill filed, and before the defendant hath answered the same, upon affidavit made that any of the plaintiff's witnesses are aged or infirm, or going out of the country, or that any one of them is a single witness to a material fact the clerk of the court shall, as of course, upon the application of the plaintiff, issue a commission to such commissioner or commissioners as a judge of the court may direct, to take the examination of such witness or witnesses de bene esse, upon giving due notice to the adverse party of the time and place of taking his testimony. FOBK OF THE LAST INTEBBOeATOBT. Rule LXXI. — The last interrogatory in the written interroga- tories to take testimony now commonly in use shall in the future be altered, and stated, in substance, thus: " Do you know, or can you set forth, any other matter or thing which may be a benefit or advantage to the parties at issue in this cause, or either of them, or that may be material to the subject of this your examination, or the matters in question in this cause ? If yea, set forth the same fully and at large in your answer." CBOSSBILL. Rule LXXII. — Where a defendant in equity files a cross-bill for discovery only against the plaintiff in the original bill, the defendant to the original bill shall first answer thereto, before the original plaintiff shall be compellable to answer the cross-bill. The answer of the original plaintiff to such cross-bill may be read and used by 56 1120 U. S. EQUITY RULES. the party filing the cross-bill, at the hearing, in the same manner and under the same restrictions as the answer praying relief may now be read and used. REFERENCE TO AND PROCEEDINGS BEFORE MASTERS. Rule LXXIII. — Every decree for an account of the personal estate of a testator or intestate shall contain a direction to the master, to whom it is referred to take the same, to inquire and state to the court what parts, if any, of such personal estate are outstand- ing or undisposed of. unless the court shall otherwise direct. Rule LXXIV. — Whenever any reference of any matter is made to a master to examine and report thereon, the party at whose instance or for whose benefit the reference is made shall cause the same to be presented to the master for a hearing on or before the next rule day succeeding the time when the reference was made; if he shall omit to do so, the adverse party shall be at liberty forthwith to cause proceedings to be had before the master, at the cost of the party procuring the reference. Rule LXXV. — 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 solici- tors ; and if either party shall fail to appear at the time and place appointed, the master shall be at liberty to proceed ex parte, or in his discretion, 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 practicable 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 LXXVI. — In the reports made by the master to the court, no part of any state of facts, charge, affidavit, deposition, examina tion, or answer, brought in or used before them, shall be stated or recited. But such state of facts, charge, affidavit, deposition, examination, or answer shall be identified, specified, and referred to, U. S. EQUITY RULES, 1121 lo as to inform the court what state of facts, charge, affidavit, depo- sition, examination, or answer, were so brought in or used. Rule LXXVII. — The master shall regulate all the proceedings in every hearing before him, upon every such 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 documents applicable thereto; and also to examine on oath, vivd voce, all witnesses produced by the parties before him, and to order the examination of other witnesses to be taken, under a commission to be issued upon his certificate from the clerk's office, or by depo- sition according to the acts of Congress, or otherwise, as hereinafter provided; and also to direct the mode in which the matters requir- ing evidence shall be proved before him; and generally to do all other acts, and direct all other inquiries and proceedings in the mat- ters before him, which he may deem necessary and proper to the jus- tice and merits thereof and the rights of the parties. Rule LXXVIII. — Witnesses who live within the district may, upon due notice to the opposite party, be summoned to appear before the commissioner appointed to take testimony, 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 witnesses at the time and place speciiied, 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 any judge thereof, in the same manner as if the con- tempt were for not attending, or for refusing to give testimony in the court. But nothing herein contained shall prevent the examina- tion of witnesses vivd voce when produced in open court, if the court shall in its discretion deem it advisable. Rule LXXIX. — 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 accounts 71 1132 U. S. EQUITY RULES. so brought in, shall be at liberty to examine the accounting party vivd voce, or upon interrogatories in the master's office, or by depo- sition, as the master shall direct. Rule LXXX. — All affidavits, depositions, 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 LXXXI. — The master shall be at liberty to examine any creditor or other person coming in to claim before him, either upon written interrogatories, or vivd voce, or in both modes, as the nature of the case may 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 requires it, in order that the same may be used by the court, if necessary. Rule LXXXII. — The Circuit Courts may appoint standing mas- ters in chancery in their respective districts (a majority of all the judges thereof, including the justice of the Supreme Court, the cir- cuit judges, and the district judge for the district, concurring in the appointment) ; and they may also appoint a master pro hac vice in any particular case. The compensation to be allowed to every master in chancery for his services in any particular case shall be fixed by the Circuit Court, in its discretion, having regard to all the circumstances thereof, and the compensation shall be charged upon and borne by such parties in the cause as the court shall direct. The master shall not retain his report as security for his compensa- tion; 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. EXCEPTIONS TO REPORT OF MASTER Rule LXXXIII. — The master as soon as his report is ready, shall return the same into the clerk's office, and the day of the return shall be entered by the clerk in the order book. The parties shall have one month from the time of filing the report to file exceptions thereto; and if no exceptions are within that period filed by either party, the report shall stand confirmed on the next rule day after the month is expired. If exceptions are filed, they shall stand for U. S. EQUITY RULES. ^1123 hearing before the court if the court is then in session; or it not, then at the next sitting of the court which shall be held thereafter by adjournment or otherwise. Rule LXXXIV. — And in order to prevent exceptions to reports from being filed for frivolous causes, or for mere delay, the party whose exceptions are overruled shall, for every exception overruled, pay costs to the other party, and for every exception allowed shall be entitled to costs — the costs to be fixed in each case by the court, by a standing rule of the Circuit Court. DEGREES. Rule LXXXV. — Clerical mistakes in decrees, or decretal orders, or errors arising from any accidental slip or omission, may, at any time before an actual enrollment thereof be corrected by order of the court or a judge thereof, upon petition, without the form or expense of a re-hearing. Rule LXXXVI. — In drawing up decrees and orders, neither the bill, nor answer, 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 further heard, as the case may be) at this term, and was argued by counsel; and thereupon, upon consideration thereof, it was ordered, adjudged, and decreed as follows, viz: " [Here insert the decree or order.] GUARDIANS AND PROCHEIN AMIS. Rule LXXXVII. — Guardians ad litem to defend a suit may be appointed by the court, or by any judge thereof, for infants or other persons who are under guardianship, or otherwise incapable to sue for themselves ; all infants and other persons so incapable may sue by their guardians, if any, or by \h^\x prochein ami; subject, however, to such orders as the court may direct for the protection of infants and other persons. Rule LXXXVIII. — Every petition for a rehearing shall contain the special matter or cause on which such rehearing is applied for, thall be signed by counsel, and the facts therein stated, if not appar- 1124 U. S. EQUITY RULES. eat on the record, shall be verified by the oath of the party, or by soaie 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 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 LXXXIX. — The Circuit Courts (a majority of all the judges thereof, including the justice of the Supreme Court, the circuit judges, and the district judge of the district, concurring therein) may make any other and further rules and regulations for the prac- tice, proceedings, and process, mesne and final, in their respective districts, not inconsistent with the rules hereby prescribed, in their discretion, and from time to time alter and amend the same. Rule XC. — In all cases where the rules prescribed by this court or by the Circuit Court do not apply, the practice of the Circuit Court shall be regulated by the present practice of the High Court of Chancery in England, so far as the same may reasonably be applied consistently with the local circumstances and local con- venience of the district where the court is held, not as positive rules,, but as furnishing just analogies to regulate the practice. Rule XCI. — Whenever under these rules an oath is or may be required to betaken, 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 XCII. — Ordered (December Term, 1863), That in suits ia equity for the foreclosure of mortgages in the Circuit Courts of the United States, or in any court of the Territories having jurisdiction of the same, a decree may be rendered for any balance that may be found due to the complainant over and above the proceeds of the sale or sales, and execution may issue for the collection of the same, as is provided in the eighth rule of this court regulating tne equity- practice, where the decree is solely for the payment of money. INJUNCTIONS, Rule XCIII. — When an appeal from a final decree in an equity suit, granting or dissolving an injunction, is allowed by a justice or U. S. EQUITY RULES. 1125 judge who took part in the decision of the cause, he may in his dis- cretion, at the time of such allowance, make an order suspending or modifying 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. BILL BY STOCKHOLDER. Rule XCIV. — 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 com- plains, 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 other- wise 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 managing directors or trustees, and, if necessary, of the share- holders, and the causes of his failure to obtain such action. See also the following sections of the act of June i, 1872: Sec. 7. That whenever notice is given of a motion for an injunction out of a Circuit or district court of the United States, the court or judge thereof may, if there appear to be danger of irreparable injury from delay, grant an order restraining the act sought to be enjoined until the decision upon the motion. Such order may be granted with or without security, in the discretion of the court or judge: Provided, That no justice of the Supreme Court shall hear or allow any application for an injunction or restraining order except within the circuit to which he is allotted, and in causes pending in the cir- cuit to which he is allotted, or in such causes at such place outside of the circuit as the parties may in writing stipulate, except in causes where such application cannot be heard by the circuit judge of the circuit, or the district judge of the district. Sec. 13. That when in any suit in equity, commenced in any court, In the United States, to enforce any legal or equitable Hen or claim against real or personal property within the district where such suit is brought, one or more of the defendants therein shall not be an 1126 U. S. EQUITY RULES. inhabitant of or found within the said district, or shall not voluntarily appear thereto, it shall be lawful for the court to make an order directing such absent defendant to appear, plead, answer, or demur to the complainant's bill at a certain day therein to be designated, which order shall be served on such absent defendant, if practicable, wherever found; or where such personal service is not practicable, such order shall be published in such a manner as the court shall direct; and in case such absent defendant shall not appear, plead, answer or demur within the time so limited, or within some further time to be allowed by the court, in its discretion, and upon proof of the service or publication of said order, and of the performance of the directions contained in the same, it shall be lawful for the court to entertain jurisdiction, and proceed to the hearing and adjudica- tion of such suit in the same manner as if such absent defendant had been served with process within the said district; but such adjudica- tion shall, as regards such absent defendant without appearance, affect his property within such district only. INDEX TO EQUITY RULES. Note. — The figures refer to the numbers of tbe rulcflb, A. Aoeount. of decedent's estate, decree to contain what. 7^ form of, on reference to master, 79. AfiSrmatlon. permissible instead of oath, 91. Amendments. when applications for filing, grantable of ooniM, |> to bills, as of course, when, 28. before answer, 28. after answer, 29, 46. after replication, 29. when to be filed, after leave granted, 301 when deemed abandoned, 30. •upplemental answer, when necessary, 46. when not allowable, of course, for defect of partleSi fk to answer, as of course, when, 60. by leave, when, 60. if exceptions for insufficiency allowed, 63. Answer. (5« Pleadings.) courts always open for filing, when, i. when applications for filing, grantable of courMi §, when to be filed, 18. bow compelled, 18. costs upon, 25. when necessary to fortify plea, 32. answer to part, demurrer or plea to part, 31. may insist on defenses available by plea, 39. what it need not contain, 37. what interrogatories need not be answered, 44. when supplemental answer to be filed, 46. (See Supplemental Pleadinos.) bf nominal parties, when necessary, 54. 1127 1128 INDEX TO EQUITY RULES. The figures refer to the numbers ot tb» nlm. Answer — {Continue J). before whom to be sworn to, 59. when amendable, 60. exceptions to, when to be filed, 61. when deemed sufficient, 6i. separate answers, costs when allowed, 6a. right to amend after exceptions filed, 63. exceptions to, hearing to be set down, 63 {See Exceptions.) bill to be taken pro confesso, on allowance of exceptloBI 10, fl^ right of plaintiff to full answer, how enforced, 64. costs on determination of exceptions to, 65. not to be recited in decree, 86. Appeal. suspending injunction, on appeal, 93. Appearances. appearance day of defendant, 17. how made, 17. to be entered in order book, 17. when unnecessary by nominal parties, S4. Applications. {See Motions.) Attachment — writ of. proper process to compel obedience to order or decree^ y. when proper final process, 8. when grantable to compel answer, 18. to compel full answer, after allowance of exceptions, 6^ B. Bills. {See Pleadings, Revivor, Supplbmsntal Plkadinoi^ courts always open for filing, preliminary, i. applications for filing, when grantable of course, J. when taken /ri7 confesso, 18, 19. frame and form of, 20. introductory part of, 20. what may be omitted from, 21. common confederacy clause, SI. charging clause, 21. jurisdiction clause, 21. prayer of, contents, 21, 23. when necessary and proper parties may be omitted, tt, to be signed by counsel, 24. costs, 25. to contain no unnecessary recitals, 86, S|. INDEX TO EQUITY RULES. 1129 The figure* refer to the numbers of the rulet> WaiM — iOmtiHueti). impertinence In. (See Imfirtincnt Mattbr.) scandalous. (See Scandalous Mattkr.) when amendable, of course, sS. (See Amendments.) when copy to be furnished, aS. when copy of whole amended bill to be furnished, aS. when amendable on motion, but without notice, 99. when amendable only on notice, 39. amending before answer or plea, 28. amending after answer, 29, 46. amending after replication, 29. to be dismissed, if demurrer or plea is not set down for argument, jl. amendable if demurrer or plea allowed, 35. interrogatories in. (See Interrogatories.) nominal parties need not answer, unless, 54. bill of revivor, when to be filed, 56. (See Revivor.) ■npplemental bills, 57. when allowed, 57- need not repeat original statements, 58. (See Supplemental Pleadinoi.) to what extent may be taken fro eonfiuo. If no answer ilad, altar «see^ tions allowed, 64. ■ot to be recited in decree, 86. by stoclcholders against corporation, 94, what to contain, 94. to be verified, 94. a Oestuls Que Trust when unnecessary but proper parties, 49. Obambers. motions, rules and orders at, 3, 4. Ctork. when to be in attendance, S. when ofiSce of, open, s. motions grantable by, as of coarse, |. Oommissloiu. court always open for issuing, I. to take testimony, when Issuable ex parU, 6y, commissioners, how chosen, 67. notice to file cross-interrogatories, 67. (See iNTMKOaATORin.) 1130 INDEX TO EQUITY RULES. The figures refer to the numbers of the rules. CJOmmiSSiOnS — (Continued). refusal to attend or testify before commissioners, 67. to take testimony de bene esse, 67. form of last interrogatory, 67. to be issued on certificate of master, 67. Contempt of Court. refusal to attend before master, examiner or commissionei; 67, 78. Costs. of bills and answers, 25. on determination of exceptions to scandalous or impertinent matter, fl& amendment without, 28. amendment upon payment of, 28, 29. when granted on hearing of demurrer or plea, 34, 35. if plaintiff requires answer from nominal party, 54. when separate answers are filed, 62. on exceptions to master's report, 84. Counsel. to sign every bill, 24. certificate of, to be filed with plea or demurrer, 31. Cross-bill. not necessary to answer, before original bill is answered, 70. D. Decree. when to be entered on default, 18, ig. on what conditions set aside, 19. for accounting of estates, what to contain, 73, clerical errors, how corrected, 85. not to recite pleadings, 86. what to contain, 86. on foreclosure, to provide for deficiency, 9a. Default. practice on default in appearing, 18. Defendants. (See Cestuis que Trust, Incompetent Pbrsonb, Infants, Partus.) to be named in introductory part of bill, 20. in prayer for subpoena, 21. nominal defendants, — . (See Nominal Partus.) service upon by publication, act of June i, 1878, sec. 13. omitted from bill when jurisdiction over not obtainable, M, 49 omitted when too numerous, 48. INDEX TO EQUITY RULES. ,1131 The figures refer to the numbers of the rulM. Defendants —(6i>H/2'»«^<^. heirs-at-law a: 50. joint and several otJigees as, 51. Deficiency. on foreclosure, decree to provide for, 98, Demurrer. application for filing, grantable of course, 5. when to be filed, 18. certificate of counsel to accompany, 31. affidavit of defendant to accompany, 31. demurrer to part, plea or answer to part, 3t. costs, if overruled, 34. if sustained, 35. for what not to ^e overruled, 36, 37. may extend to matter covered by answer, 37. plaintiff's failure to set down for argument, 38. Discovery. how obtained when default in answering, 18. how far is defendant bound to make, 39. special interrogatories necessary to obtain, 40^ Docket. when suit to be entered in, 16. B. Bxaminers. testimony before, how taken, 67. stenographers employed by, expenses of, 67. no power as to relevancy or competency of questions, 6)k duties if witnesses refuse to sign deposition, 67. refusal to testify before, 67. notice of examination to be given, 67. time within which to take testimony, 67, 69. Bzeeptlons. to scandalous and impertinent matter, 36, 17. must be specific, 27. to be determined, 26, 27. to answers, for insufficiency, 61, 63, 63, 64, 6$, when to be filed, 61. If filed, defendant may amend, 63. plaintiff to set down for hearing, 63. effect of failure, 63. If allowed, bill may be taken pro eonftua, A^ plaintiff may require full aniwer, 6^ coetB upon determination, b%. 1132 INDEX TO EQUITY RULES. The figure! refer to the nujnberi of the mlM BXeeptlODS — (OmHnued). to master's report, 83, 84. when to be filed, 83. failure to file, 83. costs, upon determlnatloa, I4. ■xeentlon. to collect deficiency on foredoiura, 91. Estate. of decedent, accountinc 7). r. Foreelosore. decree for deficiency, execution to iaine, ga. ttnardlan ad Utem. {Stt Incomfbtbnt Pkksons, Infamti.) when to be appointed, 87. H. Heir at Law. when unnecessary, though proper party, jo. High Court of Chancery In England. practice of to regulate, when, go. L Impertinent Matter. may be expunged, a6. Incompetent Persons. need of guardianship to be stated in prayer for process, SJi guardians ad litem for, 87. (,See Pkochein Ami.) InfiEuiey. of defendants to be stated in prayer for process, 33. guardians ad littm for, 87. (Set Pkochbin Ami.) iQjnnetlon. (See Restraining Order.) to be specially asked for in bill, 2t. not necessary to repeat request in prayer for process, 33. when granted, 55. bow long it continue*, 55. suspending or modMying on appeal, 93. by what judge allowed, act of June i, 1871, section 7, INDEX TO EQUITY RULES. 1133 The figures refer to the numben of tb« rulM. Inteploeatory Orders. when and where made by judge, J. btonrogatoriei. to be divided and numbered, 41. foot note to specify which to be aniwtnd, 4S« office copy to contain what, 41. words preceding the interrogatories, 43. what interrogatories need not be answered, 44. commission upon, 67. cross-interrogatories, notice to Ale, to be glv«ll, A7> form of last interrogatory, 71. master at liberty to examine upon, >Z. iMue. joined by filing of replication, 66. Joint and Several Obligees. not all necessary parties, f I. Judge. orders by, ai chambers. In racatloa, % Jurisdiction. parties not within may be omitted, aa, 47. to what extent obtained by service by pablleation, act of Jan* I, 1871, MC tion 13. M. MMters In Chancery. (Stt RsnnsNCBs, Rbpo&ts.) references to, 73, 74, 75, 76, 77, 78, 79, 80, 8x, 8a, 83, 84. powers of, on reference, 77, 78, 81. accountings before, form, 79. right on reference to use all documents, 80. circuit courts may appoint standing masters, 8a. compensation of, how enforced, 83. ■oClons. {See Intkrlocutoky Okdbrs, Ordbrs, Rulss.) courts always open for making interlocutory, i. grantable of course, when entertained by clerk, 9. to be entered in order book, 4. what are grantable of course, S- power of judge to rescind or suspend, J. not grantable of course, where made and bennli& ■e Bxeat Begno. writ of. la be fpeciaUy asked for, if. 1134 INDEX TO EQUITY RULES. The figures refer to the numbers of the Tuleti Nominal Parties. Need not answer, when, 54. Notice. (Ste Amendments, Motion, Ordkr.) of interlocutory orders, etc., before judge, %, entry of order, etc., when notice, 4. to solicitors, is notice to parties, 4, personal, may be directed, 4. time of, when abridged, 4. 0. Oath. affirmation, instead of, 91. Order Book. to be kept by clerk, 3. entry of order in, is notice, 3. appearances to be entered in, 17. entry of objection of defect of parties, 5a. Orders. court always open for making interlocutory, r gran*able of course, when entertained by clerk, a. to be entered in order book, 3, entry of, is notice, 3. P. Parties. persons not parties, rights and duties of, how enforced, Ift necessary and proper, when omitted from bill, 22, 47, 4S. omitted when numerous, 48. when trustees represent cestuis que trust, 49. cestuis que trust when unnecessary, 49. heirs-at-law, when unnecessary, 50. joint and several obligees, not all necessary, 51. objection of defect of, 52, 53. failure to set down for argument, 52. when first raised at hearing, 53. nominal, need not appear, when, 54. rights of absent not prejudiced, 47, 48. 53. service upon by publication. Act of June i, 1872, section IJ. Pleadings. {See Amendments, Answer, Bill, Dbmukkxr, PlkA.) courts always open for filing, I. when to be filed, 18. not to be recited in decrees, 86. Pleas. applications for filing, when grantable of courM^ ^ INDEX TO EQUITY RULES. 113l The figures refer to the numbers of tb« nilMb 1 — {Continued). when to be filed, l8. certificate of counsel to accompany, 31. affidavit of defendant to accompany, 31. plea to part, answer or demurrer to part, yt, when to be fortified by an answer, 32. may be argued, or issue joined, 33. of what avail to defendant, 33. costs if over-ruled, 34. defendant to answer, if over-ruled, 34. costs if allowed, 35. plaintiff's right to amend, if plea allowed, 35. when not to be over-ruled, 36, 37. right to plea or demur to matter covered by answer, 37. plaintiff's failure to reply, or set down plea for argument, 38. what defenses available by plea may be insisted on in answer, Jf, Praetlee. (5« Rules.) Process. {See Attachment, Execution, Subpcbna.) preparatory to hearing on merits, courts always open for IsBuIng, )• what applications for, grantable of course, 5. writ of subpoena, in first instance, 7. writ of attachment to compel obedience to decree, y, t> writ of sequestration, when proper, 7, 8. writ of assistance, when proper, 7, 9. final process, proper writs, 8, 9. mesne and final, how served, 15. (See Servicb of Procbsi.) Proehein Ami. infant or incompetent person may sue by, 87. Pnblleation. iervice by, when-; act of June i, 1B72, section t|. of testimony taken by commission, 69, R. Befarenees. {See Masters in Chancery, RBFOKit.) for accounting of decedent's estate, 73. who to present to master, 74. duties of master on, 75. notice of hearing on, to whom given, 7|. when to proceed ex parte, 75. report upon. {See Rcfort.) powers of master on, 77. Accountings, form of, 79. 1136 INDEX TO EQUITY RULES. The figures refer to the numbers of the rulea. Rsferenoes —(CrnHnued). what documents may be used on, 80. examination of claimant upon, 3i. exceptions to report upon. {See ExCBPnoNS, RxFOKT.) Rehearing. petition for, what to contain, 88> when granted, 88. Sejoinder. not necessary, 66. Replication. withdrawing, and amending bill, 99. no special replication allowed, 45. general, when to be filed, 66. filing joins issue, 66. failure to file, effect, 66. Report of Master. (See Excbftions, Master in Chancbrt, RKruxNOUb) what not to contain, 76, what to refer to, 76. not to be retained as security for compensatioil, 8a> exceptions to, 83, 84. when to be filed, 83. costs if over-ruled or allowed, 84. not to be recited in decree, 85. Restraining Orders. issuable when and by whom, act of June I, 1873, sec % Revivor. {See Bill.) when bill of, to be filed, 56, 57, 58. Rnle Days. motions and orders on, 3. Rules. (And Orders.) {See Motions, Ordirs.) courts always open for directing interlocutory, I. grantable of course, when entertained by clerk, a. to be entered in order book, 4. entry of, is noticed, 4. Rules, (of Practice.) additional may be made by circuit courts, 89. in default of, practice of High Court of Chancery in England to ragnUla, 91X S. Seandalous Matter. expunged if exceptions ara taken, a6, 17. INDEX TO EQUITY RULES. 1137 The figure! refer to tlie numbers of the mlea. Serviee of Process. how made, 13. by whom made, 15. how proved, 15. when by publication, act of Juot, I, 187a, Mctioa 1^1 Stenosrraphers. 1 may take oral testimony before examiner*, 6|. how chosen, 67. expense of, 67. Stockholders. bills by, against the corporation, 94. SubpoBna. (5« Process.) when proper process, 7, 8. when to issue, 11, I2, 14. when returnable, 12. memorandum at bottom, la. in case of more than one defendant. IS. how served, 13. by whom served, 15. prayer for, to contain what names, 23. infancy of defendants to be stated in, 33. Issuable of course, by cleric on bill of revivor, S& Suit. when to be entered on docket, 16. when revived, 56. collusive, by stockholders, 94. in what suits, may service be by publication, act of JlUM I, Z879, sectioa 13, Sapplemental Pleadings. supplemental answer, after amendment of bill, 4& when to be filed, 46. default in filing, 46. supplemental bill, when allowed, 57. unnecessary to repeat original statements, 581 T, Testimony. {See Commissions, Examinirs, Intxxrooakhuxs, Srnowufbiu, Witnesses.) how taken, 67, 68, 69, 70, 78. by commission, 67. notice to file cross-interrogatories, fljk bow commissioners chosen, 67. 72 1138 INDEX TO EQUITY RULES. The figures refer to the numbers of the nilea. Twttmony —(CentinueJ). when taken orally, 67. before an examiner, 67. form of deposition, 67, employment of stenographer, 67. time within which to be taken, 67, 68. taken on commission may be adduced in open oouti Af« by deposition pursuant to acts of congress, 68. publication of, if taken by commission, 69. may be taken de iene esse, 70. form of last interrogatory, 71. Trustees. when as parties they represent eestuit ftu Inul, 49b Typewriter. may be employed by examiner, 67. how chosen, expenses of, 67. f. Vacation. powers of judge durinfr. Verification. answer sworn to, before whom, 59. of petition for rehearing, 88. of bill by stockholders against corporation, q(. w. witnesses. {See Commission, Examineks, THTmamr.) may be examined on commission, 67. before examiner orally, 67. refusal of, to attend and testify, 67, 78. when testimony of, taken de bene esse, 70. powers of master over, on reference, 77, 78. THE Bankruptcy Act of 1898 WITH AMENDMENTS OF 1903, 1906, AND 1910 An Act to Establish a Uniform System of Bankruptcy Throughout the United States Approvbd Jtjly 1, 1898 ; Amendments Approved Feb. 5, 1903, June 15, 1906, AND June 35, 1910 -Be it enacted by the Senate and House of Representatives of the United States of America, in Congress assembled: CHAPTER 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 be inconsistent with the context, he 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 pro- ceeding, is a bankrupt, or if such decree is appealed from, then the date when such decree is finally confirmed; (3) "appellate courts" shall in- clude 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 part- ExpiiANATioN. — Matter in italics Is new. 1139 1140 The Bankeuptcy Act of 1898, Amended. nerships, and shall include limited or other partnership associations or- ganized under the laws making the capital subscribed alone responsible for the debts of the association; (7) "court" shall mean the court of bank- ruptcy in which the proceedings 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 Colum- bia, and the United States court of the Indian Territory, and of Alaska; (9) "creditor" shall include anyone who owns a demand or claim prov- able in bankruptcy, and may include his duly authorized agent, attorney, or proxy; (10) "date of bankruptcy," or "time of bankruptcy," or "com- mencement of proceedings " or " bankruptcy," 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) " discharge " 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 instrument in writing; (14) "holiday" shall include Christmas, the Fourth of July, the Twenty-second of February, 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 thanksgiving; (15) a person shall be deemed insolvent within the provisions of this act whenever 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 afl5rmation; (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 authorized by law to perform the duties of such officer; (19) " per- sons " shall include corporations, 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 corporations; (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 some 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 Dis- trict of Columbia; (25) "transfer " shall include the sale and every other and different mode of disposing of or parting with property, or the posses- sion of property, absolutely or conditionally, as a payment, pledge, mort- The Bankbuptct Act of 1898, Amended. 1141 gage, 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 thou- sand five hundred dollars per year; (28) words importing the masculine gender may be applied to and Include 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 OP BANKRUPTCY AND THEIR § 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 terri- torial jurisdictions for the preceding six mouths, 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 jurisdictions, or who have been adjudged bankrupts by courts of competent jurisdiction without the United States and have property within their juris- diction; (2) allow claims, disallow claims, reconsider allowed or disallowed claims, and allow or disallow them against bankrupt estates ; (3) appoint receivers or the marshals, upon application of parties in interest, in case the courts shall find it absolutely necessary, for the preservation of estates, to take charge of the property of bankrupts after tlie filing of the petition and until it is dismissed or the trustee is qualified; (4) arraign, try, and punish bankrupts, ofl&cers, and other persons, and the agents, officers, members of the board of directors or trustees, or other similar controlling bodies of cor- porations 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, regu- lating trials for the alleged violation of laws of the United States; (5) au- thorize 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, arid allow such officers additional compensation for such services, as provided in section forty-eight of tliis act ; (6) bring in and substitute additional persons or parties in proceedings in bankruptcy when necessary for the com- plete determination of a matter in controversy ; (7) cause the estates of bank- rupts to be collected, reduced to money and distributed, and determine controver- sies in relation thereto, except as herein otherwise provided ; (8) close estates, when- ever 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 1142 The Bankkuptcy Act of 1898, Amended. 1143 for further proceedings, records 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 bank- rupts 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 recommendation 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 (30) 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 bank- ruptcy of any power it would possess were certain specific powers not herein enumerated. {Thus amended by Act of Feb'y 5, 1903, and June S5, 1910). CHAPTER III. BANKRUPTS. § 3. Acts of Bankruptcy. — a Acts of bankruptcy by a person shall con- sist of his having (1) conveyed, transferred, concealed, or removed, or permitted to be concealed or removed, any part of his property with intent to hinder, delay, or defraud his creditors, or any of them ; or (2) transferred, vrhile 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) suffered or permitted, while insolvent, any creditor to obtain a preference through legal proceedings, 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 assign- ment for the benefit of his creditors, or, being insolvent, applied for a receiver or trustee for Ms property or because of insolvency a receiver or trustee has been put in charge of his property under ths laws of a State, of a Territory, or of Ihe United States; or (5) admitted in writing his liability to pay his debts and his willing- ness to be adjudged a bankrupt on that ground. b A petition may be filed against a person who is insolvent and who has com- mitted 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 transfer or assignment when the act consists in having made a 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 possession 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 proceedings in bankruptcy instituted under the first subdivision of this section to allege and prove that the party pro- ceeded against was not insolvent as defined in this act at the time of the filing the petition against him, and if solvency at such date is proved by the alleged bank- rupt the proceedings shall be dismissed, 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 talce 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 accounts, and submit to an examina- tion, and give testimony as to all matters tending to establish solvency or insolv- ency, and in case of his failure to so attend and submitto examination the burden of proving his solvency shall rest upon him. 1144 The Bankruptcy Act of 1898, Amended. 1145 e Whenever a petition is filed by any person for the purpose of having another adjudged a bankrupt, and an application is made to take charge of and hold the property of the alleged bankrupt, or auy part of the same, prior to the adjudica- tion and pending a hearing on the petition, the petitioner or applicant shall file in the same court a bond wilh 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 repre- sentatives, 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 respondent or respondents shall be allowed all costs, counsel fees, ex- penses, 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 Feb'y 5, 190S.), § 4. 'Who May Become Bankrupts. — a Any person except a railroad, insurance, or banking 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 incorporated company, and any moneyed^ business or commercial corporation, except u 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 officers, 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 SB, 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. b 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 bankrupcy which has jurisdiction of one of the partners may have jurisdiction of all the paitners and of the administration of the partnership and individual property. d The trustee shall keep separate accounts of the partnership property and of the property belonging to the individual partners. e 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 assets and be applied to the payment of the partnership debts. Should any surplus of the part- 1146 The Bankeuptcy Act of 1898, Amended. nership 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 interests in the partnership. g The court may permit the proof of the claim of the partnership estate against the individual estates, and vice versa, and may marshal the assets of the partnership estate and individual estates so as to prevent prefer- ences and secure the equitable distribution of the property of the several estates. h In the event of one or more but not all of the members of a partner- ship being adjudged bankrupt, the partnership property shall not be ad- ministered 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. — o This act shall not affect the allow- ance 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 trans- fers 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 en-> titled 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 persons, 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 testi- The Bankkuptcy Act of 1898, Amended. 1147 mony given by him shall be offered in evidence against him in any criminal proceeding. Provided, hovfevek, 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.— o 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: Pkovided, 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 a court of bankruptcy for contempt or disobedience of its lawful orders; (2) when issued from a State court having jurisdic- tion, 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 bank- ruptcy or engaged in the performance of a duty imposed by this act. & 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 qualifi- cation 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 that 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 appear- ance 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 ap- prehension 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. 1148 The Bankkuptcy Act of 1898, Amended. § 11. Suits by and agcunst 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 dis- charge, then until the question of such discharge is determined. b 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 sub- sequent to two years after the estate has been closed. § 12. Compositions, when Confirmed. — a A bankrupt may offer, eitlier before or after adjudication, terms of composition to his creditors after, but not before, he has been examined 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 bankrupt, 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 deter- mined whether such composition shall be confirmed. b An application for the confirmation of a composition may be filed in the court of bankruptcy 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 considera- tion 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 proceedings, 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 ; (3) 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 (3) the offer and its acceptance are in good faith and have not been made or procured except aa herein provided, or by any means, promises, or acts herein forbidden. e Upon the confirmation of a composition, the consideration shall be dis- tributed as the judge shall direct, and the case dismissed. Whenever a com- position is not confirmed, the estate shall be administered in bankruptcy as herein provided. (Thus amended bi/ Act of June SB, 1910. ) § 13. CoBipoaikieas, wkca Sat Aualc— a The judge may, upon the ap- plication of parties in interest filed at any time within six months after a The Bankruptcy Act of 1898, Amended. 1149 composition has l>een 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 pro- curing of such composition, and that the knowledge thereof has come to the petitioners since the confirmation of such composition. § 14. Discharges, when Granted. — a 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 pending ; if it shall be made to appear to the judge that the bankrupt was unavoidably prevented from filing it within such time, it may be filed within but not after the expiration of the next six months. b 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 im- prisonment as herein provided ; or (2) with intent to conceal his financial condi- tion, 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 discharge in bankruptcy within six years ; or (6) in the course of the proceedings in bankruptcy refused to obey any lawful order of or to answer any material question approved by the court ; Provided, that a trustee shall not inter- pose objections to a bankrupt's discharge until he shall be authorized so to do at a meeting of creditors called for that purpose. e The confirmation of a composition shall discharge the bankrupt f/om his debts, other than those agreed to be paid by the terms of the composition and those not affected by a discharge. {Thus amended by Acts of Feb'y 5, 1903 and June SB, 1910. § 15. Discharges, virhen Revoked, — a The judge may, upon the appliga- tion 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 dis- charge. § 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 discharge of such bankrupt. § 17. Debts not Affected by 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; (3) are liabilities for obtaining property by false pretenses or 1150 The Bankeuptcy Act of 1898, Amended. false representations, or for wilful and malicious injuries to the person or prop erty of another, or for alimony due or to become due, or for maintenance or support of wife m- child, or for seduction of an unmarried female, or for criminal conversa. tion; (3) have not been duly scheduled in time for proof and allowance, with the name of the creditor if known to the bankrupt, unless such creditor had notice or actual knowledge of the proceedings in bankruptcy; or (4) were created by his fraud, embezzlement, misappropriation, or defalcation while acting as an oflacer or in any fiduciary capacity. {Thus amended by Act of Peb'y 6, 1903.) CHAPTER IV. COURTS AND PROCEDURE THEREIN. § 18. Process, Pleadings, and Adjudications. — a Upon the filing of a petition for involuntary bankruptcy, service thereof, with a writ of subpoena, 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 with- in 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 publi- cation in suits to enforce a legal or equitaUe lien in courts of the United States, except tJiMt, unless the judge shall otherwise direct, the order shall be published not more than once a week for two consecutive weelcs, and the return day sliall be ten days after the last publication unless the judge shall fm- cause fix a longer time. b The bankrupt, or any creditor, may appear and plead to the petition within jive 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 deter- mine, 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 ad j udication 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 plead- ings 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 Feby 5, 1903.] § 19. Jury Trials. — a 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 his insolvency, except as herein otherwise provided, and any act of bankruptcy alleged in such petition to have been committed, upon filing a written applica- tion therefor at or before the time within which an answer may be filed. If such 1151 1152 The Bankeuptcy Act of 1898, Amended. application is not filed within such time, a trial by jury shall be deemed to have been waived. J If a Jury is not in attendance upon the court, one may be specially sum- moned 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 the 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, Affirmations. — a Oaths required by this act, except upon hear- ings in court, may be administered by (1) referees; (3) oflBcers 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 court of bankruptcy may, upon application of any officer, bankrupt, or creditor, by order require any designated person, in- cluding the bankrupt and Ms wife, to appear in court or before a referee or the judge of any State court, to be examined concerning the acts, con- duct, or property of a bankrupt whose estate is in process of administra- tion under this act: Provided, That the wife may be examined only touching business transacted by her or to which she is a party, and to determine the fact whether she has transacts or been a party to any business of the bankrupt- b The right to take depositions in proceedings under this act shall be de termined 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 claim notice shall also be served upon the claimant, and when in opposition to a dis- charge 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 consti- tute conclusive 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. The Bankeuptcy Act of 1898, Amended, 1153 / 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 bank- rupt 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 ad- ministration 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) toanyreferee 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. h 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 equitj', 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 banki-upt, whose estate is being administered by such trustee, might have brought or prosecuted 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, subdivision 6; 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 25, 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 courts of the Territories, in vacation in chambers and during their respective terms, as now or as they may be hereafter held, are hereby invested with appel- late jurisdiction of controversies arising in bankruptcy proceedings from the courts of bankruptcy from which they have appellate jurisdiction in other cases. The Supreme Court of the United States shall exercise a like jurisdiction from courts of bankruptcy not within any organized circuit of the United States and from the supreme court of the District of Columbia. S The several circuit courts of appeal shall have jurisdiction in equity, either interlocutory or final, to superintend and revise in matter of law the 1154 The Bankeuptcy Act of 1898, Amhnded. proceedings of the several inferior courts of bankruptcy -within their juris- diction. Such power shall be exercised on due notice and petition by any party aggrieved. § 25. Appeals and Writs o£ Error.— o That appeals, as in equity cases may be taken in bankruptcy proceedings from the courts of bank- ruptcy 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 judg- ment 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 uni- form 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 aris- ing In the settlement of the estate. & 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 presented, may be filed in the court and shall have like force and effect as the verdict of a jury. § 27. Compromises.— a The trustee may, with the approval of the The Bankeuptcy Act of 1898, Amended. 1155 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 published shall he 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 perled 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 docu- ment belonging to a bankrupt estate which came into his charge as trustee. 6 A person shall be punished, by imprisonment for a period not to exceed two years, upon conviction of the offense of having knowingly and fraudu- lently (1) concealed with a bankrupt, or after his discharge, from his trustee any of the property belonging to his estate in bankruptcy; or (2) made a false oath or account in, or in relation to, any proceeding in bank- ruptcy; (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) re- ceived any material amount 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 bv fine, not to exceed five hundred dollars, and forfeit his oflSce, 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 bank- ruptcy 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 commission of the offense. § 30. Rules, Forms, and Orders.— a All necessary rules, forms, and orders as to procedure 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 1156 The Bankeoptcy Act of 1898, Amended. In this act, or in any proceeding in bankruptcy, tlie 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 the same for the greatest convenience of parties in interest. CHAPTER V. OFFICERS, THEIR DUTIES AND COMPENSATION. § 33. Creation of Two Officers. — a The offices of referee and trustee are hereby created. § 34. Appointment, Removal, and Districts of Referees. — a 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 (2) designate, and from time to time change, the limits of the districts of referees, so that each county, where the services of a referee ar ■! 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 office; (2) 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 bankruptcy or circuit courts of the United States, or of the jus- tices or judges of the appellate courts of the districts wherein they may be appointed; and (4) residents of, or have their offices in, the territorial districts for which they are to be appointed. § 36. Oaths of Office of Referees. — a Referees shall take the same oath of office as that prescribed for judges of United States courts. § 37. Number of Referees. — o Such number of referees shall be ap- pointed as may be necessary to assist in expeditiously transacting the bankruptcy business pending in the various courts of bankruptcy. § 38. Jurisdiction 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 adjudi- cations or dismiss the petitions; (2) 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 1157 1158 The Bankkuptcy Act of 1898, Amended. 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 com- pensation 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 are incomplete or defective to be amended; (3) furnish such Information concerning 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 proceedings in courts, and in like manner secure the return of such papers after they have been used, or, if it be impracticable to transmit the original papers, transmit certi- fied copies thereof by mail; (9) upon application of any party in interest, preserve the evidence 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. 6 Referees shall not (1) act in cases in which they are directly or indi- rectly interested; (2) practice as attorneys and counselors at law In any bankruptcy proceedings; or (3) purchase, directly or indirectly, any prop- erty 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 administration, and from estates which have been administered before them one per centum commissions on all moneys disbursed to creditors by the trustee, or one- The Bankruptcy Act of 1898, Amended. 1159 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 con- cluded, and when the case is specially referred, the judge shall determine what part of the fee and commissions shall be paid to the referee. [ Thus amended hy Act of Feiy. 5, 1903.] § 41. Contempts before Referees. — a A person shall not, in proceed- ings 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 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. & 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 the 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 conditions 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. 6 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, to- gether 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 office 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 ap- pointment under the same court may, by order of the judge, temporarily fill the vacancy. § 44. Appointment of Trnstees. — a The creditors of a bankrupt estate 1160 The Banxeuptcy Act of 1898, Amended. 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 discharge revoked, or if there is 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. — o Trustees may be (1) individuals who are respectively competent to perform the duties of that office, and reside or have an office in the judicial district within which they are ap- pointed, or (2) 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 pro- ceeded with or defended by 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 Trustees. — o 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 'bankruptcy court, shall 6e deemed vested with all the rights, remedies, and powers oj a creditor holding a lien by legal or equitable proceedings thereon; and also, as to all property not in the custody of the bankruptcy court, shall be deemed vested with all the rights, remedies, and powers of a judgment creditor holding an execution duly returned unsatisfied; (3) deposit all money received by them in one of the designated depositories; (4) dis- burse money only by check or draft on the depositories in which it has been deposited; (5) furnish such information concerning the estates of which they are trustees and their administration as may be requested by parties in interest; (6) keep regular accounts showing all amounts re- ceived and from what sources and all amounts expended and on what ac- counts; (7) lay before the final meeting of the creditors detailed state- ments of the administration of the estates; (8) make final reports and file final accounts with the courts fifteen days before the days fixed for the final meetings of the creditors; (9) pay dividends within ten days after they are declared by the referees; (10) report to the courts, in writing, the condition of the estates and the amounts of money on hand, and such other details as may be required by the courts, within the first month after their appointment and every two months thereafter, unless other- wise ordered by the courts; and (11) set apart the bankrupt's exemptions and report the items and estimated value thereof to the court as soon as practicable after their appointment. The Bankruptcy Act of 1898, Amended. 1161 6 Whenever three trustees have been appointed for an estate, the con- currence of at least two of them shall be necessary to the validity of their every act concerning the administration of the estate. c The trustee shall, within thirty days after the adjudication, file a cert- ified copy of the decree of adjudication in the office where conveyances of real estate are recorded in every county where the bankrupt owns real estate not exempt from, execution, and pays the fee for such filing, and he shall receive a compensation of fifty cents for each copy so filed, which, together with the filing fee, shall be paid out of the estate of the bankrupt as a part of the cost and disbursements of the proceedings. [Thus amended by Acts of Feby. 5, 1903 and June 25, 1910.] § 48. Compensation of Trustees, Receivers and Marshals. — a Trustees shall receive for their services, payable after they are rendered, a fee of five 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, have, and such commissions on all moneys disbursed or turned over to any person, including lien holders, by them, as may be allowed by the courts, not to exceed six per centum on the first five hundred dol- lars or less, four per centum on moneys in excess of five hundred dollars and less than fifteen hundred dollars, two per centum on moneys in excess of fifteen hundred dollars and less than ten thousand dollars, and one per centum on moneys in excess of ten thousand dollars. And in case of the confirmation of a composition after the trustee has qualified the court may allow him, as compensation, not to exceed one-half of one per centum of the amount to be paid the creditors on such compensation. b In the event of an estate being administered by three trustees instead of one trustee or by successive trustees, the court shall apportion the fees and commissions between them, according to the services actually rendered, so that there shall not be paid to trustees for the administering of any estate a greater amount than one trustee would be entitled to. c The court may, in its discretion, withhold all compensation from any trustee who has been removed for cause. d Receivers or marshals appointed pursuant to section two, subdivision three, of this Act shall receive for their services, payable after they are rendered, compensation by way of commissions upon the moneys disbursed or turned over to any person, including lien holders, by them, and also upon the moneys turned over by them or afterwards realized by the trus- tees from property turned over in kind by them to the trustees, as the court may allow, not to exceed six per centum, on the first five hundred dollars or less, four per centum on moneys in excess of five hundred dollars and less than one thousand five hundred dollars, two per centum on moneys in excess of one thousand five hundred dollars and less than ten thousand dollars, and one per centum on moneys in excess of ten thousand dollars: Provided, That in case of the confirmation of a composi- tion such commissions shall not exceed one-half of one per centum of the amount to be paid creditors on such compositions: Provided further. That when the receiver or marshal acts as a mere custodian and does not carry on the business of the bankrupt as provided in clause five of section two of this Act, he shall not receive nor be allowed in any form or guise more 1162 The Bankeuptcy Act of 1898, Amended. than two per centum on the first thousand dollars or less, and one-half of one per centum on all above one thousand dollars on moneys disbursed by him or turned over by him to the trustee and on moneys subsequently realized from property turned over by him in kind to the trustee: Pro- vided further. That before the allowance of compensation notice of appli- cation therefor, specifying the amount asked, shall be given to creditors in the m.anner indicated in section fifty-eight of this Act. e Where the business is conducted by trustees, marshals, or receivers, as provided in clause five of section two of this Act, the court may allow such officers additional compensation for such services by way of commissions upon the moneys disbursed or turned over to any person, including lien holders, by them, and, in cases of receivers or marshals, also upon the moneys turned over by them or afterwards realized by the trustees from property turned over in kind by them to the trustees; such commissions not to exceed six per centum, on the first five hundred dollars or less, four per centum on moneys in excess of five hundred dollars and less than one thousand five hundred dollars, two per centum on moneys in excess of one thousand five hundred dollars and less than ten thousand dollars, and one per centum on moneys in excess of ten thousand dollars: Provided, That in case of the confirmation of a composition such commissions shall not exceed one-half of one percentum of the amount to be paid creditors on such composition: Provided further. That before the allowance of compen- sation noifice of application therefor, specifying the amount asked, shall be given to creditors in the manner indicated in section fifty-eight of this Act. [Thus amended by Acts of June 15, 1903 and June 25, 1910.] § 49. Accounts and Papers of Trustees. — a The accounts and papers of trustees shal be open to the inspection of officers and all parties in interest. § 50. Bonds of Referees and Trustees. — a Referees, before assuming the duties of their offices, and within such time as the district courts of the United States having jurisdiction shall prescribe, shall respectively qualify by entering into bond to the United States in such sum as shall be fixed by such courts, not to exceed five thousand dollars, with such sureties as shall be approved by such courts, conditioned for the faithful per- formance of their official duties. 6 Trustees, before entering upon the performance of their official duties, and within ten days after their appointment, or within such further time, not to exceed five days, as the court may permit, shall respectively qualify by entering into bond to the United States, with such sureties as shall be approved by tlie courts, conditioned for the faithful performance of their official duties. c The creditors of a bankrupt estate, at their first meeting after the ad- judication, 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 discharge revoked, if there is a vacancy in the office of trustee, shall fix the amount of the bond of the trustee; they may at any time increase the amount of the bond. It the creditors do not fix the amount of the bond of the trustee as herein provided the court shall do so. The Bankruptcy Act of 1898, Amended. 1163 d, The court shall require evidence as to the actual value of the property of sureties. e There shall be at least two sureties upon each bond. / The actual value of the property of the sureties, over and above their liabilities and exemptions, on each bond shall equal at least the amount of such bond. g Corporations organized for the purpose of becoming sureties upon bonds, or authorized by law to do so, may be accepted as sureties upon the bonds of referees and trustees whenever the courts are satisfied that the rights of all parties in interest will be thereby amply protected. ft Bonds of referees, trustees, and 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. i Trustees shall not be liable, personally or on their bonds, to the United States, for any penalties or forfeitures incurred by the bankrupts under this act, of whose estates they are respectively trustees. j Joint trustees may give joint or several bonds. k If any referee or trustee shall fail to give bond, as herein provided and within the time limited, he shall be deemed to have declined his ap- pointment, and such failure shall create a vacancy in his office. I Suits upon referees' bonds shall not be brought subsequent to two years after the alleged breach of the bond. m Suits upon trustees' bonds shall not be brought subsequent to two years after the estate has been closed. § 51. Duties of Clerks. — o Clerks shall respectively (1) account for, as for other fees received by them, the clerk's fee paid in each case and such other fees as may be received for certified copis of reords which may he prepared for persons other than officers; (2) collect the fees of the clerk, referee, and trustee in each case instituted before filing the petition, ex- cept the petition of a proposed voluntary bankrupt which is accompanied by an affidavit stating that the petitioner is without, and cannot obtain, the money with which to pay such fees; (3) deliver to the referees upon application all papers which may be referred to them, or, if the offices of such referees are not in the same cities or towns as the offices of such clerks, transmit such papers by mail, and in like manner return papers which were received from such referees after they have been used; (4) and within ten days after each case has been closed pay to the referee, if the case was referred,, the fee collected for him, and to the trustee the fee collected for him at the time of filing the petition. § 52. Compensation of Clerks and Marshals. — a Clerks shall respec- tively receive as full compensation for their services to each estate, a filing fee of ten dollars, except when a fee is not required from a voluntary bankrupt. 6 Marshals sJmII respectively receive from the state where an adjudica- tion in bankruptcy is made, except as herein otherwise provided, for the performance of their service in proceedings in bankruptcy, the same fees, and account for them in the same way, as they are entitled to receive for 1164 The Bankeuptcy Act of 1898, Amended. the performance of the same or similar srvices in other cases in accord- ance with laws now in force, or such as may be hereafter enacted, fixing the compensation of marshals. § 53. Duties of Attorney-General. — o The Attorney-General shall an- nually lay before Congress statistical tables showing for the whole country, and by States, the number of cases during the year of voluntary and in- voluntary bankruptcy; the amount of the property of the estates; the dividends paid and the expenses of administering such estates; and such other like information as he may deem important. § 54. Statistics of Bankruptcy Proceedings. — o Officers shall fur- nish in writing and transmit by mail such information as is within their knowledge, and as may be shown by the records and papers in their pos- session, to the Attorney-General, for statistical purposes, within ten days after being requested by him to do so. CHAPTER yi. CREDITORS. § 55. Meetings of Creditors. — o The court shall cause the first meet- ing of the creditors of a bankrupt to be held, not less than ten nor more than thirty days after the adjudication, at the county seat of the county in which the bankrupt has had his principal place of business, res'ded, or had his domicile; or if that place would be manifestly inconvenient as a place of meeting for the parties in interest, or if the bankrupt is one who does not do business, reside, or have his domicile within the United States, the court shall fix a place for the meeting which is the most convenient for parties in interest. If such meeting should by any mischance not be held within such time, the court shall fix the date, as soon as may be thereafter, when it shall be held. 6 At the first meeting of creditors the judge or referee shall preside, and, before proceeding with the other business, may allow or disallow the claims of creditors there presented, and may publicly examine the bank- rupt or cause him to be examined at the instance of any creditor. c The creditors shall at each meeting take such steps as may be perti- nent and necessary for the promotion of the best interests of the estate and the enforcement of this act. d A meeting of creditors, subsequent to the first one, may be held at any time and place when all of the creditors who have secured the allow- ance of their claims sign a written consent to hold a meeting at such time and place. e The court shall call a meeting of creditors whenever one-fourth or more in number of those who have proven their claims shall file a written request to that effect; if such request is signed by a majority of such creditors, which number represents a majority in amount of such claims, and contains a request for such meeting to be held at a designated place, the court shall call such meeting at such place within thirty days after the date of the filing of the request. / Whenever the affairs of the estate are ready to be closed a final meet- ing of creditors shall be ordered. § 56. Voters at Meetings of Creditors. — a Creditors shall pass upon matters submited to them at their meetings by a majority vote in number and amount of claims of all creditors whose claims have been allowed and are present, except as herein otherwise provided. & Creditors holding claims which are secured or have priority shall not,, in respect to such claims, be entitled to vote at creditors' meetings, nor shall such claims be counted In computing either the number of creditors or the amount of their claims, unless the amounts of such claims exceed the values of such securities or priorities, and then only for such excess. 1165 116G The Bankeuptct Act of 1898, Amended. § 57. Proof and Allowance of Claims. — o Proof of claims shall con- sist of a statement under oath, in writing, signed by a creditor setting forth the claim, the consideration therefor, and whether any, and, if so ■what, securities are held therefor, and whether any, and, if so what, payments have been made thereon, and that the sum claimed is justly ow- ing from the bankrupt to the creditor. 6 Whenever a claim is founded upon an instrument of writing, such in- strument, unless lost or destroyed, shall be filed with the proof of claim. If such instrument is lost or destroyed, a statement of such fact and of the circumstances of such loss or destruction shall be filed under oath with the claim. After the claim is allowed or disallowed, such instrument may be withdrawn by permission of the court, upon leaving a copy thereof on file with the claim. c Claims after being proved may, for the purpose of allowance, be filed by the claimant in the court where the proceedings are pending, or before the referee if the case has been referred. d Claims which have been duly proved shall be allowed, upon receipt by or upon presentation to the court, unless objection to their allowance shall be made by parties in interest, or their consideration be continued for cause by the court upon its own motion. e Claims of secured creditors and those who have priority may be al- lowed to enable such creditors to participate in the proceedings at credi- tors' meetings held prior to the determination of the value of their se- curities or priorities, but shall be allowed for such sums only as to the courts seem to be owing over and above the value of their securities or priorities. / Objections to claims shall be heard and determined as soon as the con- venience of the court and the best interests of the estates and the claim- ants will permit. g The claims of creditors who have received preferences, voidable under section sixty, subdivision b, or to whom conveyances, transfers, assign- ments, or incumbrances, void or voidable under section sixty-seven, subdi- vision e, have been made or given, shall not be allowed unless such creditors shall surrender such preferences, conveyances, transfers, assign- ments, or incumbrances. h The value of securities held by secured creditors shall be determined by converting the same into money according to the terms of the agree- ment pursuant to which such securities were delivered to such creditors or by such creditors and the trustee, by agreement, arbitration, compromise, or litigation, as the court may direct, and the amount of such value shall be credited upon such claims, and a dividend shall be paid only on the unpaid balance. i Whenever a creditor, whose claim against a bankrupt estate is secured by the individual undertaking of any person, fails to prove such claim, such person may do so in the creditor's name, and if he discharge such undertaking in whole or in part he shall be subrogated to that extent to the rights of the creditor. j Debts owing to the United States, a State, a county, a district, or a municipality as a penalty or forfeiture shall not be allowed, except for the amount of the pecuniary loss sustained by the act, transaction, or proceed- The Babtkeuptcy Act of 1898, Amended. 1167 ing out of which the penalty or forfeiture arose, with reasonable and actual costs occasioned thereby and such interest as may have accrued thereon according to law. k Claims which have been allowed may be reconsidered for cause and reallowed or rejected in whole or in part, according to the equities of the case, before but not after the estate has been closed. I Whenever a claim shall have been reconsidered and rejected, in whole or in part, upon which a dividend has been paid, the trustee may recover from the creditor the amount of the dividend received upon the claim if rejected in whole or the proportional part thereof if rejected only in part. m The claim of any estate which is being administered in bankruptcy against any like estate may be proved by the trustee and allowed by the court in the same manner and upon like terms as the claims of other creditors. n Claims shall not be proved against a bankrupt estate subsequent to one year after the adjudication ; or if they are liquidated by litigation and the final judgment therein is rendered within thirty days before or after the expiration of such time, then within sixty days after the rendition of such judgment: Provided, That the right of infants and insane persons without guardians, without notice of the proceedings, may continue six months longer: [Thus amended by Act of Feliy. 5, 1903.] § 58. Notice to Creditors. — a Creditors shall have at least ten days' notice by mail, to their respective addresses as they appear in the list of creditors of the bankrupt, or as afterwards filed with the papers in the case by the creditors, unless they waive notice in writing, of (1) all examinations of the bankrupt; (2) all hearings upon applications for the confirmation of compositions; (3) all meetings of creditors; (4) all pro- posed sales of property; (5) the declaration and time of payment of divi- dends; (6) the filing of the final accounts of the trustee, and the time when and the place where they will be examined and passed upon; (7) the proposed compromise of any controversy, (3) the proposed dismissal of the proceedings, and (9) there shall t>e thirty days notice of all applica- tions for the discharge of bankrupts. [Thus amended by the Act of June 25, 1910.] & Notice to creditors of the first meeting shall be published at least once and may be published such number of additional times as the court may direct; the last publication shall be at least one week prior to the date fixed for the meeting. Other notices may be published as the court shall direct. c All notices shall be given by the referee, unless otherwise ordered by the judge. § 59. Who may file and dismiss petitions. — o Any qualified person may file a petition to be adjudged a voluntary bankrupt. 6 Three or more creditors who have provable claims against any person which amount In the aggregate in excess of the value of securities 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. 1168 The Bankruptcy Act of 1898, Amended. c Petitions shall be filed in duplicate, one copy for the clerk and one for service on the bankrupt. d If it be averred in 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 all such creditors to be notified of the pendency of such petition and shall de- lay 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 peti- tion, or if prior to or during such hearing a sufficient number shall join therein, the case may be proceeded with, but otherwise it shall be dis- missed. e In computing the number of creditors of a bankrupt for the purpose ot determining how many creditors must join in the petition, such creditors as were employed by him at the time of filing 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 heartl in oppo- sition to the prayer of the petition. g A voluntary or involuntary petition shall not be dismissed by the peti- tioner or petitioners or for want of prosecution or by consent or parties until after notice to the creditors, and to that end the court shall, iefore entertaining an application for dismissal, require the bankrupt to file a list, under oath, of all his creditors, with their addresses, and shall cause notice to be 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. {Thus Amended by Act of June 25, 1910.) § 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 him- self 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 will 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 reference consists in a transfer, such period of four months shall no* expire until four months after the date of the recording or registering of the transfer, if by law such recording or registering is required. b If a bankrupt shall have procured or suffered a judgment to be 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 if the recording or registering of the transfer if by law recording or reg- istering thereof is required, and being within four months before the filing of the petition in bankruptcy or after the filing thereof and before the The Bankruptcy Act of 1898, Amended. 1169 adjudication, the J)ankrupt &e insolvent and the judgment and transfer then operate as a preference, and the person receiving it or to 6e benefited thereby, or his agent acting therein, shall then have reasonable cause to be- lieve that the enforcement of such judgm,ent 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 property which becomes a part of the debtor's estates, the amount of such new credit re- maining unpaid at the time of the adjudication in bankruptcy may be se< off against the amount which would otherwise 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. (.Thus Amended by Act of Feb. 5, 1903, and June 25, 1910.) CHAPETR VII. ESTATES. § 61. Depositories for money. — a Courts of bankruptcy shall desig- nate, by order, banking institutions as depositories for the money of bank- rupt estates, as convenient as may be to the residences of trustees, 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 < f any bond or change such depositories. § 62. Expenses of Administering Estates. — a The actual and neces- sary expenses incurred by officers in the administration of estates shall, ex- sept where other provisions are made for their payment, be reported in detail, under oath, and examined and approved or disapproved by the court. If approved, they shall be paid and allowed out of the estates in which they were incurred. § 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 bank- rupt 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 con- sideration 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. 6 Unliquidated claims against the bankrupt may, pursuant to application to the court, be liquidated in such manner as it shall direct, and may there- after be proved and allowed against his estate. § 64. Debts which have Priority.— a The court shall order the trus- tee 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, and upon filing the receipts of the proper public 1170 The Bankeuptcy Act of 1898, Amended. 1171 officers for such payment he shall be credited with the amount thereof, and in case any question arises as to the amount or legality of any such tax the same shall be heard and determined by the court. 6 The debts to have priority, except as herein provided, and to be paid in full out of bankrupt estates, and the order of payment shall be (1) the actual and necessary cost of preserving the estate subsequent to filing the petition; (2) the filing fees paid by creditors in involuntary cases, and, where property of the bankrupt, transferred or concealed by him either before or after the filing of the petition, shall have been recovered for the benefit of the estate of the bankrupt by the efforts and at the expense of one or more creditors, the reasonable expenses of such recovery; (3) the cost of administration, including the fees and mileage payable to witnesses as now or hereafter provided by the laws of the United States, and one reasonable attorney's fee, for the professional services actually rendered, irrespective of the number of attorneys employed, to the petitioning credi- tors in involuntary cases, to the bankrupt in Involuntary cases while performing the duties herein prescribed, and to the bankrupt In voluntary cases, as the court may allow; (4) wages due to workmen, clerks, travel- ing or city salesmen,^ or servants which have been earned within three months before the date of the commencement of proceedings, not to exceed three hundred dollars to each claimant; and (5) debts owing to any per- son who by the laws of the States or the United States is entitled to priority. c In the event of the confirmation of a composition being set aside, or a discharge revoked, the property acquired by the bankrupt in addition to his estate at the time the composition was confirmed or the adjudication was made shall be applied to the payment in full of the claims of creditors for property sold to him on credit, in good faith, while such composition or discharge was in force, and the residue. If any, shall be applied to the payment of the debts which were owing at the time of the adjudication. [Thus amended by Act of Feby. 5, 1903 and June 15, 1906.] § 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. 6 The first dividend shall be declared within thirty days after the adju- dication, 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 terns as the first and as often as the amou^.t 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 fur- ther. That the final dividend shall not be declared within three months after the first dividend shall be declared. The rights of creditors who have received dividends, or in whose favor lAmended by act of 1906, approved June 15. 1172 The Bankruptcy Act of 1898, Amended. 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 credi- tors are paid any further dividends. a 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 dividend 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. [Thus amended hy Act of Feiy. 5, 1903.] § 66. Unclaimed Dividends. — a Dividends which remain unclaimed for six months after the final dividend has been declared shall be paid by the trustee into court. 6 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 bal- ance 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. § 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. 6 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 proceeding at law or in equity, including an attachment upon mesne process or a judg- ment 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 person to be a bankrupt if (1) It appears that said Hen 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. The Bankeuptcy Act of 1898, Amended. 1173 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 consideration 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 adjudged a bank- rupt 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 encum- bered 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 inter- vened, 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, attachment, 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 shall be necessary to carry the purposes of this section into effect: Pbo- VTDED, That nothing herein contained shall have the effect to destroy or im- pair the title obtained by such levy, judgment, or other lien, of a bona fide purchaser for value who shall have acquired the same without notice or reasonable cause for inquiry. [Thus amended by Act of Feby. 5, 1903, and June 15, 1910.] § 68. Set-offs and Connterclaims. — a In all cases of mutual debts or mutual credits between the estate of a bankrupt and a creditor the account 1174 The Bankeuptcy Act of 1898, Amended. shall be stated and one debt shall be set off against the other, and the balance only shall be allowed or paid. 6 A set-off or counterclaim shall not be allowed in favor of any debtor of the bankrupt which (1) is not provable against the estate; or (2) was pur- chased by or transferred to him 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. § 69. Possession of Property. — a A judge may, upon satisfactory proof, by alBdavit, that a bankrupt against whom an involuntary petition has been fllea and is pending 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, 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 seiz- ure 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 thn 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. § 70. Title to Property. — o The trustee of the estate of a bankrupt, upon his appointment and qualification, and his successor or successors, 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) documents relating to his property; (2) interests in patents, patent rights, copyrights, and trade-marks; (3) powers which he might have exercised for his own benefit, but not those Y/hich he might have exercised for some other person; (4) property trans- ferred 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 might 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 repre- sentatives, he may, within thirty days after the cash surrender value has been ascertained and stated to the trustee by the company 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 bank- ruptcy proceedings, otherwise the policy shall pass to the trustee as assets- and (6) rights of action arising upon contracts or from the unlawful tak- ing or detention of, or Injury to, his property. 6 All 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 prac- ticable, be sold subject to the approval of the court; it shall' not be sold The Bankkuptcy Act op 1898, Amended. 1175 otherwise than subject to the approval of the court for less than seventy- flve per centum of its appraised value. c The title to property of a bankrupt estate which has been sold, as here- in 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. e The trustee may avoid any transfer by the bankrupt of his property 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 bank- ruptcy had not intervened, shall have concurrent jurisdiction. f Upon a confirmation of a composition offered by a bankrupt, the title to his property shall thereupon revest in him. [Amended by Act of Feby. 5, 1903.] § 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 heretofore or here- after 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: Provided, 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. [Added by Act of Feby. 5, 1903.] § 72. That neither the referee, receiver, marshal, nor the trustee shall in any form or guise receive, nor shall the court allow them, any other or further compensation for their services than that expressly authorized and prescribed in this act. [Added by Act of Feby. 5, 1903, and amended by Act of June 25, 1910.] THE TIME 'WHEN THIS ACT SHALI, GO INTO EFFECT. The original act of 1898 provided as follows: 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. 6 Proceedings commenced under State insolvency laws before the pas- sage of this act shall not be affected by it. The amendatory act of 1903 provides as follows: 1176 The Bankkuptcy Act of 1898, Amended. § 19. That the provisions of this amendatory act shall not apply to bankruptcy cases pending when this act takes effect, hut such cases shall be adjudicated and disposed of conformably to the provisions of the said act of July first, eighteen hundred and ninety-eight. The amendatory act of 1910 provides as follows: § 14. 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 conformably 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. INDEX TO BANKRUPTCY ACT OF 1898. [For General Index, see p. 1259.] A. PAGE Abatement of bankruptcy proceedings 1147 Absence of referee, eflfect of 1159 Acceptance of composition by creditors, when necessary 1148 Accounts by clerlis in bankruptcy proceedings 1163 of Insolvent partnership 1145 trustees 1160 notice to creditors of filing 1166 Act of bankruptcy, in what to consist 1144 Additional compensation to officers 1142 parties in bankruptcy proceedings 1142 property of bankrupt, application of 1170 Adjudication of property, definition of 1139 provisions aa to 1151 on default of pleadings 1151 decree to be filed where real estate is situated 1160 Administration of oaths and affirmations 1153 Admission of insolvency, effect of 1143 Affidavits for arrest of bankrupt 1147 Affirmation, when taken instead of oath 1153 who may take 1153 Allowance, etc. , of claims against bankrupts 1142 of secured creditor 1165 provision as to 1165 preferred claims 1165 set-offs and counterclaims 1173 State, county, etc., debts 1166 Amendments to act, effect of 1175 Amount of dividend to be collected 1171 referee's bond 1161 trustee's bond 1161 Answer, averments in, aa to number of crsditors 1167 in bankruptcy, proceedings, provisions as to 1151 Appeal, bond of trustee not required on 1154 in bankruptcy proeeedings, when allowed 1154 time for taking 1151 Appearance of creditors after filing of petition 1167 Appellate courts, definition of 1139 jurisdiction of 1153 Application for confirmation of composition, filing, etc., of 1148 discharge, filing, etc., of 1149 of additional property of bankrupt 1170 1177 1178 Index to Bankkuptcy Act of 1898. PAGE Appointment of receivers of bankrupt estates 1143 referees H^''' trustees • 1143, 1159 Apportionment of compensation among referees 1159 of several trustees 1161 Appraisal of bankrupt's property 1174 Appropriation of proceeds of insolvent partnership property 1145 Approval by court of compromise 1154 of expenses in administering bankrupt estates 1169 Arbitration of controversies 1154 Arrest of bankrupts 1147 Attendance of witnesses 1153 Attorney, etc. , transfers in contemplation of insolvency to 1168 general, duties of 1163 to receive statistical information, etc 1163 Averments in petition as to number of creditors 1167 Avoidance of bankrupt's act by trustee 1174 B. Bail of bankrupt, about to depart 1147 Banking institutions as depositories for moneys, etc 1169 Bankrupts, death or insanity of 1147 definition of 1139 duties of 1146 effect of discharge on co-debtors of '. 1148 exemption of, under State laws 1146 extradition of , 1143, 1147 protection and detention of 1147 suits by and against 1148 trial, etc., of 1143 who may become 1145 estate, allowance of claims against 1143 collection of 1143 proof, etc. , of claims of 1165 Bankruptcy, definition of commencement of 1140 of certain members of a partnership 1145 what acts to constitute 1144 Banks not to be adjudged bankrupt \ 145 Bond of banking institutions, acting as depositories 1169 in insolvency proceedings II45 of referees 1161 on release of bankrupt's property II73 suits on, when to be brought Hgg Bond by trustees, provisions as to 1161 not required on appeal 1154 on warrant for seizure of bankrupt's property 1153 Books, etc,, in insolvency proceedings II44 Burden of proof in bankruptcy proceedings II44 Index to Bankkuptcy Act of 1898. 1179 C. PAGE Cash surrender value of policy, payment of 1168 Charge of bankrupt estate 1143, 1145 Certification of controversies to perfect appeal, etc 1154 facts, constituting contempt 1159 records, kept by 1159 Certified copies of proceedings, to be evidence, etc 1153 Certiorari in bankruptcy proceedings 1154 Children of bankrupts, rights of 1147 Circuit courts, jurisdiction of 1153 appellate jurisdiction of 1153 Claims against bankrupts, allowance of 1142 of bankrupt estates, presentation, etc., of 1166 proof and allowance of 1165 of secured creditors 1165 subsequent to declaration of dividends 1171 time for presentation of 1166 Clerks, compensation of, etc 1162, 1174 duties of 1162 definition of 1139 to keep indexes of bankruptcy matters 1174 may order reference 1153 Closing bankrupt estates 1142 Co-debtors of bankrupt 1149 Collection of bankrupt estates 1142 fees for clerks 1162 moneys by trustees 1160 Commencement of proceedings, definition of 1140 Compensation of clerks 1162, 1174 marshals 1162 officers 1142, 1157 referees 1158, 1174 stenographers employed by referees 1158 trustees 1161, 1174 Composition, confirmation and rejection of 1142, 1144 Compromise of controversies by trustees 1154 notice to creditors of 1166 Computation of time 1175 Computing number of creditors 1167 time for filing petition 1144 Conceal, definition of 1140 of property by bankrupt, punishment for 1155 Concurrent jurisdiction of circuit courts 1153 Confirmation of composition 1142, 1148 Consent for selecting administrators 1154 when not to cause dismissal of petition 1167 Consolidation of cases in bankruptcy 1156 Construction of court powers 1143 words and phrases 1139, 1140, 1141 Contempt, arrest of bankrupt for 1147 manner of punishment for 1159 summary hearing on 1159 1180 Index to Bais^keuptcy Act of 1898. PAGE before referee, what to constitute 1159 Contents of records kept by referees 1159 schedules of property 1146 statement in proof of claim 1165 statistical tables furnished by Attorney-General 1163 Continuance of bankrupt's business 1142 Controversies, arbitration of 1154 compromise by trustees of 1154 in law and equity, jurisdiction over 1154 Consular officers, may administer oaths, etc 1162 Conveyance of bankrupt's property, trustee to execute 1174 with intent to defraud 1144 Corporations, definition of 1139 not to benefit by voluntary bankruptcy 1140 may act as sureties on bonds 1162 when to be adjudged bankrupt. 1145 bankrupt, liability of stockholders 1145 may act as trustees 1160 Costs allowed against bankrupt estate 1169 in insolvency proceedings 1145 of administration 1170 preserving estate 1170 taxation of 1143 Counterclaims, allowance of 1173 Courts, definition of 1140 of bankruptcy, definition of 1140 creation of 1142 to designate newspapers, etc 1155 may call meetings of creditors 1164 Credit given by preferred creditor 1168 Creditors, definition of 1140 meetings of, provisions as to 1164 notice to, when given 1166 of foreign bankrupt 1171 related to bankrupts 1167 when may file petitions 1167 Custody of bankrupt about to depart 1147 D. Damages for seizure, etc., in bankruptcy 1145, 1173 Date of bankruptcy, definition of 1140 creditors' meetings 116'! Death of bankrupt, effect of 1147 trustees, effect of 1160 Debts allowed against estate of bankrupt 1169 definition of 1140 created by fraud 1150 not scheduled, effect of 1150 of United States, etc., allowance of 1166 when not affected by discharge 1149 having priority, enumeration of 1169 Index to Bankeuptcy Act of 1898. 1181 PAGE Declaration of dividends on claims 1170 Defense to bankruptcy proceedings 1144 by trustee of actions against bankrupts 1148 Definitions 1139, 1140, 1141 Denial of insolvency allegations, effect of 1144 Departure of bankrupt, as cause for detention 1147 Deposit of moneys by trustees - 1160 Depositions, determination of right to take 1152 Depositories of moneys for bankrupt estates 1169 Designation of depositories for estates, etc 1169 districts of referees 1156 newspapers for publication of notices 1155 Detention of bankrupts 1147 Determination of issues in bankruptcy 1151 right to trial by jury 1151 securities held by creditors 1165 Diplomatic officers may administer oaths, etc 1152 Disability of referees, effect of 1159 Disbursement of moneys by trustees 1160 Discharge of bankrupts, provisions as to 1143, 1151 definition of 1140 ■when debts not affected by 1149 to release bankrupt from debts 1149 refusal or revocation of 1149 Dismissal of bankrupt proceedings 1142 of petition, provisions as to 1167 notice to creditors of 1166 Disobedience to orders of referees, effect of 1159 Dissolution of liens against bankrupt's property 1171 Distribution of bankrupt estates 1142 consideration of composition 1148 unclaimed dividends 1171 Districts of referees, designation of 1157 Dividend to creditors of foreign bankrupt 1171 disposition of unclaimed 1171 not affected by subsequent claims 1171 payment of, by trustees 1160 provisions as to declaration and payment of 1170 on reconsidered claims, recovery of 1166 Document, definition of 1140 Dower right of bankrupt's widow 1147 Duties of Attorney-General 1163 bankrupts - 1146 clerks in bankruptcy proceedings 1162 creditors at meetings 1164 officers 1157 referees, enumeration of 1158 trustees 1160 R Effect of certified copies of proceedings as evidence 1152 confirmation of composition 1148 1182 Index to Bankruptcy Act of 1898. PAOE discharge on co-debtor's of bankrupt 1149 time when provisions of bankruptcy act to go into 1175 amendments to act 1175 Enforcing provisions of bankruptcy law 1143 Equity suits, process, etc., in, to apply to bankruptcy proceedings. . 1151 Evidence of certified copies of proceedings 1152 debt to be filed with proof of claim 1165 jurisdiction, what to constitute 1153 order approving bond of trustee, effect of 1152 prepared by referees 1158 Examination of bankrupt 1142, 1146, 1147 notice of 1166 wife of bankrupt 1152 expenses in administering bankrupt estates 1169 proof of claims by bankrupt 1146 Execution of papers, etc., by bankrupt 1146 Exemption from arrest of bankrupt 1147 Exemptions of bankrupt, determination of 1143 under State laws 1146 Expenses of administering bankrupt estates 1169 insolvent partnership, how paid 1145 recovering property, prior debt 1170 Extortion, punishment for 1155 Extradition of bankrupt, when inade 1143, 1147 F. Failure to give bond by trustee or referee 1162 prove claim, effect of 1165 False claims, information by bankrupt as to 1142 punishment for presentation of 1155 oath, punishment for making 1155 Farmers not to be adjudged Involuntary bankrupts 1145 Fees, priority in payment of 1170 in bankruptcy proceedings 1162, 1163 of bankrupt attending examination, etc 1143 Filing findings of arbitrators 1154 notice to take depositions 1152 petitions, who entitled to 1166 iwoof of claim 1165 Final meeting of creditors, when held 1164 Finding of arbitrators, effect, etc., of 1154 etc., of referees 1143 Foreign countries, property of bankrupt in 1146 Forms of procedure, Supreme Court to prescribe 1155 Fraud, debts created by, not affected by discharge 1150 in obtaining discharge, effect of 1149 to vitiate composition 1148 G. General assignment, etc., effect of 1144 reference, when ordered 1153 Granting of discharge 1149 Index to Bankkuptcy Act of 1898. 1183 H. PAGE Hearing on application to confirm composition 1148 discharge, provisions as to 1149 bankrupt to attend 1146 on filing voluntary petition 1151 on notice to creditors 1166 of objections to allowance of claims 1165 Holiday, definition oi 1140 I. Indexes to be kept by clerks 1174 Indictments for offenses, limitation of time, as to 1155 Infant's claims, time for presentation of 1166 Information to be given by bankrupt 1146 of offenses, limitation of time for 1155 Insane persons, time for presentation of claims of 1166 Insanity of bankrupt, effect of 1147 Insolvency proceedings under State laws not affected, etc 1175 question of, when tried by jury 1151 Insolvent person, definition of 1140 Insurance policies, title to 1173 Interest in patents, etc., to vest in trustees 1173 Involuntary petition, jury trial on filing of 1151 3. Joining creditors after filing petition 1167 Joint trustees, bonds Of 1162 Judges, definition of 1140 duties at creditors' meeting 1164 Judgments, when deemed preference 1167 Jurisdiction of appellate courts 1153 of courts of bankruptcy 1142 evidence of, what constitutes 1152 of referees 1157 of Supreme Court 1153 over insolvent partners, etc 1145 of State courts 1153, 1167, 1172, 1174 of United States courts 1153, 1167, 1172, 1174 Jury trials, who entitled to 1151 I.. Liabilities not affected by discharge 1149, 1150 Liability of trustees on bonds 1162 Liens against bankrupt's property, provisions as to 1171, 1172 to defraud creditors, validity of 1172 through legal proceedings 1172 recorded, not affected by bankruptcy 1172 Limitation of actions on bonds 1162 against trustees 1148 bankrupt's examination 1147 indictment for offenses, etc 1155 time for presentation of claims 1166 List of creditors, when filed 1167 1184 Index to Bankruptcy Act of 1898. M. PAGE Manner of bankrupt's extradition 1147 voting at creditors' meeting 1164 Marshaling assets of insolvent partnership 1146 Marshals of bankrupt's estates, appointment of 1142 compensation of 1162 Masculine gender, construction of 1141 Meaning of words and phrases 1139, 1140, 1141 Meeting of creditors, bankrupt to attend 1146 notice of 1166 provisions as to 1164 voters at 1164 Minors, unclaimed dividends of 1171 Misbehavior on hearing before referees 1159 N. Newspapers, designation of, for publication of notices 1155 Notices to creditors, when given 1166 Notice to creditors, by referees 1158, 1166 publication of 1166 designation of newspapers for publication of 1155 of pendency of petition 1158 of taking depositions 1152 on failure of personal service of petition 1151 Number of creditors who may file petition 1166 of referees 1157 .O Oath, definition of 1140 of office of referees 1157 who may administer 1152 Objections to allowance of claim 1165 Offenses, concurrent jurisdiction of circuit courts over 1153 enumeration and punishment of 1155 Offer of composition, when mad 5 1148 Officers authorized to administer oaths, etc 1152 definition of 1140 in bankruptcy, duties, etc., of 1157 of the United States, not to act as referees 1157 Orders approving bond of trustee, as evidence, etc 1154 confirming, etc., composition 1155 of court, bankrupt to comply with 1146 as to procedure. Supreme Court to prescribe 1155 transferring cases in bankruptcy 1156 P. Partners, when to be adjudged bankrupt 1145 Payment in contemplation of insolvency, validity of 1168 of dividends on claims 1170 notice to creditors of 1166 of taxes, priority of 1169 of unclaimed dividends 1171 Pendency of petition, notice to creditors of 1167 Index to Bankruptcy Act of 1898. 1185 PAGE Persons, definition of 1140 Petition, definition of 1140 to be filed in duplicate 1167 who may file, etc 1166 against insolvent persons, filing of 1144 Place of creditors' meetings 1164 Pleadings in bankruptcy proceedings 1151 Plural number, construction of 1141 Possession of bankrupt's property 1173 Preference, permission of 1144 what deemed 1167 Preferred claims, allowance of 1165 creditors giving further credit 1168 provisions as to 1167 Presentation of claims, time for 1166 false claims, punishment for 1155 Procedure in courts of bankruptcy 1151 Process in bankruptcy proceedings 1151 Production of documents befo-e referees 1159 Proof of claim, in insolvent partnerships 1146 of what to consist 1165 solvency, burden of 1144 Property of bankrupt 1142 Prosecution of actions by trustees 1148 want of, not to cause dismissal, etc 1167 Protection of bankrupts 1147 Publication of notices, to creditors 1166 provisions as to 1151 designation of newspapers for 1155 Punishment of bankrupts ll42 for contempt, manner of 1159 for offenses, period and enumeration 1155 Q. Qualification of referees 1157 trustees 1160 Question of insolvency, when tried by jury 1151 R. Real estate, adjudication to be filed where situated 1160 Receiver, application for, as act of bankruptcy 1144 appointment of, as act of bankruptcy 1144 of bankrupt estates, appointment of 1142 Reconsideration of allowed claims 1166 Records of referees, contents of 1159 duties as to 1158 Recovery of dividends on reconsidered claims 1166 property given to attorneys, etc 1168 transferred with intent of preference 1167 expenses of 1170 Re-examination of transfers to atorneys, etc 1168 Referees, absence or disability of 1159 administration of paths by 1152 1186 Index to Bankbuptcy Act of 1898. PAGE appointment, etc., ol 1157 bonds of 1161 compensation of 1158, 1174 contempts, before 1159 definition of 1140 duties of 115g at creditors' meeting 1164 interestel in bankrupt's estate 1158 Jurisdiction of 1157 notice to creditors by 1158, 1166 number of 1157 oath of office by 1157 offenses, punishment of 1155 payment of fees to 1158 not to practice as attorneys, etc 1158 qualifications of 1157 records, contents, etc., of 1159 not to be related to judges, etc 1157 residence of 1157 Reference of cases, after adjudication 1151 when may be rendered 1151 Refusal of discharge in bankruptcy 1149 Regularity of proceedings, evidence of 1152 Rejection of composition 1142, 1148 Release from seizure of bankrupt's property 1178 Removal of referees 1157 trustees 1160 Reports of expenses in administering bankrupt's estates. 1169 by trustees 1160 Request for call of creditors' meeting 1164 Residence, etc., of persons adjudged bankrupt 1142 referees 1157 Return of petition 1151 Revesting of title in bankrupt 1174 Revocation of discharge of bankrupt 1149 Right to jury trial, determination of 1151 of action to vest In trustees 1174 Rules of procedure. Supreme Court to prescribe 1155 S. Sale of bankrupt's property 1174 notice of 1166 Schedule of bankrupt's property 1146 duty of referee as to 1158 Secured creditors, definition of 1140 Securities held by creditors, determination of 1165 Seizure of bankrupt property under warrant 1173 Selection of arbitrators in controversies 1154 Service of notice to take depositions 1152 petition for involuntary bankruptcy 1151 Set-off's, when allowed 1173 of credit given by preferred creditors 1168 Index to Bankeuptoy Act of 1898. 1187 PAOB Singular number, construction of 1141 Special reference, when ordered 1163 State, definition of 1140 court, arrest under order of 1147 jurisdiction of 1153 debts, payment of 1166 law, insolvency proceedings under 1175 exemptions under 1146 Statement of administration by trustees 1160 in proof of claim, contents of 1165 Statistics of bankruptcy proceedings by officers, etc 1163 Statistical tables furnished by Attorney-General 1163 Stay of action by or against bankrupts 1148 Stenographers employed by referees 1158 Stockholders of bankrupt corporation, liability of 1145 Submission of controversies for arbitration 1154 Subpoena to be served with petition 1151 Subrogation of trustee to rights of lienor 1171 Suits by and against bankrupts 114S trustees , 1148, 1153 on referee's bond 1162 on trustee's bond 1162 Summary hearing for contempts 1159 Summoning of special jury 1152 Supreme Court, jurisdiction of 1153 to prescribe rules of procedure 1155 Sureties on referee's or trustee's bonds 1162 corporations may act as 1162 number of 1162 Surplus of insolvent partnership, application of 1146 T. Taxation of costs 1143 Taxes not to be affected by discharge of bankrupt 1149 priority in payment of 1169 Terms of referee's office 1157 in declaring dividends 1170 Time for bringing actions on bonds 1162 taking appeals, etc 1154 Time of bankruptcy, definition of 1140 computation of 1155 of creditors' meetings 1164 of declaration of dividends 1170 for filing accounts by trustees 1160 Time for filing petition in insolvency proceedings 1144 referee's bond 1161 trustee's bond 1161 making reports by trustees 1160 giving notice to creditors 1166 paying dividends 1160 unclaimed dividends 1171 to plead 1151 1188 Index to Bankruptcy Act of 1898. PAGE for presentation of claims 1166 provisions of bankruptcy act taking effect 117S publication of notices to creditors 1166 return of petition 1151 Title to bankrupt's property 1173 revesting of 1153 evidence of 1152 Transfer, definition of 1140 in contemplation of insolvency 1167 of cases 1143, 1156 from referees 1153 to be executed by bankrupts 1146 when deemed preference 1144, 1167 voidable 1167 Trial, etc., of bankrupts 1142 Trustees, appointment of 1143, 1159 bonds of 1161 compensation of 1161, 1174 compromise of controversies of 1154 death or removal of 1160 definition of 1141 defense by, of actions against bankrupts 1148 duties of, enumerated 1160 offenses by, punishment of 1155 prosecution of bankrupt's actions by 1148 of insolvent partnership 1145 qualifications of 1160 to have title to bankrupt property 1173 validity of acts of 1160 V. Umpire in arbitration or controversies 1154 Unclaimed dividends, disposition of 1171 V. Vacancy by failure to give bonds 1162 in oflSce of referees, filing of 1159 Validity of transfers, etc., in contemplation of insolvency 1172 Value of sureties' property 1162 Verification of pleadings 1151 Voidable transfers with intent of preference 1167 Void, Hens to defraud creditors to be 1172 Voters at creditors' meetings 1164 vr. Wage-earner, definition of 1141, 1170 not to be adjudged involuntary bankrupt 1145 Wages, priority in payment of 1170. Waiver of jury trial, what to constitute 1151 Warrant for seizure of bankrupt's property 1173- on departure of bankrupt 114T Widows of bankrupts, rights of II47 Wife of bankrupt, examination of 1152 Writs of error, when allowed II54. THE BANKRUPTCY ACT OF 1867. 1189 THE BANKRUPTCY ACT OF 1867. (with amkndmbnts.) COURTS OF BANKRUPTCY. Bt it enacted by the Senatt and House tf Reprisentativea of the United States tf America in Congress assembled. That the several District Courts of the United States be, and they hereby are, constituted courts of bankruptcy, and they shall have original jurisdiction in their respective districts in all matters and proceedings in banlcruptcy, and they are hereby authorized to hear and adjudicate upon the same according to the provisions of this Act. The said courts shall be always open for the transaction of business under this Act, and the powers and jurisdiction hereby granted and conferred shall be exercised as well in vacation as in term time; and a judge sitting in chambers shall have the same powers and jurisdiction, including the power of keeping order and of punishing any contempt of his authority, as when sitting in court. And the jurisdiction hereby conferred shall extend — To all cases and controversies arising between the bankrupt and any creditor or creditors who shall claim any debt or demand under the bankruptcy; To the collection of all the assets of the bankrupt; To the ascertainment and liquidation of the liens and other specific claims thereon ; To the adjustment of the various priorities and conflicting interests of all parties; And to the marshalling and disposition of the different funds and assets, so as to secure the rights of all parties and due distribution of the assets among all the creditors; 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 bank- rupt, an({ the close of the proceedings in bankruptcy. (Provided, That the court having charge of the estate of any bankrupt may direct that any of the legal assets or debts of the bankrupt, as contra- distinguished from equitable demands, shall, when such debt does not exceed five hundred dollars, be collected in the courts of the state where such bank- rupt resides, having jurisdiction of claims of such nature and amount.)* The said courts shall have full authority 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 that the Circuit Courts now have in any suit pending therein in equity. Said courts may sit for the transaction of business in bankruptcy at any place in the district, of which place, and the time of holding couft, they shall have given notice, as well as at the places designated by law for holding such courts. § a. And be it further enacted. That the several Circuit Courts of the United States within and for the districts where the proceedings in bankruptcy shall be pending shall have a general superintendence and jurisdiction of all cases * So amended by act of aa June, 1874, ch. 390, % 1, 18 Stat, vfi. 1190 THE BANKRUPTCY ACT OF 1867. «ad quMtioas arising under this Act; and, except when special prorisioa li otherwise made, may, upon bill, petition, or other proper process of any party aggrieved, hear and determine the case as a court of equity. The powers and jurisdiction hereby granted may be exercised either by said court, or by any justice thereof, in term time or vacation. 'Said Circuit Courts shall al%o hire eomeurrent jurijdic/um with the District Courts of the same district, of all suits at law, or in equity, which may or shall be brought by the assignee in bankruptcy against any person claiming an adverse interest, or by such person against such assignee, touching any prop- erty or rights of property of said bankrupt transferable to, or vested in such assignee; (R. S., § 4979. — The several Circuit Courts shall have, within each district, concurrent jurisdiction with the district court of any district, whether the powers and jurisdiction of a Circuit Court have been conferred on such district court or not, of all suits at law or in equity brought by an assignee in bank- ruptcy against any person claiming an adverse interest or owing any debt to such bankrupt, or by any such person against an assignee, touching any prop- erty or rights of the bankrupt, transferable to or vested in such assignee.) But no suit at law or in equity shall in any case be maintainable by or against such assignee, or by or against any person claiming an adverse interest, touching the property and rights of property aforesaid, in any court whatsoever, unless the same shall be brought within two years from the time the cause of action accrued, for or against such assignee: Providtd, That noth- ing herein contained shall revive a right of action barred at the time such assignee is appointed. OF THE ADMINISTRATIOK OF THE LAW IN COURTS OF BANK- RUPTCY. g 3. A»d it it further enacted. That it shall be the duty of the judges of the District Courts of the United States within and for the several districts to appoint in each Congressional District in said districts, upon the nomination and recommendation of the Chief Justice of the Supreme Court of the United States, one or more registers in bankruptcy, to assist the judge of the District Court in the performance of his duties under this Act. No person shall be eligible to such appointment unless he be a counsellor of said court, or of some one of the courts of record of the State in which he resides. Before entering upon the duties of his office, every person so appointed a register in bankruptcy shall give a bond to the United States, with condition that he will faithfully discharge the duties of his office, in a sum not less than one thousand dollars, to be fixed by said court, with sureties satisfactory to said court, or to either of the said justices thereof. And he shall, in open court, take and subscribe the oath prescribed in the act entitled "An Act to prescribe an oath of office, and for other purposes," approved July second, eighteen hundred and sixty-two, and also, that he wilt not during his continuance in office be, directly or indirectly, interested in, ot * As amended by act of June ai, 1874, this oarasraph appears in R. S., g 4979. THE BANKRUPTCY ACT OP 1867. 1191 benefited by the fees or emoluments arising from any suit or matter pending in bankruptcy in eitlier the District or Circuit Court in his district. § 4. And be it further enacted. That every register in bankruptcy, 90 appointed and qualified, shall have power, and it shall be his duty — To make adjudication of bankruptcy; To receive the surrender of any bankrupt; To administer oaths in all proceedings before him; To hold and preside at meetings of creditors; To take proof of debts; To make all computations of dividends, and all orders of distribution, and to furnish the assignee with a certified copy of such orders, and of the schedulet of creditors and assets filed in each case; To audit and pass accounts of assignees; To grant protection; To pass the last examination of any bankrupt in cases whenever the assignee ^r a creditor does not oppose ; And to sit in chambers and dispatch t here such part of the administrative business of the court and such uncontested matters as shall be defined in gen. eral rules and orders, or as the district judge shall in any particular matter Jirect; And he shall also make short memoranda of his proceedings in each case in vhich he shall act, in a docket to be kept by him for that purpose, and he shall forthwith, as the proceedings are taken, forward to the clerk of the District Court a certified copy of said memoranda, which shall be entered by said clerk *a the proper minute book, to be kept in his office; And any register of the court may act for any other register thereof. Provided, however. That nothing in this section contained shall empower a register to commit for contempt, or to hear a disputed adjudication, or any question of the allowance or suspension of an order of discharge; But in all matters where an issue of fact or of law is raised and contested by any party to the proceedings before him, it shall be his duty to cause the ques- Jon or issue to be stated by the opposing parties in writing, and he shall adjourn the same into court for decision by the judge. * No register shall be of counsel or attorney, either in or out of court, in any suit or matter pending in bankruptcy, in either the Circuit or District Court of his district, nor in an appeal therefrom, nor shall he be executor, adminis- trator, g^aardian, commissioner, appraiser,~divider, or assignee of or upon any estate within the jurisdiction of either of said courts of bankruptcy, nor be interested in the fees or emoluments arising from either of said trusts. (R. S., Sec. 4996.* No register or clerk of court, or any partner or clerk of such register or clerk of court, or any person having any interest with either in any fees or emoluments in bankruptcy, or with whom such register or clerk of court shall have any interest in respect to any matter in bankruptcy, shall be o( counsel, solicitor, or attorney, either in or out of court, in any suit or mattef pending in bankruptcy in either the circuit or district court of his district, or in * So amended by act of 22 June, 1874, ch. 390, sec. 18, 18 Stat. 1B4. 1192 THE BANKRUPTCY ACT OF 1867. an •ppeal therefrom. Nor shall they, or either of them, be czecntor, adminis- trator, guardian, commissioner, appraiser, divider, or assignee of or upon any estate within the jurisdiction of either of said courts of banlcruptcy; nor be interested, directly or indirectly, in the fees or emoluments arising from either of said trusts.) The fees of said registers, as established by this Act, and by the general rules and orders required to be framed under it, shall be paid to them by the parties for whom the services may be rendered in the course of proceedings authorized by this Act. g 5. And be it further enatted. That the judge of the District Court may direct a register to attend at any place within the district, for the purpose of hearing such voluntary applications under this Act as may not be opposed; of attending any meeting of creditors, or receiving any proof of debts, and, generally, for the prosecution of any bankruptcy or other proceedings under this Act; and the travelling and incidental expenses of such register, and of any clerk or other officer attending him, incurred in so acting, shall be settled by said court in accordance with the rules prescribed under the tenth section of this Act, and paid out of the assets of the estate in respect of which such register has so acted; or, if there be no such assets, or if the assets shall be insufficient, then such expenses shall form a part of the costs in the case or cases in which the register shall have acted in such journey, to be apportioned by the judge; and such register, so acting, shall have and exercise all powers, except the power of commitment, vested in the District Court for the summoning and examination of persons or witnesses, and for requiring the production of books, papers, and documents: Provided always. That all depositions of persons and witnesses taken before said register, and all acts done by him, shall be reduced to writing and be signed by him, and shall be filed in the clerk's office as part of the proceedings. Such register shall be subject to removal by the judge of the District Court; And all vacancies occurring by such removal, or by resignation, change of residence, death, or disability, shall be promptly filled by other fit persons, unless said court shall deem the continuance of the particular office unnecessary § 6. And be it further enacted. That any party shall, during the proceedings before a register, be at liberty to take the opinion of the district judge upon any point or matter arising in the course of such proceedings, or upon the result of such proceedings, which shall be stated by the register in the shape of a short certificate to the judge, who shall sign the same if he approve thereof; and such certificate, so signed, shall be binding on all the parties to the proceeding; but every such certificate may be discharged or varied by the judge at chambers or in open court. In any bankruptcy, or in any other proceedings within the jurisdiction of the court under this Act, the parties concerned, or submitting to such jurisdiction, may, at any stage of the proceedings, by consent, state any question or ques- tions in a special case for the opinion of the court; and the judgment of the court shall be final, unless it be agreed and stated in such special case that either party may appeal, if, in such case, an appeal is allowed by this Act. The parties may also, if they think fit, agree, that upon the question or que*- THE BANKRUPTCY ACT OF 1867. 1193 tions raised by snch special case being finally decided, a sum o( money, fixed by the parties, or to be ascertained by the court, or in such manner as ihe court may direct, or any property, or the amount of any disputed debt or claim, shall be paid, delivered, or transferred by one of such parties to the other of them, •ither with or without costs. § 7. And it it further enacted. That parties and witnesses summoned before a register shall be bound to attend, in pursuance of such summons, at the place and time designated therein, and shall be entitled to protection, and be liable to process of contempt in like manner as parties and witnesses are now liable thereto in case of default in attendance under any writ of subpoena; And all persons wilfully and corruptly swearing or affirming falsely before a register shall be liable to all the penalties, punishments, and consequences of perjury. If any person examined before a register shall refuse or decline to answer, or to swear to or sign his examination when taken, the register shall refer the matter to the judge, who shall have power to order the person so acting to pay the costs thereby occasioned, if such person be compellable by law to answer such question or to sign such examination; and such person shall also be liable to be punished for contempt. §8. And be it further enacted. That appeals maybe taken from the District to the Circuit Courts in all cases in equity, and writs of error may be allowed to said Circuit Courts from said District Courts in cases at law under the juris- diction created by this act when the debt or damages claimed amount to more than five hundred dollars; and any supposed creditor, whose claim is wholly or in part rejected, or an assignee who is dissatisfied with the allowance of a claim, may appeal from the decision of the District Court to the Circuit Court for the same district; but no appeal shall be allowed in any case from the Dis- trict to the Circuit Court unless it is claimed, and notice given thereof to the clerk of the District Court, to be entered with the record of the proceedings, and also to the assignee or creditor, as the case may be, or to the defeated party in equity, within ten days after the entry of the decree or decision appealed from. The appeal shall be entered at the term of the Circuit Court which shall be first held within and for the district next after the expiration of ten days from the time of claiming the same. But if the appellant in writing waives his appeal before any decision thereon, proceedings may be had in the District Court as if no appeal had been taken. And no appeal shall be allowed unless the appellant, at the time of claiming the same, shall give bond in manner now required by law in cases of such appeals. No writ of error shall be allowed unless the party claiming it shall comply with the statutes regulating the granting of such writs. §9. And be it further enacted. That in cases arising under this Act, no appeal or writ of error shall be allowed in any case from the Circuit Courts to the Supreme Court of the United States, unless the matter in dispute in such case shall exceed * (two thousand dollars). * Amended by act of Feb. 6th, 1875, ch. 77, sec. 3, to $s,ooo.oo. 1194 THE BANKRUPTCY ACT OF 1867. f ra. Jmdi* it furthtr tnaettd. That the Justices of the Supreme Court of the United States, subject to the provisions of this Act, shall frame general order* r^r the following purposes: For regulating the practice and procedure of the District Courts in bank- 'uptcy, and the several forms of petitions, orders, and other proceedings to be used in said courts in all matters under this Act; For regulating the duties of the various officers of said courts; (•For regulating the fees payable, and the charges and costs to be allowed, except such as are established by this Act or by law, with respect to all pro- ceedings in bankruptcy before said courts, not exceeding the rate of fees now allowed by law for similar services in other proceedings). For regulating the fees payable and the charges and costs to be allowed, with respect to all proceedings in bankruptcy before such courts, not exceeding^ •he rate of fees now allowed by law for similar services in other proceedings. For regulating the practice and procedure upon appeals; For regulating the filing, custody, and inspection of records; And generally for carrying the provisions of this Act into effect. (f And said justices shall have power under said sections, by general regula- tions, 10 simplify, and so far as in their judgment will conduce to the benefit of creditors, to consolidate the duties of the register, assignee, marshal, and clerk, and to reduce fees, costs, and charges, to the end that prolixity, delay, and unnecessary expense may be avoided.) After such general orders shall have been so framed, they, or any of them, may be rescinded or varied, and other general orders may be framed in manner aforesaid; And all such general orders so framed shall, from time to time, by the Jus- tices of the Supreme Court, be reported to Congress, with such suggestions as said Justices may think proper. VOLUNTARY BANKRUPTCY— COMMENCEMENT OF PROCEEDINGS. § II. And be it further enacted. That if any person residing within the juris- diction of the United States, owing debts provable under this Act exceeding the amount of three hundred dollars, shall apply by petition, addressed to the judge of the judicial district in which such debtor has resided or carried on business for the six months next immediately preceding the time of filing such petition, or for the longest period during such six months, setting forth his place of residence, his inability to pay all his debts in full, his willingness to surrender all his estate and effects for the benefit of his creditors, and his desire to obtain the benefit of this Act; And shall annex to his petition a schedule (words " and inventory and valua- tion " added by act of June 22, 1874), verified by oath before the court, or before a register in bankruptcy, or before one of the commissioners of the Circuit Court of the United States, containing a full and true statement of all his debts, and. as far as possible, to whom due, with the place of residence of each cred- * Amended by act of 22 June, 1874, ch. 390, sec. 18, 18 Stat. 184, to read u io the following paragraph. \ So added by act of 22 June, 1874, ch. 390, sec. 18, 18 Stat. 184. THE BANKRUPTCY ACT OF i80r. 1196 itor, i{ known to the debtor, and, if not known, the fact to be lo stated, aad tlM sum due to each creditor; also the nature of each debt or demand, whether founded on written security, obligation, contract, or otherwise, and also the true cause and consideration of such indebtedness in each case, and the place where such indebtedness accrued, and a statement of any existing mortgage, pledge, lien, judgment, or collateral or other security given forthe payment of the same; And shall also annex to his petition an accurate inventory,* verified in like manner, of all his estate, both real and personal, assignable under this Act, describing the same, and stating where it is situated, and whether there are any, and, if so, what encumbrances thereon; The filing of such petition shall be an act of bankruptcy, and such petitioner shall be adjudged a bankrupt; Provided, That all citizens of the United States petitioning to be declared bankrupt shall, in filing such petition, and before any proceedings thereon, take and subscribe an oath of allegiance and fidelity to the United States, which oath shall be filed and recorded with the proceedings in bankruptcy. And the judge of the District Courts, or, if there be no opposing party, any register of said court, to be designated by the judge, shall forthwith, if he be satisfied that the debts due from the petitioner exceed three hundred dollars, issue a warrant, to be signed by such judge or register, directed to the marshal of said district, authorizing him forthwith, as messenger, to publish notices in such newspapers as the warrant specifies; to serve written or printed notice, by mail or personally, on all creditors upon the schedule filed with the debtor's petition, or whose names may be given to him in addition by the debtor, and to give such personal or other notice to any persons concerned as the warrant specifies, which notice shall state: First, That a warrant in bankruptcy has been issued against the estate of the debtor. Stcond. That the payment of any debts and the delivery of any property belonging to such debtor to him or for his use, and the transfer of any property by him, are forbidden by law. Third. That a meeting of the creditors of the debtor, giving the names, resi- dences, and amountsr so far as known, to prove their debts and choose one or more assignees of his estate, will be held at a court of bankruptcy, to be holden at a time and place designated in the warrant, not less than ten nor more than ninety days after the issuing of the same. (f But whenever the creditors of the bankrupt are so numerous as to make any notice now required by law to them, by mail or otherwise, a great and dis- proportionate expense to the estate, the court may, in lieu thereof, in its discre- tion, order such notice to be given by publication in a newspaper, or news- papers, to all such creditors, whose claims, as reported, do not exceed the sums, respectively, of fifty dollars.) •"And valuation," so amended Act of June 22, 1874. I So amended by act of 22 June, 1874, ch. 390, sec. 5, 18 Stat. 179. 1196 THE BANKRUPTCY ACT OF 1867. OF ASSIGNMENTS AND ASSIGNEES. I It. And bt it further enacted. That at the meeting held in pursuance of the notice, one of the registers of the court shall preside, and the messenger shall make return of the warrant and of his doings thereon; and if it appears that the notice to the creditors has not been given as required in the warrant, the meeting shall forthwith be adjourned, and a new notice given as required. If the debtor dies after the issuing of the warrant, the proceedings may be continued and concluded in like manner as if he had lived. § 13. And be it further enacted, That the creditors shall, at the first meeting held after due notice from the messenger, in presence of a register designated by the court, choose one or more assignees of the etate of the debtor; the choice to be made by the greater part in value and in number of the creditors who have proved their debts. If no choice is made by the creditors at said meeting, the judge, or, if there be no opposing interest, the register, shall appoint one or more assignees. If an assignee, so chosen or appointed, fails within five days to express in writing his acceptance of the trust, the judge or register may fill the vacancy. All elections or appointments of assignees shall be subject to the approval of the judge; and when in his judgment it is for any cause needful or expedient, he may appoint additional assignees, or order a new election. The judge at any time may, and upon the request in writing of any creditor who has proved his claim shall require the assignee to give good and sufficient bond to the United States, with a condition for the faithful performance and ■ discharge of his duties; The bond shall be approved by the judge or register by his endorsement thereon, shall be filed with the record of the case, and inure to the benefit of all creditors proving their claims, and may be prosecuted in the name and for the benefit of any injured party. If the assignee fails to give the bond within such lime as the judge orders, not exceeding ten days after notice to him of such order, the judge shall remove him and appoint another in his place. g 14. And be it further enacted. That as soon as said assignee is appointed and qualified, the judge, or, where there is no opposing interest, the register, shall, by an instrument under his hand, assign and convey to the assignee all the estate, real and personal, of the bankrupt, with all his deeds, books, and papers relating thereto; and such assignment shall relate back to the commencement of said proceedings in bankruptcy, and thereupon, by operation of law, the title to all such property and estate, both real and personal, shall vest in said assignee, although the same is then attached on mesne process as the property of the debtor, and shall dissolve any such attachment made within four months next preceding the commencement of said proceedings: 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 BANKRUPTCY ACT OF 1867. 1197 the bankrupt, but altogether qot to exceed ia Talue, in any caae, the tom of five hundred dollars; And also the wearing^ appaiel of such bankrupt, and that of hit wife and chU> dren; And the uniform, arms, and equipments of any person who is or luis been a soldier in the militia or in the service of the United States; And such otlwr property as now is, or hereafter shall be exempted from attachment, or seizure, or levy on execution by the laws of the United States; And such other property not included in the foregoing exceptions as is exempted from levy and sale upon execution or other process, or order of any court, by the laws of the State in which the bankrupt has his domicile at the time of the commencement of the proceedings in bankruptcy, to an amount not exceeding that allowed by such State exemption laws in force in the year eighteen hundred and sixty-four: Provided, That the foregoing exception shall operate as a limitation upon the conveyance of the property of the bankrupt to his assignees; And in no case shall the property hereby excepted pass to the assignees, or the title of the bankrupt thereto be impaired or affected by any of the provisions of this Act; And the determination of the assignee in the matter shall, on exception taken, be subject to the final decision of the said court: And provided further. That no mortgage of any vessel or of any other goods or chattels, made as security for any debt or debts, in good faith and for pres- ent considerations, and otherwise valid, and duly recorded, pursuant to any statute of the United States or of any State, shall be invalidated or affected hereby. And all the property conveyed by the bankrupt in fraud of his creditors; All rights in equity, choses in action, patents and patent rights and copy- rights; All debts due him, or any person for his use, and all liens and securities therefor; And all his rights of action for property or estate, real or personal, and for any cause of action which the bankrupt had against any person arising from contract or from the unlawful taking or detention or of injury to the property of the bankrupt; and all his rights of redeeming such property or estate, with the like right, title, power, and authority to sell, manage, dispose of, sue for, and recover or defend the same, as the bankrupt might or could have had if no assignment bad been made, shall, in virtue of the adjudication of bankruptcy and the appointment of his assignee, be at once vested in such assignee; And he may sue for and recover the said estate, debts, and effects, and may prosecute and defend all suits at law or in equity, pending at the time of the adjudication of bankruptcy, in which such bankrupt is a party in his own name, in the same manner and with the like effect as they might have been presented or defended by such bankrupt. And a copy, duly certified by the clerk of the court, under the seal thereof, of the assignment made by the judge or register, as the case may be, to htm as •adgnee, shall be conclusive evidence of his title as such assignee to take, hold. 1198 THE BANKRUPTCY ACT OF 1867. •«• (or, and recorer the property of the bankrupt, a* hereinbefore mentioned ; but no property held by the bankrupt in trust thall pass by such assignment. No person shall be entitled to maintain an action against an assignee in banlcruptcy for anything done by him as such assignee, without preriously giv- ing him twenty days' notice of such action, specifying the cause thereof, to the •nd that such assignee may hare an opportunity of tendering amends, should kc see fit to do so. No person shall be entitled, a* against the assignee, to withhold from him possession of any books of account of the bankrupt, or claim any lien thereon; And no suit in which the assignee is a party shall be abated by his death or removal from office, but the same may be prosecuted and defended by his suc- cessors, or by the surviving or remaining assignee, as the case may be. The assignee shall have authority, under the order and direction of the court, to redeem or discharge any mortgage or conditional contract, or pledge or deposit, or lien upon any property, real or personal, whenever payable, and to tender due performance of the condition thereof, or to sell the same subject to such mortgage, lien, or other encumbrances. The debtor shall also, at the request of the assignee, and at the expense of the estate, make and execute any instruments, deeds, and writings which may be proper, to enable the assignee to possess himself fully of all the assets of the bankrupt. The assignee shall immediately give notice of his appointment by publica- tion, at least once a week for three successive weeks, in such newspaper as shall, for that purpose, be designated by the court, due regard being had to their general circulation in the district or in that portion of the district in which the bankrupt and his creditors shall reside. And shall, within six months, cause the assignment to him to be recorded in every registry of deeds or other office within the United States where a convey- ance of any lands owned by the bankrupt ought by law to be recorded; And the record of such assignment, or a duly certified copy thereof, shall be evidence thereof in all courts. § 15. And be it further enacted. That the assignee shall demand and receive from any and all persons holding the same, all the estate assigned, or intended to be assigned, under the provisions of this Act; And he shall sell all such unencumbered estate, real and personal, which comes to his hands, on such terms as he thinks most for the interest of the creditors; (R. S.. sec. 5062a (2a June, 1874, ch. 390, sec. i, 18 Stat. 178.) — That the court may, in its discretion, on sufficient cause shown, and upon notice and hearing, direct the receiver or assignee to take possession of the property, and carry on the business of the debtor, or any part thereof, under the direction of the court, when in its judgment, the interest of the estate as well as of the creditors will be promoted thereby, but not for a period exceeding nine months from the time the debtor shall have been declared a bankrupt. Provided, That •nch order shall not be made until the court shall be satisfied that it is approved by a majority in value of the creditors.) But upon petition of any person interested, and for cauae shown, the coun THE BANKRUPTCY ACT OF 1*57. 1199 may make such order concerning the time, place, and raknaet of mU, »■ wU, in Us opinion, prove to the interest of the creditors; And the assignee shall keep a regular account of all money received by him as assignee, to which every creditor shall, at reasonable times, have free resort. (R. S., sec. 5062b (22 June, 1874, ch. 390, sec. 4, 18 Stat. 178.) — That, unleia otherwise ordered by the court, the assignee shall sell the property of the bank, rupt, whether real or personal, at public auction, in such parts or parcels, and at such times and places, as shall be best calculated to produce the greatest amount with the least expense. All notices of public sales under this act by any assignee or officer of the court shall be published once a week for three consecutive weeks in the newspaper or newspapers to be designated by the judge, which, in his opinion, shall be best calculated to give general notice of the sale. And the court on application of any party in interest, shall have com- plete supervisory power over such sales, including the power to set aside the same and to order a resale, so that the property sold shall realize the largest sum. And the court may, in its discretion, order any real estate of the bank- rupt, or any part thereof, to be sold for one-fourth cash at the time of sale, and the residue within eighteen months, in such installments as the court may direct, bearing interest at the rate of seven per centum per annum, and secured by proper mortgage or lien upon the property so sold. And it shall be the duty of every assignee to keep a regular account of all moneys received or expended by him as such assignee, to which account every creditor shall, at reasonable times, have free access. If any assignee shall fail or neglect to well and faith- fully discharge his duties in the sale or disposition of property as above contem- plated, it shall be the duty of the court to remove such assignee, and he shall forfeit all fees and emoluments to which he might be entitled in connection with such sale. And if any assignee shall in any manner, in violation of his duty aforesaid, unfairly or wrongfully sell, or dispose of, or in any manner, fraudulently or corruptly combine, conspire, or agree with any person or per- sons, with intent to unfairly or wrongfully sell, or dispose of the property com- mitted to his charge, he shall, upon proof thereof, be removed, and forfeit all fees or other compensation for any and all services, in connection with such bankrupt's estate, and upon conviction thereof, before any court of competent jurisdiction, shall be liable to a fine of not more than ten thousand dollars, or imprisonment in the penitentiary for a term of not exceeding two years, or both fine and imprisonment, at the discretion of the court. And any person 50 com- bining, conspiring, or agreeing with such assignee for the purpose aforesaid, shall, upon conviction, be liable to a like punishment. That the assignee shall report under oath, to the court, at least as often as once in three months, the condition of the estate in his charge and the state of his accounts in detail, and at all other times when the court, on motion or otherwise, shall so order. And on any settlement of the account of any assignee, he shall be required to account for all interest, benefit or advantage received, or in any manner agreed to be received, directly or indirectly, from the use, disposal or proceeds of the bankrupt's estate. And he shall be required, upon such settlement, to make and file in court an affidavit declaring, according to the truth, whether he has or has not, as the case may be, received, or is or is not, as the case may be, to 1200 THE BANKRUPTCY ACT OF 1867. thra, directly or indirectly, mny interest, benefit, or advantage from the uae or deposit of such funds; and such assignee may be examined orally upon the same subject, and if he shall wilfully swear falsely, either in such afSdavit or examination, or to his report provided for in this section, he shall be deemed to be guilty of perjury, and on conviction thereof, be punished by imprisonment in the penitentiary not less than one and not more than five years.) g 16. And be it further enacted. That the assignee shall have the like remedy 10 recover all said estate, debts, and effects in bis own name, as the debtor might have had if the decree in bankruptcy had not been rendered, and no assignment had been made. If, at the time of the commencement of the proceedings in bankruptcy ao action is pending in the name of the debtor for the recovery of a debt or other thing which might or ought to pass to the assignee by the assignment, the assignee shall, if he re(]iiires it, be admitted to prosecute the action in his own name, in like manner and with like effect as if it had been originally com- menced by him. No suit pendiiig in the name of the assignee shall be abated by his death or removal; but upon the motion of the surviving, or remaining, or new assignee, as the case may be, he shall be admitted to prosecute the suit, in like manner and with like effect as if it had been originally commenced by him. In suits prosecuted by the assignee a certified copy of the assignment made to him by the judge or register shall be conclusive evidence of his authority to sue. § 17. And be it further enacted. That the assignee shall, as soon as may be after receiving any money belonging to the estate, deposit the same in some bank in his name as assignee, or otherwise keep it distinct and apart from all other money in his possession; and shall, as far as practicable, keep all goods and effects belonging to the estate separate and apart from all other goods in his possession, or designated by appropriate marks, so that they may be easily and clearly distinguished, and may not be exposed or liable to be taken as his prop- erty or for the payment of his debts. When it appears that the distribution of the estate may be delayed by litiga- tion or other cause, the court may direct the temporary investment of the money belonging to such estate in securities to be approved by the judge or a register of said court, or may authorize the same to be deposited in any convenient bank, upon such interest, not exceeding the legal rate, as the bank may con- tract with the assignee to pay thereon. He shall give written notice to all known creditors, by mail or otherwise, of all dividends, and such notice of meetings, after the first, as may be ordered by the court. He shall be allowed, and may retain, out of money in his hands, all the neces- sary disbursements made by him in the discharge of his duty, and a reasonable compensation for his services, in the discretion of the court. He may, under the direction of the court, submit any controversy arising in the settlement of demands against the estate, or of debts due to it, to the deter- mination of arbitrators, to be chosen by him and the other party to the contn>- versy, and may, under such direction, compound and settle any such contro. THE BANKRUPTCY ACT OF 1867. 1201 rersy by agreement with the other party, ai he thinks proper and molt (or the interest of the creditors. § 18. And be it further enacted. That the court, after due notice and hearing, may remove an assignee for any cause which, in the judgment of the court, renders such removal necessary or expedient. At a meeting called by order of the court in its discretion for the purpose, or which shall be called upon the application of a majority of the creditors in num- ber and value, the creditors may, with consent of the court, remove anf assignee by such a vote as is hereinbefore provided for the choice of assignee. An assignee may, with the consent of the judge, resign his trust, and be dis- charged therefrom. Vacancies caused by death, or otherwise, in the oflSce of assignee may be filled by appointment of the court, or, at its discretion, by an election by the credit- ors, in the manner hereinbefore provided, at a regular meeting, or at a meeting called for the purpose, with such notice thereof, in writing, to all known credit- ors, and by such person as the court shall direct. The resignation or removal of an assignee shall in no way release him from performing all things requisite on his part for the proper closing up of his trust and the transmission thereof to his successors, nor shall it affect the liability of the principal or surety on the bond given by the assignee. When, by death, or otherwise, the number of assignees is reduced, the estate of the debtor not lawfully disposed of shall vest in the remaining assignee or assignees, and the persons selected to fill vacancies, if any, with the same powers and duties relative thereto as if they were originally chosen. Any former assignee, his executors or administrators, upon request, and at the expense of the estate, shall make and execute to the new assignee all deeds, conveyances, and assurances, and do all other lawful acts requisite to enable him to recover and receive all the estate. And the court may make all orders which It may deem expedient to secnie (he proper fulfillment of the duties of any former assignee, and the rights and interests of all persons interested in the estate. No person who has received any preference contrary to the provisions of thU Act shall vote for or be eligible as assignee. But no title to property, real or personal, sold, transferred, or conveyed by an assignee, shall be affected or impaired by reason of his ineligibility. An assignee refusing or unreasonably neglecting to execute an instrument when lawfully required by the court, or disobeying a lawful order or decree a< the court in the premises, may be punished as for a contempt of court. OF DEBTS AND PROOF OF CLAIMS. % 19. And he it further enacted. That all debts due and payable from the bank rupt at the time of the adjudication of bankruptcy, and all debts then existing but not payable until a future day, a rebate of interest being made when no interest is payable by the terms of contract, may be proved against the estalB of the bankrupt. All demands against the bankrupt for or on account of any goods or chattel* 76 1202 THE BANKRUPTCY ACT OF 1867. wrongfnlly taken, converted, or withheld bjr him, may be proved and allowed ai debts to the amount of the value of the property so taken or withheld, with interest. If the bankrupt shall be bound as drawer, indorser, surety, bail, or guarantor npon any bill, bond, note, or any other specialty or contract, or for any debt of another person, and his liability shall not have become absolute until after the adjudication of bankruptcy, the creditor may prove the same after such liability shall have become fixed, and before the final dividend shall have been declared. In all cases of contingent debts and contingent liabilities contracted by the bankrupt, and not herein otherwise provided for, the creditor may make claim therefor, and have his claim allowed, with the right to share in the dividends, if the contingency shall happen before the order for the final dividend; or he may at any time apply to the court to have the present value of the debt or lia- bility ascertained and liquidated, which shall then be done in such manner as the court shall order, and he shall be allowed to prove for the amount so ascer- tained. Any person liable as bail, surety, guarantor, or otherwise for the bankrupt, who shall have paid the debt or any part thereof in discharge of the whole, shall be entitled to prove such debt, or to stand in the place of the creditor if he shall have proved the same, although such payments shall have been made after the proceedings in bankruptcy were commenced. And any person so liable for the bankrupt, and who has not paid the whole of said debt, but is still liable for the same or any part thereof, may, if the creditor shall fail or omit to prove such debt, prove the same, either in the name of the creditor or otherwise, as may be provided by the rules, and subject to such regulations and limitations as may be established by such rules. Where the bankrupt is liable to pay rent, or other debt falling due at fixed and stated periods, the creditor may prove for a proportionate part thereof up to the time of the bankruptcy, as if the- same grew due from day to day, and not at such fixed and stated periods. If any bankrupt shall be liable for unliquidated damages arising out of any contract or promise, or on account of any goods or chattels wrongfully taken, converted, or withheld, the Court may cause such damages to be assessed in such mode as it may deem best, and the sum so assessed may be proved against the estate. No debts other than those above specified shall be proved or allowed against the estate. 5 JO. And be it further enacted. That in all cases of mutual debts or mutual credits between the parties the account between them shall be stated, and one debt set off against the other, and the balance only shall be allowed or paid, but no set-off shall be allowed of a claim in its nature not provable against the estate: Provided, That no set-off shall be allowed in favor of any debtor to the bankrupt of a claim purchased by or transferred to him after the filing of the petition. (•Or In case* of compulsory bankruptcy, after the act of bankruptcy upon or • So Bdd«d by act of si June, 1874, ch. sgo, sec. 6, 18 Stat. 179. THE BANKRUPTCY ACT OF 1867. 1203 In respect of which the adjudication thall be made, and with a view of making such set-oS.) When a creditor has a mortgage or pledge of real or personal property of the bankrupt, or a lien thereon for securing the payment of a debt owing to him from the bankrupt, he shall be admitted as a creditor only for the balance of the debt after deducting the value of such property, to be ascertained by agreement between him and the assignee, or by a sale thereof, to be made in such manner as the court shall direct; Or the creditor may release or convey his claim to the assignee upon such property, and be admitted to prove his whole debt. If the value of the property exceeds the sum for which it is so held at secur- ity, the assignee may release to the creditor the bankrupt's right of redemption therein on receiving such excess; or he may sell the property, subject to the claim of the creditor thereon; and in either case the assignee and creditor, respectively, shall execute all deeds and writings necessary or proper to con. summate the transaction. If the property is not so sold or released and delivered up, the creditor shall not be allowed to prove any part of his debt. § 21. And be it further enacted. That no creditor proving his debt or claim shall be allowed to maintain any suit at law or in equity therefor against the bankrupt, but shall be deemed to have waived all right of action and suit against the bankrupt, and all proceedings already commenced, or unsatisfied judgments already obtained thereon, shall be deemed to be discharged and surrendered thereby. (* But a creditor proving his debt or claim shall not be held to have waived his right of action or suit against the bankrupt where a discharge has been refused or the proceedings have been determined without a discharge.) And no creditor whose debt is provable under this act shall be allowed to prosecute to final judgment any suit at law or in equity therefor against the bank- rupt, until the question of the debtor's discharge shall have been determined. And any such suit or proceeding shall, upon the application of the bankrupt, be stayed to await the determination of the court in bankruptcy on the question of the discharge: Provided, There be no unreasonable delay on the part of the bankrupt in endeavoring to obtain his discharge: And provided, also, That if the amount due the creditor is in dispute, the suit, by leave of the court in bank- ruptcy, may proceed to judgment for the purpose of ascertaining the amount due, which amount may be proved in bankruptcy, but execution shall be stayed as aforesaid. If any bankrupt shall, at the time of adjudication, be liable upon any bill of exchange, promissory note, or other obligation in respect of distinct contracts as a member of two or more firms carrying on separate and distinct trades, and having distinct estates to be wound up in bankruptcy, or as a sole trader, and also as a member of a firm, the circumstance that such firms are in whole or In part composed of the same individuals, or that the sole contractor is also one of the joint contractors, shall not prevent proof and receipt of dividend in respect * So added by act of m Jane, 1874, ch. 390, sec. 7, iS Stat. 1)9.) 1204 THE BANKRUPTCY ACT OF 1867. M altered to conform thereto. The party prevailing in the suit shall be entitled to costs against the adverse party, to be taxed and recovered as in suits at law; if recovered against the assignee, they shall be allowed out of the estate. A bill of exchange, promissory note, or other instrument used in evidence upon the proof of a claim, and left in court, or deposited in the clerk's office, may be delivered, by the register or clerk having the custody thereof, to the person who used it, upon his filing a copy thereof, attested by the clerk of the court, who shall endorse upon it the name of the party against whose estate it has been proved, and the date and amount of any dividend declared thereon. g as. And be it further enacted. That when it appears to the satisfaction of the court that the estate of the debtor or any part thereof, is of a perishable nature, or liable to deteriorate in value, the court may order the same to be sold in such manner as may be deemed most expedient, under the direction of the messen- ger or assignee, as the case may be, who shall hold the funds received in place of the estate disposed of; And whenever it appears to the satisfaction of the court that the title to any portion of an estate, real or personal, which has come into possession of the assignee, or which is claimed by him, is in dispute, the court may, upon the petition of the assignee, and after such notice to the claimant, his agent, or attorney, as the court shall deem reasonable, order it to be sold, under the direction of the assignee, who shall hold the funds received in place of the estate disposed of; And the proceeds of the sale shall be considered the measure of the value of the property in any suit or controversy between the parties in any courts. But this provision shall not prevent the recovery of the property from the possession of the assignee by any proper action commenced at any time before the court orders the sale. § 26. And be it further enacted. That the court may, on the application of the assignee in bankruptcy, or of any creditor, or without any application, at all times require the bankrupt, upon reasonable notice, to attend and submit to an examination, on oath, upon all matters relating — To the disposal or condition of his property; To his trade and dealings with others, and his accounts concerning the same; To all debts due to or claimed from him; And to all other matters concerning his property and estate, and the due settlement thereof according to law; Which examination shall be in writing, and shall be signed by the bankrupt, and be filed with the other proceedings. And the court may, in like manner, require the attendance of any other per- son as a witness; and if such person shall fail to attend on being summoned thereto, the court may compel his attendance by warrant directed to the mar- shal, commanding him to arrest such person, and bring him forthwith before the court, or before a register in bankruptcy for examination as such witness. If the bankrupt is imprisoned, absent, or disabled from attendance, the court may order him to be produced by the jailor, or any officer in whose custody he may be; or may direct the examination to be had, taken, and certified, at such THE BANKRUPTCY ACT OF 1867. 1207 time and place and in such manner as the court may deem proper, and with lilK effect as if such examination had been in court. The bankrupt shall, at all times until his discharge, be subject to the order of the court, and shall, at the expense of the estate, execute all proper writings and instruments, and do and perform all acts required by the court touching the assigned property or estate, and to enable the assignee to demand, recover, and receive all the property and estate assigned, wherever situated; and for neglect or refusal to obey any order of the court, such bankrupt may be committed and punished as for a contempt of court. If the bankrupt is without the district, and unable to return and personally attend at any of the times, or do any of the acts which may be specified or required pursuant to this section, and if it appears that such absence was not caused by wilful default, and if, as soon as may be after the removal of such impediment, he offers to attend and submit to the order of the court in all respects, he shall be permitted so to do with like effect as if he had not been in default. He shall also be at liberty, from time to time, upon oath, to amend and cor- rect his schedule of creditors and property so that the same shall conform to the facts. For good cause shown, the wife of any bankrupt may be required to attend before the court, to the end that she may be examined as a witness; and if such wife do not attend at the time and place specified in the order, the bankrupt shall not be entitled to a discharge unless he shall prove to the satisfaction of the court that he was unable to procure the attendance of his wife. No bankrupt shall be liable to arrest during the pendency of the proceedings in bankruptcy in any civil action unless the same is founded on some debt or claim from which his discharge or bankruptcy would not release him. § 27. And be it further enacted. That all creditors whose debts are duly proved and allowed shall be entitled to share in the bankrupt's property and estate pro rata, without any priority or preference whatever, except that wages due from him to any operative, or clerk, or house servant, to an amount not exceeding fifty dollars, for labors performed within six months next preceding the adjudi- cation of bankruptcy, shall be entitled to priority, and shall be first paid in full; Provided, That any debt proved by any person liable as bail, surety, guar- antor, or otherwise for the bankrupt, shall not be paid to the person so proving the same until satisfactory evidence shall be produced of the payment of such debt by such person so liable, and the share to which such debt would be entitled may be paid into court, or otherwise held for the benefit of the party entitled thereto, as the court may direct. At the expiration of three months from the date of the adjudication of bank- ruptcy in any case, or as much earlier as the court may direct, the court, upon request of the assignee, shall call a general meeting of the creditors, of which due notice shall be given; And the assignee shall then report and exhibit to the court and to the credit- on just and true accounts of all his receipts and payments, verified by his oath; And he shall also produce and file vouchers for all payments for which Toachen ihall be required by any rule of the court; 1208 THE BANKRUPTCY ACT OF 1867. H« shall also submit the schedule of the bankrupt's creditors and property as amended, duly verified by the bankrupt, and a statement of the whole estate ol the bankrupt, as then ascertained, of the property recovered and of the prop- erty outstanding, specifying the cause of its being outstanding, also what debts or claims are yet undetermined, and stating what sura remains in his hands. At such meeting the majority in value of the creditors present shall deter- mine whether any and what part of the net proceeds of the estate, after deduct- ing and retaining a sum sufficient to provide for all undetermined claims which, by reason of the distant residence of the creditor, or for other sufficient reason, have not been proved, and for other expenses and contingencies, shall be divided among the creditors; but unless at least one-half in value of the creditors shall attend such meeting, either in person or by attorney, it shall be the duty of the assignee so to determine. In case a dividend is ordered the register shall, within ten days after such meeting, prepare a list of creditors entitled to dividend, and shall calculate and set opposite to the name of each creditor who has proved his claim, the dividend to which he is entitled out of the net proceeds of the estate set apart for divi- dend, and shall forward by mail to every creditor a statement of the dividend to which he is entitled, and such creditor shall be paid by the assignee in such manner as the court may direct. § 28. And be it further inacted. That the like proceedings shall be had at the expiration of the next three months, or earlier if practicable, and charge from his debts, and the court shall thereupon order notice to be given by mail to all creditors who have proved their debts, and by publication at least once a week in such newspapers as the court shall designate, due regard being had to the general circulation of the same in the district, or in that portion of the district in which the bankrupt and his creditors shall reside, to appear on a day appointed for that purpose, and show cause why a discharge should not be granted to the bankrupt. No discharge shall be granted, or, if granted, be valid — If the bankrupt has wilfully sworn falsely in his affidavit annexed to his peti- tion, schedule, or inventory, or upon any examination in the course of the pro- ceedings in bankruptcy, in relation to any material fact concerning his estate or his debts, or to any other material fact; Or if he has concealed any part of his estate or effects, or any books or writ- ings relating thereto; Or if he has been guilty of any fraud or negligence in the care, custody, or delivery to the assignee of the property belonging to him at the time of the presentation of his petition and inventory, excepting such property as he is per- mitted to retain under the provisions of this Act; Or if he has caused, permitted, or suffered any loss, waste, or destruction thereof; Or if, within four months before the commencement of such proceedings, he has procured his lands, goods, money, or chattels to be attached, sequestered, or seized, on execution; Or if, since the passage of this act, he has destroyed, mutilated, altered, or falsified any of his books, documents, papers, writings, or securities; Or has made or been privy to the making of any false or fraudulent entry in any book of account or other document with intent to defraud his creditors; Or has removed, or caused to be removed, any part of his property from the district with intent to defraud his creditors; Or if he has given any fraudulent preference contrary to the provisions of this Act; Or made any fraudulent payment, gift, transfer, conveyance, or assignment of any part of his property; Or has lost any part thereof in gaming; Or has admitted a false or fictitious debt against his estate; Or if, having knowledge that any person has proved such false or fictitious debt, he has not disclosed the same to his assignee within one month after such knowledge; Or if, being a merchant or tradesman, he has not, subsequently to the pass- age of this Act, kept proper books of account; Or if he, or any person in his behalf, has procured the assent of any creditcv to the discharge, or influenced the action of any creditor at any stage of the proceedings by any pecuniary consideration or obligation; Or if he has, in contemplation of becoming bankrupt, made any pledge, pay- ment, transfer, assignment, or conveyance of any part of his property, directljr or indirectly, absolutely or conditionally, for the purpose of preferring any THE BANKRUPTCY ACT OF 1867. 1211 creditor or person having a claim against him, or who is or may be und«r lite bility for him, or for the purpose of preventing the property from coming into the hands of the assignee, or of being distributed under this act in satisfactioa of his debts; Or if he has been convicted of any misdemeanor under this Act, or has be«n guilty of any fraud whatever contrary to the true intent of this Act; And before any discharge is granted, the bankrupt shall take and subscribe an oath to the effect that he has not done, suffered or been privy to any act, matter, or thing specified in this act as a ground for withholding such dis- charge, or as invalidating such discharge if granted. § 30. And be further enacted. That no person who shall have been discharged under this Act, and shall afterwards become bankrupt, on his own application, shall be again entitled to a discharge, whose estate is insufficient to pay seventy per centum of the debts proved against it, unless the assent in writing of three- fourths in value of his creditors who have proved their claims, is filed at or before the time of application for discharge. But a bankrupt, who shall prove to the satisfaction of the court that he has paid all the debts owing by him at the time of any previous bankruptcy, or who has been voluntarily released therefrom by his creditors, shall be entitled to a discharge in the same manner and with the same effect as if he had not previ- ously been bankrupt. § 31. And be it further enacted. That any creditor opposing the discharge of any bankrupt may file a specification in writing of the grounds of his opposi- tion, and the Court may in its discretion order any question of fact so presented to be tried at a stated session of the District Court. § 32. And be it further enacted. That if it shall appear to the Court that the bankrupt has in all things conformed to his duty under this act, and that he i« entitled, under the provisions thereof, to receive a discharge, the Court shall grant him a discharge from all his debts except as hereinafter provided, and shall give him a certificate thereof under the seal of the court, in substance as follows : District Court of the United States, District of . Whereas , has been duly adjudged a bankrupt under the Act of Coiw gress establishing a uniform system of bankruptcy throughout the United States, and appears to have conformed to all the requirements of law in that behalf, it is therefore ordered by the Court that said be forever dis- charged from all debts and claims which by said Act are made provable against his estate, and which existed on the day of , on which day the petition for adjudication was filed by or [or against] him excepting such debts, if any, as are by said Act excepted from the operation of a discharge in bankruptcy. Given under my hand and the seal of the court at , in the said district, this day of , A. D. . [Seal.] , Judge. § 33. And be it further encuted. That no debt created by the fraud or embezsla- ment of the bankrupt or by his defalcation as a public officer, or while acting la any fiduciary character, shall be discharged under this Act; but the debt may 1212 THE BANKRUPTCY ACT OF i867. be proved, and the dividend thereon shall be a payment on account of said debt; And no discharge granted under this Act shall release, discharge, or affect any oerson liable for the same debt for or with the bankrupt, either as partner, joint-contractor, indorser, surety, or otherwise. And in all proceedings in bankruptcy commenced after one year from the time this Act shall go into operation, no discharge shall be granted to a debtor whose assets do not pay fifty per centum of the claims against his estate, (" upon which he is liable as the principal debtor." So amended. Act of July 37, 1868, ch. 258, sec. I), unless the assent in writing of a majority in number and value of his creditors who have proved their claims, is filed in the case at or before the time cf application for discharge. (R. S., sec. 5112 a (22 June, 1874, ch. 390, sec. g, 18 Stat. 180). — That in cases of compulsory or Involuntary bankruptcy, the provisions of said act, and any amendment thereof, or of any supplement thereto, requiring the payment of any proportion of the debts of the bankrupt, or the assent of any portion of his creditors, as a condition of his discharge from his debts, shall not apply; but he may, if otherwise entitled thereto, be discharged by the court in the same man- ner and with the same effect as if he had paid such per centum of his debts, or as if the required proportion of his creditors had assented thereto. And in cases of voluntary bankruptcy, no discharge shall be granted to a debtor whose assets shall not be equal to thirty per centum of the claims proved against his estate, upon which he shall be liable as principal debtor without the assent of at least one-fourth of his creditors in number, and one-third in value. And the provision In section five thousand one hundred and twelve (thirty-three of said act of March second, eighteen hundred and sixty-seven) requiring fifty per cen- tum of such assets is hereby repealed.) § 34. And he it further enacted. That a discharge duly granted under this Act shall, with the exceptions aforesaid, lelease the bankrupt from all debts, claims, liabilities, and demands which were or might have been proved against his estate in bankruptcy, and may be pleaded, by a simple averment that on the day of its date such discharge was granted to him, setting the same forth in hac verba, as a full and complete bar to all suits brought on any such debts, claims, liabilities, or demands, and the certificate shall be conclusive evidence in favor of such bankrupt of the fact and the regularity of such discharge; Always provided. That any creditor or creditors of said bankrupt, whose debt was proved or provable against the estate in bankruptcy, who shall see fit to contest the validity of said discharge on the ground that it was fraudulently obtained, may, at any time within two years after the date thereof, apply to the ccrit which granted it to set aside and annul the same. Said application shall be in writing; shall specify which, in particular, of the several acts mentioned in section twenty-nine it is intended to give evidence of against the bankrupt, setting forth the grounds of avoidance, and no evidence shall l>e admitted as to any other of the said acts; but said application shall be subject to amendment at the discretion of the court. The court shall cause reasonable notice of said application to be given to said THE BANKRUPTCY ACT OF 1867. 121^ bankrupt, and order him to appear and answer the same, within neh time M to the court shall seem fit and proper. If, upon the hearing of said parties, the court shall find that the fraudulent acts, or any of them, set forth as aforesaid by said creditor or creditors agalnat the bankrupt, are proved, and that said creditor or creditors had no knowl- edge of the same until after the granting of said discharge, judgment shall be given in favor of said creditor or creditors, and the discharge of said bankrupt shall be set aside and annulled. But if said court shall find that said fraudulent acts, and all of them, set forth as aforesaid, are not proved, or that they were known to said creditor or creditors before the granting of said dis- charge, then judgment shall be rendered in favor of the bankrupt, and the validity of his discharge shall not be affected by said proceedings. PREFERENCES AND FRAUDULENT CONVEYANCES DECLARED VOID. § 35. And bt it further enacted. That if any person, being insolvent, or in con- templation of Insolvency, within four months before the filing of the petition by or against him, with a view to give a preference to any creditor or person hav- ing a claim against him, or who is under any liability for him, procures any part of his property to be attached, sequestered, or seized on execution, or makes any payment, pledge, assignment, transfer, or conveyance of any part of his property, either directly or indirectly, absolutely or conditionally — the person receiving such payment, pledge, assignment, transfer, or conveyance, or to be benefited thereby, or by such attachment, having reasonable cause to believe such person is Insolvent* (and that such attachment, payment, pledge, assignment, or conveyance, is made in fraud of the provisions of this Act — the same shall be void, and the assignee may recover the property, or the value of it, from the person so receiving it, or so to be benefited). And if any person being insolvent, or in contemplation of insolvency or bank- ruptcy, within six months before the filing of the petition by or against him, makes any payment, sale, assignment, transfer, conveyance, or other disposi- tion of any part of his property to any person who then has reasonable cause to believe him to be insolvent, or to be acting in contemplation of insolvency, andf that such payment, sale, assignment, transfer, or other conveyance is made with a view to prevent his property from coming to his assignee in bank- ruptcy, or to prevent the same from being distributed under this Act, or to defeat the object of, or in any way impair, hinder, impede, or delay the opera- tion and effect of, or to evade any of the provisions of this Act, the sale, assignment, transfer, or conveyance shall be void, and the assignee may recover the property, or the value thereof, as assets of the bankrupt. And if such sale, 'Amended so as to read: " Knowing that such attachment, sequestration, seizure, payment, pledge, assignment, or conveyance is made in fraud of the provisions of this Title, the same shall be void, and the assignee may recover the property, or the value of it, from the person so receiving it, or so to b* benefited. And nothing in said section five thousand one hundred and twenty- eight (thirty-five) shall be construed to invalidate any loan of actual value, or the security therefor, made in good faith, upon a security taken in good faith oa the occasion of the making of such loan." — Act of June 32, 1874. R. S. § 5M8. f (The word " knowing" Inserted by act of June M, 1874, ch. 390, sec. 11.) 1214 THE BANKRUPTCY ACT OF 1867. assignment, transfer, or conveyance is not made in the usual and ordinary course of business of the debtor, the fact shall be prima facie evidence of fraud. Any contract, covenant, or security made or given by a bankrupt or other person with, or in trust for, any creditor, for securing the payment of any money as a consideration for, or with intent to induce the creditor to forbear opposing the application for discharge of the bankrupt, shall be void; And if any creditor shall obtain any sum of money or other goods, chattels, or security from any person as an inducement for forbearing to oppose, or con- senting to such application for discharge, every creditor so offending shall forfeit all right to any share or dividend in the estate of the bankrupt, and shall also forfeit double the value or amount of such money, goods, chattels, or security so obtained, to be recovered by the assignee for the benefit of the estate. (R. S., sec. 5130 I* (23 June, 1874, ch. 390, sec. 10, 18 Stat. 180). — That in cases of involuntary or compulsory bankruptcy, the period of four months mentioned in section five thousand one hundred and twenty-eight (thirty-five) of the act to which this is an amendment, is hereby changed to two months, but this provision shall not take effect until two months after the passage of this act, and in the cases aforesaid, the period of six months mentioned in said sec- tion five thousand one hundred and twenty-nine (thirty-five) is hereby changed to three months, but this provision shall not take effect until three months after the passage of this act.) BANKRUPTCY OF PARTNERSHIPS AND OF CORPORATIONS. § 36. And be it further enacted. That where two or more persons who are part- ners in trade shall be adjudged bankrupt, either on the petition of such part- ners, or any one of them, or on the petition of any creditor of the partners, a warrant shall issue in the manner provided by this Act, upon which all the joint stock and property of the copartnership, and also all the separate estate of each of the partners, shall be taken, excepting such parts thereof as are herein- before excepted; And all the creditors of the company, and the separate creditors of each part, ner, shall be allowed to prove their respective debts; And the assignee shall be chosen by the creditors of the company, and shall also keep separate accounts of the joint stock or property of the copartnership, and of the separate estate of each member thereof; And after deducting out of the whole amount received by such assignee the whole of the expenses and disbursements, the net proceeds of the joint stock shall be appropriated to pay the creditors of the copartnership, and the net pro- ceeds 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 be 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 >epa- THE BANKRUPTCY ACT OF 1867. 1215 rate ei^ates of the several partners, according to their respectly* right and interest therein, and as it would have been if the partnership had been dl»- solved without any bankruptcy; And the sum so appropriated to the separate estate of each partner shall be applied to the payment 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. If such copartners reside in different districts, that court in which the petition Is first filed shall retain exclusive jurisdiction over the case. § 37. And be it further enacted. That the provisions of this Act shall apply to all moneyed, business, or commercial corporations and joint-stock companle*, and that upon the petition of any officer of any such corporation or company duly authorized by a vote of a majority of the corporators present, at any legal meeting called for the purpose, or upon the petition of any creditor or creditors of such corporation or company, made and presented in the manner hereinafter provided in respect to debtors, the like proceedings shall be had and taken as are hereinafter provided in the case of debtors; And all the provisions of this Act which apply to the debtor, or set forth his duties in regard to furnishing schedules and inventories, executing papers, submitting to examinations, disclosing, making over, secreting, concealing, conveying, assigning, or paying away his money or property, shall In like manner, and with like force, effect, and penalties, apply to each and every officer of such corporation or company in relation to the same matters concern- ing the corporation or company, and the money and property thereof. All payments, conveyances, and assignments declared fraudulent and void by thiS' Act, when made by a debtor, shall in like manner, and to the like extent, and with like remedies, be fraudulent and void when made by a corpo- ration or company. No allowance or discharge shall be granted to any corpo- ration or joint-stock company, or to any person, or officer, or member thereof; Provided, That whenever any corporation by proceedings under this Act shall be declared bankrupt, all its property and assets shall be distributed to the creditors of such corporation in the manner provided in this Act in respect to natural persons. OF DATES AND DEPOSITIONS. § 38. And be it further enacted, That the filing of a petition for adjudication la bankruptcy, either by a debtor in his own behalf, or by any creditor against a debtor, upon which an order may be issued by the court, or by a register, In the manner provided in section four, shall be deemed and taken to be the com- mencement of proceedings in bankruptcy under this act; The proceedings in all cases of bankruptcy shall be deemed matters of record, but the same shall not be required to be recorded at large, but shall be carefully fied, kept, and numbered in the office of the clerk of the court, and a docket 1216 THE BANKRUPTCY ACT OF 1867. only, or ihort memorandum thereof, kept in books to be provided for that pur- pose, which shall be open to public inspection. Copies of such records, duly certified under the seal of the court, shall in all cases he prima facie evidence of the facts therein stated. Evidence of examination in any of the proceedings under this Act may be taken before the court, or a register in bankruptcy, viva voce or in writing, before a commissioner of the Circuit Court, or by affidavit, or on commission, and the court may direct a reference to a register in bankruptcy, or other suit- able person, to take and certify such examination, and may compel the attend- ance of witnesses, the production of books and papers, and the giving of testi- mony, in the same manner as in suits in equity in the Circuit Court. INVOLUNTARY BANKRUPTCY. § 39. And be it further enacted. That any person residing and owing debts as aforesaid, who, after the passage of this Act, Shall depart from the State, district, or territory of which he is an inhabitant, with intent to defraud his creditors; Or, being absent, shall, with such intent, remain absent; Or shall conceal himself to avoid the service of legal process in any action for the recovery of a debt or demand provable under this Act: Or shall conceal or remove any of his property to avoid its being attached, taken, or sequestered on legal process. Or shall make any assignment, gift, sale, conveyance, or transfer of his estate, property, rights, or credits, either within the United States or elsewhere, with intent to delay, defraud, or hinder his creditors; Or who has been arrested and held in custody under or by virtue of mesne process or execution issued out of any court of any State, district or Territory within which such debtor resides or has property, founded upon a demand in its nature provable against a bankrupt's estate under this 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 shall make any payment, gift, grant, sale, conveyance, f (or transfer of money, or other property, estate, rights, or credits, or give any warrant to confess judgment, or procure or suffer his property to be taken on legal pro- cess), 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 defent or delay the operation of this Act; •(Amended to " twenty." R. S., sec. 5021; Act of June 23, 1874). \ 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 judg- ment, or procure his property to be taken on legal process." THE BANKRUPTCY ACT OF 1867. 1217 *(0r 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 prescribed, shall be adjudged a bankrupt, on the petition of one or more of his creditors,f (the aggregate of whose debts provable under this Act amount to at least two hundred and fifty dollars, provided such petition is brought within six months after the act of bankruptcy shall have been com- mitted.) I 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 trans- ferred contrary 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. •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, or 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 days, to pay any depositor upon demand of payment lawfully made. R. S., sec. 5021, Act of June 22, 1874.) f Words in parentheses amended so as to read, " who shall constitute one- fourth thereof, at least, in number, and the aggregate of whose debts (i) prov- able under this act amounts to at least one-third of the debts so provable. R. S. sec. 5021, Act of June 22, 1874..) X 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 involuntary bankruptcy commenced since the first day of December, eighteen hundred and seventy-three, as well as to those com- menced 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 allega- tion 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 forth- with 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. But 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 satisfied that the admis- tlon 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 frant reasonable time, not exceeding in cases heretofore commenced, twenty days, and in cases hereafter commenced ten days, within which other creditors may join in sach petition. And if, at the expiration of such time so limited, 77 1218 THE BANKRUPTCY ACT OF 1867. 5 40. And be it further enacted. That upon the filing of the petition authorized by the next preceding section, if it shall appear that sufficient grounds exist therefor, the court shall direct the entrj 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, vrhy 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 I9 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 dis- position 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 peti- tion or the further order of the court, and forthwith to take possession provi- sionally of all the property and effects of the debt or, andsafely keep the same until the further order of the court. 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 b.e made by publication, in such manner as the judge may direct. No further proceedings, unless the debtor appear and consent thereto, shall 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 sec- tion, 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 (ra) or property so paid, conveyed, sold, assigned, or transferred contrary to this act: Provided, That the person receiving such pay- ment or conveyance had reasonable cause to believe that the debtor was insolv- ent, and knew that « 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 peti- tion of creditors under this section may be sufficiently verified by the oaths of the first five signers 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 attor- neys, agent or agents, of such signers. And in computing the number of cred- itors, as aforesaid, 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 having debts of a less amount shall be reckoned for the purpose aforesaid. So amended by »ct of July a6, 1876, ch. 434, sec. i, 19 Stat. io«. THE BANKRUPTCY ACT OF 1867. 1219 be had until proof shall have been given, to the satisfaction of the cottrt, of such service or publication; •And if such proof be not given on the return day of such order, the proceed- ings 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 consent of the debtor, the court shall proceed summarily to hear the allegations of the petitioner and debtor, and may adjourn the proceed- ings 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; \ (Or, at the election t>l the debtor, the court may, in its discretion, award a venire facias to the marshal of the district returnable within ter. days before him, for the trial of the facts set forth in the petition, at which time the trial shall be had, unless adjourned for cause.) And if, upon such 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 prop- erty, 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 prop- erty of the debtor upon his own petition. The order of adjudication of bankruptcy shall require the bankrupt forth- with, 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 •Amended by act of 22 June, 1874, ch. 390, sec. 13, 18 Stat. 182, to read; " And if, on return day of the order to show cause as aforesaid the court shall be satisfied that the requirement of section five thousand and twenty-one (thirty-nine) of said act, as to the number and amount of petitioning creditors, has been complied with, or it within the time provided for in section five thou, sand 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 judg- ment shall be final; otherwise it shall dismiss the proceedings, and, in cases hereafter commenced, with costs." f So amended by act of S2 June, 1874, ch. 390, sec. 14, 18 Stat. 182.) 1220 THE BANKRUPTCY ACT OF 1667. (faUrer, or transmit by mail, post-paid, to the messenger, a schedule* ot the creditors and an inventory of his estate in the form, and verified in the 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 inven- tory shall be prepared by the messenger and the assignee from the best infor- mation they can obtain. If the petitioning creditor shall not appear and proceed on the return day, or adjourned 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 publication of notice to the debtor. § 43. And be it further enacted. That if, at the first meeting of creditors, or at any meeting of creditors to be specially called for that purpose, and of which previous notice shall have been given for such length of time and in such man- ner as the court may direct, three-fourths in value of the creditors whose claims have been 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 distribute the estate, under 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 conveyance 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 proceed, ings in bankruptcy had been taken, or as the assignee in bankruptcy would have done had such resolution not 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 the creditors; and the said trustees shall pro- (» Words " and valuation " added. Act of June 22, 1874.) THE BANKRUPTCY ACT OF 1867. 1221 ceed to wind up and settle the estate under the direction and Inspection ot 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 thlt section shall be deemed to be proceedings in banlcruptcy under this Act; and the said trustees shall have all the rights and powers of assignees in banlcruptcy. The court, on the application of such trustees, shall have power to summon and examine, on oath or otherwise, the banltrupt 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 execution 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 dis- charge after the passage of such resolution and the appointment of such trus- tees 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 proceed- ings; 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 b« reckoned in calculating periods of time prescribed by this Act. (R. S., sec. 5103 a (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 composition 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 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 credit- ors 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. The debtor, unless prevented by sickness or other cause satisfactory to such meeting, shall be present 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 1222 THE BANKRUPTCY ACT OF 1867. his behftl/, 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 debts 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, and upon hearing, inquire whether such resolution has been passed in the manner directed by this sec- tion; 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 circum- stances 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 resolu- tion by which the composition was accepted in the first instance. The provi- sions 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 statem»>nt of the debtor produced at the meeting 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 required 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 sufficient description by the debtor in respect to such debt. Any mistake made inadvertently by a debtor in the statement of his debts may be corrected 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, pro- vide for Zifro rata payment or satisfaction in money, to the 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. THE BANKRUPTCY ACT OF 1867. 1223 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 oi legal difficulties, or for any sufiScient cause, proceed without injustice or undue delay to the creditors or to the debtor, the court may refuse to accept and con- firm 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 lime 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 bank- ruptcy, — Secrete or conceal any property belonging to his estate; Or part with, conceal, or destroy, alter, mutilate, or falsify, or cause to be concealed, destroyed, altered, mutilated, or falsified, any book, deed, document, or writing relating thereto, or remove, or cause to be removed, the same, or any part thereof, out of the district, or otherwise dispose of any part thereof, with intent to prevent it from coming into the possession of the assignee in bank- ruptcy, 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 with 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 whatsoever; 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 thereof; Or shall attempt to account for any of his property by fictitious losses or expenses; 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 commencement 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 have 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, marshal, messenger, assignee, or any other officer of the several courts of bankruptcy 1224: THE BANKRUPTCY ACT OF 1867. shall, for anything done or pretended to be done under this Act, or under colo* of doing anything thereunder, wilfully demand or take, or appoint or allow aaj 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. /Ini/ 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 counterferit signature of any such judge, register, or other officer, or a false or counterfeit seal of the cot/rt, subscribed or attached thereto, knowing such sig- nature or seal to be false or counterfeit, any such person shall be guilty of fel- ony, 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 fhe 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 the 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: For 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. 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 dol- lars 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. THE BANKRUPTCY ACT OF 1867. 1225 Before any dividend is ordered tlie assignee shall pay out of the estate to tbi messenger 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 him, and are just and reasonable, the same to be taxed or adjusted by the court, an(d the oath of the messenger shall not be conclusive 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 ihe foregoing fees shall not prevent the judges, who shall frame general rules and orders in accordance with the provisions of section ten, from prescribing 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 M 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 allow- ances, 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 ninetv (ten) and five thousand one hundred and twenty-seven (forty-seven) of said act, and no longer, which duties they shall perform as soon as may be. § 5127 i} (22 J une, 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 pre- scribed 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 sucb year; Fifthly, a summarized statement of all actual disbursements in such cases for such year. 1226 THE BANKRUPTCY ACT OF 1867. 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 himduringf said 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; Fifthly, the number of compulsory cases in bankruptcy coming before him, in the same way; Sixthly, the amount of assets and liabilities, as nearly as may be, of auch 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, received 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 sepa* rately, in his charge during said year; Secondly, the amount of assets and liabilities therein, respectively and sepa- rately ; 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; Fifthly, the total 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 proceedlnga 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 jrear; Secondly, all of such cases disposed of; Thirdly, all dividends declafed 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 malu 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 hit fees, THE BANKRUPTCY ACT OF 1867. 1227 charges, costs, and emoluments, respectively, earned or accrued duriag said year, giving each head under which the same accrued, and also the sum of all moneys paid into and disbursed •ut 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 dis- missed from his oflSce, 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 be it further enacted. 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 officer. The word " marshal" shall include the marshal's deputies; the word "person" shall also include "corporation;" and the word "oath" shall include " aflirmation." 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 a day of public fast or thanksgiving, or on the Fourth of July, in which case the time shall be reckoned exclusive of that day also § 4q. And be it further enacted. That all the jurisdiction, power, and authority conferred 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 further enncted. 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 of June, Anno Domini eighteen hundred and sixty-seven. ■^228 THE BANKRUPTCY ACT OF 1841. THE BANKRUPTCY ACT OF 1841. Ah Act to establish a uniform System of Bankruptcy throughout the United States. (Passed August 19th, 1841, repealed March 3rd, 1843.) Section i. Be it 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 Ter- ritory of the United States, owing debts which shall not have been created in consequence of a defalcation as a public officer ; 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 conscien- tiously 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 engagements, 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, underwriters 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 the 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 he is an inhabitant, with intent to defraud his creditors; or shall conceal himself to avoid being arrested, or shall willingly and fraudulently 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 con- ceal 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 entitled 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 man- THE BANKRUPTCY ACT OF 1841 1229 ner and under such directions as the court may prescribe and give; and aS such decrees passed by such court, and not so re-examined, shall be deemed final and conclusive as to the subject-matter thereof. Sec. 3. And be it further enacted, that all future payments, securities, con- veyances, or transfers of property, or agreement made or given by any bank- rupt in contemplation of bankruptcy, to any person or persons whatever, not itor, indorser, surety, or other person, any preference or priority over the general creditors of such bankrupts; and all other payments, securities, con- veyances, or transfers of property, or agreements made or given by such bank- rupt in contemplation of bankruptcy, to any person or persons whatever, ncit 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 as- signee under the bankruptcy shall be entitled to claim, sue for, recover, and receive, the same as part of the assets of the bankruptcy ; and the person mak- ing 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 invalida- ted or affected by this act: Provided, That the other party to any such deal- ings or transactions had no notice of a prior act of bankruptcy, or of the in- tention of the bankrupt 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 contemplation 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 be 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 prop- erty, of every name and nature, and whether real, personal or mixed, of every bankrupt, 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 ope- ration of law, ipso facto, from the time of such decree, be deemed to be divest- ed out of such bankrupt, without any other act, assignment or other convey- ance 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 equitr 1230 THE BANKRUPTCY ACT OF 1841. then pending, in which such bankrupt is a party, may be prosecuted and de- fended 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 com- menced 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 bankrupt, and that of his wife and children; and the determination of the assignee in the matter shall, on exception taken, be sub- ject 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 conform 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, designated 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 In- terest, 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 bankrupt shall be guilty of any fraud or wilful con- cealment of his property or rights of property, or shall have preferred any of his creditors contrary to the provisions of this act, 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 such discharge or certificate; nor shall any person, being a merchant, banker, factor, underwriter, broker, or marine insurer, be entitled to any such dis- charge or certificate, who shall become bankrupt, and who shall not have kept proper books of account, after the 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 partner, joint contrac- tor, indorser, surety, or otherwise, for or with the bankrupt. And such bank- THE BANKRUPTCY ACT OF 1841. 1231 rupt shall at all times be subject to examination, orally, or upon written inter- rogatories, in and before such court, or any commission appointed by the court therefor, on oath, or, if conscientiously scrupulous of taking an oath, upon hii 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 corruptly 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 of 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 rigrhts of property, as aforesaid, contrary to the 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 suth 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 there- after to the circuit court next to be held for the same district, by simply en- tering 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 pro- vided. And if, upon a full hearing of the parties, it shall appear to the satis- faction 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 direcfions 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, without 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 pref- erence, 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- 1232 THE BANKRUPTCY ACT OF 1841. 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 pernaitted to come in and prove such debts or claims under this act, and shall have a right, when their debts and claims be- come absolute, to have the same allowed them ; and such annuitants and hold- ers 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 presentij 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 there- by; and in all cases where there are mutual debts or mutual credits between the 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 corpora- tions 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 per- form 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 un- der this act, and any other act which may hereafter be passed upon the sub- ject of bankruptcy; the said jurisdiction to be exercised summarily, in the nature of summary proceedings in equity; and for this purpose the said dis- trict 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 ex- tend 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 jurisdiction to compel obedience to all orders and decrees passed by them in bankruptcy, by process of contempt and other remedial process, to the same THE BANKRUPTCY ACT OF 1841. 1233' 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 regnilations, 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 therefore; 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 th» 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 sup- posed 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 such 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 entitled to prove the same under this act shall be under oath or solemn affirmations, 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 regulations hereinbefore authorized to be made and established by the courts having jurisdiction in bankruptcy. But all such proofs of debts and other claims shall be open to contestation in the proper court having jurisdiction over the proceedings in the particular case in bankruptcy ; and as well the assignee as 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, un- less a new 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, swear 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 bx other cues. 18 1234 THE BANKRUPTCY ACT OF 1841. Sk. 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 juris- diction with the district court of the same district of all suits at law and ia 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 transferrable 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 within two years after the declaration and decree of bank- ruptcy, or after the cause of suit shall first have accrued. Sec. 9. And be it further enacted. That all sales, transfers and other con- veyances 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 future 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 ensure a speedy settle- ment 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 reduc- tion 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 re- duced 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; no- tice of such dividends and distribution to be given in some newspaper or news- papers 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 distribu- tion, 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 thereafter made, as the other creditors have already received, before the latter shall be entitled to any portion thereof. Sec. II. And be it further enacted. That the assignee shall have full au- thority, by and under the order and direction of the proper court in bank- THE BANKRUPTCY ACT OF 1841. 1235 ruptcy, 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 the district, to be designated by the court, ten days at least before the hearing, so that all creditors and other persons in interest may ap- pear and show cause, if any they have, at the hearing, why the order or direction should not be passed. 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 discharge 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 re- quired to be recorded at large, but shall be carefully filed, kept and numbered in the office of the said court, and a docket only, or short memorandum there- of, 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 dol- lar 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 company, 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 com- pany, 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 disbursements 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 part- ner, after the payment of his separate debts, such balance shall be 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 in- 1236 THE BANKRUPTCY ACT OF 1841. tcretti therein, and as it would have been if the partnership had been dis- solved without any bankruptcy; and the sum so appropriated to the separate estate of each partner shall be applied to the payment of his separate debts; and the certificate of discharge shall be granted or refused to each part- ner, 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 conductel 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 bank- ruptcy, and the appointment of assignees, as directed by the third section of this act, shall be recited in 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 com- plete 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 purposes, as if made by such bankrupt himself immediately before such order. Sec. 16. And be it further enacted. That all jurisdiction, power and author- ity, conferred 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 any 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. Sbc. 12- And be it further enacted, That this act shall taka effect from and after the first day of February next. THE BANKRUPTCY ACT OF 1800. 1237 THE BANKRUPTCY ACT OF 1800. An Ael to establish a uniform System of Bankruptcy throughout thi United States. (Passed April 4th, 1800; repealed December 19th, 1803.) Section i. 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 de- fraud 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 ex- ecution, 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 evi- dence of debt, or being arrested for debt, or having surrendered him or her- self 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 hail, being arrested for debt after his 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 sufficient security for the payment of what may be recovered in the suit in which he or ihe 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 pro- cess 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. 3. And be it further enacted. That the judge of the district court of the United States, for the district where the debtor resides, or usually resided at the time of committing the act of bankruptcy, upon petition in writing against such person or persons being bankrupt, to him to be exhibited by any one creditor; or by a greater number, being partners, whose single debt shall amount to one thousand dollars, or by two creditors whose debts shall amount to one thousand, five hundred dollars, or by more than two creditors whose debts shall amount to two thousand dollars, shall have power, by commission nnder his band and seal, to appoint such good and substantial persons, being citiMsi of the United States, and resident in such district, as such judge shaH 1238 THE BANKRUPTCY ACT OF 1800. Seem proper, not exceeding three, to be commissioners of the said bankrupt, snd in case of vacancy or refusal to act, to appoint others from time to time as occasion may require: Provided always, that before any commission shall issue, the creditor or creditors petitioning shall make affidavit or solemn affir- mation before the said judge of the truth of his, her or their debts, and give bond, to be taken by the said judge, in the name and for the benefit of the said party so charged as a bankrupt, and in such penalty, and with such surety, as he shall require, to be conditioned for the proving of his, her or their debts, as well before the commissioners as upon a trial at law, in case the due issuing forth of the said commission shall be contested,- and also for proving the party a bankrupt, and to proceed on such commission in the man- ner herein prescribed. And if such debt shall not be really due, or after such commission taken out it cannot be proved that the party was a bankrupt, then the said judge shall upon the petition of the party aggrieved, in case there be occasion, deliver such bond to the said party, who may sue thereon, and recover such damages under the penalty of the same, as, upon trial at law, he shall make appear he has sustained, by reason of any breach of the condition thereof. Sec. 3. And be it further enacted, That before the commissioners shall be capable of acting, they shall respectively take and subscribe the following oath or affirmation, which shall be administered by the judge issuing the com- mission, or by any of the judges of the Supreme Court of the United States, or any judge, justice or chancellor of any State court, and filed in the office of the clerk of the district court : " I, A. B., do swear, or affirm, that I will faithfully, impartially and honestly, according to the best of my skill and knowledge, execute the several powers and trusts reposed in me, as a com- missioner, in a commission of bankruptcy against , and that with- out favor or affection, prejudice or malice." And the commissioners, who shall be sworn, as aforesaid, shall proceed, as soon as may be, to execute the same ; and upon due examination, and sufficient cause appearing against the party charged, shall and may declare him or her to be a bankrupt : Provided, that before such examination be had, reasonable notice thereof, in writing, shall be delivered to the person charged as a bankrupt; or if he or she be not found at his or her usual place of abode, to some person of the family above the age of twelve years, or if no such person appear, shall be fixed at the front or other public door of the house in which he or she usually resides, and thereupon it shall be in the power of such person, so charged as aforesaid, to demand before, or at the time appointed for such examination, that a jury be empanelled to inquire into the fact or facts alleged as the causes for issuing the commission, and on such demand being made the inquiry shall be had be- fore the judge granting the commission, at such time as he may direct, and in that case such person shall not be declared bankrupt, unless, by the verdict of the jury, he or she shall be found to be within the description of this act, and shall be convicted of some one of the acts described in the first section of this act: Provided also, that any commission which shall be taken out as aforesaid, and which shall not be proceeded in as aforesaid, within thirty days thereafter, may be superseded by the said judge who shall have granted the same, upon tha application of the party thereby charged as a bankrupt, or of THE BANKRUPTCY ACT OF 1800. 1239 any creditor of such person, unless the delay shall have been unavoidable 01 upon a just occasion. Skc. 4. And be it further enacted, That the commissioners so to be ap- pointed shall have power forthwith, after they have declared such person a bankrupt, to cause to be apprehended, by warrant under their hands and seals, the body of such bankrupt, wheresoever to be found within the United States : Provided, they shall think that there is reason to apprehend that the said bankrupt intends to abscond or conceal him or herself, Jind in case it be necessary in order to take the body of said bankrupt, shall have power to cause the doors of the dwelling-house of such bankrupt to be broken, or the doors of any other house in which he or she shall be found. Sec. S. And be it further enacted, That it shall be the duty of the commis- sioners so to be appointed, forthwith, after they have declared such person a bankrupt, and they Shall have power to take into their possession all the estate, real and personal, of every nature and description, to which the said bankrupt may be entitled, either in law or equity, in any manner whatsoever, and cause the same to be inventoried and appraised to the best value, (his or her nec- essary wearing apparel, and the necessary wearing apparel of the wife and children, and necessary beds and bedding of such bankrupt only excepted) and also to take into their possession, and secure, all deeds and books of ac- count, papers and writings belonging to such bankrupt; and shall cause the same to be safely kept, until assignees shall be chosen or appointed, in manner hereafter provided. Sec. 6. And be it further enacted. That the said commissioners shall forth- with, after they have declared such person a bankrupt, cause due and suffi- cient public notice thereof to be given, and in such notice shall appoint some convenient time and place for the creditors to meet, in order to choose an as- signee or assignees of the said bankrupt's estate and effects ; at which meeting the said cotmnissioners shall admit the creditors of such bankrupt to prove their debts ; and where any creditor shall reside at a distance from the place of such meeting, shall allow the debt of such creditor to be proved by oath or af- firmation, made before some competent authority, and duly certified, and shall permit any person duly authorized by letter of attorney from such creditor, due proof of the execution of such letter of attorney being first made, to vote in the choice of an assignee or assijinees of such bankrupt's estate and effects in the place and stead of such creditor: and the said ccenwissioners shall assign, transfer or deliver over, all and singular, the said bankrupt's estate and effects, aforesaid, with all muniments and evidences thereof, to such person or persons as the major part in value of such creditors, according to the several debts then proved, shall choose as aforesaid: Provided always, That in such choice, no vote shall be given by, or in behalf of, any creditor whose debt shall not amount to two hundred dollars. Sec. 7. Provided always, and be it further enacted, That it shall be lawful for the said commissioners, as often as they shall see cause, for the better preserving and securing of the bankrupt's estate, before assignees shall be chosen as aforesaid, immediately to appoint ore or more assignee or assignees of the estate and effects aforesaid, or any part thereof; which assignee or as- signees aforesaid, or any of them, may be removed at the meeting of the credit- ors, so to be appointed as aforesaid for the choice of assignees, is such credit- 1240 THE BANKRUPTCY ACT OF 1800. ors, entitled to vote as aforesaid, or the major pait in value of them, shall think fit ; and such assignee or assignees as shall be so removed, shall deliver up all the estate and effects of such bankrupt which shall have come to his or their hands or possession, unto such other assignee or assignees as shall be chosen by the creditors as aforesaid; and all such estate and effects shall be, to all intents and purposes, as effectually and legally vested in such new assignee or assignees as if the first assignment had been made to him or them by the said commissioners; and if such first assignee or assignees shall refuse or neglect, for the space of ten days next after notice, in writing, from such new assignee or assignees of their appointment, as aforesaid, to- deliver over as aforesaid, all the estate and effects as aforesaid, every such assignee or assignees shall, respectively, forfeit a sum not exceeding five thousand dollars, for the use of the creditors, and shall moreover be liable for the property so detained. Sec. 8. And be it further enacted. That at any time previous to the closing of the accounts of the said assignee or assignees so chosen as aforesaid, it shall be lawful for such creditors of the bankrupt as are hereby authorized to vote in the choice of assignees, or the major part of them in value, at a reg- ular meeting of the said creditors, to be called for that purpose by the said commissioners, or by one-fourth in value of such creditors, to remove all or any of the assignees chosen as aforesaid, and to choose one or more in his or their place and stead; and such assignee or assignees as shall be so removed shall deliver up all the estate and effects of such bankrupt which shall have come into his or their hands or possession, unto such new assignee or assignees as shall be chosen by the creditors at such meeting; and all such estate and effects shall be, to all intents and purposes, as effectually and legally vested ia such new assignee or assignees as if the first assignment had been made to him or them by the said commissioners: and if such former assignee or assignees shall refuse or neglect, for the space of ten days next after notice, in writing from such new assignee or assignees of their appointment, as aforesaid, to deliver over, as aforesaid, all the estate and effects aforesaid, every such former assignee or assignees shall respectively forfeit a sum not exceeding five thousand dollars for the use of the creditors, and moreover shall be liable for the property so detained. Sec. 9. And be it further enacted. That whenever a new assignee or as- signees shall be chosen as aforesaid, no suit at law or in equity shall be thereby abated ; but it shall and may be lawful for the court in which any suit may depend, upon the suggestion of the removal of a former assignee or as- signees, and of the appointment of a new assignee or assignees, to allow the name of such new assignee or assignees, to be substituted in place of the name or names of the former assignee or assignees, and thereupon the suit shall be prosecuted in the name or names of the new assignee or assignees, in the same manner as if he or they had originally commenced the suit in his or their own names. Sec. 10. And be it further enacted. That the assignment or assignments of the commissioners of the bankrupt's estate and effects as aforesaid, made as aforesaid, shall be good at law or in equity against the bankrupt, and all per- sons claiming by, from or under such bankrupt, by any act done at the time. THE BANKRUPTCY ACT OF 1800. 1241 or after, he shall have committed the act of bankruptcy upon which the com- mission issued: Provided always, that in case of a bona-fide purchase made before the issuing of the commission from or under such bankrupt, for a valu- able consideration, by any person having no knowledge, information or notice of any act of bankruptcy committed, such purchase shall not be invalidated or impeached. Sec. II. And be it further enacted, That the said commissioners shall have power, by deed or deeds, under their hands and seals, to assign and convey to the assignee or assignees to be appointed or chosen as aforesaid, any lands, tenements or hereditaments which such bankrupt shall be seized of or entitled to, in fee tail, at law, or in equity, in possession, remainder or reversion, for the benefit of the creditors; and all such deeds being duly executed and recorded, according to the laws of the State within which such lands, tenements or here- ditaments may be situated, shall be good and effectual against all persons whom the said bankrupt, by common recovery, or other means, might or could bar of any estate, right, title of or in the said lands, tenements or heredi- taments. Sec. 12. And be it further enacted, That if any bankrupt shall have con- veyed or assured any lands, goods or estate, unto any person, upon condition or power of redemption, by payment of money or otherwise, it shall be lawful for the commissioners, or for any person by them duly authorized for that pur- pose, by writing, under their hands and seals, to make tender of money or oth- er performance according to the nature of such condition, as fully as the bankrupt might have done; and the commissioners, after such performance or tender, shall have power to assign such lands, goods and estate for the benefit of the creditors, as fully and effectually as any other part of the estate of such bankrupt. Sec. 13. And be it further enacted, That the commissioners aforesaid shall have power to assign, for the use aforesaid, all the debts due to such bank- rupt, or to any other person for his or her use or benefit; which assignment shall vest the property and right thereof in the assignee or assignees of such bankrupt, as fully as if the bond, judgment, contract or claim had originally belonged or been made to the said assignees; and after the said assignment, neither the said bankrupt nor any person acting as trustee for him or her, shall have power to recover or discharge the same, nor shall the same be at- tached as the debt of the said bankrupt; but the assignee or assignees afore- said shall have such remedy to recover the same, in his or their own name or names, as such bankrupt might or could have had if no commission of bank- ruptcy had issued. And when any action in the name of such bankrupt shall have been commenced, and shall be pending for the recovery of any debt or effects of such bankrupt, which shall be assigned, or shall or might become vested in the assignee or assignees of such bankrupt as aforesaid, then such assiKnee or assignees may claim to be, and shall be thereupon, admitted to prosecute such action in his or their name, for the use and benefit of the cred- itors of such bankrupt; and the same judgment shall be rendered in such action, and all attachments and other security taken therein shall be in like manner holden and liable, as if the said action had been originally commenced in the name of said assignee or assignees, after the original plaintiff therein 1242 THE BANKRUPTCY ACT OF 1800. bad become a bankrupt as aforesaid: Provided, that where a debtor shall have, bona-fide, paid his debt to any bankrupt, without notice that such per- son was bankrupt, he or she shall not be liable to pay the same to the assignee or assif^nees. Sec. 14. And be it further enacted, That if complaint shall be made or in- formation given to the commissioners, or if they shall have good reason to Delieve or suspect, that any of the property, goods, chattels, or debts, of the bankrupt are in the possession of any other person, or that any person is indebted to or for the use of the bankrupt, then the said commissioners shall have power to summon, or to cause to be summoned, by their attorney or other person duly authorized by them, all such persons before them, or the judge of the district where such person shall reside, by such process, or other means, as they shall think convenient, and upon their appearance to examine them by parole or by interrogatories, in writing, on oath or affirmation, which oath or affirmation they are hereby empowered to administer, respecting the knowledge of all such property, goods, chattels and debts; and if such person shall refuse to be sworn or affirmed, and to make answer to such questions or interrogatories as shall be administered, and to subscribe the said answers, or upon examination shall not declare the whole truth, touching the subject-mat- ter of such exa.mination, then it shall be lawful for the commissioners or judge to commit such person to prison, there to be detained until they shall submit themselves to be examined in manner aforesaid, and they shall, moreover, for- feit double the value of all the property, goods, chattels and debts by them concealed. Sec. 15. And be it further enacted. That if any of the aforesaid persons shall, after legal summons to appear before the commissioners or judge, to be examined, refuse to attend, or shall not attend at the time appointed, having no such impediment as shall be allowed of by the commissioners or judge it shall be lawful for the said commissioners or judge to direct their warrants to such person or persons as by them shall be thought proper, to apprehend such persons as shall refuse to appear, and to bring them before the commissioners or judge to be examined, and upon their refusal to come, to commit them to prison, until they shall submit themselves to be examined according to the directions of this act: Provided, that such witnesses as shall be so sent for shall be allowed such compensation as the commissioners or judge shall think fit, to be ratably borne by the creditors; and if any person, other than the bankrupt, either by subornation of others, or by his or her own act, shall wilfully or corruptly commit perjury, shall on conviction thereof be fined not exceeding four thousand dollars and imprisoned not exceeding two years, and moreover shall, in either case, be rendered incapable of being a witness in any court of record. Sec. 16. And be it further enacted. That if any person or persons shall fraudulently or coUusively claim any debts, or claim or detain any real or per- sonal estate of the bankrupt, every such person shall forfeit double the value thereof, to and for the use of the creditors. Sec. 17. And be it further enacted. That if any person, prior to his or her becoming a bankrupt, shall convey to any of his or her children, or other per- sons, any lands or goods, or transfer his or her debts or demands into other THE BANKRUPTCY ACT OF 1800. 1243 persons' names, with intent to defraud his or her creditors, the commisstoners shall have power to assign the same in as effectual a manner as if the bank- rupt had been actually seized or possessed thereof. Sec. 18. And be it further enacted, That if any person or persons who shall become bankrupt within the intent and meaning of this act, and against whom a commission of bankruptcy shall be duly issuedyv upon which commission such person or persons shall be declared bankrupt, shall not, within forty-two days after notice thereof, in writing, to be Igft at the usual place of abode of such person or persons, or personal notice in case such person or persons be then in prison, and notice given in sonme gazette, that such commission hath been issued, and of the time and place of meeting of the commissioners, sur- render hira or herself to the said commissioners, and sign or subscribe such surrender, and submit to be examined, from time to time, upon oath or solemn affirmation, by and before such commissioners, and in all things conform to the provisions of this act, and also upon such his or her examination fully and truly disclose and discover all his or her effects and estate, real and personal, and how and in what manner, to whom and upon what consideration, and at what time or times, he or she hath disposed of, assigned or transferred, any of his or her goods, wares or merchandise, monies or other effects and estate, and of all books, papers and writings relating thereunto of which he or she was possessed, or in or to which he or she was in any way interested or en- titled, or which any person or persons shall then have, or shall have had in trust for him or her, or for his or her use, at any time before or after the issuing of the said commission, or whereby such bankrupt, or his or her fam- ily then hath or may have or expect any profit, possibility of profit, benefit or advantage whatsoever, except only such part of his or her estate and effects as shall have been really and bona-fide before sold and disposed of in the way of his or her trade and dealings, and except such sums of money as shall have been laid out in the ordinary expenses of his or her family, and also upon such examination, execute in due form of law such conveyance, assur- ance and assignment of his or her estate, whatsoever and wheresoever, as shall be devised and directed by the commissioners, to vest the same in the assignees, their heirs, executors, administrators and assigns forever, in trust, for the use of all and every the creditors of such bankrupt, who shall come in and prove their debts under the commission ; and deliver up unto the commission- ers all such part of his or her, the said bankrupt's goods, wares, merchandise, money, effects and estate, and all books, papers and writing thereunto relating, as at the time of such examination shall be in his or her possession, custody or power, his or her necessary wearing apparel, and the necessary wearing ap- parel of the wife and children, and necessary beds and bedding of such bank- rupt only excepted, then he or she the said bankrupt, upon the conviction of any wilful default or omission in any of the matters or things aforesaid, shall be adjudged a fraudulent bankrupt, and shall suffer imprisonment for a term not less than twelve months, nor exceeding ten years, and shall not at any time after be entitled to the benefits of this act : Provided always, that in case any bankrupt shall be in prison or custody at the time of issuing such com- mission, and is willing to surrender and submit to be examined according to the directions of this act, and can be brought before the said commissioners 1244 THE BANKRUPTCY ACT OF 1800. and creditors for that purpose, the expense thereof shall be paid out of the said bankrupt's effects, and in case such bankrupt is in execution, or cannot be brought before the commissioners, that then the said commissioners, or some one of them, shall from time to time attend the said bankrupt in prison or custody, and take his or her discovery as in other cases, and the assignees or one of them, or some person appointed by them, shall attend such bankrupt in prison or custody, and produce his or her books, papers and writings, in order to enable him or her to prepare his or her discovery ; a copy whereof the said assignees shall apply for, and the said bankrupt shall deliver to them or their order within a reasonable time after the same shall have been re- quired. Sec. 19. And be it further enacted, That the said commissioaers shall ap- point, within the said forty-two days, so limited as aforesaid, for the bank- rupt to surrender and conform as aforesaid, not less than three several meet- ings for the purposes aforesaid, the third of which meetings shall be on the last of the said forty-two days: Provided always, that the judge of the district within which such commission issues shall have power to enlarge the time so limited as aforesaid, for the purposes aforesaid, as he shall think fit, not exceeding fifty days, to be computed from the end of the said forty- two days, so as such order for enlarging the time be made at least six days before the expiration of said term. Sec. 20. And be it further enacted. That it shall be lawful for the commis- sioners, or any other person or officers by them to be appointed, by their war- rant, under their hands and seals, to break open in the day time the houses, chambers, shops, warehouses, doors, trunks or chests, of the bankrupt, where any of his or her goods or estate, deeds, books of account or writings, shall be, and to take possession of the goods, money and other estate, deeds, books of account or writings of such bankrupt. Sec. 21. And be it further enacted, That if the bankrupt shall refuse to be examined, or to answer fully, or to subscribe his or her examination as afore- said, it shall be lawful for the commissioners to commit the offender to close iinprisonment until he or she shall conform him or herself; and if the said bankrupt shall submit to be examined, and upon his or her examination it shall appear that he or she hath committed wilful or corrupt perjury, he or she may be indicted therefor, and being thereof convicted shall suffer imprison- ment for a term not less than two years, nor exceeding ten years. Sec. 22. And be it further enacted. That every bankrupt having surrendered, shall, at all seasonable times before the expiration of the said forty-two days, as aforesaid, or of such further time as shall be allowed to finish his or her examination, be at liberty to inspect his or her books and writings, in the presence of some person to be appointed by the commissioners, and to bring with him or her, for his or her assistance, such persons as he or she shall think fit, not exceeding two at one time, and to make extracts and copies to enable him or her to make a full discovery of his or her effects ; and the said bankrupt shall be free from arrests, in coming to surrender, and after having surrendered to the said commissioners for the said forty-two days, or such farther time as shall be allowed for the finishing his or her examination; and in case such bankrupt shall be arrested for debt, or taken on any escape war- THE BANKRUPTCY ACT OF 1800. 1245 rant or execution, coming to surrender, or after his or her surrender within the time before mentioned, then on producing such summons or notice under the hands of the commissioners, and giving the officer a copy thereof, he or she shall be discharged; and in case any officer shall afterwards detain such bankrupt, such officer shall forfeit to such bankrupt, for his or her own use, ten dollars for every day he shall detain the bankrupt. Sec. 23. And be it further enacted. That every person who shall knowingly or wilfully receive or keep concealed any bankrupt so as aforesaid summoned to appear, or who shall assist such bankrupt in concealing him or herself, or in absconding, shall suffer such imprisonment, not exceeding twelve months, or pay such fine to the United States, not exceeding one thousand dollars, as upon conviction thereof shall be adjudged. Sec. 24. And be it further enacted. That the said commissioners shall have power to examine, upon oath or affirmation, the wife of any person lawfully declared a bankrupt, for the discovery of such part of his estate as may be concealed or disposed of by such wife, or by any other person; and the wife shall incur such penalties for not appearing before the said commissioners, or refusing to be sworn or affirmed or examined, and to subscribe her examina- tion, or for not disclosing the truth, as by this act is provided against any other oerson in like cases. Sec. 25. And be it further enacted. That in case any person shall be com- mitted by the commissioners for refusing to answer, or for not fully answering any question, or for any other cause, the commissioners shall in their warrant specify such question or other cause of commitment. Sec. 26. And be it further enacted, That if after the bankrupt shall have finished his or her final examination, any other person or persons shall volun- tarily make discovery of any part of such bankrupt's estate, before unknown to the commissioners, such person or persons shall be entitled to five per cent. out of the effects so discovered, and such further reward as the commissioners shall think proper; and any trustee having notice of the bankruptcy, wilfully concealing the estate of any bankrupt for the space of ten days after the bank- nipt shall have finished his final examination, as aforesaid, shall forfeit double the value of the estate so concealed, for the benefit of the creditors. Sec. 27. And be it further enacted. That if any bankrupt, after the issuing any commission against him or her, pay to the person who sued out the same, or give or deliver to such person, goods, or any other satisfaction or security for his or her debt, whereby such person shall privately have and receive a greater proportion of his or her debt than the other creditors, such preference shall be a new act of bankruptcy, and on good proof thereof such commission may and shall be superseded, and it shall and may be lawful for either of the judges having authority to grant the commission as aforesaid, to award any creditor petitioning another commission, and such person, so taking such un- due satisfaction as aforesaid, shall forfeit and lose, as well his or her whole debts, as the whole he or she shall have taken and received, and shall pay back or deliver up the same, or the full value thereof, to the assignee or assignees who shall be appointed or chosen under such commission, in manner aforesaid, in trust for, and to be divided among, the other creditorg of the said bankrupt, in proportion to their respective debts. 1246 THE BANKRUPTCY ACT OF 1800. Sec. 28. And be it further enacted, That if any bankrupt, after the issuing any commission against him or her, pay to the person who sued out the same, or give or deliver to such person, goods, or any other satisfaction or security, for his or her debt, whereby such person shall privately have and re- ceive a greater proportion of his or her debt than the other creditors, such preference shall be a new act of bankruptcy, and on good proof thereof, such commission shall and may be superseded, and it shall and may be lawful for either of the judges, having authority to grant the commission as afore- said, to award any creditor petitioning another commission; and such person, so taking such undue satisfaction as aforesaid, shall forfeit and lose, as well his or her whole debts, as the whole he or she shall have taken and received, and shall pay back, or deliver up the same, or the full value thereof, to the assignee or assignees who shall be appointed or chosen under such commission in manner aforesaid, in trust for, and to be divided amongst the other creditors of the said bankrupt, in proportion to their respective debts. Sec. 29. And be it further enacted. That every person who shall be chosen assienee of the estate and effects of a bankrupt shall, at some time after the expiration of four months, and within twelve months from the time of issuing the commission, cause at least thirty days public notice to be given of the time and place the commissioners and assignees intend to meet, to make a dividend or distribution of the bankrupt's estate and effects ; at which time the creditors who have not before proved their debts shall be at liberty to prove the same ; and upon every such meeting the assignee or assignees shall produce to the commissioners and creditors then present fair and just accounts of all his or their receipts and payments, touching the bankrupt's estate and effects, and of what shall remain outstanding, and the particulars thereof, and shall, if the creditors then present, or a major part of them, require the same, be examined upon oath or solemn affirmation before the same commissioners, touching the truth of such accounts ; and in such accounts the said assigfnee or assignees shall be allowed and retain all such sum and sums of money as they shall have paid or expended in suing out and prosecuting the commis- sion, and all other just allowances on account of or by reason or means of their being assignee or assignees ; and the said commissioners shall order such part of the net produce of the said bankrupt's estate as by such accounts or otherwise shall appear to be in the hands of the said assignees, as they shall think fit. to be forthwith divided among such of the bankrupt's creditors as have duly proved their debts under such commission, in proportion to their several and respective debts; and the commissioners shall make such their order for a dividend in writing, under their hands, and shall cause one part of such order to be filed amongst the proceedings under the said commission, and shall deliver to each of the assignees under such commission a duplicate of such their order, which order of distribution shall contain an account of the time and place of making such order, and the sum total or quantum of all the debts proved under the commission, and the sum total of the money remain- ing in the hands of the assignee or assignees to be divided, and how many per cent, in particular is there ordered to be paid to every creditor of his debt ; and the said assignee or assignees, in pursuance of such order, and without any deed or deeds of distribution to be made for the purpose, shall forthwith THE BANKRUPTCY ACT OF 1800. 1247 malce such dividend and distribution accordingly, and shall take receipts In a book to be kept for the purpose, from each creditor, for the part or share of such dividend or distribution which he or they shall make and pay to each creditor respectively; and such order and receipt shall be a full and effectual discharge to such assignee for so much as he shall fairly pay, pursuant to such order as aforesaid. Sec. 30. And be it further enacted. That within eighteen months next after the issuing of the commission the assignee or assignees shall make a second dividend of the bankrupt's estate and effects, in case the same were not wholly divided upon the first dividend, and shall cause due public notice to be given of the time and place the said commissioners intend to meet to make a second distribution of the bankrupt's estate and effects, and for the creditors who shall not before have proved their debts to come in and prove the same; and at said meeting the said assignees shall produce, on oath or solemn affirma- tion as aforesaid, their account of the bankrupt's estate and effects, and what upon the balance thereof shall appear to be in their hands shall, by like order of the commissioners, be forthwith divided amongst such of the bankrupt's creditors as shall have made due proof of their debts, in proportion to their several and respective debts, which second dividend shall be final, unless any suit at law or in equity be pending, or any part of the estate standing out that could not have been disposed of, or that the major part of the creditors shall not have agreed to be sold or disposed of, or unless some other or future estate or effects of the bankrupt shall afterwards come to or vest in the said assignees, in which cases the said assignees shall, as soon as may be, convert such future or other estate and effects into money, and shall within two months after the same be converted into money, by like order of the commissioners, divide the same among such bankrupt's creditors as shall have made due proof of their debt under such commission. Sec. .^i. And be it further enacted. That in the distribution of the bankrupt's effects there shall be paid to every one of the creditors a portion-rate according to the amount of their respective debts, so that every creditor having security for his debt by judgment, statute, recognizance, or speciality, or having an at- tachment under any of the laws of the individual States, or of the United States, on the estate of such bankrupt, (Provided, there be no execution exe- cuted upon any of the real or personal estate of such bankrupt before the time he or she became bankrupts) shall not be relieved upon any such judgment, statute, recognizance, specialty or attachment, for more than a ratable part of his debt, with the other creditors of the bankrupt. Sec. 32. And be it further enacted. That the assignees shall keep one or more distinct book or books of account, wherein he or they shall duly enter all sums of money or effects which he or they shall have received or got into his or their possession, of the said bankrupt's estate, to which books of ac- count every creditor who shall have proved his or her debt shall, at all rea- sonable times, have free resort and inspect the same as often as he or she shall think fit. Sec. 33. And be it further enacted. That every bankrupt, not being in prison or custody, shall at all times after his surrender be bound to attend the assignees upon every reasonable notice, in writing, for that purpose, given or 1248 THE BANKRUPTCY ACT OF 1800. left at the usual place of his or her abode, in order to assist in making cut the accounts of the said bankrupt's estate and effects, and to attend any court of record, to be examined touching the same, or such other business as the said assignee shall judge necessary, for which he shall receive three dollars per day. Sec. 34. And be it further enacted. That all and every person and persons who shall beceme bankrupt as aforesaid, and who shall within the time limited by this act surrender him or herself to the commissioners, and in all things conform as in and by this act is directed, shall be allowed five per cent, upon the net produce of all the estate that shall be recovered in and received, which shall be paid unto him or her by the assignee or assignees, in case the net prod- uce, to be paid as aforesaid so as such ten per cent, shall not, in the whole, creditors of said bankrupt who shall have proved their debts under such com- mission the amount of fifty per cent, on their said debts, respectively, and so as the said five per cent, shall not exceed, in the whole, the sum of five hundred dollars; and in case the net produce of the said estate shall, over and above the allowance hereafter mentioned, be sufficient to pay the said creditors sev- enty-five per cent, on the amount of their said debts, respectively, that then the said bankrupt shall be allowed ten per cent, on the amount of such net prod- uce, to be paid as aforesaid so as such ten per cent, shall not, in the whole, exceed the sum of eight hundred dollars; and every such bankrupt shall be discharged from all debts by him or her dn.e or owing at the time he or she became bankrupt, and all which were or might have been proved under the said commission ; and in case any such bankrupt shall afterwards be arrested or prosecuted or impleaded, for or on account of any of the said debts, such bankrupt may nppear without bail, and may plead the general issue, and give this act and the special matter in evidence. And the certificate of such bank- rupt's conforming, and the allowance thereof, according to the directions of this act, shall be, and shall be allowed to be, suflicient evidence, prima facie of the party's being a bankrupt within the meaning of this act, and of the commis- sion and other proceedings precedent to the obtaining such certificate, and a verdict shall thereupon pass for the defendant, unless the plaintiff in such action can prove the said certificate was obtained unfairly and by fraud, or unless he can make appear any concealment of estate or effects by such bank- runt to the value of one hundred dollars. Provided, That no such discharge of a bankrupt shall release or discharge any person who was a partner with such bankrupt at the time he or she became bankrupt, or who was then iointly held or bound with such bankrupt for the same debt or debts from which such bankrupt was discharged as aforesaid. Sec. 3S. Provided always, and be it further enacted. That if the net pro- ceeds of the bankrupt's estate, so to be discovered, recovered and received, shall not amount to so much as will pay all and every of the creditors of the said bankrupt who shall have proved their debts under the said commis- sion, the amount of fifty per cent, on their debts respectively, after all charges first deducted, that then and in such case the bankrupt shall not be allowed five per centum on such estate as shall be recovered in, but shall have and b« paid by the assignees so much money as the commissioners shall think fit to allow, not more than three hundred dollars, nor exceeding three per centtun on the net proceeds of the said bankrupt's estate. THE BANKRUPTCY ACT OF 1800. 1249 Sec. 36. Provided also, and be it further enacted, That no person becomingr a bankrupt according to the intent and provisions of this act shall be entitled to a certificate of discharge, or to any of the benefits of the act, unless the commissioners shall certify under their hands to the judge of the district within which such commission issues that such bankrupt hath made a full dis- covery of his or her estate and effects, and in all things conformed him or herself to the directions of this act, and that there doth not appear to them any reason to doubt of the truth of such discovery, or that the same was not a full discovery of the said bankrupt's estate and effects, and in all things ■conformed him or herself to the directions of this act, and that there doth not appear to them any reason to doubt of the truth of such discovery, or that the ."June was not a full discovery of the said bankrupt's estate and effects; or Jlless the said judge should be of opinion that the said certificate was unrea- sonably denied by the commissioners; and unless two-thirds, in number and in value, of the creditors of the bankrupt, who shall be creditors for not less than fifty dollars respectively, and who shall have duly proved their debts under the said commission, shall sign such certificate to the judge, and testify their consent to the allowance of a certificate of discharge in pursuance of this act; which signing and consent shall be also certified by the com- missioners; but the said commissioners shall not certify the same till they have proof by affidavit or affirmation, in writing, of such creditors, or of the persons respectively authorized for that purpose signing the said certifi- cate ; which aflSdavit or affirmation, together with the letter or power of attor- ney to sign, shall be laid before the judge of the district within which such commission issues, in order for the allowing the certificate of discharge, and the said certificate shall not be allowed unless the bankrupt make oath or affirmation in writing that the certificate of the commissioners and consent of the creditors thereunto were obtained fairly and without fraud; and any of the creditors of the said bankrupt are allowed to be heard, if they shall think fit before the respective persons aforesaid, against the making or allowing of «uch certificates by the commissioners or judge. Sec. J,T. And be it further enacted. That if any creditor, or pretended cred- itor, of any bankrupt shall exhibit to the commissioners any fictitious or false debt or demand, with intent to defraud the real qreditors of such bankrupt, and the bankrupt shall refuse to make discovery thereof and suffer the fair creditors to be imposed upon, he shall lose all title to the allowance upon the amount 6f his effects and to a certificate of discharge as aforesaid, nor shall he be entitled to the said allowance or certificate if he has lost at any one time fifty dollars, or in the whole three hundred dollars, after the passing of this act and within twelve months before he became a bankrupt, by any manner of gaming or wagering whatever. Sec. .38. And be it further enacted. That if any bankrupt who shall have obtained his certificate shall be taken in execution or detained in prison on account of any debts owing before he became a bankrupt, by reason that judgment was obtained before such certificate was allowed, it shall be lawful for any of the judges of the court wherein judgment was so obtained, or for any court, judge or justice, within the district in which such bankrupt shall be detained, having powers to award or allow the writ of habeas corpus, op 79 1250 THE BANKRUPTCY ACT OF 1800. such bankrupt producing his certificate so as aforesaid allowed, to order any sheriflE or gaoler who shall have such bankrupt in custody to discharge such bankrupt without fee or charge, first giving reasonable notice to the plaintiff, or his attorney, of the motion for such discharge. Sec. 39. And be it further enacted. That every person who shall have bona- fide given credit to or taken securities, payable at future days, from persons who are or shall become bankrupts, not due at the time of such persons be- coming bankrupt, shall be admitted to prove their debts and contracts as if they were payable presently, and shall have a dividend in proportion to the other creditors, discounting, where no interest is payable, at the rate of so much per centum per annum, as is equal to the lawful interest of the State where the debt was payable, and the obligee of any bottomry or respondentia bond, and the assured in any policy of insurance, shall be admitted to claim, and after the contingency or loss to prove the debt thereon, in like manner as if the same had happened before issuing the commission; and the bankrupt shall be discharged from such securities as if such money had been due and payable before the time of his or her becoming bankrupt ; and such creditors may peti- tion for a commission, or join in petitioning. Sec. 40. And be it further enacted, That in case any person committed by the commissioners' warrant shall obtain a habeas corpus, in order to be dis- charged and there shall appear any insufficiency in the form of the warrant, it shall be lawful for the court or judge before whom such party shall be brought by habeas corpus, by rule or warrant, to commit such persons to the same prison, there to remain until he shall conform as aforesaid, unless it shall be made to appear that he had fully answered all lawful questions put to him by the commissioners; or in case such person was committed for not signing bis examination, unless it shall appear that the party had good reason for re- fusing to sign the same or that the commissioners had exceeded their authority in making such commitment ; and in case the gaoler to whom such person shall be committed shall wilfully or negligently suffer such person to escape, or go without the doors or walls of the prison, such gaoler shall for such offense, being convicted thereof, forfeit a sum not exceeding three thousand dollars, for the use of the creditors. Sbc. 41. And be it further enacted. That the gaoler shall, upon the request of any creditor having proved his debt and showing a certificate thereof under the hands of the commissioners, which the commissioners shall give without fee or reward, produce the person so committed ; and in case such gaoler shall refuse to show such person to such creditor requesting the same, such person shall be considered as having escaped, and the gaoler or sheriff so refusing shall be liable as for a wilful escape. Sec. 42. And be it further enacted, That where it shall appear to the said commissioners that there hath been mutual credit given by the bankrupt and any other person, or mutual debts between them at any time before such per- son became bankrupt, the assignee or assignees of the estate shall state the account between them, and one debt may be set off against the other, and what shall appear to be due on either side on the balance of such account after •uch set ofiF, and no more, shall be claimed or paid on either side respectively. &C. 43. And be it further enacted, That it shall and may be lawful to and THE BANKRUPTCY ACT OF 1800. 1251 lor the assignee or assignees of any bankrupt's estate and effects, under the direction of the commissioners, and by and with the consent of the major part in value of such of the said bankrupt's creditors as shall have duly proved their debts under the commission, and shall be present at any meeting of the said creditors, to be held in pursuance of due and public notice for that pur- pose given, to submit any difference or dispute for, on account of, or by reason or means of, any matter, cause, or thing whatsoever, relating to such bank- rupt, or to his or her estate or effects, to the final end and determination of ar- bitrators to be chosen by the said commissioners, and the major part in value of such creditors as shall be present at such meeting as aforesaid, in such manner as the said assignee or assignees, under the direction and with the consent aforesaid, shall think fit and can agree; and the same shall be binding on the several creditors of the said bankrupt, and the said assignee or assignees are hereby indemnified for what they shall fairly do, according to the direc- tions aforesaid. Sue. 44. And be it further enacted, That the assignees shall be, and hereby are, vested with full power to dispose of all the bankrupt's estate, real and per- •onal, at public auction or vendue, without being subject to any tax, duty, im- position, or restriction, any law to the contrary notwithstanding. Sec. 45. And be it further enacted, That if after any commission of bank- ruptcy sued forth, the bankrupt happen to die before the commissioners shall have distributed the effects, or any part thereof, the commissioners shall nev- ertheless proceed to execute the commission as fully as they might have done if the party were living. Sec. 46. And be it further enacted. That where any commission of bank- ruptcy shall be delivered to the commissioners therein named, to be executed, it shall and may be lawful for them before they take the oath or affirmatieMi of qualification, to demand and take from the creditor or creditors prosecuting such commission a bond with one good security, if required, in the penalty of one thousand dollars, conditioned for the payment of the costs, charges and expenses which shall arise and accrue upon the prosecution of the said com- mission : Provided always, that the expenses so as aforesaid to be secured and paid by the petitioning creditor or creditors shall be repaid to him or them by the commissioner or assignees out of the first monies arising from the bankrupt's estate or effects, if so much be received therefrom. Sec. 47. And be it further enacted, That the district judges in each district respectively shall fix a rate of allowance to be made to the commissioners of bankruptcy, as compensation of services to be rendered under the commission, and it shall be lawful for any creditor, by petition to the district judge, to ex- cept to any charge contained in the account of the commissioners : and the said judge, after hearing the commissioners, may in a summary way decide upon the validity of such exception. Sec. 48. And be it further enacted. That all penalties given by this act for the benefit of the creditors shall be recovered by the assignee or assignees by action of debt, and the money so recovered, the charges of suit being deducted, shall be distributed towards payment of the creditors. Sec. 49. And be it further enacted. That if any action shall be brought •gainst any commissioner, or assignee or other person, having authority under 1252 THE BANKRUPTCY ACT OF iSoo. the commission, for anything done and performed by force of this act, the de< < fendant may plead the general issue, and give this act and the special matter in evidence; and in case of a non-suit, discontinuance, or verdict or judgment for him, he shall recover double costs. Sec. so. And be it further enacted. That if any estate, real or personal, shall descend, revert to, or become vested in any person after he or she shall be declared a bankrupt, and before he or she shall obtain a certificate signed by the judge as aforesaid, all such estate shall, by virtue of this act, be vested in the said commissioners, and shall be by them assigned and conveyed to the assignee or assignees in fee simple or otherwise, in like manner as above direct- ed, with the estate of the said bankrupt, at the time of the bankruptcy, and the proceeds thereof shall be divided among the creditors. Sec. si. And be it further enacted. That the said commissioners shall, once in every year, carefully file in the clerk's office of the district court all the proceedings had in every case before them, and which shall have been finished, including the commissionB, examinations, dividends, entries and other determi- nations of the said commissioners, in which office the final certificate of the said bankrupt may also be recorded ; all which proceedings shall remain of record in the said office, and certified copies thereof shall be admitted as evi- dence in all courts, in like manner as the copies of the proceedings of the said district court are admitted in other cases. Sec. 52. And be it further enacted. That it shall and may be lawful for any creditor of such bankrupt to attend all or any of the examinations of said bank- rupt, and the allowance of the final certificate, if he shall think proper, and then and there to propose interrogatories to be put by the judge or commis- sioners to the said bankrupt and others, and also to produce and examine witnesses and documents before such judge or commissioners, relative to the subject-matter before them. And in case either the bankrupt or credi- tor shall think him or herself aggrieved by the determination of the said judge or commissioners, relative to any material fact in the commence- ment or progress of the said proceedings, or in the allowance of the certificate aforesaid, it shall and may be lawful for either party to pe- tition the said judge, setting forth such facts and the determination there- on, with the complaint of the party, and a prayer for trial by jury to de- terpiine the same, and the said judge shall, in his discretion, make order thereon, and reward a venire facias to the marshal of the district, return- able within fifteen days before him, for the trial of the facts mentioned in the said petition, notice whereof shall be given to the commissioners and creditors concerned in the same; at which time the trial shall be had, unless, on good cause shown, the judge shall give farther time, and judgment being entered on the verdict of the jury shall be final on the said facts, and the judge or com- missioners shall proceed agreeably thereto. Sec. S3. And be it further enacted, That the commissioners before the ap- pointment of assignees, and the assignees after such appointment, may from time to time make such allowance out of the bankrupt's estate until he shall have obtained his final discharge, as in their opinion may be requisite for the necessary support of the said bankrupt and his family. Sk. 54. And be it further enacted, That it shall be lawful for the major THE BANKRUPTCY ACT OF 1800. 1253 part in value of the creditors, before they proceed to the choice of assignees, to direct in what manner, with whom and where the monies arising by and to be received from time to time out of the bankrupt's estate shall be lodged, until the same shall be divided among the creditors, as herein provided; to which direction every such assignee and assignees shall conform as often as three hundred dollars shall be received. Sec. 55. And be it further enacted. That every matter and thing by this act required to be done by the commissioners of any bankrupt shall be valid to all intents and purposes, if performed by a majority of them. Sec. 56. And be it further enacted, That in all cases where the assignee shall prosecute any debtor of the bankrupt for any debt, duty or demand, the commission, or a certified copy thereof, and the assignment ot the commis- sioners of the bankrupt's estate, shall be conclusive evidence of the issuing the commission and of the person named therein being a trader and bankrupt at the time mentioned therein. Sec. 57. And be it further enacted, That every person obtaining a discharge from his debts, by certificate as aforesaid, granted under a commission of bankruptcy, shall not on any future (;()mmission be entitled to any other cer- tificate than a discharge of his person only; unless the net proceeds of the estate and effects of such person so becoming bankrupt a second time shall be sufficient to pay seventy-five per cent, to his or her creditors on the amount of their debts respectively. Sec. 58. And be it further enacted. That any creditor of a person against whom a commission of bankruptcy shall have been sued forth, and who shall lay his claim before the commissioners appointed in pursuance of this act, may at the same time declare his unwillingness to submit the same to the judgment of tke said commissioners, and his wish that a jury may be im- panelled to decide thereon: And in like manner the assignee or assignees of such bankrupt may object to the consideration of any particular claim by the commissioners, and require that the same should be referred to a jury. In either case such objection and request shall be entered on the books of the commissioners, and thereupon an issue shall be made up between the parties, and a jury shall be impanelled, as in other cases, to try the same in the circuit court for the district in which such bankrupt has usually resided. The verdict of such jury shall be subject to the control of the court, as in suits originally instituted in the said court, and when rendered, if not set aside by the said court, shall be certified to the commissioners, and shall ascertain the amount of any such claim, and such creditor or creditors shall be considered in all respects as having proved their debts under the commission. Sec. 59. And be it further enacted. That the lands and effects of any person becoming bankrupt may be sold on such credit, and on such security, as a major part in value of the creditors may direct: Provided, nothing herein contained shall be allowed so to operate as to retard the granting the bank- rupt's certificate. Sec. 60. And be it further enacted. That if any person becoming bankrupt shall be in prison, it shall be lawful for any creditor or creditors, at whose suit he or she shall be in execution, to discharge him or her from custody, or if such creditor or creditors shall refuse to do so, the prisoner may petidoa 1354 THE BANKRUPTCY ACT OF 1800. the commissioners to liberate him or her, and thereupon, if in the opinion of the connnissioners the conduct of such bankrupt shall have been fair, so as to en- title him or her in their opinion to a certificate, when by law such certificate might be given, it shall be lawful for them to direct the discharge of such prisoner, and to enter the same in their books, which being notified to the keep- er of the gaol in which such prisoner may be confined shall be a sufficient au- thority for his or her discharge : Provided, that in either case, such discharge shall be no bar to another execution, if a certificate shall be refused to such bankrupt : And provided also, that it shall be no bar to a subsequent impris- onment of such bankrupt by order of the commissioners, in conformity with the provisions of this act. Sec. 61. And be it further enacted, That this act shall not repeal or annul, or be construed to repeal or annul, the laws of any State now in force, or which may be hereafter enacted, for the relief of insolvent debtors, except so far as the same may respect persons who are or may be clearly within the pur- view of this act, and whose debts shall amount in the cases specified in the second section thereof to the sums herein mentioned. And if any person with- in the purview of this act shall be imprisoned for the space of three months, for any debt or upon any contract, unless the creditors of such prisoner shall proceed to prosecute a commission of bankruptcy against him or her, agreea- bly to the provisions of this act, such debtor may and shall be entitled to re- lief, under any such laws for the relief of insolvent debtors, this act notwith- standing. Sec. 62. And be it further enacted, That nothing contained in this law shall in any maimer affect the right of preference to prior satisfaction of debts due to the United States as secured or provided by any law heretofore passed, nor shall be construed to lessen or impair any right to, or security for, money due to the United States or to any of them. Sec 63. And be it further enacted. That nothing contained in this act shall be t^ken or construed to invalidate or impair any lien existing at the date of this act upon the lands or chattels of any person who may have become a bankrupt. Sec. 64. And be it further enacted. That this act shall continue in force during the term of five years, and from thence to the end of the next session of congress thereafter, and no longer: Provided, that the expiration of this act shall not prevent the complete execution of any commission which may have been previously thereto issued. An Act to provide for the more convenient organixation of the Courts of the United States. (February 13, 1801.) Sec. la. The said circuit courts respectively shall have cognizance, concur- rently with the district courts, of all cases which shall arise, within their re- spective circuits, under the act to establish an uniform system of bankruptcy throughout the United States; and each circuit judge, within his respective circuit, shall and may perform, all and singular, the duties enjoined by the Mtid act upon a judge of a district court: and the proceedings under a com* THE BANKRUPTCY ACT OF 1800. 1255 mission of bankruptcy which shall issue from a circuit judge shall, ia ail re- spects, be conformable to the proceedings under a commission of bankruptcy which shall issue from a district judge, mutatis mutandis. An Act to amend the judicial system of the United States, (April 29, 1802.) Sec II. In all cases in which proceedings shall, on the said first day of July next, be pending under a commission of bankruptcy issued in pursuance of the aforesaid act, entitled " An act to provide for the more convenient organiza- tion of the courts of the United States," the cognizance of the same shall be> and hereby is, transferred to, and vested in, the district judge of the district within which such commission shall have issued, who is hereby empowered to proceed therein in the same manner and to the same effect as if such com- mifsion of bankruptcy had been issued by his order. GENERAL INDEX GENERAL INDEX. [For index of General Orders and Forms, see p. 1085.] A. PAGE Absentees. service of process on 345 Accounts. final, notices to creditors 623 trustee's duty to render 542 inspection by parties in interest 554 Acts of Bankmtcy. committed by officer or agent 86 comparative legislation 58 confession of bankruptcy : to be in writing 84 essential elements 85 directors of corporation 85 member of firm 86 construction of statute 59 enumerated generally 54 former United States statutes 58 fraudulent transfer: elements 61 cash sales of property 62 mortgages to secure present loans 62 meaning of words of devolution 63 intent to hinder, delay or defraud 64 allegations and proof 64, 65 receivership of corporation 65 insolvency not material 66, 89 creditors, or any of them 66 general assignment or receivership : generally 77 what constitutes 78 insolvency not essential in case of assignment. 78, 79 receivership of corporation 80, 81 insolvency essential 82 meaning of words 83 precedents under former law 83 insolvency, when essential 60 partnership: when committed by 118, 119 receivership constitutes 117 insolvency, how determined 119 preference through legal proceedings: elements 72 comparison with act of 1867 73 intent not essential 73 suffered or permitted ; non-resistance 74 creditors to be affected 74 1259 1260 GENERAL INDEX. PAGE A.ots of Bankruptcy — Continued. preference, sufficiency 75 legal proceedings, meaning 75 vacating or discharging preference 76 five days before sale 76 construction of subsection 77 insolvency alleged and proved 89 preferential transfer : elements 67 what constitutes 67 intent to prefer 69 allegation and proof 70, 72 inferred from transfer of all of property 70 knowledge of insolvency 71 distinguished from motive 71 insolvency must be alleged and proved 90 trial by jury of issue 364, 365 Adjudication. (See Involuntary Proceedings.) certified copy, trustee to record 546 definition 1 eflfect of, in rem 28 in involuntary appearance 354 on voluntary appearance 355 effect generally 357 on rights of creditors 357 vacating, application 353 when ordered 3gg default, where judge is in district 359 when judge is absent 3gO jurisdictional requirements 24 residence or domicile 24 25 principal place of business 26 preceding six months 27 jurisdiction of courts of bankruptcy I3 referee, jurisdiction of ^gg practice after reference ^qq Administration of Estates. attorneys, allowances 688-694 expenses, statute respecting goj scope of section 62 gog priority of payment gog auctioneer's services gog preservation of property gos assignees for creditors, allowances ggg practice or allowance gg7 priority of payment of cost 73g witness fees and mileage 73g attorney's fees 730 without reference to referee 3)^1) GENERAL INDEX. 1261 FA.GE Adverse Claimants. meaning of term as used in section 23 399 not summarily proceeded against in district court 400, 401 consent to jurisdiction of district court 402 how may be shown 403 1 eeeiver's possession of property 32 Affirmations. in lieu of oaths 372 Alien. bankruptcy, adjudication 28 voluntary bankruptcy, may file petitions 98 Alimony. debt not dischargeable 321 not provable, against husband 720 Allovrance of Claims. distinction between proof of claims and 586, 699 Bee Proof of Claims, defenses interposed 698 Amendments. petition for discharge 260 petitions, when allowed 339, 340 practice 342 pleadings in bankruptcy, how made 350 proof of claims, when allowed 593, 594 efifect on time limitation 615 schedules, to include exempt property 147, 162 when allowed 184 specifications of objections to discharge 265 Ancillary Jurisdiction. when exercised by district courts 412 Ancillary Proceedings. courts of bankruptcy in another district 21 Answer. by bankrupt, what to allege 350 to petition in involuntary bankruptcy 638 Appeals and Errors. circuit court of appeals: controversies in bankruptcy 424 appeals as in equity cases , 442, 443 from what judgments 443-446 in compositions 446 time of taking 446 parties 447 practice 448-451 rehearing for purpose of allowing 447 bond, when required 449 not required of trustee 452 1262 GENERAL INDEX. PAOB Appeals and Errors — Continued. costs, when allowed 450 revision in matter of law, petitions 432 comparative legislation 432 distinction between, and appeals 432, 433 petition, and appeal, exclusive or cumulative 434, 435 questions of law only considered 436 what may be reviewed 437, 438 practice on petition 439-441 petition to state questions 439 record to accompany petition 440 composition, order confirming or rejecting - 244 controversies arising in bankruptcy proceedings 423 to circuit court of appeals and supreme court 424 from district or circuit court to supreme court 425 jurisdiction of appellate courts 421 under law of 1867 322 methods of appeal in bankruptcy 431 statute relating to 429 scope and meaning of § 25 430 supreme court: appellate jurisdiction 421 from circuit and district courts 425 from highest court of state 425 certification of questions 453 writs of certiorari from 453, 454 Appearances. in bankruptcy proceedings, by whom 347 voluntary, by bankrupt 348 when and how made 348, 349 Appellate Courts. See Appeals and Errors. include certain courts 1 Appraisal. of bankrupt's property 834, 835 Arbitration. of controversies, scope and practice 455 arbitrators, how chosen 456 eflFect 456 Assets. collection by trustee. See Trustee 539 Assigned Claims. proof, how made 591 Assignment for Benefit of Creditors. act of bankruptcy. See Acts of Bankruptcy 77-84 not unlawful 78 constructive fraud on act 78 adjudication deprives state court of jurisdiction 418 GENERAL INDEX. 1263 PAGE ABsigiLment for Benefit of Creditors— Continued. assignees, allowances for expenses 686 allowance for attorneys 694 priority of fees and expenses 744, 745 creditors assenting, estopped from filing petition 636 diseliarge, when refused because of *. 289 trustee's title to property 814 Attachment. costs, provability of claim 715 lien nullified, if within four months period 787 sureties on bond not released by discharge of principal 306 Attorney. bankrupt, preferential payments 678-681 compensation, allowance 688 for claimants 689 petitioning creditors 690 receivers 690 bankrupt, involuntary cases 691 voluntary cases 691 does not include discharge 692 trustees 692 amount, how determined 693 assignee, prior to bankruptcy 694 eflfect of amendment of 1903 694 proirity of payment 736 assignees and receivers, priority 744, 745 employment, in general 687 for trustee 687 lien, validity 772 Attorney-General. statistics in respect to bankruptcy 566 to be furnished by ofiioers 567 Auctioneers. expenses, payment 685 Auxiliary Remedies. in district courts, when afforded 413, 414 B. Ban^. depositories, designation 682 disbursement of moneys 682 excepted from involuntary bankruptcy 110 lien, validity 772 preference, deposit of money 661 proof of notes discounted at 604 set-off of deposit"! against unpaid note 794 1264 GENERAL INDEX. PAGE Bankrupt. attorneys, allowances 691, 092 business conducted by receivers, marshals or trustees 13 claims: examination of. See Proof of Claims 175 to be consulted as to 175 false, information as to 175 co-debtor, liability not affected by discharge 303 death, effect of 193, 194 on right of discharge 195 on rights of widow 196 definition 1 detention within district 202 application, when made 203 not to be imprisoned 203 writ of ne exeat 203 duties prescribed by statute 170 estates, collection and distribution 14, 43 closing and re-opening 14, 47 evasion of act, notice to trustee 176 examination under § 21-a 375 duty to submit 185 when to be had 185 application at first meeting 186 method of conducting 187 employment of stenographer 187 subject matter 189 unsatisfactory answers 190 criminating questions 190, 191 discbarge withheld for refusal to answer 192 false swearing, effect 192 under § 21-a 375 exemptions. See Exemptions 139-169 extradition, jurisdiction of courts of bankruptcy 14 extradition of, when allowed 204 practice 204, 205 farmers and those engaged in tillage of soil 100 insanity, effect of 193, 194 on right of discharge 195 involuntary, persons who may be adjudged 99 meetings : attendance at. See Meetings of Creditors 172 attendance from more than 150 miles 173 order directing attendance 173 p.Tyment of expenses 173 obedience of lawful orders 173 orders either written or oral 174 offense against act 466 concealment; false oath 467 papers, execution and delivery 176 protection and detention, statutory provision 197 protection from arrest: scope of section 198 when right begins and ends 199 GEJMEIIAL 1ND£X. 1265 Bankrupt— 'Continued. on what depends 1!)9 dischargeable debt the basis 200 order, application for 201 removal from one district to another 28 schedules: preparjition and filing. See Schedules 177 time of preparation and filing 178 duty to prepare and file 178 puuisliment for failure to file 179 framing, form and method 179, 180 creditors and liabilities 180, 181 assets and exemptions 182 verification 183 amendment 184 stay of suits against : under previous acts 207 begun after filing petition 208 dischargeability of debt, depending on 209 suits subject to 210 power to grant discretionary 211 exercised with caution 211 proof of debt, effect 212 suits or proceedings in rem 213 to enforce lien 214-216 under general assignments 216 practice and pleadings 217, 218 papers and procedure 219, 220 duration 221 suits by and against 206 surrender of property, refusal a contempt 39 impossible to perform 39 wage-earners, exceptions 100 who may become 93 Bankrapiicy. See Acts of Bankruptcy. date of, date of petition 1 Bankruptcy Courts. See District Courts; Jurisdiction. creation and jurisdiction 13 jurisdiction : in equity 17 limited by statute , 18 exclusive or concurrent 19 suits to recover property 20 territorial extent 20 voluntary appearance as waiver 21 court first acquiring 23 domicile of party adjudicated 23 open at all times 20 Bankruptcy Law. enforcement by necessary orders, etc 49 yiolaition, court may punish , 37 80 1266 Uil:^EKAL index. PAfl« Books. discharge refuaed for failure to keep, destruction or coneealment. .280-284 proof required 280 after passage of law 281 act of bankrupt 281 intent to conceal financial condition 281 what constitutes failure to keep, etc 282 burden of proof 283 Bomd. appeals, when required 449 not required of trustee 452 of trustee, certified copy of order approving 387 referees and trustees, statute 555 when given 557 condition and amount 557 sureties; forms 557 effect of failure to give 558 required, where property is taken before adjudication 90 remedies under 91 Breacb of Fromiae. liability, when dischargeable 316 Bnrdenioiue Property. trustee not to assume 832 rights and duties 832 report, order of court 833 Bmlness of Bankrupt. conduct by receiver or trustee. See Trustee 35 additional compensation of trustee 36 O. Certified Copiea. of proceedings before referee 386 order approving trustee's bond 387 confirming or setting aside composition . 387, 388 granting or setting aside discharge 387 Certiorari, Writa of. from supreme court to circuit court of appeals 45:^ Chattel SCortgages. See Liens. invalid, if within four months period 780 want of record, effect 763 Clronit Conrta. jurisdiction generally 392 concurrent with courts of bankruptcy 392, 420 same as fixed by general law 395 removal of suits to 396 GENERAL INDEX, 1267 PAOK Clreuit Court of Appeals. See Appeals and Errors. appeals as in equity cases 442-451 appellate jurisdiction in general 421 revision in matter of law 432-440 supervisory jurisdiction 427 Claim Fee. for filing claim for allowance 507, 510 Claim a. bankrupt's duty as to examination 175 false, presentation an offense against act 470 fees for filing 507, 510 jurisdiction of courts of bankruptcy 13 proof and allowance of. See Proof of Claims 582-616 Clerks. compensation, statute 563 filing fee 563, 564 other fees 564 definition 1 duties specified, statute 559 under general orders and forms 560 fees, collection and account 560 payment to referee and trustee 561 pauper aflSdavits 561 additional 562 indexes of petitions and discharges 846 priority of payment of wages 737, 740 records to be certified to, by referee 522 Closing Estates. jurisdiction of courts of bankruptcy 47 Collection and Distribution. estates of bankrupt; jurisdiction 14, 43 sale, power implied 44 seat in stock exchange 45 Commissions. on disbursements to creditors, of referee 511, 512 of trustee 55(1 Compensation. additional fees to referee or trustee prohibited 847-848 attorneys, in administration of estate 688-694 of referee. See Referee 507-513 trustee. See Trustee 550-553 receivers, for conducting business 34 trustee, additional for conducting business 36 Composition. certified copy of order confirming or setting aside 387 commissions of trustee on disbursements 652 coT;pensation of referee 510 1268 GENERAL INDEX. FASB Compoaitioii — Continued. confirmation, notices to creditors 621 confirmmg or rejecting : objections 239 against best interests of creditors 239 act or failure barring discharge 240 absence of good faitli 241 fraud, effect, where already confirmed 241 practice 242 continental system 229 dismissal and appeal 243, 244 distribution, judge to direct 242 practice 243 effect of 294 English system 228 informal, ineffectual 233 jurisdiction of courts of bankruptcy 14, 49 offer and confirmation, statutory provision 226 offer: terms as specified in statute 233 when to be made 234 meetings of creditors 234 acceptance by creditors 234 when to be made 234 how obtained 235 who may accept 235 how many must accept 235 deposit of consideration 236 nature and amount 236 cash, when necessary 237 assets of estate 237 practice: before confirmation 238 examination of bankrupt 238 ascertainment of acceptance by majority 238 report to judge 239 referee, jurisdiction respecting 494 set aside: when 245 fraud, what constitutes 246 misrepresentation and concealment 246 false schedule or oath 246 application, who may make 247 to whom and when made 247 practice as on discharge 247 notice to creditors 248 trial, how conducted 248 effect 248, 249 title to property, when set aside 842 under former acts 229, 230 under present law: changes 231 constitutionality 231 section, how construed 231 general purpose and effect 232 prfictice , 233 GENERAL INDEX. 1269 PAOB Compromises. of controversies, scope tind practice 457, 468 notices to creditors 623 Concealment. definition , 2 considered 8 discharge, ground of opposition 272 what constitutes 272-275 evidence 275 continuing concealment 276 exemptions forfeited for fraudulent 159 offense against act, by bankrupt 467 indictment or information 464, 465 punishment 469 punishment for contempt 40 Conditional Sales. See Liens. want of record, effect 763, 764 Confession of Banbmptcy. act of bankruptcy. (See Acts of Bankruptcy) 84-86 Conspiracy. offenses against act, punishment 470 Contempts. before referee: statute 514 scope of § 41 615 disobedience of lawful order 615, 516 order directing surrender 516 misbehavior 517 witnesses, in general 517 refusal to be sworn 518 misbehavior 618 certificate to judge required 619 practice before judge 519, 620 punishment 520 jurisdiction of courts of bankruptcy 14, 37 proceedings: when will lie 38 surrender of bankrupt's property 39 concealment of property 40 practice 41 punishment not imprisonment for debt 38 referee, in presence of 42 Contingent Iiiabilities. provability 711, 718 Contracts. provability of debt. See Provable Debts 710-714 Controversies. settlement, jurisdiction as to 45 1270 GENERAL INDEX. PAGE CmiTeraloB. liability, dischargeability 315 Copyrights. vest in trustee 813 Corporatioiu. bankruptcy does not release officers and stockholders 93, 111 effect of; discharge 110 definition. 1 directors not released by discharge 307 involuntary bankruptcy 102 engaged principally in manufacturing, etc 103, 104 manufacturing 104, 105 trading 106-108 printing and publishing 108 mercantile 109 mining 109 principal place of business 27 proof of claims by 689, 691 service of process on 345 Cost*. discharge, contested applications 292 involuntary proceedings, allowance on dismissal 91 jurisdiction of courts of bankruptcy 14 on appeals to circuit courts of appeals 450 provability of claims for 714 against involuntary bankrupt 715 action to recover provable debt 715 attachment suits 716 taxation generally 62, 53 Connterolaim. statute respecting. See Set-Offs 791 Conxts. definition 1 Conrts of Bankrmptcy. See Bankruptcy Courts; District Courts; Juris- diction, definition 1 Creditor. definition , 1 meetings of. See Meetings of Creditors 668-573 voters at 674-681 Creditor's Bill. lien nullified, if vrithin four months period 788 Criminal Conversation. liability not dischargeable 324 GENERAL INDEX. ;1271 FAOl Crl«t«»tt«K Qneitloaa. examination of bankrupt 190-192 of third persons luder § 21a 383 Curtesy. rights vest in trustee 819 D. Say*. computation of time by 477 Death. of bankrupt, e£Fect 193, 194 on rights of discharge 19S, 258 on rights of widow and children 196 Debt. definition 1 partnership, provability 129 distribution of assets 130 firm and individual creditors 131, 133 Decedent's Estates. voluntary bankruptcy, effect 99 Default. no pleadings filed, adjudication or dismissal 359 Definitions. object and use 4 preferences under present law 648 prior to amendments of 1903 648 Demnrrer. by bankrupt, what to allege 360 Depositions. practice on taking 386 notice to adverse party 380 Depositories. banks designated 682 disbursement of moneys 682 Detention. of bankrupt within district 202, 203 Direetors. See Corporations. liability released by discharge 316 Disbursements. referee's commissions 611 trustee to make 543 method of payment 544 1272 GENERAL INDEX. PAOB Discharge. amendatory act of 1903, effect 256 appeals from order granting or refusing 444 application: who may make 257 death or insanity of bankrupt 25.S time of making 25S extension, when allowed 258 to whom made 259 petition, contents 259 verification 259 where filed 260 amendments 260 notice to creditors and trustee 2G0 appearances 26 1 notices to creditors 62 1 certified copy of order granting or setting aside 3S7 co-dehtors of bankrupt not affected 3ii.^ effect of creditor's acts , 304 discharge, necessary party 304 joint debts 305 indorsers 305 obligors on bonds 303 attachment and other judicial bonds 305, 306 directors of bankrupt corporation 307 composition, acts barring, as an objection 240 constitutionality of restrictions 256 corporation entitled to 110 costs on contested applications .\ 292 death or insanity of bankrupt, effect 195 debts not affected, statute 308 excepted debts in England 310 under our law of 1867 310 provable debts under § 63a 310 courts to determine 311 support of wife and child 316, 322 liabilities to state 317 for certain acts, effect of act of 1903 317 false representation or pretenses 319, 320 fraudulent acts 319 wilful or malicious injuries 320, 324 alimony due or to become due 321 seduction of unmarried woman 323 criminal conversation 324 debts not scheduled 324, 325 fiduciary debts 326, 327 what are 328 definition 2 effect : in general 293 on liens 293 courts to determine 311 exempt property, claim to be enforced before 147, 150 GENERAL INDEX. 1273 PAGE Diaeharge — Continued. grant or refusal, discretionary 29'2 hearing: on application 261 appearances 261 reference to special master 267 proceedings 268 evidence, rules of 268 proof required 269 minutes and report 270 indexes, clerk to keep 846 jurisdiction of courts of bankruptcy . . .- 14, 257 lack of, not raised by creditor who has participated 257 law governing proceedings 257 opposition: grounds in general 271 offense of larceny 272 offense punishable by imprisonment 272 concealment of property ; 272 what constitutes 273 knowingly or fraudulently 273 failure to schedule property 274, 275 evidence 275 continuing, what constitutes 276 false oath in proceeding 277 on former examination 278 instances cited 279 books, failure to keep, destruction or concealment 280 proof required 280 after passage of act , 281 act by bankrupt 281 intent to conceal financial condition 281 what constitutes failure, etc 282 burden of proof 283 false statement of credit 284 elements of proof 284 pleadings and proof 284 meaning of words 285-287 fraudulent transfer, in general 287 elements of proof 288 general assignment as 289 previous discharge within six years 289 in voluntary bankruptcy 289 effect and application 290 measure of time 290 refusal to obey lawful order 291 includes what 291 refusal to answer material question 291 what constitutes 291 origin and nature 254 partnership : effect on firm or individual debts 125, 126 pleading after judgment 294 in action on dischargeable debt , 329 1274 GENERAL INDEX. PAGB BiaeltarBe — Oontinued. dependent on time 330 provable debts: subject to 312 dependent on person claiming 313 alien bankrupts 313 married woman 313 liability for torts 313, 314 conversion 315 breach of promise 316 support of wife and child 316 factor, liability released 316 stockholders, directors, partners 316 referee, jurisdiction respecting 494 revival of discharged debt by new promise 330 revocation: under Englist act 296 under former laws 296 jurisdiction 296 collateral attack not permitted 296 exclusive 297 parties in interest 297 undue laches 298 within one year 298 upon a trial 298 fraud of bankrupt 299 facts not warranting discharge 299 grounds; fraud 299 what constitutes fraud 300 knowledge of fraud 301 practice 301 effect '. . . 302 specifications of objections: generally 261 who may file 262 form and contents 263 allegations, must be specific 264 " knowingly and fraudulently " 264 dismissal for vagueness 265 amendment, when allowed 265 waiver of defects 266 exceptions 266 verifications 267 creditor proceeding under those of another 267 evidence confined to 269 proof required 269 title to property, when revoked 842 trial by jury of contested 368 United States laws relating to 255 unsatisfactory answers, withheld for 192 vacating, when 293 when granted, statute 260 under Roman and continental systems 253 under English system 2S4 GENERAL INDEX. 1375 FAOK DismiiHtL petition in involuntaiy proceedings 642 District Conrti. auxiliary remedies in 413 jurisdiction over suits by trustee 397 prior to amendment of 1903 398 case of Bardes v. Bank 398 purpose of amendment of 1903 398 adverse claimant, consent required 400, 401 when consent given jurisdiction retained 403 how consent may be shown 403 recovery of property, suits for 404 who may bring 405 when to be brought 406 summary, when exercised 407, 411 dependent upon possession 408, 410 ancillary, when exercised 412 DiTidends. commissions of referee on payment 611, 512 of trustee on payment 550 declaration of, by referee 499 declaration and payment: statute 748 comparative legislation 749 meaning of clause 750 priority creditors not entitled 760 creditors entitled to pro rata 751 practice 752 claims allowed subsequent to payment 752 definition by courts 11 first : when declared 761 effect of amendment of 1903 761 notices to creditors, of declaration and payment 623 payment by trustee 544 preference to residents of United States 753 recovery, on reconsideration and rejection of claims 611 subsequent: time and amount 751 final, when declared 763 unclaimed: statute respecting 764 comparative legislation 764 practice 764, 765 Docunents. definition 2 vest in trustee 813 Domicile. jurisdiction affected by 23 of debtor, what constitutes 2S Dower. death of bankrupt, effect on right 196 lights vest in trustee 819 1276 GENERAL INDEX. E. FAOB Employes. priority of payment of wages 737, 740 " Engaged Principally In." manufactuiing, etc., meaning of clause 103 Entity Doctrine. See Partnership. as applied to partnership 115, 116 Eqnltable Claims. pro-vability 702 Equity. bankruptcy proceedings are In 17 Estates. expenses of administering, statute 684 Estoppel. creditors filing petition 636 Evidence. provisions respecting 373" depositions, practice on taking 386 certified copies of proceedings 386 or orders approving trustees bonds 387 referee to preserve 501 Examination of Bankrupt. application at first meeting 186 at any other time 187 notice to creditors 621 practice : how brought on 186 method of conducting 187 counsel to bankrupt 188 record; objections 188 subject matter: unsatisfactory answers 190 criminating questions 190-192 false swearing, effect of 192 Examination of Third Persons. application: by whom made 376 trustee to make for creditors 376 time of making 376 after adjudication 377 persons subject to 378 wife of bankrupt 378 refusal to appear and testify 384 contempts, how punished 384 scope and conduct : right to counsel 379 questions submitted 380 production of books and papers 381 privileged communications 381 criminating questions 382 privilege, by whom claimed 383 practice generally 385 use in proceedings in other courts 384 GENERAL INDEX. 1277 PAGE Examinatioiuk conducted by referee - 491 witnesses sworn by referee 491 Exemptions. attacliment and liens on property, effect 148 concealment of property, forfeiture 159 constitutionality of provision 141 English bankruptcy act, provisions respecting 140 forfeiture for fraudulent acts 160 fraudulent conveyances, forfeiture 158 historical statement . . . , 140 jurisdiction of courts of bankruptcy .....' 14 parties entitled 150 wife and children of bankrupt 151 " house holder," or " head of family" 151 divorced woman 151 " laborer " or " farmer " 151 practice : in general 162 validity determined, when no trustee 162 claim to be clearly stated 163 proceeds of sale subjected to claim 163 determination by trustee 163 Mists and expenses, how paid 164 property subject to : in general 152 watches and wearing apparel 152 jewelry 153 tools and implements 153 homesteads 163, 154 insurance policies 155 pension money 156 partnership assets 157 incumbered, lien affected 160 annulment of lien, effect of 161 right of bankrupt 145 domicile, right affected by 145 assertion of, required 146 time and effect 146 failure to include in schedules 147 amendment to supply 147, 162 waiver, effect 149 note containing, effect 149 rules governing : in general 141 state law controls 142 time and manner of claiming, bankruptcy act governs 142 sale of property, bankruptcy court may not direct 143 title to property in bankrupt . . . 144 schedules to contain 182 table of cases arranged by states 165-169 trustees, rights and duties 144, 145 set apart, and estimate value I44 1278 GENERAL INDEX. PAGE Esamptiwma — Continued. property surrendered to bankrupt 145 to set apart 545 haye no title to property 833 unpaid purchase money not subject to 158 Eztortioii. offense against act 470 Estradltion of bankrupt, when allowed , 204 practice 204, 205 r. Factor. liability released by discharge 316 False Claims. bankrupt's duty as to 175 False Oath. objection to discharge 277 on form«r examination 278 instances 279 offense against act, by bankrupt 467 indictment or information 465 punishment 469 False Pretenses. liability not dischargeable 319, 320 False Statement of Credit. discharge refused on ground of 284 elements of proof 284 pleading, how to allege 284 obtaining property on credit 285 statement of financial condition 285 to be in writing - 285 materially false 286 purpose of obtaining property 286 by the bankrupt 287 Farmers. excepted from bankruptcy 100 pleading exception 101 who entitled to exception 101 Fees. additional, referee or trustee not to receive 847 effect of limitation 848 for conducting business 848 special masters 849 GENERAL INDEX. 1279 F*«i — Continued. clerk to collect and account for 6S0 payment to referee and trustee 661 filing fee 663 filing petition in bankruptcy 607, 510 claims for allowance 607, 610 Fldnoiary Beltts. not dischargeable 326, 327 vrhat constitute 328 FlUmcFee. on filing petition in each case, of referee 607, 610 of clerk of court 663 priority of payment, in involuntary cases 736 Fine*. judgment, not provable 720 Fixed IdabiUty. provability. See Provable Debts 705-709 Forms, Official. prescribed by supreme court 473 should be followed 474 Four Months Period. fraudulent transfers within 775 legal proceedings, lien secured through, invalid 784 preference, when begins to run against 651 agreement prior to period 652 running of time, when recording required 654 Franchises. vest in trustee 819 Fraud. proof and allowance of debt created by 592 provability affected by 705 IVandnlenit Representations. title of trustee affected by 826 Frandnlent Transfer. act of bankruptcy. See Acts of Bankruptcy 61-66 discbarge refused on ground of 287 elements of proof 288 general assignment as 289 exemptions forfeited 158 invalid, nullified 774 scope of § 67-f 774 insolvency not essential 775 within four months period 775 intent to hinder, delay or defraud 775-777 under state laws ; 773 suits to recover •jng 1280 GENERAL INDEX. PAGE Fraudulent Transfer — Continued. mortgages to secure antecedent debts 779 chattel mortgages 780 voluntary settlements 781 general assignments 781 property vests in trustee 8i3 recovery of property, suits for, jurisdiction 404-400 trustee : may sue to set aside 842 subrogated to rights of creditors . . . 843 suit in equity 843 amendment of 1903 845 G. Gender. masculine includes feminine 3 General Orders. notices to creditors under 619 prescribed by supreme court 473 should be followed 474 B. Holiday. definition 2 Homesteads. exemptions, right of bankrupt 153, 154 I. Indexes. of petitions and disduurges 846 Indians. voluntary bankruptcy, may file petitions 98 Indictment. offenses against bankruptcy act 464, 465 Indorsers. not released by discharge of maker 305 provability of claim 709 Infant. partner, adjudication against partnership 121 voluntary bankruptcy, may file petitions 96 Information. offenses against bankruptcy act 464, 46S GENERAL INDEX. 1281 PAGE Injmnotion. fraudulent or oppreBsive petitions 628 power inherent in court of bankruptcy 50 exercise, other than against suits. See Stay of Suits Against Bankrupt 50 sale of bankrupt's property 51 practice 52 referee, jurisdiction to grant 495 Injuries. wilful or malicious, debt not dischargeable 320, 324 provability of claim 717 Insanity. ^ of bankrupt, effect 193, 194 on rights of discharge 195, 258 Insolvency. act of hankruptcy : when need not be shown 88 burden of proving 88 consists of what 2 fair valuation of property 6 fraudulent transfers, not essential in case of 775 legal proceedings, essential to nullify lien through 784 material in certain acts of bankruptcy 60 of partnership, how determined 119 preference : debtor insolvent when made 650 at time when made 650 valuation at time of 650 knowledge, bearing on intent 668 when not required 669 receivership of corporation, essential to constitute act of bankruptcy 82 trial by jury in contested cases 364, 365 valuation: of property 4, 5 property transferred excluded .• ? fair market value 9 Insolvency Iianrs. state, effect of bankruptcy proceedings 851 suspension 851-854 Insurance Folicies. exemptions, right of bankrupt 153 Injtearvention. creditors in involuntary proceedings 640, 641 Involuntary Bankruptcy. adjudication : in general 354 on voluntary appearance 355 effect generally 357 on rights of creditors 357 vacating, application 358 when ordered 359 81 1282 GENERAL INDEX. PAGE Involnntary Bankruptcy — CTontinued. answer : alleging more than twelve creditors 638 list of creditors to be filed 638 practice 639 appearances : by whom 347 voluntary, by bankrupt 348 when to be made 348 how to be made 349 attorneys : allowances 690 petitioning creditors 690 bankrupt 691 corporations: may be proceeded against 102 unincorporated companies 103 engaged principally in manufacturing, etc 103 manufacturing, what constitute 104, 105 trading, what constitute 106-108 printing and publishing 108 mercantile pursuits 109 mining, what constitute . 109 pleadings ; allegations ; 109 effect on officers and stockholders 110 costs: provability of claim 715 dismissal : after trial 355 by consent of parties 356 in case of default 359 filing fees, priority of payment 735 intervention : by other creditors 646 counted among original creditors 640 any creditor entitled to 641 practice 641 partnership. See Partnership 117 persons : who may be proceeded against 99 wage-earners not subject to 100 farmers excepted 100 pleadings where exceptions are set up 101 petitions: number of creditors 631 amount of claims 631 creditors having provable debts 632 secured creditors not to file 634 creditors who have attachments 635 advantage through fraud 635 estoppel ; assented to assignment 636 preferred, when to file 634 counting creditors, when one files 637 duplicate originals 637 relatives and employes excluded 63'J creditors, intervening to be counted 640 notice of filing not required 642 banks dismissal on motion of bankrupt 642 pleadings : who may file 347 GENERAL INDEX. j.283 FAGB lavolnntary Bankruptcy — Continued. attaching creditor 347 when to be filed 348 answer or demurrer 350, 351 amendments, how made 350 verification, in general 351 by attorney 352 referee : jurisdiction 489 practice after reference 490 trial: without a jury 353 by jury 354 by referee or special master 354 Involnntary Petition. against whom filed 86 must be insolvent, when 86 time of filing 54 within four months 87 when begins to run 87 Involnntary Proceedings. (See Involuntary Bankruptcy.) bond required, where property is held 55, 90 remedies under 91 costs to be paid by petitioner on dismissal 55, 9 1 examination as to solvency 55 solvency as a defense 54 J. Judge. definition 2 Judgment. lien, when nullified 785, 786 preference, when procured or suffered by debtor 655 proof of, transcript to be attached 593 provability. {See Provable Debts) 706, 707 for fines not provable . . 720 Jurisdiction. appellate courts: statutory provision 421 Circuit courts: of United States 392, 395 concurrent with bankruptcy courts 392, 420 same as fixed by general law 395 removal of suits to 396 district courts : suits by trustee 397 comparative legislation 397 prior to amendment of 1903 398 case of Bardes v. Bank 398 purpose of amendment of 1903 398 adverse claimants, meaning of term 399 not summarily proceeded against 400, 401 consent required 402 when consent given court retains jurisdiction 403 1284 GENERAI- INDEX. PASS Jnriidictloa — Continued. how consent may be shown 403 recovery of property transferred 404-406 summary, when exercised 407, 411 dependent upon possession 408-410 ancillary, when exercised 412 offenses against act, trial 464 of courts of bankruptcy. (See Bankruptcy Court) 13, 14 conferred by statute 18 exclusive or concurrent 19 of referee. (See Referee) 487-495 that of judge of district court 492 partnership, partners in different districts 127 preferences, suits for recovery 673 state courts: statutory provision 392 suits brought in 414 properly in possession 416-418 Jury Trial. conducted as in other cases 367 demand by written application 365 effect of failure to make 366 discharges, contested 368 involuntary bankruptcy cases 354 jury, how attained 366 at stated term 366 offenses and other controversies 367 right to, cases specified 363 limited to two issues 364 question of insolvency 364, 365 commitment of act of bankruptcy 364, 365 Iiandlord's Liens. (See Liens.) validity of 770 Iiarceny. not a ground of opposition to discharge 272 Lease. breach of covenant, provability 712 Iiegal Proceedings. liens secured through, nullified 782 insolvency essential 784 four months period 784 judgment and execution 785, 786 attachment 787 creditor's bill 788 preference through, act of bankruptcy 72-77 GENERAL INDEX. 1285 FAGII Urns. fraudulent transfers: invalid 774- scope of § 67f 774 insolvency not essential 775 within four months period 775 intent to hinder, delay or defraud 775 evidence 776 under state laws 778 recovery, suits for 778 amendment of 1903 778 mortgages to secure antecedent debts 779 chattel mortgages 780 voluntary settlements 781 general assignments 781 tnvalid: for want of record 761 state law controls 762 want of record, in general 762 chattel mortgages 763 conditional sales 763 failure to file, effect 764 for other reasons 765, 766 legal proceedings : nullified 782 comparative legislation 782 effect of insolvency 784 four months period . '. 784 judgment and execution 785 enforcing pre-existing lien 786 attachment 787 creditor's bill 788 preserving, for benefit of creditors 789, 790 priorities and distinction 727 statute : respecting 756 comparative legislation 759 scope of § 67 760 construction and general effect 760 suits to annul, practice 789 trustee : subrogated to rights of creditor 766 as judgment creditor of bankrupt 767 valid : preserved 768 mechanics' liens 769 landlords' liens 770 mortgages to secure future advances 771 on after acquired property 771 chattel mortgagor in possession 771 attorney's lien 772 banker's lien 772 livery stable keeper's lien 773 IiUe Insurance Folioy. bankrupt's interest, when vests in trustee 822 proof of claim secured by 696 1286 GENERAL INDEX. PAGE Iiimitationjs, Statute Of. provability , of debts affected by 722 Uvery Stable Keeper. lien, validity 773 Xnnatic. partner, partnership may be adjudicated 121 presumption of insanity, where person is adjudged insane 102 voluntary bankruptcy, may file petitions 97 M. Mannfactnring Corporations. what constitutes manufacturing 104, 105 Married Women. voluntary bankruptcy, may file petitions 98 Marsbal. compensation fixed by statute 564 custody of property of bankrupt 13 Mechanics' Liens. validity of 769 Meetings of Creditors. imnkrupts' attendance: at first ■* 172 expenses, when paid 173 ordered to attend 17-3 composition, act upon offer 234 examination of bankrupt, application 186 final, when ordered 573 first ; when to be be held 570 after adjudication 570 order of business 571 allowance or disallowance of claims 571 judge or referee to preside 571 notice to creditors: form and contents 618 when required 624 when not necessary 619 of first meeting and examination 620 special : when and how called 572 on call of creditors 573 statute: respecting 568 scope of § 55 569 trustee : appointed at first 526 approval or disapproval by judge or referee 528, 529 voters at : statute 574 scope of § 56 575 qualifications, how determined 576 election of trustee by 576- majority in number and amount to control 577 creditors only qualified as 578 secured creditors not qualified 57S GENERAL INDEX. ^287 PAGB Meetings of Creditors — C!ontlnued. priority creditors not qualified 579 preferred creditors, surrender of preference 579 attorneys in fact may vote 579 proxy, form required 580 practice in voting 581 Mercantile Pursuits. corporations engaged in 109 Mining Corporations. what constitutes mining 109 Months. computation of time by 476 Mortgages. antecedent debts, to secure, Invalid , 779 future advances, validity 771 preferential transfer 659 N. Ne Exeat, Writ of. power to grant against bankrupt 203 Negotiable Instruments. preferential transfer, delivery of note to third person 660 payments on notes or checks 600 proof, how made 592 by indorser on note 607 provability. See Provable Debts 70S indorser and surety debts 709 NeDD'spapers. publication of notices, etc., designation 459 Notices to Creditors. effect on jurisdiction 620 form and contents 618 under general orders and forms 619 not necessary in certain cases 619 publication: of first meeting of creditors 624 when in other cases 624 referee to give •••••• 500, 624 required: of examination of bankrupt 621 confirmation of composition . • 621 discharge, application for 621 proposed sales 622 perishable property excepted 622 dividends, declaration and payment 62.3 final accounts, filing ,. . : ; 623 compromise of controversy 623 dismissal of proceeding 623 statute : respecting 617 construction and scope of § 58 619 1288 GENERAL INDEX. O. PAOB Oaths. before attorneys of record 371 by whom administered ^ 370 definition 2 how authenticated 371 referee may administer 4^1 Offenses. against bankruptcy act : designated 461 section 29, how construed 463 knowingly or fraudulently committed 463 jurisdiction of district court 464 indictment or information, generally 464 false oath 465 concealment of property 465 no prosecution after one year 472 bankrupt: generally 466 concealment of property 467 false oath 468 punishment 469 other than bankrupt : generally 469 presenting false claim 470 receiving property with intent to defeat act 470 extorting money 470 conspiracy 471 referee : what are 471 punishment 471 trustee: what constitute 461, 466 I punishment 466 0£Scers. include what 2 Orders. bankrupt to obey lawful 173, 174 enforcement by courts of bankruptcy 14, 37 refusal to obey, ground for refusing discharge 291 Orders, General. prescribed by supreme court 473 I should be followed 474 ) P. Papers. execution and delivery by bankrupt 176 Parties. additional, may be brought in 14, 43 Partners. baTikruptcy, statutory provisions 112 GENERAl, INDEX. 1289 PAOB Partnership. adjudication : when individual partners affected 125 effect on discharge 125 assets: marslialling to prevent preferences 130 distribution generally 130 partnership and individual creditors 131 firm and individual, what are 132 hankruptcy : effect on partners , 116 adjudication in general 117 receivership as act of 117 acts, when committed 118 insolvency, how determined 119 death, insanity or infancy of partner 120-121 creditors, distribution of assets 131 debts: firm and individual 133 assumption of, by one partner 134 individual, assumption 135 proof, and dividends from each estate 137 entity doctrine 115 effect 115, 116 exemptions, claim of partners 157 jurisdiction, where partners are domiciled in different districts.... 127 petition : by all partners 122 where all do not join 122 notice to non-joining partner 123 form and contents 124 practice before adjudication 122-124 provablity: of debts 129 claims of partners and vice versa 129 cases cited 136 service of process on non-joining partner 345 solvency : of one or more partners '. 137 right to administer 138 consent of solvent partner 137, 138 trustees : choice 128 powers in respect to individual estates 129 separate accounts to be kept 129 payment of expenses 129 what constitutes 114 Patents. vest in trustee 813 Pauper Cases. affidavits of poor persons 561 compensation of referee 509 of trustee 549 Pension Money. exemptions, right of bankrupt 156 1290 GENERAL INDEX. FAOB Person Against Wbom Petition Filed. (See Petitions; Involuntary Bankruptcy. ) includes person who has filed voluntary petition 1 Persons. defined 2 Petitions. amendments, when allowed 339, 340 practice 342 defined 2 facts to be alleged 337 filed with clerk 338 filing generally 628 framing. General Order V 337 fraudulent or oppressive, injunction 628 indexes, clerk to keep 846 involuntary : exceptions as to wage-earners and farmers 101 corporations, allegations respecting 109 number of creditors 630 amount of claims 630, 631 creditors having provai/te claims 632 secured creditors not to file " 634 preferred creditors, when to file 634 attaching creditors not to file 635 estoppel of creditors 636 counting creditors when one files 637 duplicate originals 637 relatives and employes not counted 639 intervention by creditors 640 dismissal 642 jurisdiction conferred by 339 partnership : where all join ......'. 122 where all do not join 122 form and contents 124 voluntary: who may file 96-99, 628 where involuntary has been filed 629 form and practice 629 who may file and dismiss, statute .' 626 scope of § 59 628 Pleadings. in bankruptcy proceedings, who may file 347 attaching creditor 347 when filed 348 answer or demurrer 350, 351 amendments, how made 350 verification, in general 351 by attorney 352 Plural Number. singular included g GENERAL INDEX. 1291 PAOO Poor Persons. petitions accompanied by affidavit. {See Pauper Oases.) 561 Possession of Property. of bankrupt, statute 799 scope of § 69 800 bond of petitioning creditor 800 property claimed by third person 801 marshal's liability 801 practice 801 Preceding Six Months. residence of debtor in district 27 Preference. act of bankruptcy. (See Acta of Bankruptcy) 67-72 attorney of bankrupt, payment for services 678 future services, payment for 679 practice 680 definition 11 elements : in general 649 while insolvent 650 within four months 651 time begins to run 651 agreement made prior to period 652 where recording is required 654 procured or suffered judgment 655 transfer of property, in general 656 method immaterial 656 intent or good faith 657 estates must be diminished 657 payment of antecedent debts 658 mortgage of property 659 notes and checks 660 deposit of money 661 wages, payment 661 when not voidable 661 effect, a greater percentage 662 creditors only preferred 6G3 illustrative cases 664 partnership assets, distribution to prevent 130 set-off of subsequent credit 676 meaning of § 60c 677 statute : respecting 644 historical statement 647 comparative legislation 647 definition under present 648 prior to amendments of 1903 648 voidaile : in general 665 person receiving it 666 reasonable cause to believe 666 actual knowledge not required 666 1292 GENERAL INDEX. FAOB Prefezvnoe — Continued. guess or suspicion insufficient 668 knowledge of insolvency 668, 669 purpose and eflfect considered 670 evidence; burden of proof 671 sale of entire stock 671 agent or attorney, knowledge or belief of 671 recovery, in general 672 by trustee only 672 action, against whom brought 673 in what court 673 permission to sue 674 practice 674 property or its value 675 Preferential Transfer. recovery of property, jurisdiction of suits 404-406 Preferred Creditors. (See Preferences.) creditors' meeting, surrender of preference 579 proof of claims by 599-604 surrender of preference 603, 605 statute respecting. (See Preferences) 644 Preserving Estate. priority of payment of cost 734, 735 Principal Place of Bnsiness. jurisdiction affected by 26 of corporation 27 Printing and Pnblisbing. what constitutes 108 Priority. administration: of estate, payment ^f cost 736 witness fees and mileage 736 attorneys fees 736 assignee for creditors: fees and expenses 744 allowed by state laws 745 attorneys for, allowances 745 claims, proof of 598, 599 creditors having, not entitled to vote 579 debts which have, statute 724 comparative legislation 726 construction of, § 64 727 filing fees : in involuntary cases , 735 liens, distinction 727 order of, how determined 728 practice, claim asserted 729 allegations in petition 729 preserving estate : cost 734 effect of amendment of 1903 735 GENERAL INDEX. 1293 PAGE Priority — Continued. what must be shown 736 receivers: fees and expenses 744 allowed by state laws 745 attorneys for, allowances 745 sheriff's fees : payment 746 disbursements, payment 747 State laws : debts entitled to 741 liens under 741, 742 conflicting or overlapping 743 tacoes: payment in general 729 first paid 730 amount and legality, determination 730 proof not required 730 payment out of proceeds of sale 731 Include what 731 license fees and franchise taxes 732 liquor licenses 733 subrogation on payment 733 accrued since proceeding was instituted 733 interest payable 734 United States, debts due 728 wages : payment 737 term construed 738 assignee of claim 738 services, when performed 739 persons entitled 740 workmen, clerks and servants 740 traveling or city salesmen 741 Frivileged Conunnnications. examination of third persons 381 Process. service, as in equity 344 by publication 345 on corporations, infants, etc 345 on non-joining partners 345 on absentees 346 eflfect on jurisdiction 346 delay, effect 346 proof 347 voluntary bankruptcy, not required 337 when returnable 343, 344 Proof of Claims. amendment of proofs 593 when allowed 593 presentment of new claim 594 effect on time limitation 615 contests : hearing 608 objections to allowance 608 who may file 608 1294 GENERAL INDEX. , FAOE Proof of Claims — Continued. form and contents 608 reconsideration and rejection 609 practice and petition 609 application, when made; laches 610 trial; evidence 611 recovery of dividends 611 corporation, oath by treasurer 589 distinction between allowance and 586 e^ect : of proof and allowance 616 waiver of lien 616 filing with referee 594 method, : of making, generally 587 what to be shown 588 written and under oath 588 requirements of Gen. Ord. XVI 589 caption and form 589 partner or agent, oath required 589 corporation, oath of treasurer 589 official forms, requirements 590 before whom proof taken 590 who may make proof 590 against whom made 591 assigned claim, how proven 591 evidenced by written instrument 592 fraud, debts created by 592 \ statements to be attached 593 transcripts of judgments 593 partnership, against partners 129 penalty and forfeiture claims 607 preference claims: before amendment of 1903 599 meaning and effect of amendment of 1903 600-602 surrender, when required 603 what constitutes 605 payments on running accounts 603 preference actually intended 604 payment of notes discounted at bank 604 priority claims: manner of proof 598 landlord's claim for rent 599 proved as secured claims 590 secured claims: security to be set forth 595 surrender of security 595 life insurance policy 596 secured creditor, what constitutes 596 value of securities, how ascertained 597 proving secured debt as unsecured 59g statute : respecting 582 scope of § 57 585 comparative legislation 586 suhrogation claims : proof of 606 surety proves principal debt 606 GENERAL INDEX. j^295 FAQE] Proof of Claims — Continued. surrender of preference by surety 607 indorser, proves amount due 607 time limitation : proof within a year 612 purpose and effect 612 exceptions, tax claims 613 claims liquidated by litigation 613 proof after expiration of year 614 amendment, effect of 615 Property. appraisal : fees of appraisers 834 not needed in no-asset cases 835 wlien made 835 report and affidavits 835 burdensome : trustees not to take 832 assumption of existing executory contract 832 report as to, to be filed 833 order to disclaim 833 definition under English act 12 exempt : trustee does not take. See Exemptions 833 life insurance policies 833 reolamation: proceedings, when to lie 827 goods obtained by fraud 827 articles sold on condition 828 false representation as to solvency 828 recovery of identified articles 829, 830 rights of action: pass to trustee 830 recoveiy of usury 831 actions for conspiracy 831 sales : by trustee, in general 835 illustrative cases 836 General Order XVIII 837 incumbered property 838, 839 practice; hovir conducted 840 resale, when granted 841 transfer of title to purchaser 841 title to : statute 803 comparative legislation 806 scope of § 70 806 trustee vested 807, 809 when vests in 807 bankrupt's, before appointment of trustee 808 subject to claims, liens and equities 810 particular property 812 documents 813 patents, . copyrights and trade-marks 813 personal powers 813 fraudulently transferred 813 assigned for benefit of creditors 814 which might have been transferred: passes to trustee 814 prior to filing petition 815 interest in pending action 815 1296 GENERAL INDEX. FAOB Property — Continued. stock in hands of broker 816 remainders and interests in trust 817 dower and curtesy rights 819 licenses, franchises and personal privileges 819 contracts between publisher and author 820 seat in stock exchange 821 life insurance policies 822 property sold on condition 823, 824 fraudulent representations, affected by 826 Protection. of bankrupt from arrest 198-201 Provable Debts. See Proof of Claims. contracts : debt founded on 710 illegal, effect 710 owing at time of filing petition 711 breach of warranty 711 contingent liabilities 711 continuing, bonds, etc 712 employment and for commissions 712 breach of covenant in lease 712 implied 713 contracts, provability 700 costs : claims for 714 against involuntary banlcrupt 715 in action to recover provable dd)t 715 in attachment suits 716 determination: of provability, as affected by statute 698 defenses to allowance 698 "proved " and " allowed " 699 ex contractu and ex delicto 700 debt existed when petition filed 701 equitable debts 702 debts against more than one person 703 provability as affected by person proving 703 executor may prove 704 married women 704 i fraud or preference 705 fixed liahility : absolutely owing 705 meaning of term 705 judgment, evidenced by 706 nature nf liahility 706, 707 impeacliinp", full faith and credit 707 written instrument, evidenced by 708 indorser and surety debts 709 involuntary petitions by creditors having 632 judgments : entered after bankruptcy 714 fixed liability evidenced by 700, 707 not provahle: in general 7j9 judgments fnr finps 720 GENERAL INDEX. 1297 PA OR Provable Debts— Continued. alimony due or to accrue 720 rent to accrue 720 receiver in possession 721 outlawed by statute of limitations 722 commissions of trustees 723 open account : debt founded on 710 set-off, entitled to 797 statute respecting 695 history and comparative legislation 697 torts, provability 700 unliquidated claims, in general 717 effect and purpose 717 injuries to persons and property 717 liquidation, how accomplished 718 contingent liabilities '. 718 Proxy. proof of claims by 590 vote by, at creditors' meetings 579, 580 Fnblication. designation of newspapers 459 notices to creditors 624 service of process by 345 Fnnislmiejit. jurisdiction of courts of bankruptcy 13, 37 B. Reasonable Cause to Believe. preference intended. Bee Preferences 666-671 Beceivers. ancillary, when appointed 22, 33 appointment, when authorized 29 attorneys, allowances 690 compensation 34 jurisdiction of courts of bankruptcy 13 powers ; generally 30 sale of property 31 recovery of property 31 possession of property held adversely 32 conduct of business of bankrupt 35 practice on appointment 33 priority of fees and expenses 744, 745 Beceiversbip. act of bankruptcy. See Acts of Bankruptcy 77-84 insolvency essential 82 in state court, effect of adjudication 418 partnership, act of bankruptcy 117 82 1298 GENERAL INDEX. FAOB Reclamation. proceedings, when to li« 827 goods obtained by fraud 827 articles sold on condition 828 recovery of identified articles 829, 830 Recording Instrument. liens invalid for want of record. Bee Liens 762-764 chattel mortgages 763 conditional sales 763 preferential transfer, running of four months period 654 Records. referee to keep 521 what to be kept 521, 522 when and how certified to clerk , 522 referee to make up and transfer to clerk 500 Recovery. preferential transfers, when suit brought 672 by trustee only 672 action, against whom 673 in what court 673 permission to bring 674 practice 674 property or its value 675 damages and costs 676 suits, jurisdiction of district court. See Suits; Trustee 400-406 by trustee, when maintained 540 Referee. absence or disability 523 adjudication, reference after 389 appointment by court in district 481 bonds : statute 555 condition and amount 556 sureties 557 where filed 558 failure to give, effect 558 clerk to pay fees to 561 compensation : statute 507 comparative legislation 508 prior to amendment of 1903 508 pauper eases 509 special master, while sitting as 509 in composition cases 510 filing fee 510 claim fee 510 commissions on disbursements 511 " full compensation," meaning 512 allowance for expenses 513 on reference to two or more referees 513 additional fees not allowed 847, 848 GENERAL INDEX. 1299 PAGB Referee — Continued. contempts before. See Contempts 614-520 defined 2 duties: specified 497 dividends, declaration 499 schedules, examination and amendment 499 preparation in certain cases 500 information to be furnished 499 notices to creditors 500 records and copies for clerk 500 evidence, preservation 501 interest in case disqualifies 501 jurisdiction : statute 487 comparative legislation 488 scope of § 38 488 adjudication or dismissal 489 bankrupt subject to orders 490 after reference in involuntary cases 490 oaths administered by 491 examinations conducted by 491 seize and release property 492 exercise statutory jurisdiction of judge 492 discharges and compositions 494 injunctions 495 employment of stenographers 495 limits of district 482 notices to creditors, how given 624 number appointed 486 oath of ofiice 485 offense against act, vyhat constitutes 471 punishment 471 office created 480 practice in bankruptcy proceedings prohibited 502 preside at first meeting of creditors 568, 57 1 proceedings before, certified copies as evidence 386 proof of claims filed with 594 purchase of property of estate prohibited 502 qualifications 483 not related to judge 483 records and findings, jurisdiction of courts of bankruptcy 14 records, how kept 52 1 what are 521, 522 when and how certified to clerk 522 removal from ofiice 482 review of order by judge 502-506 term of office 482 trial of involuntary bankruptcy case 354 trustee, appointment by 527 approval or disapproval of appointment 528, 529 vacancy, how filled 523 1300' GENERAL INDEX. FAGB Beferencea. (See Referee.) after adjudication 389 administration without '. . . . 389 general and limited 390 to any referee in district 390 order of, effect 361 Rehearing. for purpose of taking appeal 447 Bemainderg. vest in trustee 817 Keiaoval. trustee, for cause 531 suit or proceeding not abated 536 withholding compensation 553 Bent. not provable 720 Re-opening Estates. jurisdiction of courts of bankruptcy 47 laches in making application 48 Reports. trustees to make 542 supplemental, when required 545 Residence. distinguished from domicile 24 of debtor, what constitutes 25 Resignation. trustee 532 Review. {See Appeals and Errors.) by judge, of order of referee 502 when to be asked 502 petition, contents 503 decision on facta not disturbed 504 certificate for review 505 what to be certified 505 hearing 506 I in matter of law by circuit court of appeals 432 distinction between, and appeal 432, 435 petition and appeal, exclusive or cumulative 434, 435 questions of law considered 436-43& practice on petition 439-441 Bevooation. of discharge. {See Discharge) 295-302 Bnles. prescribed by supreme court 473 GENERAL INDEX. 130I FAQB s. Sales. notices to creditors 622 taxes paid from proceeds 731 trustee to provide for 835 under direction of court 835 referee may order or confirm 836 inadequacy of price 836 public auction 837 notices to creditors 837 incumbered property 838 free of liens 838, 839 inchoate right of dower 839 practice generally 840 resale, when granted 841 transfer of title to purchaser 841, 842 Salesmen. priority of payment of wages 737, 741 Schedules. amendment, when allowed 184 debts not included not discharged 324, 325 discharge withheld for failure to include property 274, 275 exempt property, failure to include, effect 147 preparation and filing, by bankrupt 177, 178 time 178 punishment for failure 179 triplicate 178 form and method 179 contents 180 creditors and liabilities 180, 181 assets and exemptions 182 referee to examine and amend 499 to prepare in certain cases 500 use as evidence 179 verification 183 Secured Creditor. definition 2 involuntary petitions not to be filed 634 proof of claims by 595-598 what are 596 security to be held by 8 vote at creditor's mjoiings, not entitled to 578 Sednction. debt not dischargeable 321 Servants. priority of payment of wages 737, 740 1302 GENERAL INDEX. FAQE Set-offs. allowed: mutual debts or mutual credits 792 time when determined 793 nature of liability 794 deposits in bank 794, 795 same right and capacities 796 joint and several claims 796 waiver 797 not allowed : debts not provable 797 purchased after bankruptcy 797 with a, view to use 798 statute respecting 791 comparative legislation 792 subsequent credit, preference 676, 677 Sberiffs. priority of payment of fees 746 of disbursements 747 Singnlar Number. plural included 3 Special Master. compensation of referee as 509 fees to referee acting as 849 trial of involuntary bankruptcy case 354 State Courts. jurisdiction of suits by trustee 414, 415 affected by bankruptcy 416, 418 possession of property 417 States. include territories, etc 2 Statistics. bankruptcy, attorney -general to report 566 officers to furnish to attorney-general 567 Stay of Suits Against Bankrupt. begun after filing petition 208 dependent on dischargeability of debt 209 duration 221 power to grant, discretionary 211 exercised with caution 211 proof of debt, effect 212 proceedings in rem, generally 213 to enforce lien 214 sale of mortgaged premises 215 distress by landlord 216 under general assignments 216 proceedings in personam 216 when to be granted 217 practice and pleadings 217 application to state court 217 ! to judge or referee 218 papers and procedure 219 GENERAL INDEX. 1303 PAGE Stenographers. referee may authorize employment 495 Stock Exchange. seat vests in trustee 821 Stockholders. liability released by discharge 316 Subpoena. clerk to issue on filing involuntary petition 337 form prescribed 344 issued out of court under seal 344 service, as in equity 344 by publication 345 on corporations, infants, etc 345 on non-joining partners 345 on absentees 345 elTect on jurisdiction 346 delay, effect of 346 proof 347 territorial limits of effect 21 when returnable 343, 344 Subrogation. liens, trustee subrogated to rights of creditors 766 payment of taxes, priority 733 Snits. (See Bankruptcy Courts; Jurisdiction; Trustee.) against bankrupt: stay. (See Stay of Suit Against Bankrupt) . .208-221 by and against bankrupt, continuance by trustee 221, 222 intervention by trustee, practice 223 limitation, when begun by trustee 224 effect generally 224 two years after estate is closed 224 when time begins to run 225 fraudulent transfers: recovery 778 trustee may bring in state court 842 subrogated to rights of creditors 843 suit in equity 843 amendment of 1903 845 ] recovery of preference : when brought 672 : by trustee only 672 in what courts 673 practice 674 property or its value 675 damages; costs 676 recovery of property: jurisdiction of bankruptcy court 20 receiver, power to institute 31 1304 GENERAX, INDEX. PAGE SmniuaTy Jurisdiction. (See Adverse Claimant.) district courts, when exercised 407 dependent upon possession 408-410 exercise of, under certain conditions 411 Supreme Court. {See Appeals and Errors.) appeals from circuit and district courts 425 from highest court of state 425 from circuit court of appeals 451 practice 452 appellate jurisdiction 421 certification of questions 453 writs of certiorari from 453 Surety. provability of debt 709 Taking Effect. act of 1898 856 amendatory act of 1903 - 850 Taxes. priority of payment 729 amount and legality 730 what entitled to 731-733 Time. computation of 476 by months and years 476 by days, and fractions thereof 477 Title to Property. (See Property.) statute respecting 803 comparative legislation 806 scope of § 70 806 Torts. discharge, for disability 313, 314 provability, in general 700 Trade-marks. vest in trustee 813 Trading Corporations. what constitutes trading 106-108 GENERAL INDEX. 1305 PAOB Transfer. {See Fraudulent Transfer.) cases to another bankruptcy court 478 defined 2 fraudulent, as act of bankruptcy. See Actsi of Bankruptcy 61-66 from one referee to another 391 payment of money included 9 performance of labor not included 9 preference: in general. See Preferences 656 method immaterial 656 intent or good faith 657 estate must be diminished 657 antecedent debts, payment 658 mortgage of property 659 notes and checks 660 deposit of money 661 wages, payment 661 preferential, act of bankruptcy 67-72 Trial. in involuntary bankruptcy 353 without a jury 353 by jury 354 by referee or special master 354 voluntary bankruptcy, in general 360 involuntary petition pending 361 Trustee. appeals, not required to give bond 452 appointment : statute 524 scope of § 44 , 525 comparative legislation 525 first meeting of creditors to make 526 continuance by adjournment 527 approval or disapproval by referee or judge 528, 529 creditors entitled to vote 576 judge or referee, when to make 527 vacancies, how filled by 530 notification of 531 arbitration of controversies 455 attorneys, allowances 692, 693 bond: certified copy of order approving ' 387 ofiicial, statute requires 555 when given ; condition and amount 557 sureties ; forms 557 where filed 558 effect of failure to give 558 clerk to pay fees to 561 compensation: additional, for conducting business 36 statute 547 comparative legislation 548 amount 548 pauper cases 549 1306 GENERAL INDEX. PAGE nmstee — Oontinued. effect of amendatory act of 1903 550 commissions on disbursements 550 rate 551 in case of composition 552 additional, when allowed 552 apportioned between trustees 553 withholding, when removed 553 additional fees not allowed 847, 848 compromise of controversy 457, 458 concurrence of two or three necessary 546 death not to abate suit or proceeding 636 defined 3 duties: specified, statute 537 scope of section 47 539 collection of assets 539 suits for recovery of assets 540 sales of property 541 employment of attorneys 542 interest to be accounted for 542 deposit of money 542 accounts and reports 542 disbursements, how made '543 Method of payment 544 supplemental report 545 exemptions to be set apart 545 information to be furnished 545 adjudication, certified copy to be recorded 546 ewemptions : rights and duties in respect to. See Exemptions. . .144, 145 determination of claims 163 practice generally 162-164 fraudulent transfer, suits for recovery 778 inspection of accounts and papers 554 jurisdiction of courts of bankruptcy 14 none appointed where no assets 530 notice of ap'pointment 531 number 530 offense against act, what constitutes 461, 466 punishment 466 oflSce created ". 480 partnership: choice. See Partnership 128 powers in respect to individual estates 129 separate accounts to be kept 129 payment of expenses 129 preferences, suits for recovery. See Preferences 676 qualifications: statute 533 individuals or corporations 533 residence in district 533, 534 bankrupt's choice not appointed 534 stockholder of bankrupt corporation 535 removal for cause 531 GENERAL INBEX. 1307 PA&B Trustee — Oontinued. suit or proceeding not abated 536 withholding compensation 553 resignation 532 subrogation to rights of creditors as to liens 766 to rights of judgment creditor 767 j amis by and against bankrupt : continuance 221 ■ where bankrupt is defendant 221 * intervention ; practice 223 limitation; two years after estate is closed 224 when begins to run 225 title to property: vested in. See Property 807, 809 when vests 807 particular kinds of property - 812-814 which might have been transferred 814-826 reclamation proceedings, when maintained 827-830 rights of action pass 830, 831 burdehsolne and exempt property 832-834 burdensome property, duties as to 832, 833 exempt property 333, 334 ' appraisal of bankrupt's property 834, 835 J sales of property. See Sales 835-841 transfer to putehaset 842 composition set aside or discharge revoked 842 fraudulent transfer, under state law 842 action to avoid 842, 843 saving clause 845 amendment of 1903 845 vacancies, how filled 530 Trust Interests. vest in trustee 817 V. TTnincorporated Companies. involuntary bankruptcy 103 TTnited States. debts due, priority 728 V. Vacancy. referee, in office of, how filled 523 trustee, in office of, how filled 630 Verification. petition for discharge , ■ , ggg pleadings in bankruptcy „^ 351 by attorney. 352 schedules of bankrupt's properly 183 1308 GENERAIi INDEX. PAOB Voluntary Bankruptcy. appearances and pleading 347-352 persons who may file petitions 96 infants 96 lunatics 97 married women 98 aliens 98 Indians 98 estates of decedents 99 petitions : qualified person may file 628 where involuntary has been filed 629 form and practice 629 process not required 337 trial, in general 360 involuntary petition pending 361 Volnntary Petition. person against whom petition is filed 1 Volnntary Settlements. invalid, if within four months period 781 Voting. at creditor's meeting. {See Meetings of Creditors) 574-581 vr. Wage Earner. defined 3 excepted from bankruptcy 100 pleading exception 101 persons included within term 10 Wages. payment not a preference 661 priority of payment 737 assignee of claim 738 persons entitled 740 Warranty, Breach of. provability ''■^ Widow. death of bankru-"- effect on dower 196 Wife. provable debts against husband 704 Witnesses. contempts before referee. (See Contempts) 517-519 examination. {See Examination of Third Persons.) priority of payment of fees 736 subpoena of. {See Subpoena) 344-347 GENERAL INDEX. 1309 FAQB Words and Fhrasea. meaning of 1 Workmen. priority of payment of wages 737, 740 T. Years. computation of time by 478 [Total number of pages, 1,377.] KF 1524 C69 1910 Author Vol. Collier, William Miller '^'teie law & practice in bankruptSjp'' InnrSp-p tj^e national act of I898. SMH: