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Cornell University Library
KF 1524.C69 1900
The law and practice in bankruPjf;1YllV1!?der
3 1924 019 342 801
Cornell University
Library
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the Cornell University Library.
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THE
LAW AND PRACTICE
IN
BANKRUPTCY
UNDER
The National Bankruptcy Act of 1898,
WITH
CITATIONS TO THE DECISIONS TO DATE.
By
WM. MILLER COLLIER.
TttTJElJD EDITIOIT
Revised and Enlarged.
By
JAMES W. EATON,
OF THE ALBANY, N. Y., BAR, INSTRUCTOR IN THE LAW OF CONTRACTS AND OF
EVIDENCE, LECTURER ON BANKRUPTCY IN THE ALBANY LAW SCHOOL
AND EDITOR OF THE AMERICAN BANKRUPTCY REPORTS.
ALBANY, N. Y.
MATTHEW BENDER,
1900.
^//J7
JOPYRIGHT, l8g8,
By WM. MILLER COLLIER,
Copyright, 1899,
By WM. MILLER COLLIER.
Copyright, 1900,
By MATTHEW BENDER
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 has
vi 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.
PREFACE
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 thi3
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, —
in some cases enforced by local rulings of district courts —
vjji 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. ^ *s 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 our
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 12 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 the changes
x 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, then, is a matter of statutory con-
structicn. 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
PREFACE. XI
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. This
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. Ym Sept. 10, 1898.
TABLE OF CONTENTS
PAGE
Preface to Third Edition v
Preface to Enlarged Edition vii
Preface to Original Edition ix
Table of Cases xiii
CHAPTER I
Definitions
SECTION
i. Meaning of words and phrases i
CHAPTER II
2. Creation of Courts of Bankruptcy and their jurisdiction 6
CHAPTER III
Bankrupts
3. Acts of Bankruptcy 2.2
4. Who may become Bankrupts 45
5. Partners 55
6. Exemptions of Bankrupts 78
7. Duties of Bankrupts 89
8. Death or Insanity of Bankrupts 106
9. Protection and Detention of Bankrupts 108
10, Extradition of Bankrupts 118
xiii
xiv TABLE OF CONTENTS.
SECTION
PACE
ii. Suits By and Against Bankrupts 119
12. Compositions, when Confirmed 137
13. Compositions, when Set Aside iS7
14. Discharges, when Granted 158
15. Discharges, when Revoked 172
16. Co-debtors of Bankrupts 178
17. Debts not Affected by a Discharge 187
CHAPTER IV
Courts and Procedure Therein
18. Process, Pleadings, and Adjudications 219
19. Jury Trials 224
20. Oaths, Affirmations 226
21. Evidence 221
22. Reference of Cases after Adjudication 233
23. Jurisdiction of United States and State Courts 234
24. Jurisdiction of Appellate Courts 241
25. Appeals and Writs of Error 246
26. Arbitration of Controversies 253
27. Compromises 254
28. Designation of Newspapers 255
29. Offenses 255
30. Rules, Forms, and Orders 258
31. Computation of Time 259
32. Transfer of Cases 26©
CHAPTER V
Officers, Their Duties and Compensation
33. Creation of two Officers 263
34. Appointment, Removal, and Districts of Referees 263
35. Qualifications of Referees 264
36. Oaths of Office of Referees 265
TABLE OF CONTENTS. xv
SECTION PAGE
37. Number of Referees 265
38. Jurisdiction of Referees 265
39. Duties of Referees 268
40. Compensation of Referees 272
41. Contempts before Referees 276
42. Records of Referees 278
43. Referee's Absence or Disability 278
44. Appointment of Trustees 279
45. Qualifications of Trustees 283
46. Death or Removal of Trustees 285
47. Duties of Trustees 286
48. Compensation of Trustees 292
49. Accounts and Papers of Trustees 294
50. Bonds of Referees and Trustees 294
51. Duties of Clerks 296
52. Compensation of Clerks and Marshals 297
53. Duties of Attorney-General 299
54. Statistics of Bankruptcy Proceedings 299
CHAPTER VI
Creditors
55. Meetings of Creditors 300
56. Voters at Meetings of Creditors 303
57. Proof and Allowance of Claims 305
58. Notice to Creditors 324
59. Who may File and Dismiss Petitions 328
60. Preferred Creditors 339
CHAPTER VII
Estates
61. Depositories for Money 375
62. Expenses of Administering Estates 375
63. Debts which may be Proved 379
XVi TABLE OF CONTENTS.
SECTION PAGE
64. Debts which have Priority 4°8
65. Declaration and Payment of Dividends 4*8
66. Unclaimed" Dividends 42°
67. Liens 421
68. Set-Offs and Counterclaims 439
69. Possession of Property 452
70. Title to Property 453
The Time when this Act shall go into Effect 477
Operation of State Insolvency Laws Suspended 477
The General Orders in Bankruptcy, Annotated and Cross-
referenced 481
Index to General Orders in Bankruptcy 516
Official Forms 527
Index to Forms 601
The Bankruptcy Act of 1898 607
The Bankruptcy Act of 1867 659
The Bankruptcy Act of 1841 698
The Bankruptcy Act of 1800 707
The Rules in EqUity of the United States Courts 727
Index to the Rules in Equity of the United States Courts 755
Abstracts of the Exemption Laws of the Different States- and
Territories
767
List of the Judges and Clerks of the Courts of Bankruptcy,
with Official Addresses of the Clerks ; the Time and Place
of holding Courts; and, the Geographical Limits of Dis-
tricts and Courts
General Index .........
795
827
TABLE OF" CASES CITED.
The numbers refer to the pages.
Abbe, In re 63.
Able, Payne v. 179, 182, 327.
Abraham, In re 240, 245, 248, 436,
457-
Adam, Ex p. 48.
Adams, In re 373.
Adams, Gardner v. 472.
Adams, Holyoke v. 181, 210, 211.
Adams Sartorial Co. In re 19.
Adler, In re 156.
Adler Brothers, In re 285.
Ainslie, Stienmetz v. 397.
Albany City Bank, Montgomery
Bank v. 349.
Albany Bank, Munger v. 441, 445.
Albe, Payne v. 327.
Albecht, In re 181, 194, 386.
Alderson, In re 194, 386.
Aldrich v. Campbell 442.
Alexander, In re 317, 331, 332, 404,
Alexander, Bennett v. 186.
Alexander, Fitzgerald v. 217.
Alexander, Kaufman v. 207.
Allen, In re 395, 396.
Allen v. Ferguson 215, 216, 218.
Allen, Jackson v. 83.
Allen, Lawrence v. 51.
Allen, McCombs v. 181.
Allen v. Merchant's Bank 349.
Almon v. Hamilton 151.
Alsager v. Currie 444.
Alsberg, In re 115.
Alston v. Robinett 175.
Altenheim, In re 302.
Altman, In re 63.
American, Gaytes v. 371.
C
437,
Co.
Ames, Foster v. 476.
Ames v. Gilman, 135, 137.
Amoskeag Mfg. Co. v. Barnes 209.
Amsinck v. Bean, 57, 64, 151, 152, 153.
357-
Anderson, Guilfoyle v. 207.
Anderson, Knapp v. 184.
Anderson, Morse v. 483.
Andrews, Thurmond v. 198, 327.
Angel v. Plume 482.
Anonymous 48.
Anshall v. Denby, 151.
Anson, In re 413.
Anstill v. Crawford 305.
Apperson v. Stewart 217.
Archenbrown, In re 189, 327.
Archer, Jersey City Ins. Co. t. 21&
403-
Arding v. Flower no.
Argall v. Jacobs 212.
Arkansas R'y Co., Credit Co. v. 251-
Armour, Jenkins v. 446.
Armstrong, Marsh v. 453.
Armstrong, Stewart v. 322.
Arnold, Heard v. 327.
Arnold v. Maynard 33, 34, 169.
Arnstein, In re 394.
Ashby v. Steere 169.
Ashley v. Robinson 93.
Aspinwall, In re 231.
Astley v. Gurney 442.
Atkins, Ex p. 449.
Atkinson v. Bank 32, 169.
Atkinson, Clark v. 217.
Atkinson, Williams v. 182.
Atlantic D. Co. James v. 50.
Atlantic Ex. Co. v. Wilmington 482.
Atterbury, Marrett v. 408.
Att'y-Gen. Crawford v. 192.
xvm
TABLE OF CASES CITED.
The numbers refer to the pages.
Auditor, The, Johnson v. 193-
Avery v. Hackley 367.
Aymar, Bank v. 348.
Ayr v. Braston 65.
Babbit v. Burgess 461.
Babbitt, Walburn v. 346.
Babcock v. Echler 27.
Bacon v. Heathcote 462.
Bacon, Vanderhorst v. 82.
Badger v. Gilmore 217.
Baginsky, In re 379.
Bailey, Ex p. 445.
Bailey v. Weir 136.
Bailey, Wood v. 250.
Baker, Ex p. 286.
Baker, In re no, 112, 192, 194,
389, 4". 469.
Baker v. Taylor 213.
Baldwin, Corn v. 192.
Bancroft, Mason & Hamlin v.
154. 214-
Ball, Boynton v. 384.
Ball, Johnson v. 212.
Bangs, Gilmore v. 135.
Bank, Atkinson v. 32.
Bank v. Aymar 348.
Bank, Bardes v. 82, 238, 240, 252.
Bank, Blaky v. 317.
Bank v. Campbell 372.
Bank v. Cooper 246.
Bank, Crocker v. 472.
Bank, Crooks v. 29, 343.
Bank, Cunningham v. 248.
Bank v. Davis 348.
Bank, Downing v. 322.
Bank, Dutcher v. 290.
Bank v. Eldred 483.
Bank, Emery v. 399.
Bank, Fisher v. 482.
Bank, Fleckner v. 363.
Bank, Grant v. 345.
Bank v. Hall 75.
Bank, Hart v. 351.
Bank, Houston v. 475.
Bank, Jenkins v. 137.
180,
Bank v. Jones 371.
Bank v. Joslyn 368.
Bank, Knox v. 135.
Bank v. Madison 200, 450.
Bank, Mays v. 460.
Bank, Mead v. 75, 76. 399.
Bank, National v. Taylor 210.
Bank of India, Naoroji v. 442.
Bank v. Onion 214.
Bank v. Pierce 322.
Bank, Reeves v. 349.
Bank, Rix v. 37.
Bank, Sandusky v. 16.
Bank v. Sherman 460.
Bank, Shutts v. 240.
Bank, Stephens v. 461.
Bank, Stone v. 130.
Bank v. U. S. 193.
Bank, Warren v. 32, 33, 179.
Bank of Waverly, In re 413.
Bank, Wright v. 471, 472.
Bank, Yeatman v. 462.
Bank v. Young 442, 448.
Barber, In re 273, 418.
Barbour, Barton v. 225.
Barden, In re 61.
Bardes v. First Nat. Bk. 9, 15. 82, 238,
240, 252.
Barker, Marks v. 444.
Barker, Wood v. 152.
Barnes, Amoskeag Mfg. Co. v. 209.
Barnes, Cook v. 368.
Barnes, Symonds v. 327.
Barney, Hill v. 482.
Barr v. Gratz 312.
Barrow, Ex p. 48, 175, 456.
Barrett, In re 284.
Barstow v. Hansen 210, 211.
Bartenbach, In re 391.
Bartholomew v. West 86.
Barton v. Barbour 22S.
Barwise, Ex p. 48.
Basch, In re 133, 205.
Bass, In re 82, 84.
Batchelder, In re 31, 351.
Batchelder v. Low 176.
Batelle, Lincoln v. 349.
Bates, In re 74, 478.
TABLE OF CASES CITED.
The numbers refer to the pages.
xix
Bates, Ex p. 286.
Bates, Gary v. 289.
Bates Mach. Co. In re 44.
Bates v. Tappan 182.
Bauchman, Snyder v. 482.
Baudouine, In re 235. 239, 240, 466.
Baum, In re 96.
Bayer, U. S. v. 257.
Beal, In re 94.
Beale, Courtney v. 209.
Beale, Murray v. 239.
Bean, In re 83.
Bean v. Amsinck 151, 152, 153.
Bean, Amsinck v. 57, 64, 357.
Bean v. Brookmire 151, 152, 153.
Bear v. Chase 126, 133, 134, 436.
Beattie v. Gardner 32, 35.
Beatty, Mut. Reserve Assn. v. 217.
Beauchamp, In re 85.
Becham v. Drake 471.
Bechtel, Comstock v. 86, 87.
Becke, Cobb v. 349.
Becker, In re 457.
Becker, Dingee v. 133, 188.
Beckerford, In re 79.
Becket, In re 154.
Beddingfield, In re 330, 331.
Bedford, Dommett v. 468.
Beebe v. Pyle 155.
Beecher v. Clark 27.
Beeneman, Ex p. 169.
Beers v. Hamlin 28, 384, 385.
Belcher v. Bernard 466.
Belden, In re 133.
Bell v. Carey 441.
Bell, Newland v. 53.
Bell, Sellers v. 83, 93, 168.
Belle v. Simpson 356.
Bellis & Milligan, In re 161, 169.
Bellows, Nichols v. 472
Belton v. Hodges 48.
Bemis, David v. 348.
Benbow, Southern Loan and Trust
Co. v. 237, 239, 327, 475-
Bennett, In re 425.
Bennett v. Alexander 186.
Bennett, Gray v. 473.
Berkowitz, In re 168.
Bernard, Belcher v. 466.
Bernard v. Norwich & Worcester R.
R. Co. 426.
Bernasconi, In re 125.
Berner, In re v, 18.
Bernheimer v. Bryan 241.
Bevan, Doe v. 468.
Bigelow, Burbank v. 236.
Bigelow & Kellogg, In re 75.
Bingham, In re 321, 381.
Bingham, Hudson v. 174, 177.
Binninger, Clark v. 244, 428.
Binninger, Hardy v. 33.
Birch, Heanny v. 52.
Bird v. Brown 363.
Bishop v. Church 445.
Bishop, Johnson v. 131.
Bissell v. Couchane 207.
Black, In re 170.
Black v. Blazo 198.
Blake, Hawkins v. 466.
Blaky v. Bank 317.
Blair, In re 58.
Blair, R'y Equipment Co. v. 312.
Blandin, In re 404.
Blanford, Louden v. 134.
Blazo, Black v. 198.
Blight, Humphries v. 449.
Block, U. S. v. 258.
BIoss, In re 315.
Blunt, Green v. 81.
Boasberg, In re 164.
Boatman's Sav. Ins., Tiffany v. 35,
3S6, 472.
Boerum, Cleveland v. 134, 137.
Bohle, Davis v. 239.
Bolander v. Gentry 372.
Bolton, Ex p. 73.
Bond, Ex p. 75.
Bond v. Gardner 181.
Book, In re 46.
Booth, In re 239, 424.
Boothroyd, In re 86.
Borden v. Cuyler 75.
Borland, Phelps v. 190.
Bosanquette v. Dashwood 473.
Boussieux, Mutual B'd'g Fund v. 200.
Bouton, In re 330.
XX
Bowen, Gardner v. 214.
Bowie, Hume v. 483.
Boyd, In re 474.
Boyd v. Vanderkamp 349.
Boylston, Denman v. 450.
Boynton v. Ball 384.
Boynton, Brewer v. 215.
Brackett, Downer v. 424.
Bracken v. Johnston, 437.
Brackett v. Watkins 86.
Bradbury, In re 99.
Bradford, Parker v. 398.
Bradley, In re 76.
Bradley, Pusey v. 329.
Bradner, Strang v. 201, 243.
Bradstreet v. Everson 349.
Brady, Comm. v. 257.
Braeutigam, Kinmouth v. 434.
Braham, Brix v. 218.
Braithwaite, Southcote v. 184.
Braley v. Boomer 182.
Bramwell v. Eglington 461.
Bramwell v. Lucas 231.
Brand, In re 315.
Brandies v. Cochrane 251.
Brandt, In re 96, 471.
Brastow, Ayr v. 65.
Bray v. Cobb 272, 326, 393.
Beck v. Cole 152.
Breitling, U. S. v. 482, 483.
Brentano, Muller v. 453.
Brett v. Carter 426.
Brewer v. Boynton 215.
Brewing Co., Courier-Journal
245, 248.
Brewer v. Dew 471.
Brewer, In re 258.
Brice, In re 47.
Brichta v. N. Y. Lafayette Ins.
468.
Bridgman, In re 420.
Briggs v. McCollough 82.
Briggs v. Thompson 473.
Bright, Morrison's Assignee v. 442.
Brinkerhoff, Smith v. 448.
Brinkman, In re 175.
Brittlestone v. Temmis 441.
Brix v. Braham 218.
TABLE OF CASES CITED.
The numbers refer to the pages.
Broach, Brown v. 201, 212.
Brodbine, In re 469.
Broich, In re 333.
Bromley & Co. In re 97.
Bromley, In re 90.
Bromley, Smith v. 152, 472.
Brooke, In re 282.
Brooks, In re 239.
Brookmire, Bean v. 151, 152, 153.
Brooks v. Wilson 312.
Broome, In re 84.
Brown, Bird v. 363.
Brown v. Broach 201, 212.
Brown v. Carr, 151, 180, 184.
Brownell, Tripp v. 482.
Brown v. Heathcote 423.
Brown, In re 82.
Brown, Lamb v. 189, 198.
Brown, Stewart v. 85, 175.
Brown v. Walker 103.
Bruce, Livingstone v. 35, 378.
Bruss-Ritter Co. In re 478.
Bruteston v. Cooke 356.
Bryan, Bernheimer v. 241.
Bryant, Hamilton v. 182.
Buchanan v. Findley 444.
Buchanan v. Smith 344, 345, 435.
Buckingham v. McLean 169.
Buckner, Commercial B'k v. 205.
Bucknor, Geery v. 218.
Bucyrus Machine Co. 72.
Bucyrus, Mongomery v. 462.
Buelow, In re 471.
Buffington Randall v. 87.
Bullington, Reed v. 174.
Buntrock Clothing Co. In re 240.
Burbank v. Bigelow 236.
Burdick v. Jackson 33.
Co. Burgess, Babbit v. 461.
Burgess v. Simonson 312.
Burk, In re 161, 162.
Burkholder v. Stump 378.
Burnett v. Mercantile Co. 240.
Burnhisel v. Firman 35, 354, 368.
Burns v. Harris 85.
Burnside v. Brigham 175.
Burr v. Carr 180, 184.
Burr v. Hopkins 320.
Co.
TABLE OF CASES CITED.
XXI
The numbers
Burrus, In re 413.
Burt v. Mould 65.
Burton, Samson v. 91.
Bush, Wiggin v. 152.
Butt, Ex p. 150.
Butcher, Williams v. 327.
Butterfield, In re 502.
Byers v. Franklin Coal Co. 51.
Byers v. McAuley 122.
Byrne, In re 70, 417.
Byrne, Grimes v. 86.
Cade, Woolsey v. 205, 206.
Cain, In re 333.
Caldwell, Paine v. 15.
Calkins Darrow v. 70.
Calze, Robson v. 150.
Cambridge Inst. v. Littlefield 216.
Cameron Town F. L. & W. Ins. Co.
In, re 54.
Camp, In re 82, 84, 85.
Camp v. Gifford 186.
Camp, Sabin v. 33, 347, 353.
Camp v. Zellars 240.
Campbell, In re 231, 413.
Campbell's Case 313.
Campbell, Aldrich v. 442.
Campbell, Morgan v. 461.
Campbell v. Perkins 233.
Campbell, Trader's Bank v. 30, 32, 133.
290, 372, 450, 465.
Canal Bank, Emery v. 76.
Candee v. Lord 311.
Canfield, In re 328.
Cannon v. Welford 65.
Capell v. Trinity Church 404.
Carey, Bell v. 441.
Carey, Evans v. 216.
Carlan v. West. Assur. Co. 51.
Carmichael, In re 169.
Carolina Cooperage Co. In re 270, 4i5.
Carpenter, Hopkins v. 63.
Carpenter, McDougall v. 189.
Carpenter v. Osborn 312.
Carpenter v. Terrill 182.
Carr, Browne v. 151. 180, 184.
refer to the pages.
Carr, Burr v. 180, 184.
Carr, Eland 444.
Carr v. Gale 461.
Carroll v. Shields 152.
Carroll, Taylor v. 124.
Carson, etc. v. Chicago T, & T. Co.
317-
Carson, Howland v. 195.
Carson v. Osborn 217.
Carter, Brett v. 425.
Carter v. Hobbs 239, 457.
Cashman, In re 164.
Cassard v. Kroner 175.
Cast, Dickson v. 449.
Catlin, In re 442.
Catlin v. Hoffman 35.
Cato, Eson v. 445.
Central Bank, King v. 186.
Chadwick v. Starrett 191.
Challoner, In re 389.
Chamberlain, In re 143.
Chamberlain, Ward v. 482.
Chambers, Calder & Co. In re 122, 126,
237.
Chambers, Marsh v. 448.
Chambers, Marvin v. 425.
Chandler, In re 52, 54, 403.
Chapin v. James 122.
Chapman, Crump v. 347.
Chapman v. Forsyth 204, 207.
Chase, Bear v. 126, 133, 134, 436.
Chateaugay Ore and Iron Co. Ex parte
483-
Chatfield v. O'Dwyer 248, 366.
Chattanooga Nat. Bank v. Rome Iron
Co. 424.
Chemical Bank v. Mayer 57, 61.
Chemung Bank v. Judson 8, 137.
Chicago Dry Goods Co. Neustetter r.
335-
Chicago, Gray v. 482.
Chicago v. Tilley 397.
Chicago Title and T. Co. Carson, etc
v. 317.
Chilton, Green v. 207.
Church, Bishop v. 445.
Churchill, Farrar v. 251.
Christley, In re 502.
xxu
TABLE OF CASES CITED.
The numbers refer to the pages.
Ctiristensen, In re 225, 373.
Christy, In re 244, 475.
Christy, Ex p. 274, 423.
Cincinnati, Louisville Trust Co. v. 124.
City Bank, In re 441, 449.
City Bank, Wilson v. 24, 37, 39. 4°,
427.
City of Bangor, Stetson v. 175.
City of Boston v. Shaw 175.
City of Utica, Storrs v. 349.
Claflin v. Housman 24.
Clairmont, In re 284.
Clapp v. Thomas 82.
Clapton v. Spratt 180, 186.
Clarion Bank v. Jones 34, 351
Clark, In re 91, 98.
Clark v. Atkinson 217.
Clark, Beecher v. 27.
Clark v. Binninger 244, 316, 428.
Clark v. Hawkins 442.
Clark v. Islin 35, 39, 427, 429, 347, 353,
45i.
Clark, Neal v. 200.
Clark, Jones v. 200.
Clark v. White 152.
Clark, Winslow v. 36.
Clasen, Phelns v. 330.
Clawson, Strong v. 462.
Cleland, In re 55.
Cleveland v. Boerum 134, 137.
Cleveland, Dyer v. 185.
Cleveland Ins. Co., Starkweather v.
468.
Clews, Hennequin v. 203, 207, 208, 243.
Clews, Sheldon v. 233.
Cliffe, In re 230.
Clinton, Grover v. 206.
Clinton v. Mayo 332.
Clisdell, In re 17, 163.
Clute, In re 457.
Coale v. Williams 366.
Cobb, In re 125, 302, 356.
Cobb, Ex p. 154.
Cobb v. Becke 349.
Cobb, Bray v. 272, 326, 393.
Cochran v. Loring 482.
Cochrane, Brandies v. 251.
Cochrane, Ward v. 483.
Coe, In re 314.
Coe, Pennock v. 427.
Coe v. Whitbeck 65.
Coffin, In re 418.
Coffin, Payson v. 137.
Cohn, In re 237, 378.
Cole, Breck v. 152.
Cole v. Hawkins no.
Cole, Rex v. 48.
Coleman v. Davis 209.
Collier, In re 83.
Collier, Taylor & Co., In re 66, 70, 71.
Collignon, In re 394.
Collins, In re 39.
Collins v. Hood 36, 169.
Collins, Johnson v. 182.
Collins v. Jones 441.
Columbia Real Estate Co. In re 8, 222.
314-
Com. v. Baldwin 192.
Com. Bank of Pa. v. Union Bank 349.
Combes, Jackington v. 450.
Comforth v. Rivett 444.
Com. v. Hutchinson 192, 193.
Com. Ins. Co., Lazarus v. 468.
Comly v. Fisher 371.
Comm. v. Brady 257.
Commercial Bank v. Buckner 205.
Commonwealth v. Nat. Gas Co. 55.
Commonwealth, Norris v. 55.
Commonwealth, Temple v. 105.
Com. Saunders v. 193.
Comstock, In re 230, 499.
Comstock & Co. In re 321.
Comstock v. Bechtel 86, 87.
Comstock, Merchant's B'k v. 315.
Comstock, Wicker v. 81.
Conhaim, In re 302, 317, 319, 343, 411.
Conn. v. Shelton 193.
Connell, In re 94, 95.
Conner, U. S. v. 257.
Connolly, In re 241.
Connor, In re 34.
Connor v. Long 450.
Conrad v. Ins. Co. 371.
Cook v. Barnes 368.
Cook, Cooley v. 259, 365.
Cooke, Bruteston v. 356.
TABLE OF CASES CITED.
The numbers refer to the pages.
xxiu
Cook v. Farrington 315.
Cook, Gardner v. 395.
Cook v. Rogers 365.
Cook v. Tullias 35 354, 364, 423, 464.
Cookingham v. Morgan 372.
Cooksey, Hawes v. 388.
Cooley v. Cook 259, 365.
Cooley, Hall v. 52.
Coolong v. Noyes 151.
Coombe, Edwards v. 155.
Coope, Haydock v. 338.
Coope, Stillwell v. 218.
Cooper, Bank v. 246.
Copeland v. Stevens 468.
Cordell, Newman v. 26.
Corey v. Ripley 175, 327.
Corliss v. Shepherd 218.
Cornell, In re 164.
Cornell v. Dakin 184, 213.
Corse, Haxton v. 126.
Cornwall, In re 406.
Couchane, Bissell v. 207.
(Dotting, Cronan v. 207.
Cotton,7« re 46, 388.
Cottrell, Ex p. 404.
Counselman v. Hitchcook 102, 103, 104,
105.
Courier-Journal, etc. v. Brewing Co.
245, 248.
Courtney v. Beale 209.
Cousins, Kingsley v. 218.
Cousins, Parker v. 368.
Coweley, Ogden v. 450.
Cowell, Ruckman v. 8.
Cowen, Ex p. 154.
Cowie v. Harris 365.
Cowles, In re 26, 52.
Cox v. Darwin 133.
Coxe v. Hale 35, 337.
Cox, Mc Pherson v. 284.
Cox v. Wall 19. 239.
Cox v. Wilder 86.
Craft, In re 224.
Crafts, Whitney v. 188.
Craig v. Craig 389.
Craig v. Seitz 216.
Cramer, In re 320.
Crawford v. Att'y-Gen. 192.
Crawford, Anstill v. 205.
Crawford, Farren v. 30.
Crawford, Murphy v. 215, 217.
Credit Co. v. Arkansas R'y Co. 251.
Cregin v. Thompson 378.
Crenshaw, In re 165.
Crippin v. Heermance 368.
Crisfield, In re 209.
Crispe, Ex p. 73.
Crocker v. Bank 472.
Crockett, In re 63, 471.
Crockett v. Jewett 94.
Crompton v. Conkling 63.
Crompton, Howard v. 461.
Cronan v. Cotting 207,
Cronin, In re 336.
Cronkhite, Warren v. 197.
Crooks v. Bank 29, 343.
Crosby, Lehman v. 239.
Crowninshield, Surges v. 175.
Crowther, Howard v. 471.
Crump v. Chapman 347.
Crutwell, Hutton v. 356.
Crystal Spring Co. In re 447, 450.
Cummins, Patty-Joiner Co. v. 41.
Cunningham v. Bank 248.
Curran v. Munger 30.
Currie, Alsager v. 446.
Currier, In re 320, 332, 333.
Curtis, In re 338, 413.
Curtis, Medomac Bank v. 442.
Cutter v. Folsom 212.
Cuyler, Borden v. 75.
Dakin, Cornell v. 184, 213.
Daly, Howard v. 397.
Daniels, Ex p. 404.
Darby v. Institution 34, 352.
Darrow v. Calkins 70.
Dashwood, Bosanquette v. 473.
Dauglish v. Tennent 150, 152.
Davenport, Ex p. 316.
Davenport, In re 377.
David v. Bemis 348.
Davidson, In re 320, 329.
Davis, In re 424.
XXI V
TABLE OF CASES CITED
The numbers refer to the pages.
Davis, Bank of U. S. v. 348.
Davis v. Bohle 239.
Davis, Coleman v. 209.
Davis, McDonald v. 121, 130, 131, i55>
210.
Davis, Sutherland v. 135.
Day, Meyers v. 442.
D. & H. C. Co. Littlefield v. 246.
Debs, In re 19.
Decker v. Decker 312.
Decker v. Kitchen 217.
Deckert, In re 84.
Deeze, Ex p. 445.
Delatour, Hochster v. 397.
Delong, In re 127.
De Lue, In re 432.
De Mattos, Woods v. 192.
De Mendez, Holyland v. 468.
Deming v. Foster 482.
Denby, Anshall v. 151.
Denman v. Boylston 450.
Dennett v. Mitchell 169.
De Rottenham, Murray v. 189, 398.
Derby, In re 47, 48, 410.
Derby, Everett v. 337.
Derby v. Worcester Co. 248.
Desanges, Thomas v. 365.
Detert, In re 86.
Deuell, In re 101.
Devoe, In re 114.
Dew, Brewer v. 471.
Dewdney, In re 405.
Dewerse v. Rein!.ard 123.
Dewey, Monroe v. 466.
Dewey, Moyer v. 180.
Dewey v. Moyer 366.
Dews, In re 164, 168, 169.
Dexter v. Snow 151.
Dey v. Dunham 473.
Diack, In re 91, 470.
Diack, Ex p. 125.
Dibblee, In re 30, 35, 225.
Dicas Phillips v. 150.
Dickey, U. S. v. 257.
Dickinson, Hayes v. 463.
Dickson v. Cast 449.
Dickson v. Evans 448, 449, 450.
Dietz, In re 173.
Dillard, In re 84, 86, 87.
Dillon, In re 77, 322.
Dingee v. Becker 133, 188.
Dimock v. Revere Co. 155, 210.
Doane, Tooker v. 218.
D'Obree Ex p. 365.
Dobson, In re 433.
Dobie, Gibson v. 36, 357.
Dodd, Giddings v. 32, 34, 351.
Dodge v. Sheldon 366.
Doe v. Bevan 468.
Doe v. Smith 468.
Dollar Sav. B'k v. U. S. 192.
Dolson v. Pierce 174.
Dommett v. Bedford 468.
Donaldson v. Farwell 423, 463.
Donnell v. Swaim 218.
Dorwin, Cox v. 133.
Dow, In re 442, 443, 448, 462.
Dow v. Sargent 347.
Downer v. Brackett 424.
Downing, In re 63, 67, 70.
Downing v. Trader's B'k 322, 398.
Downs, Ex p. 315.
Drake, Becham v. 471.
Drake v. Rollo 441, 446.
Drake, Lathrop v. 10, 15.
Dredge v. Forsyth 483.
Dresser v. Norwood 351.
Drexel, Sparhawk v. 445.
Driggs v. Moore 30.
Drummond, In re 30.
Dudley v. Easton 464.
Dudley v. Mayhew 175.
Duff, In re 55.
Duguid, In re 47, 60, 64.
Duncan, People v. 469.
Dungun, Miller v. no.
Dunham, Dey v. 473.
Dunham v. Whitehead 43.
Dunkerson, In re 77, 429.
Dunkle, Madison v. 209.
Dunnigan Bros. In re 60, 64.
Dupee, In re 158, 174.
Dupuy v. Harris 232.
Durant, Vail v. 208.
Dusenbury v. Hoyt 214, 217.
Dutcher v. Bank 290.
TABLE OF CASES CITED.
The numbers refer to the pages.
XZT
Dutcher v. Wright 260, 364, 365.
Duttoo v. Morrison 73.
Dyer v. Cleveland 185.
Dyson, Hall v. 151.
Eagles & Crisp, In re 301, 304.
Easley, In re 432.
Easton, Dudley v. 464.
Ebert, In re 351.
Eby v. Schumaker 371.
Ecfort v. Greeley 26.
Echler, Babcock v. 27.
Eckler v. Galbraith 217.
Edmonds, People Ex rel. Morris v.
275-
Edmondson v. Hyde 88.
Edwards, Ex p. 75.
Edwards v. Coomber 155.
Edwards, Regina v. 192.
Egbert v. McMichael 217.
Eggert, In re 343, 344-
Eglington, Bramwell v. 461.
Ehlers, Muller v. 483.
Eickerman, Ruiz v. 189.
Eland v. Carr 444.
Eldred, Bank v. 483.
Eldridge, In re 406.
Electric Co. v. Worden 317, 318, 319.
Elk Park M. & M Co., In re 52.
Ellerhorst, In re 322.
Elliot v. Higgins 209.
Ellis, In re 87, 393, 394-
Ely, Flagg v. 205.
Emerson, Stewart v. 202.
Emery, In re 105.
Emery v. Canal Bank 76, 399.
Empire Met. Bed Co. In re 24, 42, 43.
Emslie, In re 425, 469.
Endl, In re 125.
Engle, Smith -v. iSS-
Eson v. Cato 445.
Etheridge, In re 475, 47&
Evans v. Carey 216.
Evans, Dickson v. 448, 449, 45°-
Everett, In re 86.
D
Everett v. Derby 337.
Everett v. Stone 169.
Everson, Bradstreet v. 349.
Evans, Stevens v. 175.
Ewart v. Schwarz 131.
Exley v. Inglis 461.
Eyster v. Gaff 10, 121, 124, 130, 289.
Fair v. Mclver 450.
Falls City M'f g Co. In re 417.
Farmer's Bank, Atkinson v. 169.
Farmer's, etc. Bank v. Franklin 85.
Farnsworth, In re 450.
Farnum, In re 75.
Farquhar, Ex p. 365.
Farrar v. Churchill 251.
Farren v. Crawford 30.
Farrington, Cook v. 315.
Farris v. Richardson 47.
Farwell, Donaldson v. 423, 463.
Fay, In re 230.
Feinberg, In re 230.
Feldstein, In re 102, 231.
Fellerath, In re 239.
Fellows v. Freudenthall 167, 275.
Fellows v. Hall 210.
Ferguson, Allen v. 215, 216, 218.
Fielding, In re 275, 419, 421.
File Co. v. Garrett 123.
Fillingin v. Thornton 329.
Findley, Buchanan v. 444.
Foote, In re 77.
Forbes v. Howe 33, 347.
Forbes, Tapley v. 370.
Force, In re 412.
Ford, Hayes v. 8.
Ford, People Ex rel. Taylor v. 103,
106.
Forsyth, Chapman v. 204 ,207.
Forsyth, Dredge v. 483.
Forsyth v. Hammond 253.
Forsythe v. Vehmeyer 200, 203, 243.
Fortune, In re 395.
Foster, In re 395.
' Foster, Ex p. 461.
XXVI
Foster v. Ames 476.
Foster, Deming v. 482.
Foster v. Goulding 161.
Foster v. Hackley 370.
Foster v. Inglee 411.
Fbthergill, Hardy v. 388.
Fouraker, Yea v. 217.
Fowler, In re 313.
Fowler, Hall v. 184.
Fowler v. Hamill 251.
Fowler v. Kendall 209, 398.
Fowler, Winthrow v. 357.
Fox v. Mayer 27.
Finklestein, In re 164.
Finlay, In re 305.
Firman, Burnhisel 35, 354, 368.
First Nat. Bk, Bardes v. 9, IS-
Fisk, In re 232.
Fiske v. Hunt 462.
Fisher, In re 91, 469.
Fisher v. Bank 482.
Fisher, Conly 371.
Fisher v. Hepburn 133.
Fisher, U. S. v. 140.
Fitzgerald v. Alexander 217.
Fixen, In re 19, 229, 239, 317.
Flagg v. Ely 205.
Flagg v. Tyler 184, 185.
Flanagan v. Pearson 131, 202, 208.
Fleckner v. Bank 363.
Fleming v. Tullman 217.
Flickerstein, Schuman v. 370, 371.
Flint, Key v. 445.
Flower, Arding v. no.
Folsom. Cutter v. 212.
Fraley v. Kelly 218.
Frame, McNulty v. 233.
Francis-Valentine Co. In re 239, 436.
Franklin Coal Co., Byers v. 51.
Franklin, Farmer's, etc. Bank v. 85.
Franklin Syndicate, In re 97, 105.
Franks, In re 240, 436.
Frazee v. Moffit 51.
Fredenburp, In re 230.
Freelander & Gerson v. Holloman,
136.
Freeman, In re 170.
Freeman v. Howe 124.
TABLE OF CASES CITED.
The numbers refer to the pages.
Frere, Thompson v. 65.
Freudentha'.l, Fellows v. 167, 27s.
Freund, In re 63.
Frice, In re 161.
Friedman, In re 316.
Friedrich, In re 80, 85.
Frost, Spitley v. 81.
Frostman & Hicks, In re 130.
Fry, Schroeder v. 201.
Fry, Zahn v. 320.
Fullerton v. U. S. Bank 482.
Fulton Bank v. N. Y. & S. C. Co. 34&
Funk, In re 48.
Funk, McKay v. 127.
Funkenstein, In re 284.
Gaff, Eyster v. 10, 121, 124, 130, 289.
Galbraith, Eckler v. 217.
Gale, Carr v. 461.
Gale v. Halfknight 53.
Gale, Seving v. 151.
Gallimore, Ex p. 55.
Gallinger, In re 224.
Gany, In re 463.
Garden, In re 82, 274, 275.
Gardner v. Adams 472.
Gardner, Beattie v. 32, 35.
Gardner, Bond v. 181.
Gardner v. Bowen 214.
Gardner v. Cook 395.
Garland, Ex p. 49.
Garrett, In re 83, 389.
Garrett, File Co. v. 123.
Garrison, Kirby v. 185.
Garrison v. Markley 230.
Gary v. Bates 289.
Gattman v. Howes 34.
Gay, In re 61.
Gaylord v. Imhoff 85.
Gaytes v. American 371.
Gazlin, Otis v. 218.
Gentry, Bolander 372.
Gerdes, In re 129.
Gerry v. Bucknor 218.
Ghiradelli, In re 121.
Gibbs, McClave v. 225.
TABLE OF CASES CITED.
X3LVU
The numbers
Gibson v. Dobie 36, 357.
Gibson v. Gorman 208.
Gibson v. Warden 359, 423.
Giddings v. Dodd 32, 34, 351.
Giddey, Worman v. 85.
Gifford, Camp v. 186.
Gilbert v. Lynch 421.
Gilbert, McNair v. 217.
Gilbert, Sixth Ave. R. R. v. 133.
Gillispie, Miller v. 187.
Gilman, Ames v. 135, 137.
Gilmore, Badger v. 217.
Gilmore v. Bangs 135.
Gimmingham v. Laing 53.
Girard, Greigson v. 316.
Glaser, In re 114, 115.
Glazer, In re 482.
Glazen, Otis v. 217.
Glenny v. Langdon 366, 367.
Glidden, Merritt v. 128.
Grister, In re 130.
Goddard v. Weaver 423.
Godfrey, Morse v. 30, 169.
Goedde, In re 67.
Goldman v. Smith 36.
Goldney v. Lording 155.
Goldschmidt, In re 26, 27, 17a
Goldsmith, In re 167, 257.
Good, In re 245, 246, 247, 251.
Goodall v. Tuttle 88.
Goodman, In re 48, 403, 446.
Goodman, Mc Farland v. 86.
Goodykoontz, In re 476.
Gordon, Smith v. 465.
Gorman, Gibson v. 208.
Gormerly v. McGlynn 482.
Gorney v. Warren 468.
Goulding, Foster v. 161.
Gourdin, Strain v. 35, 363.
Graham, In re 86.
II Graham v. Meyer 151.
Graham v. O'Hern 217.
Graham v. Pierson 394.
Graham v. Stark 35.
Granger, In re 315.
Grant, In re 284.
Grant v. Bank 345.
Grant, Westbrook M'fg Co. v 260.
refer to the pages.
Gratz, Barr v. 312.
Graves, Ex p. 314.
Graves, Steele v. 209.
Graves v. Winter 50.
Gray, In re 42, 373, 465.
Gray v. Bennett 473.
Gray v. Chicago 482.
Gray v. Rollo 447.
Greater American Expos. In re 129.
Great West. R. R. Roach v. 27.
Greely, Ec*ort v. 26.
Green, In re 403.
Green v. Blunt 81.
Green v. Chilton 207.
Greenbaum, Hoover v. 330.
Greenewald, In re 414.
Greenwood v. Marvin 69.
Gregg, In re 378.
Greigson v. Girard 316. '
Griel v. Solomon 218.
Grier, Person v. no.
Griffin, In re 84.
Griffin v. Sutherland 82.
Grimes, In re 17, 80, 82, 84.
Grimes v. Byrne 86.
Griswold v. Haven 348.
Groom v. West 443.
Grover v. Clinton 206.
Groves v. Rice 338.
Grubs, Wiley Co., In re 416.
Guilfoyle v. Anderson 207.
Gunderman, Selling 289.
Guptil v. McFee 85.
Gurney, Astley v. 442.
Gutwillig, In re 41, 43, 239, 457, 478.
Haake, In re 391, 393.
Hackley, Avery v. 367.
Hackley, Foster v. 370.
Hagan, In re 420.
Haggerty v. Morrison 214.
Hale, Coxe v. 35, 337.
Halfknight, Gale v. 53.
Hall, Ex p. 107, 150.
Hall, Bank v. 75.
Hall v. Cooley 52.
XXVU1
TABLE OF CASES CITED.
The numbers refer to the pages.
Hall v. Dyson 151.
Hall, Fellows v. 210.
Hall v. Fowler 184.
Hall, Heath v. 75.
Hall v. Kincell 239.
Hall, Wager v. 31, 344. 435.
Halleck v. Fritch 355.
Halsey v. Norton 65.
Halsey v. Stewart no.
Haman, Lenihan v. 134.
Hambright, In re 84.
Hamill, Fowler v. 251.
Hamilton, Almon v. 151.
Hamilton, Parmenter M'f'g Co. v. 478.
Hamilton v. Bryant 182.
Hamilton Southern Pacific Co. v. 483.
Hamlin v. Hamlin 126.
Hammon, In re 239.
Hammond, In re 436.
Hammond, Forsyth v. 253.
Hammond, Noble v. 207.
Hampton v. Rouse 460.
Hankey v. Jones 52.
Hanlin, Beers v. 28, 384, 385.
Hanna, Rucker v. 217.
Hansen, Barstow v. 210, 211.
Hanson, Ex p. 447.
Hanson v. McCue 482.
Hardin, In re 406.
Harding, Hill v. 172, 183.
Harding, McKinsey v. 313.
Harding, Thomas v. 62.
Hardy v. Binninge/ 33.
Hardy v. Fothergill 388.
Hargrove, Stewart v. 469.
Harmer, Peiper v. 136.
Harper, Wilson v. 233.
Harrington, Lawrence v. 207, 216.
Harris, In re 65, 90, 457.
Harris, Burns v. 85.
Harris, Cowrie v. 365.
Harris, Dupuy v. 232.
Harris v. Peck 216.
Harris v. Rickett 356.
Harrison, Ex p. 150.
Harrison v. Mitchell 85.
Hart v. Bank 351.
Hart, Rose v. 442, 443, 445.
Hart v. Smith 154.
Hartough, In re 63.
Hassall v. Wilcox 312.
Hatch, In re 82.
Hatch v. Seely 315.
Hatch, Thompson v. 482.
Hatje, In re 395.
Hatton, In re 155.
Havemeyer v. Ingersoll 482.
Haven, Griswold v. 348.
Havens, In re 453.
Hawe v. Stow 450.
Hawes v. Cooksey 388.
Hawk v. Hawk 108.
Hawkins v. Blake 464.
Hawkins, Clark v. 442.
Hawkins, Cole v. no.
Hawkins v. Whittier 449.
Hawley, Wilcox v. 86.
Haxton v. Corse 126.
Haydock v. Coope 338.
Hayes v. Dickinson 463.
Hayes <• Ford 8.
Hayes v. Shields no.
Hayman v. Pond 205.
Hayton v. Wilkinson 186.
Headley, In re 314.
Headley, Pepperdine v. 240.
Healey, In re no.
Heanny v. Birch 52.
Heany, Markson v. 15, 175.
Heard v. Arnold 327.
Heard v. Jones 315.
Heathcote, Bacon v. 462.
Heathcote, Brown v. 423.
Heath v. Hall 75.
Heaton, March v. 462.
Hearmance, Crippen v. 368.
Heffron, In re 336.
Heller, In re 95.
Henderson, In re 48.
Henderson, Kink v. 336.
Henderson, Shipping v. 217.
Henkel, In re 87.
Hennequin v. Clews 203, 207, 208, 243.
Hepburn, Fisher v. 133.
Herkimer, People v. 192.
Herman, Mayer v. 351.
TABLE OF CASES CITED.
The numbers refer to the pages.
XXIX
Herndon v. Ridgeway 15.
Herrick, In re 72.
Herron, U. S. v. 191, 192, 193.
Hewitt v. Rankin 85.
Heyman, In re 321.
Hicks v. Knost 240, 241.
Higgins, In re 433.
Higgins, Elliot v. 200.
Higgins, Pinneo v. 152.
Hill, Ex p. 67.
Hill, In re 82, 161, 166, 302.
Hill v. Barney 482.
Hill v. Harding 172, 183.
Hill v. Levy 404.
Hill v. Robins 327.
Hill v. Simpson 344.
Hill, Smith v. 450.
Hill, Zeiber v. 396.
Hills, Selby v. no.
Hinds, In re 77.
Hirsch, In re 15, 62, 127, 160, 165, 168,
169.
Hitchcock, Counselman v. 102, 103,
104, 105.
Hitchcock v. Rollo 449, 450.
Hitchcock v. Sedgwick 460.
Hixon, In re 164.
Hoadley, In re 466.
Hoag, Sawyer v. 290, 466.
Hoar, U. S. v. 192.
Hobbs, Carter v. 239. 457.
Hochster v. Delatour 397.
Hodge, Walcott v. 208.
Hodges, Bolton v. 48.
Hodgson, Ex p. 73.
Hodson, Smith v. 444.
Hoffman, In re 164, 166.
Hoffman, Catlin v. 35.
Holland v. Palmer 150.
Holland v. Seaver 136.
Hollis, Home Ins. Co. v. 135.
Hollister, In re 322,
Holloman, Freeland, etc. v. 136.
Holman, In re 160, 169.
Holyland v. DeMendez 468.
Holyoke v. Adams 181, 210, 211.
Home Ins. Co. v. Hollis 135.
Honea, Gattman v. 34.
Hoover, York v. 260.
Hood, Co.lins v. 36, 169.
Hood v. Karpcr 320.
Hoover v. Greenbaum 350.
Hopkins, Burr v. 320.
Hopkins v. Carpenter 63.
Hopkins, Libby v. 444.
Hopkins v. Ward 217.
Horgan & Slattery, In re 230.
Hornby, Ex p. 315.
Horner v. Speed, 216, 217.
Horner v. Spellman, 210.
Horton , In re 129.
Horton, Moore v. 190.
Hotchkiss, Parker v. no.
Houghton, Ex p. 394.
Houghton, In re 161.
Housberger, In re 395.
House, In re 31.
Houseman, Claflin v. 124.
Houston, In re 388, 389.
Houston v. Bank, 475.
Hover v. Wise, 349.
Hovcy v. Insurance Co. 449.
Howard, In re 229.
Howard, Cole & Co. In re 76, 314,
Howard v. Crompton, 461.
Howard v. Crowther, 471.
Howard v. Daly 397.
Howe, Forbes v. 347.
Howe, Freeman v. 124.
Howe, Newton v. 85.
Howes, In re 365.
Howe, Way v. 175, 177.
Howland, In re 48.
Howland v. Carson 195.
Hoyt, Dusenbury v. 214, 217.
Hoyt, Knacp v. 218.
Hoyt, Wakeman v. 54, 160.
Hubbard, In re 316.
Hudson v. Bingham 174, 177.
Hughes v. Jackson 482.
Humbert, In re 44.
Hume v. Bowie, 483.
Humphrey, Irving v. 151.
Humphries v. Blight, 449.
Hunnicutt v. Peyton, 483.
Hunt, In re 347.
193-
xxx
Hunt, Fiske v. 462.
Hunt & Hornell, In re 337.
Hunt, Knight v. 151.
Hunt v. Mortimer, 356.
Hunt, Nat. Bank v. 33.
Hunt v. Pooke, 63, 65, 107.
Hunter, Wood v. 27.
Hunter, Young v. 75.
Hurst, In re 144, 155.
Hussman, In re 93, 166.
Hutchins, Palmer v. 213.
Hutchins v. Taylor, 169.
Hutchinson, Com. v. 192,
Hutto, In re 8d, 428.
Hutton v. Crutwell, 356.
Hyde, Edmondson v. 88.
Hyde v. Tufts, 471.
Hyman, Whiteside v. 151.
Idzall, In re 164.
Ihmsen, McLean v. 65.
Imhoff, Gaylord v. 85.
Independent Ins. Co. In re 50.
Indianapolis C. & L. R. Co. In re 336,
Ingalls v. Morgan, 348.
Ingersoll, Havermeyer v.
Inglee, Foster v. 411.
Inglis, Exley v. 461.
Ingraham, Kane v. 186.
Ins. Co. Conrad v. 371.
Ins. Co. Hovey v. 449.
Ins. Co. v. Murphy. 476.
Institution, Darby v. 34, 352.
Irving v. Humphrey 151.
Iselin, Clark v. 35, 39, 237, 353, 427,
429, 4Si-
Isett, Lyon v. 210.
Isidor, Stewart v. 126, 315.
Israel, In re 332, 336.
Jackman v. Mitchell, 152,
Jackson v. Allen 85.
Jackson, Burdick v. 33.
Jackson, Hughes v. 482.
TABLE OF CASES CITED.
The numbers refer to the pages.
Jackson Iron Co. In re 34.
Jackson v. Lomas 150.
Jackson v. Miller, 420.
Jackson, Russell v. 231.
Jackson, Stephenson v. 76.
Jacobs, Ex p. 154, 180.
Jacobs, In re 215, 24s, 343.
Jacobs, Argall v. 212.
Jakington v. Combes, 450.
James, Ex p. 286.
James v. Atlantic D. Co. 50.
James, Chapin v. 122.
Janvrin, Zoller v. 187.
Janson, Ex p. 67.
Jaycox & Green, In re 316, 403.
Jefferson, In re 393.
Jenkins v. Armour 446.
Jenkins v. Bank 137.
Jenkins v. Pierce 463.
Jenks, In re 395.
Jenks v. Opp 186.
Jenness, Peck v. 424.
Jerome v. McCarter 423, 428, 429, 464.
Jersey City Ins. Co. v. Archer 218.
403-
Jewett, In re 67.
Jewett, Crockett v. 94.
Jewson x. Moulson 462.
Jobbins v. Montague 8, 13.
Johnson, Ex p. 122.
Johnson v. Ball, 212.
Johnson v. Bishop, 131.
Johnson v. Collins, 182.
Johnson, Palen v. 473.
Johnson, Southern Pacific Co. v. 483.
Johnson v. The Auditor, 193.
Johnson, Van Lieuw v. no.
Johnson v. Wald 32.
Johnston, Bracken v. 437.
Jones, In re 71, 318.
Jones, Clarion Bank v. 34, 351, 371.
Jones v. Clark 200.
Jones, Collins v. 441.
Jones, Ex p. 403.
Jones, Heard v. 315.
Jones v. Kinney 378.
Jones v. Know 209.
Jones, Moore v. 472.
482.
TABLE OF CASES CITED.
The numbers refer to the pages.
XXX1.
Jones v. Russell, 208.
Jones v. Sleeper 24, 169.
Jones, U. S. v. 483.
Jordan, In re 84, 318.
Jordan, Ross v. 217.
Jordan v. Taylor 122.
Joslyn v. Bank 368.
Judson, Chemung Bank v. 8, 137.
Juneau Bank v. McSpedan no.
Kabureck, Schulenberg v. 346.
Kahley, In re 476.
Kaiser, In re 160, 268.
Kane v. Ingraham 186.
Kansas City, In re 362.
Karper, Hood v. 320.
Kaufman v. Alexander 207.
Kean, In re 84.
Keefer, Keeting v. 86.
Keegan v. King 237, 239, 457.
Keeting v. Keefer 86.
Kehr, Smith v. 86.
Kellogg, Matteson v. 205, 207.
Kelly, In re 240, 436.
Kelly, Fraley v. 218.
Kelly v. Scott 463.
Kemp, In re 433.
Kendall, Fowler v. 209, 398
Kendall, Windsor v. 36.
Kenney, In re 57, 239, 436, 438.
Kensington Ex p. 66, 67, 393.
Kenyon, In re 52.
Kerby-Denis Co. In re 425.
Kerr, In re 87.
Kerr v. Kerr 388.
Key v. Flint 445.
Kimball, In re 55, 112, 114, 115, 227,
239.
Kimball, Pond v. 81, 85.
Kimball, Scammon v. 446.
Kincell, Hall v. 239.
King, Ex p. no.
King v. Central Bank 186.
King v. Henderson 336.
King, Keegan v. 122, 125, 237, 239, 457-
King, London v. 395.
Kinmouth v. Braeutigam 434.
Kingsland v. Spaulding 207.
Kingsley, In re 93, 406, 451.
Kingsley v. Cousins 218.
Kingsley v. Kingsley 85.
King, U. S. v. 192.
Kindt, In re 227, 357.
Kinkeade, In re 48.
Kinney, Jones v. 378.
Kinnier v. Kinnier 174.
Kinzie v. Winston 465.
Kipp, In re 320.
Kirley v. Garrison 185.
Kirkpatrick v. Tattersall 218.
Kitchen, Decker v. 217.
Kletchka, In re 239.
Klingaman, In re 358.
Knapp v. Anderson 184, 185.
Knapp v. Hoyt 218.
Knapp, Rison v. 30, 346, 369.
Knight, In re 67.
Knight v. Hunt 151.
Knight, Turquand v. 231.
Knight, U. S. v. 192.
Knowlton v. Moseby 153.
Knowlton, Ray v. 299.
Knost, Hicks v. 240, 241.
Knost, Strobel & Wilken Co. v. 317.
Knox v. Bank 135.
Knox, Jones v. 209.
Knox, Marshall v. 236, 371, 427, 428.
Kouns, Manwarring v. 210.
Kosches v. Libowitz 479.
Kroner, Cassard v. 175.
Kross, In re 373, 413.
Kuffler, In re 282.
Kyler, In re 408.
Lachemeyer, In re 388.
Lafone. Latham v. 148.
Laing, Gimmingham v. 53.
Lake, In re 461.
Lamb v. Brown 189, 198.
Lambert, In re 83.
Lamkin v. Starkey no.
Lane, In re 446.
XXXll
Lang, In re 259, 471.
Langdon, Glenny v. 366, 367.
Lange, In re 355.
Langley, Perry v. 26, 27, 337-
Langslow, In re 62.
Lanier, Hen!y v. 217.
Lapham, Ryal v. 198, 326, 327.
Latham v. Lafone 148.
Lathrop v. Drake 10, 15.
Lathrop v. Stuart 233.
Laughlin, In re 63, 92.
Lavender, In re 53.
Lawrence v. Allen 51.
Lawrence v. Harrington 207, 216.
Lawrence, Poillon v. 176.
Lazarus v. Com. Ins. Co. 468.
Lazear, Porter v. 108.
Lea, West Co. v. 25, 30, 41, 42, 43-
Leaf, Ex p. 67.
Lee, In re 319.
Lee & Armstrong, In re 67.
Lee, Whee'.cck v. 472.
Legal Tender Cases 140.
Legge, In re 99.
Lehigh Lumber Co. In re 72.
Lehman v. Crosby 239.
Lehman v. Strassberg 403.
Leicester v. Rose 150.
Leidigh Carriage Co. v. Stengel 222,
239, 338.
Leland, In re yy, 320.
Lenihan v. Haman 134.
Leonard, In re 224.
Leigh, Sadler v. 365.
Lerow v. Wilmarth 218.
Lesser, In re 132.
Letcher, Rouse v. 124.
Leverich, Pringle v. 233.
Levy, In re 63.
Levy & Levy, In re 179.
Levy, Hill v. 404.
Lewensohn, /• re in, 195, 279, 284,
286.
Lewis v. Peck 349.
Lewis, Sloan v. 331, 390.
Lewis v. U. S. 74, 410.
Libby v. Hopkins 444.
Libowitz, Koches v. 479.
TABLE OF CASES CITED.
The numbers refer to the pages.
Lilly, Olcott v.
186.
Lincoln v. Batelle 349.
Linkman v. Wilcox 32.
Linn v. Smith 331.
Linniss, McAdoo v. 208.
Lipke, In re 116.
Lipman, In re 406.
Little River Lumber Co. In re 366, 378.
Littlefield, Cambridge Inst. v. 216.
Littlefield v. D. & H. C. Co. 246.
Livingston v. Bruce 35, 378.
List, Ex p. no.
Lloyd, In re 331.
Lodge v. Richard 68.
Logan, In re 162, 167, 171.
Lomas, Jackson v. 150.
London v. King 395.
Long, In re 70, 71.
Long, Connor v. 460.
Longley v. Swayne 213.
Lord, Ex p. 211.
Lord, Candee v. 311.
Lord, Palmer v. 473.
Lording Goldney v. 155.
Lorillard, Perry v. 468.
Loring, In re 323.
Loring, Cochrane v. 482.
Louden v. Blanford 134.
Louisville Trust Co. v. City Cincinnati
124.
Louisville Tr. Co. v. Marx 239, 240.
Love v. Love 54.
Low, Batchelder v. 176.
Lowe v. Waller 403.
Lowenstein, In re 167.
Lucas, Bramwell v. 231.
Lucas, Tiffany v. 438.
Lucketts v. Townsend 362.
Luckhardt, In re 49.
Lullman, Fleming v. 217.
Lynch, Gilbert v. 421.
Lyon v. I sett 210.
M.
Mabon, Willis v. 179.
MacDonald v. Moore 378.
Mackay, In re 169.
TABLE OF CASES CITED.
The numbers refer to the pages.
XXX1U
Mackel v. Rochester 102.
Mackey, In re 92.
Mackin v. U. S. 258.
Mackintosh v. Ogilvie 118.
Madison v. Dunkle 209.
Madison, Bank v. 450.
Magdalen College Case 193.
Mahcr, Peop'.e v. 103.
Makersay v. Ramsay 349.
Mallory, In re 285.
Mallory, Vanderhayden v. 191.
Manwarring v. Kouns 210.
March v. Heaton 462.
Marine Mach. Co. In re 44.
Markham, Perkins v. 239.
Markley, Garrison v. 230.
Marks, In re 63, 453.
Marks v. Barker 444.
Markson v. Heaney IS. 175-
Marlur, Worrall v. 462.
Marrett v. Atterbury 408.
Marsh v. Armstrong 453.
Marsh v. Chambers 448.
Marshall v. Knox 236, 371, 427, 428.
Marshall Paper Co, In re 50, 170, 171,
178.
Marshall v. Tray 217.
Marston, In re 55.
Martin. In re 99.
Martin, Redmond v. 59.
Martin, Toof v. 30, 31, 344. 347, 435-
Marvin, In re 48.
Marvin v. Chambers 425.
Marvin, Greenwood v. 69.
Marwick, In re 67.
Marx, In re 167.
Marx. Louisville Tr. Co. v. 239, 240.
Maryland, McColloch v. 140.
Mason, In re 163.
Mason & Hamlin Organ Co. v. Ban-
croft 154, !8o, 214.
Mason, Smith v. 236.
Massey, Twiss v. 73.
Matteson v. Kellogg 205, 207.
Matthews, In re 412.
Matthews. State v. 19.
Matthews v. Tufts no.
Mattocks v. Tremain 118.
E
Mawson, In re 96.
Maxim v. Morse 217.
May, In re TJ.
May v. May 284.
May & Merwin, In re 407.
Mayer, In re 231, 414.
Mayer, Fox v. 27.
Mayer v. Herman 351.
Mayhew, Dudley v. 175.
Maynard, Arnold v. 33, 34, 169.
Mayo, Clinton v. 332.
Mayor v. Nias 444.
Mayor v. Walker 208.
Mays v. Bank 460.
McAdoo v. Lumiss 208-
McAulcy, Byrrs v. 122.
McBrien, In re 98.
McBryde, In re 381, 384.
McCain, Wood v. 363.
McCarter, Jerome v. 423, 428, 429, 464.
McCarthy, In re 166.
McCauley, In re 196, 387.
McCauley, Perkins v. 240.
McClave v. Gibbs 225.
McC'.ure, Mitchell v. 240, 241.
McCollough, Briggs v. 82.
McCoilough v. Maryland 140.
McCombs v. Allen 181.
McConnell, In re 316.
McCormick, In re 101, 277.
McCormick v. Pickering 212.
McCracken v. San Francisco 363.
McCue, Hanson v. 482.
McCullough, Miles v. no.
McDonald, In re 161, 180.
McDonald v. Davis 121, 130, 131, 155,
210.
McDonald, Poole v. 141.
McDonnell, In re 464, 471.
McDougall v. Carpenter 189.
McElroy, Wilson v. 88.
McEwan, In re 67.
McFarland v. Goodman 86.
McFee, Guptil v. 85.
McGlynn, In re 284.
McGlynn Gormerly v. 482.
McGurn, In re 160.
XXXIV
TABLE OF CASES CITED.
The numbers refer to the pages.
McHenry v. Societe Franchise 464,
465-
Mclntyre, Richardson v. 186.
Mclver, Fair v. 450.
McKay, In re 34.
McKay & Aldus, In re 463.
McKay v. Funk 127.
McKinsey v. Harding 313.
McLam, In re 32, 254, 439-
McLaren v. Pennington 442.
McLean, Buckingham v. 169.
McLean v. Ihmsen, 65.
McLean v. Meline 366.
McLean v. Rockey 461.
McLellan, Winson v. 423, 462.
McLennon, Russell v. 85.
McMichel, Egbert v. 217.
McNair v. Gilbert 217.
McNamara, In re 166.
McNaughton v. Osgood 225.
McNulty v. Frame 233.
McPherson v. Cox 284.
McRae, Hornthal v. 218.
McSpedan, Juneau Bank v. no.
Mead v. Bank 75, 76, 399.
Mear, Ex p. 48.
Medbury v. Swan 210.
Medomac Bank v. Curtis 442.
Meech v. Stoner 473.
Meldaur, In re 294.
Melendy, Rice v. 344.
Meleck. In re 66.
Meline, McLean v. 366.
Mellen, In re 96.
Mendelsohn, In re 164.
Mercantile Co. Burnett v. 240.
Merchant's Bank, Allen v. 349.
Merchants' Bk. v. Comstock 315.
Merchants' Ins. Co. In re' 50.
Mercur, In re 331.
Merriman, In re 214.
Merritt v. Glidden 128.
Metcalf & Duncan 127.
Meyer, In re 42, 43, 57, 60, 61.
Meyer, Chemical Bank v. 57, 61.
Meyer, Graham v. 151.
Meyers, In re 39, 62, 63, 164, 173.
Meyers v. Day, 442.
Michener v. Payson 232.
Migel, In re 114.
Miles v. McCullough no.
Miller, In re 72.
Miller v. Dungun no.
Miller v. Gillespie 187.
Miller, Jackson v. 420.
Miller v. Morgan 483.
Miller v. O'Brien 461.
Mills, In re 67, 70.
Minot, Somerset Pottery Co. v. 67.
Mitchell, In re 294.
Mitchell, Dennett v. 169.
Mitchell, Harrison v. 85.
Mitchell, Jackman v. 152.
Mitchell v. McClure 240, 241.
Mitchell, Sherwood v. 202.
Mitchell v. Winslow 423, 426, 427, 462.
Mitford v. Mitford 462.
Moffit, Frazee v. 51.
Monroe v. Dewey 466.
Monroe v. Upton 210.
Montague, Jobbins v. 8, 15.
Montgomery, In re 320, 402.
Montgomery v. Bucyrus 462.
Montgomery Co. Bank v. Albany City
Bank 349.
Moore, Driggs v. 30.
Moore v. Horton 190.
Moore, MacDonald v. 378.
Moran v. Sturges 126.
Moore v. Jones 472.
Morgan, In re 160, 169.
Morgan v. Campbell 461.
Morgan, Cookingham v. 372.
Morgan, Ingalls v. 348.
Morgan, Miller v. 483.
Morgan, Roberts v. 218.
Morris, In re 145, 148.
Morris, Wait v. 217.
Morrison's Assignee v. Bright 442.
Morrison, Dutton v. 73.
Morrison, Haggerty v. 214.
Morrison v. Woolson 233.
Morse, In re 290.
Morse v. Anderson 483.
Morse v. Gloyes 233.
Morse v. Godfrey 30, 169.
TABLE OF CASES CITED.
The numbers refer to the pages.
XXXV
Morse, Maxim v. 217.
Mortimer, Hunt v. 356.
Moseley, Knowlton v. 153.
Moss, In re 55.
Mould, Burt v. 65.
Moule, Ex p. 48, 52.
Moulson, Jewson v. 462.
Mountford v. Scott 351.
Moyer, In re 39.
Moyer v. Dewey 180, 366.
Muggridge, Parker v. 65.
Mulholland v. Wood 415.
Mullen, In re 369.
Muller, In re 24.
Muller v. Brentano 452.
Muller v. Ehlers 483.
Mumford, Ex p. 403.
Munger v. Albany Bank 441, 445.
Munger, Curran v. 30.
Murphy, In re 48.
Murphy v. Crawford 215, 217.
Murphy, Ins. Co. v. 476.
Murray, In re 60, 407.
Murray v. Beale 239.
Murray v. De Rottenham 189, 398.
Murray v. Murray 57, 65.
Murray, Nicholas v. 407.
Murray v. Riggs 442.
Musgrave v. Sherwood 133.
Mussey, In re 191.
Mutual B'd'g Fund v. Boussieux 290.
Mut. Reserve Assn. v. Beatty 217.
N.
Naoroji v. Bank of India 442.
Nat. Bank v. Hunt 33.
Nat. Prot. Co. N. Y. C. Ins. Co. v.
3Si
Natural Gas Co. Commonwealth v. 55.
Nave, Norcross v. 250.
Neal v. Clark 200.
Nebe, In re 227.
Nelson, In re 41, 85.
Neustadter v. Chicago Drygoods Co.
335-
Newberry, In re 239.
Newhall, Ex. p. 462.
Newell v. Van Praagh 155.
Newland, In re 391.
Newland v. Bell 53.
Newman, In re 169.
Newman v. Cordell 26.
Newman v. Stretch 27.
Newton v. Howe 85.
Nias, Mayor v. 444.
Nicholas v. Murray 407.
Nichols'v. Bellows 472.
Nichols, U. S. v. 257.
Nixon, Richards v. 233.
Noble v. Hammond 207.
Noeson, In re 406.
Noonan, In re 63.
Noonan v. Orton 471.
Norcross, In re 94.
Norcross v. Nathan 240.
Norcross v. Nave 250.
Norris v. Commonwealth 55.
Norseworthy, Ray v. 475, 476.
Norton, Halsey v. 65.
Norton, Penniman v. 136.
Norton v. Switzer 134, 135, 136.
Norwich & Worcester R. R. Co. Ber-
nard v. 426.
Norwood, Dresser v. 351.
Nowell, In re 387.
Nowell, State v. 105.
Novak, In re 405.
Noyes, In re 376.
Noyes, Coolong v. 151.
Nunn, In re 81.
Nussbaum, Stern v. 215.
N. Y. Lafayette Ins. Co. Brichta v.
468.
N. Y. C. Ins. Co. v. Nat. Prot. Co.
351-
N. Y. Mail S. S. Co. In re 420, 428.
N. Y. & S. Co. Fulton Bank v. 348.
N. Y. & W. Water Co. In re 50, 53-
O'Bannon, In re 93.
O'Brien, Miller v. 461.
Ocean Nat Bank v. Olcott 175.
Ockendon, Ex p. 445.
XXXVI
TABLE OF CASES CITED.
The numbers
O'Connell, In re 413.
O'Connor, In re 432.
Odeil v. Wootten 184.
O'Donnell v. Segar 87.
O'Dwyer, Chatfield v. 248, 366.
O'Gara, In re 168.
Ogden v. Coweley 450.
Ogilvie, Mackintosh v. 118.
O'Hern, Graham v. 217.
Okott v. Lilly 186.
Olcott, Ocean Nat. Bank v. 175.
O'Neil, Ex p. 313.
O'Neill, In re 394.
Onion, Bank v. 214.
Opp, Jenks v. 186.
Oregon Printing Co. In re 31.
Orne, In re 94 95, 391, 396, 487.
Orton, Noonan v. 471.
Osborn, Carpenter v. 312.
Osborn. Carson v. 217.
Osgood McNaughton v. 225.
Otis v. Glazen 217, 218.
Ouimette, In re 332. 347.
Owen, Russell v. 451.
Owens, In re 84.
Oxford Iron Co. v. Slafter 32.
Oxley, Tucker v. 447.
P.
Page, In re 469.
Paige, In re 223, 259.
Palen v. Johnson 473.
Palmer, Holland v. 150.
Palmer v. Hutchins 213.
Palmer v. Lord 473.
Palmer. People v. 82.
Palmer, Rogers v. 348.
Parker v. Bradford 398.
Parker v. Cousins 368.
Parker v. Hotchkiss no.
Parker v. Muggridge 65.
Parker, Piatt v. 198, 327.
Parkes, In re 316.
Parmedee v. Simpson 363.
Parmenter Mfg. Co. v. Hamilton 478,
Paterson Gas Co. Receivers v. 442.
Patman v. Vaughan 53.
refer to the pages.
Patten v. Browne 55.
Patterson, In re 111, 197, 270.
Patterson v. Winn 482.
Pattison v. Wilbur if 9, 327.
Patty-Joiner Co. v. Cummins 41.
Pauley, In re 378.
Payne v. Able 179, 182, 327.
Payson v. Coffin 137.
Payson, Michener v. 232.
Payson v. Payson 175.
Peacock, Ex p. 314.
Peake, Ex p. 67.
Pearson, Flanagan v. 131, 202, 208.
Pease, In re 74, 4^7. 456.
Pease, Usher v. 117.
Peck, Harris v. 216.
Peck v. Jenness 424.
Peck, Lewis v. 349.
Peel v. Ringgold 65.
Pegues, In re 377.
Peiper v. Harmer 136.
Penn, In re 61.
Pennell v. Percival 233.
Pennington, McLaren v. 442.
Penniman v. Norton 136.
Pennington v. Sale 175.
Pennock v. Coe 427.
Penny v. Taylor 86.
People v. Duncan 469.
People v. Herkimer 192.
People v. Maher 103.
People ex rel. Morris v. Edmonds
275-
People ex rel. New Eng. D. M. Co. v.
Roberts, 52.
People v. Palmer 82.
People, Reitz v. 209.
People v. Spalding 386.
People ex rel. Taylor v. Forbes 103,
106.
People ex rel. U. P. P. Co. v. Roberts,
Si-
Pepperdine v. Heailey 240.
Percival, Pennell v. 233.
Perkins, In re 285 291.
Perkins. Camnbell v. 233.
Perkins v. Markham 219.
Perkins v. McCauley 240.
TABLE OF CASES CITED.
xxx vii
The numbers
Perrin, In re 34.
Perry v. Langley 26, 337.
Perry v. Lorillard 468.
Pershing, Thompson v. 482.
Person v. Grier no.
Pesant, Robinson v. 397.
Peters, In re 97.
Peterson, In re 86.
Petrie, In re 450.
Peyton, Hunnicutt v. 483.
Phelps, In re 313. 370.
Phelps v. Barland igo.
Phelps, Caldwell & Co. In re 65.
Phelps v. Clasen 330.
Phelps v. Rice 442.
Philips, In re 164, 231.
Phillips v. Dicas 150.
Pickering, McCormick v. 212.
Picquet v. Swan 15.
Pierce, In re 64, 164.
Pierce, Bank v. 322.
Pierce, Dolson v. 174.
Pierson, Graham v. 394.
Pierce & Holbrook, In re 93.
Pierce, Jenkins v. 463.
Pinkel. In re 384.
Pinnero v. Hiegins 152.
Pioneer Paper Co. In re 230.
Piper, In re 317.
Pitte'kow, In re 239, 475, 476.
Piatt v. Parker 198, 327.
Piatt, Stewart v. 462.
Piatt, White v. 208.
Plum, Angel v. 482.
Plumb, Storrs v. 133.
Plummer, In re 293.
Plummer, Taylor v. 464.
Poillon v. Lawrence 176.
Pond, Hayman v. 205.
Pond v. Kimball 81, 85.
Pooke, Hunt v. 63, 65, 107.
Pool v. McDonald 141.
Pope, Windmuller v. 397.
Poppenhausen v. Seely 184.
Porter v. Lazear 108.
Porter v. Porter 215
Port v. Turton 55.
Powell, In re 284.
refer to the pages.
Pratt, In re 48, 88.
Pratt, Wright v. 85.
Prescott, Ex p. 441, 445.
Prescott, In re 83, 403.
Preston, In re 395.
Price, In re 96, 32s.
Pryer, West v. 445.
^ryor, In re 461.
Pulver, In re 92.
Purvine, In re 164, 245, 248, 249.
Pusey v. Bradley 329.
Putnam, Smith v. 468.
Pyle, Beebe v. 155.
B.
Railway Co. v. Russell 483.
Ramsay, Makersay v. 349.
Randall, In re 461.
Randall v. Buffington 87.
Rankin, Hewitt v. 85.
Rathbone, In re 166.
Ray, In re 18, 405.
Ray v. Knowlton 299.
Ray v. Norseworthy 475, 476.
Rayl v. Lapham 326, 327.
Reade v. Waterhouse 134, 135, 13$
290.
Receivers v. Paterson Gas Co. 442.
Redmond v. Martin 59.
Reed, In re 406.
Reed v. Bullington 174.
Reed v. Vaughan 8.
Reeves v. Bank of Ohio 349.
Regan v. Zeeb 88.
Regina v. Edwards 192.
Reichman, In re 38, 40.
Reinman, In re 139, 148, 152, 155.
Reinhard, Deweese v. 122.
Reitz v. People 209.
Reliance Co. In re 323.
Resler In re 406.
Revere Co. v. Demock 155, 210.
Rex v. Cole 48.
Rexford, Southard v. 103.
Rex v. Slaney 103.
Rhoades, In re 433.
Rhoades v. Williams 85.
XXXV111
TABLE OF CASES CITED.
The numbers
Rhutassel, In re 163, 191, 194, 195.
Rice, In re 67.
Rice, Groves v. 338.
Rice v. Melendy 344.
Rice, Phelps v. 442.
Rice v. Welling & Fake 368.
Richard, Lodge v. 68.
Richards, In re 245, 248, 249, 433.
Richards v. Nixon 233.
Richardson, Ex p. 49.
Richardson, In re 365.
Richardson, Farris v. 47.
Richardson v. Mclntyre 186.
Richter, In re 318, 319, 320.
Rickett, Harris v. 356.
Ridenbaugh, Young v. 107.
Rider, In re 141, 142, 146.
Ridgeway, Herndon v. 15.
Rina v. Eckerson 189.
Ringgold, Peel v. 65.
Riggs, Murray v. 442.
Riggs v. Roberts 217.
Riggs v. White 213.
Riordan, In re 319, 320.
Ripley, Carey v. 175, 327.
Ripon Knitting Wks. v. Schreiber 20.
Rison v. Knapp 30, 346, 369.
Rivett, Comforth v. 444.
Rix v. Bank 37.
Roach v. Great West. R. R. 27.
Robinett, Alston v. 175.
Robbins, Hill v. 327.
Roberts v. Morgan 218.
Roberts, People ex rel. N. E. D. M.
Co. v. 52.
Roberts, Peonle ex rel. U. P. P. Co. v.
Si-
Roberts, Riggs v. 217.
Robertson, In re 93, 94, m, 114, 166.
Robinson, Ashley v. 93.
Robinson v. Pesant 397.
Robinson, Taylor v. 363.
Robinson v. White 239.
Rob Roy, In re 200.
Robson v. Calze 150.
Roche, In re 250, 367.
Rochester. Mackel v. 102, 103.
Rockey, McLean v. 461.
refer to the pages.
Rockford, R. I. & St. L. R. Co. In re
289.
Rockwood, In re 240.
Roddin, In re 72.
Rado, In re 337.
Rogers, In re 260.
Rogers, Cook v. 365.
Rogers Milling Co. In re 319, 332.
Rogers v. Palme- 348.
Rogers, Russell v. 152.
Rogers, Tobias v. 186.
Rogers v. Winsor 428.
Rollo, Drake v. 441, 446.
Rollo, Gray v. 447.
Rollo, Hitchcock v. 449, 450.
Rome Iron Co. Chattanooga Nat. Bank
v. 424.
Rome Planing Mills, In re 29, 38, 39,
4S.
Rose v. Hart 442, 443, 445.
Rose, Leicester v. 150.
Rosenberg, In re 127, 132, 462.
Rosenfeld, In re 162.
Rosser, In re 20, 102, 164.
Ross v. Jordan 217.
Rothchild, Sheldon v. 441.
Rourke v. Story 349.
Rouse, Hampton v. 460.
Rouse, Hazard & Co. In re 245, 248,
249.
Rouse v. Letcher 124.
Romanow, In re 42, 330.
Rowlandson, Ex p. 75.
Roxley, Ex p. 75.
Rozinski, In re 413.
R. R. Co. Winter v. 35.
Rucker v. Hanna 217.
Ruckman v. Cowell 8.
Pumsey, etc. Co. v. Novelty & M. Co.
42.
Runel, "Ex p. 258.
Rupp, In re 88.
Russell, Ex p. 154.
Russell, In re 60, 123, 237.
Russell v. Jackson 231.
Russell, Jones v. 208.
Russell, Railway Co. v. 483.
Russell v. McLennon 85.
TABLE OF CASES CITED.
The numbers refer to the pages.
xxxtx
Russell v. Owen 457.
Russell v. Rogers 152.
Russie, In re 466.
Rutter, Shoshone M. Co. v. 14.
Ruiz v. Eickerman 189.
Royal v. Lapham 198.
R'y Equipment Co. v. Blair 312.
S.
Sabine, In re 419.
Sabin v. Camp 33, 347, 353-
Sacchi, In re 175, 426, 476
Sachs, Webb v. 33.
Sadler, Ex p. 66.
Sadler v. Leigh 365.
Sage v. Wynkoop 348.
Sale, Pennington v. 175.
Salkey & Gerson, In re 100.
Salmons, In re 175.
Samson v. Burton 91.
Sanborn, In re 475.
Sandford v. Sandford 135.
Sandusky v. Bank 16.
San Trancisco v. McQ-acken 363.
San Gabriel Sanatorium Co. In re 55,
129, 239.
Sapiro, In re 106.
Sargent, In re 336.
Sargent, Dow v. 347.
Saunders, In re 302.
Saunders v. Comm. 193.
Sauthoff, In re 83.
Savings Bank, Yeatman v. 423, 424,
428.
Sawyer, In re 150, 151, 152.
Sawyer v. Hoag 290, 446.
Sawyer v. Turpin 33, 34, 35, 354, 359.
Saylor v. Taylor 482.
Scammon, In re 331.
Scammon v. Kimball 446.
Scanlon, In re 414, 415.
Schatz, Schlitz v. 37.
Scheiffer v. Garrett, In re 65.
Schleehauf, Zimmer v. 127.
Schlesinger, In re 20, 100.
Schlitz v. Schatz 37.
Schloub, White v. 237. 437-
Schmitt, Vonderbank v. 70.
Schrack, In re 166.
Schreiber, Ripon W'ks v. 20.
Schroeder v. Fry 201.
Schulenberg v. Kabwreck 346.
Schumaker, Eby v. 371.
Schuman v. Flickenstein 370, 371.
Schuyler, In re 336.
Schwarz, Ewart v. 131.
Scott, In re 19, 102, 259, 378, 419-
Scott, Collins & Co. In re 139. 142,
152.
Scott, Kelly v. 463.
Scott v. McCarthy 320.
Scott, Mountford v. 351.
Scrafford, In re 333, 334-
Scruggs, Neal v. 200.
Seaver, Holland v. 136.
Seckendorf, In re 96.
Security Bank, Vaccaro v. 47, 58.
Sedgwick, Hitchcock v. 460.
Seeley, Hatch v. 315.
Seeley, Poppenhausen v. 184.
Segar, O'Donnell v. 87.
Seiiing v. Gunderman 289.
Selby v. Hills no.
Sellers v. Bell 83, 93, 168.
Sessaman, Shay v. 474.
Seving v. Gale 151.
Seward, Van Wyck v. 26.
Shaw, City of Boston v. 175.
Shawhan v. Wherritt 174, 233.
Shay v. Sessaman 474.
Sheehan, In re 337.
Sheldon v. Clews 233.
Sheldon, Dodge v. 366.
Sheldon v. Rothchild 441.
Shepard, In re 389.
Shepherd, Corliss v. 218.
Sheppard, In re 406.
Sheridan, In re 353, 356, 361.
Sherman, Bank v. 460.
Shertzer, In re 168.
Sherwood v. Mitchell 202.
Sheton, Conn. v. 193.
Shields, Carroll v. 132.
Shields, Hayes v. no.
Shipping v. Henderson 217.
xl
TABLE OF CASES CITED.
The numbers refer to the pages.
Shomo v. Zeigler 232.
Shorer, In re 169.
Shoshone M. Co. v. Rutter 14.
Shouse, Ex p. 330, 356.
Shuman v. Strauss 218.
Shutts v. Bank 240.
Sidle, In re 387.
Sievers, In re 42.
Sigourney v. Williams 180.
Silverman, In re 25, 30, 31, 33, 381,
396-
Simonson, In re 221.
Simmons, Wheeler v. 216.
Simonson, Burgess v. 312.
Simonson v. Sinsheimer 225, 338.
Simpson, Belle v. 356.
Simpson, Hill v. 344.
Simpson, Parmedee v. 363.
Sisler, In re 82.
Sixth Ave. R. R. v. Gilbert 133.
Slafter, Oxford Iron Co. v. 32.
Slaney, Rex v. 103.
Sleeper, Jones v. 24, 169.
Slevin, In re 274.
Sloan, In re 317.
Sloan v. Lewis 331, 390.
Smedley, In re 46.
Smith, In re 31, 54, 55, 84, 228, 239,
277, 390 420.
Smith v. Brinkerhoff 448, 450
Smith v. Bromley 152. 472.
Smith, Buchanan v. 344, 345, 435.
Smith, Doe v. 468.
Smith v. Engle 155.
Smith, Goldmount v. 36.
Smith v. Gordon 136, 465.
Smith, Hart v. 154.
Smith v. Hill 450.
Smith v. Hodson 444.
Smith v. Kehr 86.
Smith, Linn v. 331.
Smith v. Mason 236.
Smith v. Putnam 468.
Smoke, In re 317.
Snyder v. Bauchman 482.
Snedaker, In re 17$ 425.
Snow, Dexter v. 151.
Societe Francaise, McHenry v. 464, 465.
Solomon, Ex p. 315.
Solomon, In re 169.
Solomon, Griel v. 218.
Somerset Pottery Co. v. Minot 67.
Soper, In re 222 259.
Southard v. Rexford 103.
Southcote v. Braithwaite 184.
Souther, In re 322.
Southern Loan & Trust Co. v. Ben-
bow, 237, 239, 327, 475.
Southern Pacific Co. v. Hamilton 483.
Southern Pacific Co. v. Johnson 483.
Spalding, People v. 386.
Sparhawk v. Drexel 445.
Spaulding, Kingsland v. 207.
Speed, Horner v. 216, 217.
Spellman, Horner v. 210.
Sprague, Toland v. 15.
Spratt, Clopton v. 180, 186.
SpOman, In re 142.
Spitley v. Frost 81.
Stamp, In re 48.
Stansfield, In re 189.
Stark, Graham v. 35.
Starking, Lamkin v. no.
Starkweather v. Cleveland Ins. Co.
468.
Starrett, Chadwick v. 171.
State, Guise v. 82.
State v. Matthews 19.
State v. Nowell 105.
Steele, In re 470.
Steele v. Graves 209.
Steele, Wrights v. 217.
Steere, Ashby v. 169.
Stein, In re 419, 421.
Steinmetz v. Ainslie 397.
Stengel, Leidigh Carriage Co. v. 222,
239, 338.
Stephens, Ex p. 447.
Stephenson, In re 76.
Stephenson v. Jackson 76.
Stephens, Swan v. 82.
Stern v. Nussbaum 215.
Stetson v. City of Bangor 175.
Stewart, In re 328.
Stewart, Apperson v. 217.
Stewart v. Armstrong 322.
TABLE OF CASES CITED.
xli
The numbers
Stewart v. Brown 85.
Stewart v. Emerson 202.
Stewart, Halsey v. no.
Stewart v. Hargrove 469.
Stewart v. Isidor 126, 315.
Stewart v. Piatt 462.
Stevens, In re 87.
Stevens v. Bank 461.
Stevens v. Brown 175.
Stevens, Copeland v. 468.
Stevens v. Evans 175.
Stevenson, In re 85.
Stickney v. Wilt 250.
Stillwell v. Coope 218.
Stix, Wolf v. 183, 200, 213.
Stoddart, In re 363.
Stokes, In re 18.
Stoll v. Wilson 212.
Stone v. Bank 130.
Stone, Everett v. 169.
Stoner, Meech v. 473.
Stoors v. City of Utica 349.
Stoors v. Plumb 133.
Story, Rourke v. 349.
Stotts, In re 326.
Stow, Howe v. 450.
Strain v. Gourdin 35, 363.
Strang v. Bradner 201, 243.
Strassberg, Lehman v. 403.
Strobel & Wilken Co. v. Knost 317.
Strong v. Clawson 462.
Stretch, Newman v. 27.
Stuart, Lathrop v. 233.
Stump, Burkholder v. 378.
Stumpff, In re 253.
Sturgis, In re 152.
Sturges v. Crowninshield 175.
Sturges, Moran v. 126.
Stuyvesant Bank, In re 423.
Styer, In re 476.
Sugenheimer, In re 302.
Sullivan, In re 195.
Sumner, In re 308.
Sumner v. White 124.
Sutherland, In re 386.
Sutherland v. Davis 135.
Sutherland, Griffin v. 82.
Sutton v. Weeley 54.
refer to the pages.
Swaim, Donnell v. 218.
Swan, Medbury v. 210.
Swan, Picquet v. 15.
Swan v. Stephens 82.
Swayne, Longley v. 213.
Sweet, In re 377.
Switzer, Norton v. 134, 135, 136.
Symonds v. Barnes 327.
Taliafero, In re 476.
Tapley v. Forbes 370.
Tappan. Bates v. 182.
Tattersall, Kirkpatrick v. 218.
Taylor, In re 49, 404.
Taylor, Baker v. 213.
Taylor v. Carroll 124.
Taylor, Hutchins v. 169.
Taylor, Jordan v. 122.
Taylor, National B'k v. 210.
Taylor, Penny v. 86.
Taylor v. Plumer 46^1.
Taylor v. Robinson 363.
Taylor, Saylor v. 482.
Taylor v. Taylor 129.
Tebo In re 412.
Temmis, Brittlestone v. 441.
Temple v. Commonwealth 105.
Tennent, Dauelish v. 150, 162.
Terrill, Carpenter v. 182.
Texas Land Co. v. Williams 482.
The Distilled Spirits 351.
The Illinois 482.
Thomas, In re 41, 133, 163 164, 191,
194, I9S> 340.
Thomas, Clapp v. 82.
Thomas v. Desan^es 365.
Thomas v. Harding 62.
Thompson, Briggs v. 473.
Thompson, Cragin v. 378.
Thompson v. Hatch 482.
Thompson v. Bershing 482.
Thomson v. Frere 65.
Thomson, In re 49.
Thornton, Fillingin v. 329.
Thurmond v. Andrews 198, 327.
xlii
TABLE OF CASES CITED.
The numbers refer to the pages.
Tiffany v. Boatman's Ins. 35, 356, 357.
472.
Tiffany v. Lucas 438.
Tilden, In re 410, 411.
Tilley, Chicago v. 307.
Tobias v. Rogers 186.
Todd, Ward v. 131.
Toland v. Sprague 15.
Tonkin, In re 319, 320.
Toof v. Martin 303, 344, 347, 435-
Tooker, In re 155.
Tooker v. Doane 218.
Towner, Walker v. 137-
Townsend, Lucketts v. 362.
Traders' B'k v. Campbell 30, 32, 133,
290, 450, 465.
Traders' Bank, Downing v. 398.
Trafton, In re 155.
Tray, Marshall v. 217.
Tremain, Mattocks v. 118.
Trinity Church, Capell v. 404.
Tripp v. Brownell 482.
Tritch, Halleck v. 355.
Troy Woolen Co. In re 398, 444.
Tucker v. Opley 447.
Tudor, In re 164.
Tufts, Hyde v. 471.
Tufts, Matthews v. no.
Tullis, Cook v. 35, 354, 364, 423, 464.
Tunctall, Ward v. 213.
Turpin, Sawyer v. 33, 34, 35, 354, 359.
Turquand v. Knight 231.
Turton, Part v. 55.
Tuttle, Goodall v. 88.
Twiss v. Massey 73.
Twogood, Ex p. 447.
Tyler, Flagg v. 184, 185.
Tyler v. Tyler 388.
Tyler, Wadsworth v. 356.
Tyrrel, In re 161.
Ulfelder Clothing Co. In re 321.
Ungewitter v. Von Sachs 402.
Union Bank, Com. Bank of Pa. v. 349.
Union Canal Co. v. Woodside 136.
Upton, Monroe v. 210.
Usher v. Pease 117.
U. S. v. Breitling 482, 483.
U. S. Bank, Fullerton v. 482.
U. S. Bank, Voorhees v. 174.
U. S. v. Bayer 257.
U. S. v. Block 258.
U. S. v. Conner 2^7.
U. S. v. Dickey 257.
U. S. Dollar Sav. B'k v. 192.
U. S. v. Fisher 140.
U. S. v. Herron 191, 192, 193.
U. S. v. Hoar 192.
U. S. v. Jones 483.
U S. v. King 192.'
U. S. v. Knight 192.
U. S. Lewis v. 74.
U. S. v. Lewis 410.
U. S. Mackin v. 258.
U. S. v. Nichols 257.
U. S. Savings B'k v. 193.
Vaccaro v. Security Bank 42, 58.
Vail v. Durant 206.
Valk, In re 114.
Valla, Wickham v. 47^.
Vanderhayden v. Mallbry igi.
Vanderkamp, Boyd v. 349.
Van Lieuw v. Johnson no.
Van Orden, In re 389.
Van Praagh, Newall v. 155.
Van Wyck v. Seward 26, 27.
Varnum v. Wheeler 212.
Vaughan, In re 433.
Vaughan, Patman v. 53.
Vaughn, Reed v. 8.
Vehmeyer, Forsythe v. 200, 203, 243.
Veitch, In re 411.
Vogel, In re 96, 126, 453.
Vonderbank v. Schmitt 70.
Von Sachs, Ungewitter v. 402.
Voorhees v. U. S. Bank 174.
Vorland, In re 475.
W.
Waddell, In re 424.
TABLE OF CASES CITED.
The numbers refer to the pages.
xliii
Wadsworth v. Tyler 356.
Wager v. Hall 31, 344, 435.
A/aggoner, In re 161.
Wagstaff, Ex p. 441.
Waite, In re 32, 357.
Wait v. Morris 217.
Wakeman v. Hoyt 54, 169.
Walbrun v. Babbitt 346.
Wald, Johnson v. 32.
Waller, Low v. 403.
Walker, Brown v. 103.
Walker, Mayor v. 208.
Walker v. Towner 137.
Wall, Cox v. 19.
Ward, In re 395.
Ward v. Chamberlain 482.
Ward v. Cochrane 483.
Ward, Hopkins v. 217.
Ward v. Todd 131.
Warden, Gibson v. 359, 423.
Warner v. Cronkhite 197.
Warren, In re 72.
Warren v. Bank 32, 33.
Warren, Bank v. 179.
Warren, Gornev v. 468.
Warwick v. Warwick 251.
Washington Ins. Co. In re 50.
Waterhouse, Reade v. 134, 135. 136,
290.
Watkins, Brackett v. 86.
Ward v. Chamberlain 402.
Watson, Ex p. 48, 286.
Waxelbaum, In re 81, 261, 327.
Way v. Howe 175, 177.
Weaver, Goddard v. 423.
Webb, In re 72, 164.
Webb v. Sachs 33.
Weber Furniture Co. In re 141, 145,
147, 148.
Weeks, In re 428.
Weeley, Sutton v. 54.
Weir, Bailey v. 136.
Welge, In re 294.
Wellford, Cannon v. 65.
Welling & Fake, Rice v. 368.
Wellman, In re 365.
West. Assur. Co. Carlan v. 51.
West, Bartholomew v. 86.
West Co. v. Lea 25, 30, 41, 42, 43.
West, Groom v. 443.
West v. Pryer 445.
Wescott Co. v. Berry 479.
Westbrook M'f'g Co. v. Grant, 260.
Wetmore, In re 165, 466.
Wheeler v. Simmons 216.
Wheeler, Varnum v. 212.
Wheeler v. Wheeler 218.
Wheelock v. Lee 472.
Wherritt, Shawhan v. 174, 253.
Whipple, In re 128, 145, 148.
Whitbeck, 'Coe v. 65.
White, In re 497.
White, Clark v. 152.
White v. Piatt 208.
White, Riggs v. 213.
White, Robinson v. 239.
White v. Schloerb 237, 437.
White, Sumner v. 124.
Whitehead, In re 84.
Whitehead, Dunham v. 43.
Whitehouse, In re in, 197.
Whiteside v. Hyman 151.
Whiting, Ex p. 442, 443, 448.
Whitney, In re 150, 151, 152.
Whittier, Hawkins v. 449.
Whitney v. Crafts 188.
Wicker v. Comstock 81.
Wickham v. Valle 474.
Wiggin v. Bush 152.
Wiggert, In re 113.
Wilbur, Pattison 189, 327.
Wilder, Cox v. 86.
Wilcox, In re 67, 68, 69.
Wilcox, Hassall v. 312.
Wilcox v. Hawley 86.
Wilcox, Linkman v. 32.
Wiley, In re 70.
Wilkes, Ex p. 52.
Wilkinson, Hayton v. 186.
Wilkinson v. Wilkinso" 468.
Williams, Ex p. 153.
Williams In re 63, 332, 337, 402.
Williams v. /tkinson 182.
Williams v. Butcher 327.
Williams, Coale v. 366.
Williams & McPheeters, In re 113, 115.
xliv
TABLE OF CASES CITED.
The numbers refer to the pages.
Williams, Rhodes v. 8c.
Williams, Sigourney v. 180.
Williams, Texas Land Co. v. 482.
Williamson, In re 404.
Willis v. Mabon 179.
Wilmarth, Lerow v. 218.
Wilmington, Atlantic Ex. Co. v. 482.
Wilson, In re 258.
Wilson, Brooks v. 312.
Wilson v. City Bank 24, 37, 39, 427.
Wi'son v. Harper 233.
Wilson v. McElroy 88.
Wilson, Stoll v. 212.
Wilt, Stickney v. 250.
Windmuller v. Pope 397.
Windsor v. Kendall 36.
Winkins, In re 63.
Winn, In re 17S.
Winn, Patterson v. 482.
Winslow v. Clark 36.
Winslow, Mitchell v. 423, 426, 427,
462.
Winson v. McLellan 423, 462.
Winsor, Rogers v. 428.
Winston, Kinzie v. 465.
Winter, Graves v. 50.
Winter v. R. R. Co. 35.
Winthrow v. Fowler 357.
Wise, Hoover v. 349.
Wolcott v. Hodge 208.
Wolf, In re 33, 159, .'.53, 356.
Wolf v. Stix 183, 200. 213.
Wood, In re 33, 94, 167.
Wood v. Bailey 250.
Wood v. Barker 152.
Wood v. Hunter 27.
Wood v. McCain 363.
Wood, Mulholland v. 415.
Woodbury, In re 240.
Woodford & Chamberlain, In re 330.
Woodruff, In re 82.
Woods, In re 55.
Woods v. De Mattos 192.
Woodside, Union Canal Co. v. 136.
Woodward, In re 45, 55, 232, 277.
Woolsey v. Cade 205, 206.
Woolson, Morrison v. 233.
Wootten, Odell v. 184, 185.
Worcester Co. In re 246, 249, 251.
Worcester County, In re 410.
Worden, Electric Co. v. 317, 318, 319.
Worman v. Giddey 85.
Worrall v. Marlow 462.
Wright, In re 87, 406, 429.
Wright v. Bank 471, 472.
Wright, Dutcher v. 260, 364, 365.
Wright v. Pratt 85.
Wright v. Steele 217.
Wydown, In re 365.
Wynkoop, Sage v. 348.
Y.
Yale, Ex p. 62.
Yea v. Fourak^r 217.
Yeatman v. Savings Bank 423, 424, 428,
462.
York v. Hoover, 260.
Young, In re 395 403.
Young v. Bank 442, 448.
Young v. Hunter 75.
Young v. Ridenbaugh 107.
Yukon Woolen Co. In re 429, 430, 458.
Zahn v. Fry 320.
Zarega, In re 190.
Zeeb, Regan v. 88.
Zeiber v. Hill 396.
Zeigler, Shorno v. 232.
Zellars, Camp v. 240.
Zimmer v. Schleehauf 127.
Zoller v. Janvrin 182.
THE NATIONAL BANKEUPTCY LAW.
CHAPTER I.
DEFINITIONS.
Section i. 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, be construed as
follows : ( i ) " A person against whom a petition has been filed "
shall include a person who has filed a voluntary petition; (2)
" adjudication " shall mean the date of the entry of a decree that
the defendant, in a bankruptcy proceeding, is a bankrupt, or if
such decree is appealed from, then the date when such decree is
finally confirmed; (3) "appellate courts" shall include the cir-
cuit 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 in-
voluntary 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) "corpora-
tions " shall mean all bodies having any of the powers and priv-
ileges of private corporations not possessed by individuals or
partnerships, and shall include limited or other partnership as-
sociations organized under laws making the capital subscribed
alone responsible for the debts of the association; (7) " courts "
shall mean the court of bankruptcy in which the proceedings are
pending, and may include the referee; (8) " courts of bank-
ruptcy " shall include the district courts of the United States and
of the Territories, the supreme court of the District of Columbia,
and the United States court of the Indian Territory, and of
Alaska; (9) "creditor" shall include anyone who owns a de-
mand or claim provable in bankruptcy, and may include his duly
(1) *
THE NATIONAL BANKRUPTCY LAW.
Meaning of Words and Phrases. [Ch. I.
authorized agent, attorney, or proxy ; ( 10) " date of bank-
ruptcy," or " time of bankruptcy," or " commencement of pro-
ceedings," or " bankruptcy," with reference to time, shall mean
the date when the petition was filed; (n) " debt" shall include
any debt, demand, or claim provable in bankruptcy; (12) " dis-
charge " shall mean the release of a bankrupt from all of his
debts which are provable in bankruptcy, except such as are ex-
cepted 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 aggre-
gate 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 in-
clude affirmation; (18) "officer" shall include clerk, marshal,
receiver, referee, and trustee, and the imposing of a duty upon or
the forbidding of an act by any officer shall include his successor
and any person authorized by law to perform the duties of such
officer; (19) "persons" 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 cor-
porations; (20) " petition " shall mean a paper filed in a court of
bankruptcy or with a clerk or deputy clerk by a debtor praying
for the benefits of this act, or by creditors alleging the commission
of an act of bankruptcy by a debtor therein named; (21)
" referee " shall mean the referee who has jurisdiction of the case
or to whom the case has been referred, or anyone acting in his
stead; (22) " conceal " shall include secrete, falsify, 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 bank-
rupt has such security upon the bankrupt's assets; (24) "States "
DEFINITIONS.
§ i.J Meaning of Words and Phrases.
shall include the Territories, the Indian Territory, Alaska, and
the District of Columbia; (25) " transfer " shall include the sale
and every other and different mode of disposing of or parting
with property, or the possession of property, absolutely or con-
ditionally, as a payment, pledge, mortgage, gift, or security; (26)
"trustee" shall include all of the trustees of an estate; (27)
" wage-earner " shall mean an individual who works for wages,
salary, or hire, at a rate of compensation not exceeding one thou-
sand five hundred dollars per year 5(28) words importing the mas-
culine gender may be applied to and include corporations, partner-
ships, 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.
Analogous Provisions of Former Acts. — R. S. § 5013; act of 1867, § 48.
The Definitions. — The definitions of the words and phrases
used in the bankruptcy act given in section 1, are best discussed
in connection with the subsequent sections in which such words
occur and demand only brief notice here. Many of them embody
decisions of the courts as to the construction of the same words
as used in previous acts, while others give the words a meaning
different from that which they formerly had. These definitions
in reality largely determine the scope of the whole act. In some
cases words are used in a manner at variance with their ordinary
meaning. Thus " a person against whom a petition is filed "
includes one who files a voluntary petition, which becomes very
important in the construction of section 6yi. post relating to the
dissolution of liens.
The fact that such expressions as " date of bankruptcy," " time
of bankruptcy," and " bankruptcy," when used with reference to
time, mean the time of the filing of the petition, and not the time
of the adjudication, should never be overlooked. So a " bank-
rupt " is one against, or by whom a petition is filed, as well as
one who has been adjudged a bankrupt; also, one as to whom
an application to set aside a composition or to revoke a discharge
THE NATIONAL BANKRUPTCY LAW.
Meaning of Words and Phrases. [Ch. I.
has been filed. One must also always bear in mind the limited
meaning given to the words " creditor " and " debt." It should
be noted, too, that one is not a " secured creditor," unless the
security held by him is property assignable under this act and
belonging to the bankrupt; or unless some person secondarily
liable to him, holds as security, property of the bankrupt. If the
security is the property of another, or if it is exempt property
of the bankrupt, it does not fall within the terms of the words
" security " as used in the act. This definition simply declares
a well-established principle of the law of bankruptcy, but it must
be borne in mind in considering the rights of that class of credit-
ors. So the fact that " transfer " includes the sale and every
mode of disposing of, or parting with property, or the possession
of property, either absolutely or conditionally, as payment, pledge,
mortgage, gift, or security, is of importance in construing the
many sections of the act as to preferential transfers, and especially
those relating to acts of bankruptcy. The present act in the form
in which it passed the House of Representatives, included in
" transfer," the " creation of a lien by any means other than by
compulsory process prosecuted in good faith ; " but in the con-
ference between the House and Senate arising on account of the
opposition of the latter body to many of the provisions as to in-
voluntary bankruptcy, the words quoted were stricken out and the
bill passed as here stated.
Most important of all the definitions is number (15) on in-
solvency, because that definition makes the present law radically
different from the former act as to cases when one can be put into
bankruptcy involuntarily. The judicial definition of the word
"insolvency" as established by the decisions under the former
act was, " an inability to pay debts as they mature and become
due and payable in the ordinary course of business, as persons
carrying on that business usually do, in that which is made, by
the laws of the United States, lawful jnoney or legal tender to
be used in the payment of debts, without reference to the amount
of the debtor's property and without reference to the possibility
or even certainty, that at a future time, on the settlement and
DEFINITIONS.
§ i.] Meaning of Words and Phrases.
winding up of all his affairs, his debts will be paid in full out of
his property." It was also held that " the amount of the trader's
property was of no consequence, if he was unable to pay his debts
in lawful money as they matured." But under the present act the
value of the property must be considered. If at a fair valuation,
it equals the debtor's debts, he is not insolvent. This provision
was one of the concessions made in the passing of the bill to those
who first opposed it on the ground that its provisions would make
a debtor liable unnecessarily to have his property taken from him,
because of a mere temporary embarrassment. See further sub
nom. "Acts of Bankruptcy" section 3 post.
CHAPTER II.
CREATION OF COURTS OE BANKRUPTCY AND THEIR
JURISDICTION.
Sec. 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 court9 in the
Indian Territory and the District of Alaska, are hereby made
courts of bankruptcy, and are hereby invested, within their re-
spective 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 ( i ) adjudge
persons bankrupt who have had their principal place of business,
resided, or had their domicile within their respective territorial
jurisdictions for the preceding six months, or the greater portion
thereof, or who do not have their principal place of business,
reside, or have their domicile within the United States, but have
property within their jurisdictions, or who have been adjudged
bankrupts by courts of competent jurisdiction without the United
States and have property within their jurisdictions; (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 preser-
vation of estates, to take charge of the property of bankrupts
after the filing of the petition and until it is dismissed or the
trustee is qualified; (4) arraign, try, and punish bankrupts, offi-
cers, and other persons, and the agents, officers, members of the
board of directors or trustees, or other similar controlling bodies
of corporations for violations of this act, in accordance with the
laws of procedure of the United States now in force, or such as
may be hereafter enacted, regulating trials for the alleged viola-
tion of laws of the United States ; ( 5 ) authorize the business of
bankrupts to be conducted for limited periods by receivers, the
marshals, or trustees, if necessary in the best interests of the
6
COURTS OF BANKRUPTCY.
§ 2.] Jurisdiction.
estates; (6) bring in and substitute additional persons or parties
in proceedings in bankruptcy when necessary for the complete
determination of a matter in controversy; (7) cause the estates of
bankrupts to be collected, reduced to money and distributed, and
determine controversies in relation thereto, except as herein other-
wise provided; (8) close estates, whenever it appears that they
have been fully administered, by approving the final accounts and
discharging the trustees, and reopen them whenever it appears
they were closed before being fully administered; (9) confirm or
reject compositions between debtors and their creditors, and set
aside compositions and reinstate the cases; (10) consider and
confirm, modify or overrule, or return, with instructions for
further proceedings, records and findings certified to them by
referees ; ( 1 1 ) determine all claims of bankrupts to their exemp-
tions; (12) discharge or refuse to discharge bankrupts and set
aside discharges and reinstate the cases; (13) enforce obedience
by bankrupts, officers, and other persons to all lawful orders, by
fine or imprisonment or fine and imprisonment; (14) extradite
bankrupts from their respective districts to other districts; (15)
make such orders, issue such process, and enter such judgments in
addition to those specifically provided for as may be necessary
for the enforcement of the provisions of this act; ( 16) punish per-
sons for contempts committed before referees; (17) pursuant to
the recommendation of creditors, or when they neglect to recom-
mend the appointment of trustees, appoint trustees, and upon com-
plaints 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;
and (19) transfer cases to other courts of bankruptcy.
Nothing in this section contained shall be construed to deprive
a court of bankruptcy of any power it would possess were certain
specific powers not herein enumerated.
Analogous Provisions of Former Acts. —
As to courts of bankruptcy: R. S. §§ 563, 711, 4972, 4973, 4974, 4975, 4977,
4978, 4978A, 4978B; act of 1867, §§ 1, 49; act of 1841, §§ 6, 16.
As to specific powers : compare Analogous Provisions of Former Acts, given
under the several sections of this act, cited in the cross-references given in the
notes to this section.
THE NATIONAL BANKRUPTCY LAW.
Courts of Bankruptcy — Jurisdiction of Bankruptcy Courts. [Ch. II.
Courts of Bankruptcy. — In providing for the administration of a
system of bankruptcy Congress has invariably availed itself of
an existing organization, namely, the district courts of the United
States. These courts are denominated and constituted courts of
bankruptcy, but it has been held that although the same persons
hold relatively the same offices, and the territorial jurisdiction of
the courts as courts of bankruptcy is co-extensive with their ju-
risdiction as United States district courts, they are nevertheless,
distinct and separate courts with powers and jurisdiction distinct
and separate. As bankruptcy courts, they are statutory in their
origin, and have no powers, authority or jurisdiction except that
which is expressly conferred upon them by the statute, or that
which is necessarily implied. (Clark v. Binninger, i Abb. N. C.
421 ; 38 How. Pr. 341 ; s. c. 3 N. B. R. 518; in re Norris, 18 Fed.
Cas. 317; 4 N. B. R. 35; Johbins v. Montague, 6 N. B. R. 509;
Fed. Cas. 7330.)
But the courts of bankruptcy are not inferior courts in the sense
that their jurisdiction must necessarily appear upon the face of the
papers. An adjudication in bankruptcy is a proceeding in rem
and the jurisdiction of the court over the person will be presumed
if it does not appear upon the record. (Hayes v. Ford, 55 Ind.
52; 15 N. B. R. 509, citing Ruckman v. Cowell, 1 N. Y. 505.
See also Chemung Bank v. Judson, 8 N. Y. 254; Reed v. Vaughn,
10 Mo. 447 and in re Columbia Real Estate Co. 4 Am. B. R.
411; 101 Fed. 965.)
Construction of the Section. Jurisdiction of Bankruptcy Courts.
This section, first, confers upon courts of bankruptcy, jurisdiction
at law and in equity, in chambers and at regular terms, of all
proceedings in bankruptcy. This is a general vesting of jurisdic-
tion. After that the section goes on and enumerates certain
specific classes of cases to which the jurisdiction shall be deemed
to extend, and which are generally explained in subsequent sec-
tions.
The question of the extent of the jurisdiction of the District
Courts conferred by the terms of this section, especially by subd.
COURTS OF BANKRUPTCY.
§ 2-] Jurisdiction of Bankruptcy Courts.
7, giving jurisdiction to " cause the estates of bankrupts to be
collected, reduced to money and distributed and determine con-
troversies in relation thereto except as herein otherwise pro-
vided," has troubled the courts more than any other question
arising in the administration of the Act of 1898. Finally, how-
ever, the question has been definitely settled (unless Congress
amends the law) by the tribunal whose decrees are theoretically
infallible in Bardes v. First Nat. Bank of Hawarden, 4 Am. B.
R. 163; 178 U. S. 524; 44 L. Ed. 1001. No better statement
of the limitation upon jurisdiction can be given than by
quoting from Mr. Justice Gray's opinion in that case. After
quoting section 2 of the Act of 1898, he proceeds to construe it by
comparison with the Act of 1867 as follows :
" In the Act of 1867, the provisions as to the jurisdiction of proceedings in
bankruptcy, and as to the original jurisdiction of actions at law and suits in
equity, were as follows:
' Sec. 1. 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
bankruptcy, 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 juris-
diction hereby granted and conferred shall be exercised as well in vacation as
in term time, and a judge sitting at chambers shall have the same powers and
jurisdiction, including the power of keeping order and of punishing any con-
tempt of his authority, as when sitting in court. And the jurisdiction hereby
conferred shall extend to all cases and controversies arising between the bank-
rupt 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 settle-
ment of the estate of the bankrupt, and the close of the proceedings in bank-
ruptcy.' 14 Stat. 517; Rev. Stat. §§ 563, 711, 4972, 4973.
' Sec. 2. 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 and questions
arising under this act; and, except when special provision is otherwise made,
(2)
io THE NATIONAL BANKRUPTCY LAW.
Jurisdiction of Bankruptcy Courts. [Ch. II.
may, upon bill, petition or other proper process, of any party aggrieved, hear
and determine the case in a court of eguity. 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 also have concurrent
jurisdiction 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 property or rights of property of said bankrupt
transferable to or vested in such assignee.' 14 Stat. 518; Rev. Stat. §§
4979, 4986.
In Lathrop v. Drake (1875), 91 U. S. 516, the jurisdiction conferred on the
District Courts and the Circuit Courts of the United States by the Bankrupt
Act of 1867 was defined by this court, speaking by Mr. Justice Bradley, as
consisting of 'two distinct classes: first, jurisdiction, as a court of bank-
ruptcy, over the proceedings in bankruptcy, initiated by the petition, and end-
ing in the distribution of assets amongst the creditors, and the discharge or
refusal of a discharge of the bankrupt; secondly, jurisdiction, as an ordinary
court, of suits at law or in equity, brought by or against the assignee in refer-
ence to alleged property of the bankrupt, or to claims alleged to be due from
or to him,' and the jurisdiction of the District and Circuit Courts over suits
to recover assets of the bankrupt from a stranger to the proceedings in bank-
ruptcy, brought by the assignee in a district other than that in which the de-
cree in bankruptcy had been made, was upheld, not under the provisions of
section 1 of that act, giving to the District Court original jurisdiction of pro-
ceedings in bankruptcy, and of section 2, giving to the Circuit Court supervis-
ory jurisdiction over such proceedings; but wholly under the distinct clause of
section 2, which gave to those two courts concurrent jurisdiction of all suits, at
law or in equity, brought 'by the assignee in bankruptcy against any person
claiming an adverse interest, or by such person against such assignee, touch-
ing any property or rights of property of said bankrupt transferable to or
vested in such assignee.'
The jurisdiction of the courts of the United States over all matters and
proceedings in bankruptcy, as distinguished from independent suits at law or
in equity, was of course exclusive. But it was well settled that the jurisdiction
of such suits, conferred by the second section of the Act of 1867 upon the
Circuit and District Courts of the United States for the benefit of an assignee
in bankruptcy, was concurrent with that of the State courts. In Eyster v.
Gaff (91 U. S. 521), this court, speaking by Mr. Justice Miller, said: 'The
opinion seems to have been quite prevalent in many quarters at one time, that,
the moment a man is declared bankrupt, the District Court which has so ad-
judged draws to itself by that act not only all control of the bankrupt's
property and credits, but that no one can litigate with the assignee contested
rights in any other court, except in so far as the Circuit Courts have concur-
COURTS OF BANKRUPTCY. n
§ 2.] Jurisdiction of Bankruptcy Courts,
rent jurisdiction, and that other courts can proceed no further in suits of which
they had at that time full cognizance ; and it was a prevalent practice to bring
any person who contested with the assignee any matter growing out of dis-
puted rights of property or of contracts, into the bankrupt court by the service
of a rule to show cause, and to dispose of their rights in a summary way. This
court has steadily set its face against this view. The debtor of a bankrupt,
or the man who contests the right to real or personal property with him, loses
none of those rights by the bankruptcy of his adversary. The same courts re-
main open to him in such contests, and the statute has not divested those
courts of jurisdiction in such actions. If it has for certain classes of actions
conferred a jurisdiction for the benefit of the assignee in the Circuit and
District Courts of the United States, it is concurrent with and does not di-
vest that of the State courts.'
Under the Act of 1867, then, the distinction between proceedings in bank-
ruptcy, properly so called, and independent suits, at law or in equity, between
the assignee in bankruptcy and an adverse claimant, was distinctly recog-
nized and emphatically declared. Jurisdiction of such suits was conferred
upon the District Courts and Circuit Courts of the United States by the
express provision to that effect in section 2 of that act, and was not derived
from the other provisions of sections 1 and 2, conferring jurisdiction of pro-
ceedings in bankruptcy. And the jurisdiction of suits between assignees and
adverse claimants, so conferred on the Circuit and District Courts of the
United States, did not divest or impair the jurisdiction of the State courts
over like cases.
We now recur to the provisions of the Act of 1898. This act has the some-
what unusual feature of inserting at the head of each section a separate title
indicating its subject-matter.
Section 2 of this act, entitled ' Creation of Courts of Bankruptcy and
their Jurisdiction,' takes the place of section 1 of the Act of 1867, and hardly
differs from that section, except in the following particulars :
First. It begins by describing the jurisdiction conferred on ' the courts of
bankruptcy ' as ' such jurisdiction, at law and in equity, as will enable them to
exercise original jurisdiction in bankruptcy proceedings;' and it ends by de-
claring that ' nothing in this section contained shall be construed to deprive
a court of bankruptcy of any power it would possess were certain specific
powers not herein enumerated.'
Second. It specifies in greater detail matters which are, in the strictest
sense, proceedings in bankruptcy.
Third. It includes, among the powers specifically conferred on the courts
of bankruptcy, those to ' (4) arraign, try and punish bankrupts, officers and
other persons, and the agents, officers, members of the board of directors or
trustees, or other similar controlling bodies of corporations, for violations,
of this act, in accordance with the laws of procedure of the United States now
12 THE NATIONAL BANKRUPTCY LAW.
Jurisdiction of Bankruptcy Courts. [Ch. II.
in force, or such as may be hereafter enacted, regulating trials for the alleged
violation of laws of the United States;' ' (6) bring in and substitute ad-
ditional persons or parties in proceedings in bankruptcy, when necessary for
the complete determination of a matter in controversy; (7) cause the estates
of bankrupts to be collected, reduced to money and distributed, and determine
controversies in relation thereto, except as herein otherwise provided;' and
' (15) make such orders, issue such process, and enter such judgments, in ad-
dition to those specifically provided for, as may be necessary for the enforce-
ment of the provisions of this act.'
The general provisions at the beginning and end of this section mention
' courts of bankruptcy ' and ' bankruptcy proceedings.'
Proceedings in bankruptcy generally are in the nature of proceedings in
equity ; and the words ' at law,' in the opening sentence conferring on the
courts of bankruptcy ' such jurisdiction, at law and in equity, as will enable
them to exercise original jurisdiction in bankruptcy proceedings,' may have
been inserted to meet clause 4, authorizing the trial and punishment of offenses,
the jurisdiction over which must necessarily be at law and not in equity.
The section nowhere mentions civil actions at law, or plenary suits in
equity. And no intention to vest the courts of bankruptcy with jurisdiction to
entertain such actions and suits can reasonably be inferred from the grant of
the incidental powers, in clause 6, to bring in and substitute additional parties
' in proceedings in bankruptcy,' and in clause 15, to make orders, issue process
and enter judgments, ' necessary for the enforcement of the provisions of this
act.'
The chief reliance of the appellant is upon clause 7. But this clause, in so
far as it speaks of the collection, conversion into money and distribution of the
bankrupt's estate, is no broader than the corresponding provisions of section 1
of the Act of 1867; and in that respect, as well as in respect to the further pro-
vision authorizing the court of bankruptcy to ' determine controversies in
relation thereto,' it is controlled and limited by the concluding words of the
clause, ' except as herein otherwise provided.'
These words, ' herein otherwise provided,' evidently refer to section 23 of
the act, the general scope and object of which, as indicated by its title, are to
define the 'Jurisdiction of United States and State Courts' in the premises.
The first and second clauses are the only ones relating to civil actions and
suits at law or in equity.
The first clause provides that ' the United States Circuit Courts shall have
jurisdiction of all controversies at law and in equity, as distinguished from
proceedings in bankruptcy' (thus clearly recognizing the essential difference
between proceedings in bankruptcy, on the one hand, and suits at law or in
equity, on the other), 'between trustees as such and adverse claimants, con-
cerning the property acquired or claimed by the trustees,' restricting that
jurisdiction, however, by the further words, ' 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 claim-
ants." This clause, while relating to the Circuit Courts only, and not to the Dis-
COURTS OF BANKRUPTCY. i3
§ 2. Jurisdiction of Bankruptcy Courts.
trict Courts of the United States, indicates the intention of Congress that the
ascertainment, as between the trustee in bankruptcy and a stranger to the
bankruptcy proceedings, of the question whether certain property claimed
by the trustee does or does not form part of the estate to be administered in
bankruptcy, shall not be brought within the jurisdiction of the national courts
solely because the rights of the bankrupt and of his creditors have been trans-
ferred to the trustee in bankruptcy.
But the second clause applies both to the District Courts and to the Circuit
Courts of the United States, as well as to the State courts. This appears, not
only by the clear words of the title of the section, but also by the use in this
clause of the general words, ' the courts,' as contrasted with the specific words,
' the United States Circuit Courts,' in the first and in the third clauses.
The second clause positively directs that ' 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 pro-
posed defendant.'
Had there been no bankruptcy proceedings, the bankrupt might have
brought suit in any State court of competent jurisdiction ; or, if there was
a sufficient jurisdictional amount, and the requisite diversity of citizenship ex-
isted, or the case arose under the Constitution, laws or treaties of the United
States, he could have brought suit in the Circuit Court of the United States.
Act of August 13, 1888, ch. 866 ; 25 Stat. 434. He could not have sued in a Dis-
trict Court of the United States, because such a court has no jurisdiction of
suits at law or in equity between private parties, except where, by special
provision of an act of Congress, a District Court has the powers of a Circuit
Count, or is given jurisdiction of a particular class of civil suits.
It was argued for the appellant that the clause cannot apply to a case like the
present one, because the bankrupt could not have brought a suit to set aside a
conveyance made by himself in fraud of his creditors. But the clause concerns
the jurisdiction only, and not the merits, of a case; the forum in which a case
may be tried, and not the way in which it must be decided ; the right to decide
the case, and not the principles which must govern the decision. The bank-
rupt himself could have brought a suit to recover property, which he claimed
as his own, against one asserting an adverse title in it; and the incapacity of
the bankrupt to set aside his own fraudulent conveyance is a matter affecting
the merits of such an action, and not the jurisdiction of the court to entertain
and determine it.
The Bankrupt Acts of 1867 and 1841, as has been seen, each contained a
provision conferring in the clearest terms on the Circuit and District Courts of
the United States concurrent jurisdiction of suits at law or in equity between
the assignee in bankruptcy and an adverse claimant of property of the bank-
rupt. We find it impossible to infer that when Congress, in framing the Act
of 1898, entirely omitted any similar provision, and submitted the restricted
provisions of section 23, it intended that either of those courts should retain
the jurisdiction which it had under the obsolete provision of the earlier acts.
i4 THE NATIONAL BANKRUPTCY LAW.
Territorial Extent of Jurisdiction. [Ch.II.
On the contrary, Congress, by the second clause of section 23 of the present
Bankrupt 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 strangers to those pro-
ceediings, should not come within the jurisdiction of the District Courts of the
United States, ' unless by consent of the proposed defendant,' of which there
is no pretence in this case.
One object in inserting this clause in the act may well have been to leave
such controversies to be tried and determined for the most part, in the local
courts of the State, to the greater economy and convenience of litigants and
witnesses. See Shoshone Mining Co. v. Rutter, 177 U. S. 505, 511, 513."
It will thus be seen that the District Courts of bankruptcy have
no jurisdiction (unless conferred by consent) except exclusive
jurisdiction in matters which belong to " Proceedings in Bank-
ruptcy " beginning with the petition and ending with the dis-
charge or non-discharge of the bankrupt and the distribution of
assets. What this jurisdiction includes will best be discovered
by studying the act in detail. For further discussion as to gen-
eral limits of jurisdiction, see section 23 post. We will now con-
sider the general provisions of this section separately :
Territorial Extent of Jurisdiction. Section 2 (1) (19) — The
act provides that the courts of bankruptcy are vested with juris-
diction " within their respective territorial limits." Under the
former act, the equivalent words " in their respective districts "
were construed differently by the different courts. The question
arose most frequently in cases where assignees brought suits to
recover assets of the bankrupt in district courts other than those
by which they were appointed. The Supreme Court of the
United States held that the jurisdiction of the bankruptcy court
was confined to its respective district only in so far as the exer-
cise of it was concerned. Each court could exercise its jurisdic-
tion and powers only within its own district, but its powers ex-
tended to all matters of bankruptcy without limitation.
It was held that the jurisdiction over bankruptcy proceedings
as such was necessarily limited to the court of the district which
acquired jurisdiction over the person of the bankrupt, pursuant
COURTS OF BANKRUPTCY. 15
§ 2.] Territorial Extent of Jurisdiction.
to the statute ; but the exclusion of other district courts from jur-
isdiction over bankruptcy proceedings as such, did not prevent
the courts of bankruptcy of other districts from exercising juris-
diction in matters growing out of, or connected with that identical
bankruptcy, so far as it did not conflict with or trench upon the
jurisdiction of the court in which the case was pending. That
the courts of other districts might exercise jurisdiction in such
cases, was held by the Supreme Court to be a necessary result of
the general jurisdiction conferred upon bankruptcy courts, and
was in harmony with the scope and design of the act. (Lathrop
v. Drake, 91 U. S. 516.) It is, however, to be noted in connec-
tion with this case that by the present statute the trustee can bring
suits only where the bankrupt might have brought them, had
not bankruptcy occurred. See Bardes v. Bank, 4 Am. B. R. 163 ;
178 U. S. 524. Moreover the limitation that bankruptcy courts
shall exercise their powers only within their own districts pre-
vents them from summoning parties from without their districts.
It does not limit their power over the subject-matter of which
they are given jurisdiction. Thus when they make an adjudica-
tion of bankruptcy, and a trustee is chosen, the bankrupt's prop-
erty wherever situated passes to him, and all. his debts wherever
the creditors reside are affected by the orders and decrees of the
bankruptcy court. The property passes to the trustee who is the
officer of the bankruptcy court appointing him, and it is thus
in the custody of that court, so that all creditors holding claims
are affected by all of its decrees, whether they come into the
proceeding voluntarily or involuntarily, or fail to enter any ap-
pearance whatever. (Markson v. Heaney, 1 Dill. 497; Fed. Cas.
9098; 3 Chi. Leg. News, 153; 4 N. B. R. 510; Paine v. Caldwell,
Fed. Cas. 10,674; 6 N. B. R. 558, citing Picquet v. Swan, Fed.
Cas. 11,134; 5 Mason, 35; Toland v. Sprague, 12 Pet. 327;
Herndon v. Ridgeway, 17 How. 424; in re Hirsch, 2 N. B. R.
3 ; Fed. Cas. 6,529 ; 2 Ben. 493 ; Jobbins v. Montague, 6 N. B. R.
509; Fed. Cas. 7,330.)
It may often happen that petitions may be properly filed in
either of two districts. Hence section 32 post provides that
1 6 THE NATIONAL BANKRUPTCY LAW.
Courts Always Open — Jurisdiction to Adjudge Persons Bankrupt. [Ch. II.
In the event petitions are filed against the same persons in different courts
of bankruptcy each of which has jurisdiction, the case shall be transferred to
the court which can proceed for the greatest convenience of parties in interest.
And General Order 6 provides " that if two or more petitions
shall be filed against the same individual in different districts,
the first hearing shall be had in the district in which the debtor
has his domicil," although the case may be transferred by one
court to the other, " if that is for the greatest convenience of the
parties in interest."
And see subd. 19 of this section giving jurisdiction " to trans-
fer cases to other courts of bankruptcy."
Courts Always Open. Section 2 (1) (2) (8) (12) — The pro-
ceedings in bankruptcy from the time of filing the petition to the
final order of distribution or the settlement of the trustee's ac-
counts, is one continuous, entire proceeding. Whether the mat-
ters are heard at chambers during vacation or in court during
term time, the court is always open and the proceedings may be
re-opened and re-examined at any time during their pendency,
unless rights have become vested. Such application for re-ex-
amination is only a part of the original proceedings. ( Sandusky
v. Bank, 23 Wall. 289; s. c. 12 N. B. R. 176.) By subdivision
(2) of this section, express authority is given to the court to re-
consider allowed or disallowed claims, and by subdivision (8)
they may re-open closed estates, whenever it appears that they
were closed before being fully administered; they may also set
aside compositions and re-instate the cases (9), and may set aside
discharges and re-instate the cases (12).
As to reconsideration of claims see section 57k; as to setting
aside composition see section 13; as to revocation of discharges
and re-opening of estates see sections 15, 7od. post.
Jurisdiction to Adjudge Persons Bankrupt. Section 2 (1) —
Many differences are to be noted between the provisions of (1)
of this section, and the corresponding provisions under former
acts as to the facts giving the bankruptcy court jurisdiction to
adjudicate one bankrupt. Under the act of 1867, it was provided
COURTS OF BANKRUPTCY. i7
§ 2.] Jurisdiction to Adjudge Persons Bankrupt.
that the courts might adjudge as bankrupt persons who " had re-
sided or carried on business for the six months next preceding the
time of filing such petition, or for the longest period during such
six months." There was nothing in the act in regard to domicil,
and consequently frequent questions arose as to place of residence,
when the place of residence differed from the place of domicil.
The present act by inserting the word "domicil," sets those ques-
tions at rest. Domicil and residence are distinct terms. Resi-
dence may involve the intent to leave when the purpose for which
it has been taken ceases; domicil implies no such intent. The
abiding is animo manendi. One is a resident of a place from
which his departure is indefinite as to purpose; and for this pur-
pose he has made the place his temporary home, while if his intent
be to remain permanently, it becomes his domicil. Residence for
voting purposes, or for the benefit of the poor laws is not neces-
sarily the same as residence in cases involving jurisdiction for
judicial purposes. Where it is sought to be proved that there
has been an abandonment of the old domicil in the establishment
of a new one, the burden of proof lies upon those asserting such
change. {In re Berner, 3 Am. B. R. 325 ; in re Cisdell, 2 Am.
B. R. 424 ; both of which are referees' decisions. See also In re
Grimes, D. C. 2 Am. B. R. 160; 96 Fed. 529 and cases cited in
the opinions.)
The words " principal place of business " instead of the
words " carried on business " also prevents the arising of
many questions which frequently sprang up under the former
act. where persons conducted a business in a certain place and
in connection with it had agencies or branches in other places.
The expression " for the preceding six months or the greater
portion thereof," should also be noted. The words " for the six
months next preceding or for the longest period during such six
months," in the former act, were construed as giving the court
jurisdiction to adjudge one bankrupt if he had resided only one
day in the district, provided he had not resided a longer period
in any other district ; but the words " for the preceding six months
or the greater portion thereof," imply that unless a debtor has
(3)
1 8 THE NATIONAL BANKRUPTCY LAW.
Allowing Claims — Power to Take Charge of Property. [Ch. II.
resided within the district for at least three months, the court has
no jurisdiction to adjudge him bankrupt. But by the better opin-
ion any residence of three months' duration during the six months'
period is sufficient to give the court jurisdiction. It need not be
at the beginning or end of such period. (In re Ray, 2 Am. B. R.
159; in re Berner, supra, disapproving of in re Stokes, 1 Am. B.
R. 35-)
Aliens whether resident or non-resident, may be adjudged
bankrupt, the only requirement being that they shall either have
property within the jurisdiction of the court, and have neither a
residence, domicil, nor principal place of business in the United
States, or else that they shall have such property within the juris-
diction of the court, and shall have theretofore been adjudged
bankrupt by a foreign court, and regardless of whether they do
reside or have a domicil, or a principal place of business in the
United States. Under the former act only resident aliens could
take the benefit of it.
As to effect of foreign bankruptcies see note under section 17
on that subject.
Allowing Claims. Section 2 (2) — Compare, as to proof of
claims, section 57; as to provable debts, section 63.
Power to Take Charge of Property. Section 2 (3) (5) — The
right of the court to appoint receivers or marshals to preserve the
estate of the bankrupt and to take charge of the property between
the filing of the petition and the adjudication upon it, or the
qualification of the trustee, relates to the same subject as sec-
tion 69, except that section 69 relates only to involuntary bank-
ruptcy while the grant of power under this section is broader.
Such an order should never be made without requiring the bond
in that section provided for. This subdivision (3) did not ap-
pear in the bankruptcy bill until after the conference between the.
House and the Senate. It was doubtless inserted for the purpose
of clearing up any questions that might arise as to the jurisdiction
of the bankruptcy court over the property before adjudication.
COURTS OF BANKRUPTCY. i9
§ 2.] Power to Make and Enforce Orders by Proceedings for Contempt.
It is to be borne in mind that under the present act, the title to
the property which is vested in the trustee, does not relate back
to the time of the filing of the petition, but only to the time of
adjudication; but from the time of the filing of the petition in
bankruptcy, the property of the bankrupt, the subject-matter of
the proceeding comes into the prehensory power of the court as
fully as if it were in the actual and visible presence of the court,
and consequently it is under its protection and control.
Courts of bankruptcy have undoubted authority not only by
the special provisions of this section but by virtue of their general
equity powers to appoint receivers and to preserve the property
by taking it into their legal custody, through receivers and into
their manual control through their marshals. (Cox v. Wall, 3
Am. B. R. 664 ; 99 Fed. 546 ; In re Fixen & Co. 2 Am. B. R. 822 ;
96 Fed. 748 and, cases cited.) The compensation to be allowed
to the receiver and the marshal in this respect rests in the sound
discretion of the Court. {In re Scott, 3 Am. B. R. 625 ; 96 Fed.
607; In re Adams Sartorial Co. 4 Am. B. R. 107; 101 Fed. 215.)
Power to Make and Enforce Orders by Proceedings for Contempt.
Section 2 (13) (15) (16) — The power to make all necessary
orders and to enforce obedience thereto is inherent in every court.
See further in this connection section 7 as to the Duties of Bank-
rupts. The power of a court to punish summarily for contempt
is as old as the law itself. Such a proceeding is in the nature of a
^Masi-criminal proceeding, but it is not a criminal proceeding
within the meaning of the Constitution, guaranteeing a jury trial.
This has been uniformly held throughout the Union. In re Debs.
(158 U. S. 564) the Supreme Court held that the court enforcing
obedience to its orders by proceedings of contempt is not execu-
ting the criminal law of the land nor invading any constitutional
right; but it has been as uniformly held that the respondent in
proceedings for contempt should always have an opportunity
to be heard in his defense before final order punishing him is
made. A valuable discussion of the general law of contempt will
be found in the case of State v. Matthews (37 N. H. 453). In a
20 THE NATIONAL BANKRUPTCY LAW.
Cross References — Subdivisions not Heretofore Discussed. [Ch. II,
late case decided by the Circuit Court of Appeals of the 8th Circuit
(In re Rosser, 4 Am. B. R. 153; 101 Fed. 562), the Court, while
upholding the right to punish a bankrupt for failure to turn over
property to his trustee, and holding that the exercise of such
power is in no sense a violation of the Statute against imprison-
ment for debt, held that before a bankrupt or other person can be
punished for contempt for failure to obey an order to turn over
property, he must have notice and an opportunity to show cause
why he should not comply with the order. Where such notice
was not given before the order was made, the fact that he is
allowed upon the proceedings for contempt to be cross-examined
does not cure the defect involved in the order of the referee in
failing to give him such notice. ( See also, Ripon Knitting Works
v. Schreiber, 4 Am. B. R. 299; 101 Fed. 810; In re Schlesinger,
4 Am. B. R. 361 ; 102 Fed. 117.)
As to the practice in punishing contempts committed before a
referee see section 41.
Cross Eeferences — Subdivisions not Heretofore Discussed. — Sub-
divisions 6 and 7 have already been considered under head of
" Construction of the Section " ante. Subdivision 5 relates to the
same subject as subdivision 3. The following are the cross ref-
erences to the other subdivisions which are discussed at length
in subsequent sections of the Law.
(4) As to offenses, compare section 29; as to the right to a
jury trial, compare section 19 (c).
(8) As to accounts of trustees, compare section 47.
(9) As to compositions, compare sections 12 and 13. As to
the title vesting in trustee appointed after a composition is set
aside, see section 70 (d) ; as to the election of a trustee after a
composition is set aside, see section 44.
(10) As to referee's powers, duties and records, see sections
38> 39. 4i and 42.
(11) As to exemptions, see section 6; as to bankrupt's duty
to claim exemptions, see section 7 (8) ; as to trustee's duty to set
apart exemptions, see section 47.
COURTS OF BANKRUPTCY. 21
§ 2.] Cross References — Subdivisions not Heretofore Discussed.
(12) As to discharge, the granting of it, revocation, and effect,
see sections 14, 15, 16 and 17. As to the title of a trustee ap-
pointed after a discharge is set aside, see section 70 d ; as to the
appointment of a trustee after a discharge is set aside, see sec-
tion 44.
( 14) As to extraditions, see section 10.
(19) Transfer of cases. Compare section 32.
CHAPTER III.
BANKRUPTS.
Sec. 3. Acts of Bankruptcy. — a Acts of bankruptcy by a person
shall consist 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 cred-
itors, or any of them; or (2) transferred, while insolvent, any
portion of his property to one or more of his creditors with intent
to prefer such creditors over his other creditors; or (3) suffered
or permitted, while insolvent, any creditor to obtain a preference
through legal proceedings, and not having at least five days be-
fore a sale or final disposition of any property affected by such
preference vacated or discharged such preference; or (4) made a
general assignment for the benefit of his creditors ; or ( 5 ) admitted
in writing his inability to pay his debts and his willingness to be
adjudged a bankrupt on that ground.
b A petition may be filed against a person who is insolvent and
who has committed an act of bankruptcy within four months
after the commission of such act. Such time shall not expire
until four months after(i)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, de-
lay, or defraud his creditors or for the purpose of giving a pref-
erence 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 takes 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 bank-
ruptcy instituted under the first subdivision of this section to
allege and prove that the party proceeded against was not insol-
vent as denned in this act at the time of the filing the petition
against him, and if solvency at such date is proved by the alleged
bankrupt the proceedings shall be dismissed, and under said sub-
division one the burden of proving solvency shall be on the alleged
bankrupt.
BANKRUPTS. 23
§ 3-] Construction of the Section.
d Whenever a person against whom a petition has been filed
as hereinbefore provided under the second and third subdivisions
of this section takes 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 insolvency, and in case of his failure to so attend and
submit to examination the burden of proving his solvency shall
rest upon him.
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 any part of the same, prior to the adjudication and pending a
hearing on the petition, the petitioner or applicant shall file in the
same court a bond with at least two good and sufficient sureties
who shall reside within the jurisdiction of said court, to be ap-
proved by the court or a judge thereof, in such sum as the court
shall direct, conditioned for the payment, in case such petition is
dismissed, to the respondent, his or her personal representatives,
all costs, expenses, and damages occasioned by such seizure,
taking, and detention of the property of the alleged bankrupt.
If such petition be dismissed by the court or withdrawn by the
petitioner, the respondent or respondents shall be allowed all costs,
counsel fees, expenses, and damages occasioned by such seizure,
taking, or detention of such property. Counsel fees, costs, ex-
penses, and damages shall be fixed and allowed by the court, and
paid by the obligors in such bond.
Analogous Provisions of Former Acts. —
R. S., § 5021 (amended by act of June 22, 1874, ch. 390, § 12, and by act of
July 26, 1876, ch. 234, § 1) ; act of 1867, § 39 (amended by act of July 27, 1868,
§ 2) ; act of 1841, § 7 ; act of 1800, §§ 1, 2.
Construction of the Section. — This section relates to involuntary
bankruptcy. There was some conflict of authority as to the
proper construction to be given to similar provisions in former
bankruptcy acts. On principle and highest authority, though,
we should say that as the section sets forth acts which justify a
court in depriving one of his property, being in derogation of
common-law rights, it should be construed strictly. Though the
24 THE NATIONAL BANKRUPTCY LAW.
Construction of the Section. Ch. III.
general purpose of the act is remedial, this section is almost penal
in character. It ought not to be enlarged by construction to in-
clude acts that may be within the reason of the law, but which are
not within the words of the statute according to a reasonable con-
struction. The facts and circumstances justifying one person in
instituting a proceeding to take from another all possession and
control of his property and to stop him in the pursuit of his busi-
ness, ought to be defined by law with exactness, and the law
should not be construed to include cases not clearly within its
scope. (Wilson v. City Bank, 17 Wall. 473; 9 N. B. R. 97; s. c.
below, 1 Dill. 476; Fed. Cas. 17,797; 5 N. B. R. 270; Jones v.
Sleeper, Fed. Cas. 7,496; 2 N. Y. Leg. Obs. 131; Act of 1841.)
And this seems to be the construction which has been placed
upon the present law. In the case of the Empire Metallic Bed-
stead Co. C. C. A. 2d Circuit (3 Am. B. R. 575 ; 39 C. C. A. 372 ;
98 Fed. 981), the question was whether an application under the
New York Statute for a dissolution of a corporation and the ap-
pointment of a receiver was an act of bankruptcy. The petition
of the creditors in bankruptcy alleged that the statutory procedure
was equivalent to a general assignment and hence an act of bank-
ruptcy. But the Circuit Court of Appeals refused to recognize
" equivalency " of result and said that it was not the province
of a court to " enlarge the classification because the omitted class
seems to partake of the sin of the named class."
Many courts, however, have favored a liberal construction. In
the case of In re Muller (Deady, 519; Fed. Cas. No. 9,912), the
Court says : " Counsel have insisted that this is a special pro-
ceeding, purely statutory, and that the. bankruptcy act is to be
construed most strictly against the petitioning creditor and in
favor of the bankrupt. In the opinion of the court this view of
the matter is not supported by reason or authority. The act does
not attempt to punish the bankrupt, but to distribute his property
fairly and impartially among his creditors, to whom in justice
it belongs. It is remedial and seeks to protect the honest creditor
from being over-reached and defrauded by the unscrupulous. It
is intended to relieve the honest but unfortunate debtor from the
BANKRUPTS.
25
§ 3.] Acts of Bankruptcy — Fraudulent Transfers, Concealments, etc.
burden of liabilities which he cannot discharge, and allow him to
commence the business of life anew. Such a statute is not to be
construed strictly, but according to the fair import of its terms
with a view to effect its objects and to promote justice." (See
also favoring a liberal construction, In re Silverman, 4 N. B. R.
523; s. c. 2 Abb. C. C. 243.)
Acts of Bankruptcy. — It is to be first observed in the analysis of
this section that the insolvency of the debtor is an essential con-
comitant in the act of bankruptcy only in subdivisions 2 and 3
relating to transfers with an intent to give preferences to credit-
ors over other creditors and the suffering or permitting a credit-
or to obtain a preference by legal proceedings. But by para-
graph (c) it is provided that solvency at the date of the filing of
the petition in bankruptcy against him shall be a complete de-
fense to proceedings instituted under subdivision 1, which relates
to fraudulent conveyances made with intent to hinder, delay or
defraud the bankrupt's creditors or any of them. In subdivisions
4 and 5 it is immaterial whether insolvency exists at the time of
the act of bankruptcy or of the filing of the petition or not. This
is an important distinction which will be referred to hereafter
under the head of general assignments as acts of bankruptcy.
(See, for analysis of this section, West Co. v. Lea, U. S. Supreme
Court [1899] 2 Am. B. R. 463; 174 U. S. 590.) It is to be re-
membered in this connection that insolvency as defined by the
Bankruptcy Act, Section 1 (15) is as follows : " 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 per-
mitted 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." See discussion as to the meaning
of this definition under section 1 ante.
First Class of Acts of Bankruptcy — Fraudulent Transfers, Con-
cealments, etc., with Intent to Hinder, Delay or Defraud. Section
3a (1) — By Section 1 (25) " transfer " is denned to include " the
(4)
26 THE NATIONAL BANKRUPTCY LAW.
Fraudulent Transfers, Concealments, etc. [Ch. III.
sale and every other mode of disposing of or parting with prop-
erty or the possession of property, absolutely or conditionally, as a
payment, pledge, mortgage, gift or security." Such transfers are
declared void if made within four months of bankruptcy by Sec-
tion 6ye post (q. v.). Even if made sooner than four months
prior to bankruptcy, they may be avoided by the trustee suing in
equity as the representative of creditors (section joe post).
The acts referred to in this subdivision are : those transfers or
conveyances made with intent to defraud, delay or hinder credit-
ors which under the statute of 13 Eliz. ch. 5 (and the common
law), were declared void, which statute has been adopted with
few changes in nearly every state of the Union. They include all
those transfers in which the lack of a change of possession or of
delivery, or the want of consideration, as well as other facts,
prove or tend to prove an intent to defraud, delay or hinder cred-
itors. Just what acts and circumstances attending the transac-
tions will furnish a legal presumption of the existence of this
fraudulent intent, is largely a question, not of the law of bank-
ruptcy, but of the law of fraudulent assignments, and the de-
cisions upon cases of that character will be applicable.
Such acts must be accompanied by an intent to hinder, delay,
or to defraud. Intent is a fact to be proven {In re Cowles, 1
N. B. R. 280; Fed. Cas. 3,297; In re Goldschmidt, Fed. Cas.
5,520; 3 N. B. R. 165; s. c. 3 Ben. 379; Ecfort v. Greely, 6 N.
B. R. 433; Fed. Cas. 4,260; Perry v. Langley, 2 N. B. R. 596;
s. c. 8 A. L. Reg. 427) ; but it need not be established by direct
proof; in fact, it is hardly susceptible of direct proof. As the
mind manifests itself only by outward acts, intent must be in-
ferred from other facts which are proven. (Van Wyck v. Sew-
ard, 18 Wend. 374, 395; Newman v. Cordell, 43 Barb. 456.)
Intent can be evidenced only by one's acts or admissions. Oral
or written admissions that an intent exists, are almost conclu-
sive evidence. All the circumstances accompanying the act and
tending to explain the intent, are admissible in evidence. The
intention may be inferred from the act itself as a necessary con-
sequence of it, or it may be established by admissions and dec-
BANKRUPTS. 27
§ 3.] Voluntary Transfers — Delay — Creditors — " Any One of Them."
larations of the actor, and such admissions and declarations, al-
though not contemporaneous with the commission of the act, if
they are so connected with it as to form part of the res gestae, are
admissible. ( Roach v. Great Western R. R. 1 Q. B. 5 1 ; Bateman
v. Bailey, 5 T. R. 512; Newman v. Stretch, M. & M. 388.)
Compare what is said post upon intent in connection with sub-
division 2 on the subject of preferences.
Voluntary Transfers — Voluntary conveyances, that is, convey-
ances made where good will and friendship are the only consid-
erations, are generally held to be prima facie fraudulent and
void, and throw the burden of proof upon the transferrer, to
overcome the legal presumption of a fraudulent intent thus raised.
(Van Wyck v. Seward, 18 Wend. 374, 395 ; Wood v. Hunt, 38
Barb. 302 ; Babcock v. Echler, 24 N. Y. 623.) When a voluntary
transfer of property is attacked by creditors, it is not always suf-
ficient for the donor to show that at the time of making it he re-
tained sufficient property to pay his debts. It must also be shown
that he made it without intent to defraud creditors. Such trans-
fers are peculiarly suspicious where one is engaged in business in-
volving great risks, or which is in a failing condition. (Beecher
v. Clark, 10 N. B. R. 385; Fed. Cas 1,223, citing Fox v. Mayer,
54 N. Y. 125, at 133.)
Delay. — A transfer which will merely delay a creditor in en-
forcing his rights, if made with that intent, is void and is an act of
bankruptcy. Thus it has been held that a sale of all one's prop-
erty for a very small sum in cash and the balance on a very long
credit, made with intent to delay creditors, is an act of bankruptcy ;
that such a sale inevitably delaying creditors, the intent to delay
may be presumed. (In re Goldschmidt, Fed. Cas. 5,520; 3 N.
B. R. 165; s. c. 3 Ben. 379.)
Creditors. — "Any One of Them." — The word "creditor" in-
cludes any one who owns a demand or claim provable in bank-
ruptcy. (Section 1 [9].) As to what are claims provable in
bankruptcy see section 63 post. An unliquidated claim is not a
28 THE NATIONAL BANKRUPTCY LAW.
Concealment — Transfer With Intent to Prefer. [Ch. III.
provable debt in bankruptcy, and when arising out of a tort must
be reduced to judgment or be liquidated as the court may direct
in order to be provable. Therefore where the only alleged cred-
itor is one who has an unliquidated claim for tort unreduced to
judgment at the time of an alleged preferential transfer, he is
not a creditor who can insist that such transfer is an act of bank-
ruptcy. (See Beers v. Hanlin, 3 Am. B. R. 745; 99 Fed. 695.)
Concealment. — This word is denned by Section 1 (22) as in-
cluding secreting, falsifying and mutilating. Concealment of
assets is a ground for refusing discharge by Section 14b, and an
offense punishable by imprisonment by Section 29, which see for
more detailed discussion.
The permitting of a removal or concealment of his property
by a debtor is of course equally obnoxious to the law, when made
with intent to hinder, delay, etc., and does not need discussion
Qui non prohibet id quod prohibere potest, assentire videtur.
(2 Coke Inst. 305.)
For further consideration of Fraudulent Transfers see Section
6?e post.
Transfer With Intent to Prefer. Section 3a (2) — The acts, by
subdivision 2 declared to be acts of bankruptcy, are not in
themselves illegal or fraudulent. The common law, which
throughout this country is on this point generally unchanged,
does not deem it wrong for a debtor, although he is in failing cir-
cumstances, to pay one creditor in full, notwithstanding the re-
sult may be that other creditors go unpaid. But it is to avoid
this partiality in paying creditors that a bankruptcy law is en-
acted. Its fundamental purpose is to secure the equal or pro rata
distribution among creditors of the property of one who is un-
able to pay all in full. This subdivision is to be considered in
connection with section 60b which defines "preferences," and
declares the circumstances under which they will be invalidated.
But, although that section and this subdivision are in pari ma-
teria, in determining what is an act of bankruptcy, this subdivision
BANKRUPTS. 29
§ 3.] Transfer With Intent to Prefer.
is to be considered independently of section 60, except in so far
as that section defines " preference."
Section 60 declares what is a preference and under what cir-
cumstances it can be invalidated, but it is to be noted that al-
though it may not be voidable, a preference may yet be an act of
bankruptcy. To make it such, although intent on the part of the
transferrer is an essential element, the intent or motive of the
transferee is absolutely immaterial.
In other words any preference made with intent to prefer is an
act of bankruptcy, but in order to make such a preference void-
able, there must exist, in addition to the elements constituting
it an act of bankruptcy, the additional element of reasonable
cause on the part of the transferee to believe that it was given as a
preference, and this reasonable cause must have existed at the
time of the transfer. (Crooks v. Bank, 3 Am. B. R. 238; 46 N.
Y. App. Div. 335.) The analysis of Section 3a, Subd. 2 is
made in a recent decision in the District Court for the Northern
District of N. Y. {In re Rome Planing Mills, 3 Am. B. R. 123 ;
96 Fed. 812.) In passing upon the question of the sufficiency
of a petition Coxe, J., says :
" In order to succeed under this subdivision the petitioners must prove :
First. A transfer of the debtor's property to a creditor. Second. The
debtor's intent to prefer such creditor. Third. The insolvency of the
debtor at the date of the transfer. The burden of proof is upon the petitioners
except in the contingency provided for in paragraph d of section 3, where a
presumption of insolvency is raised against a debtor who refuses to produce his
books and papers and submit to an examination. In the present case the
debtor has complied with the requirements of the law in this regard, and no
presumption of insolvency exists.
The meaning of the word ' transferred ' is defined in section 1, subd. 25, of
the act as follows :
' " Transfer," shall include the sale and every other and different mode of
disposing of or parting with property, or the possession of property, abso-
lutely or conditionally, as a payment, pledge, mortgage, gift or security.'
The intent which it is necessary to establish is that of the debtor. It is not
important that the intent of the creditor to whom the preference is given
should be shown ; whether or not he had reasonable cause to believe that a
preference was intended is immaterial. The debtor's intent to give a prefer-
ence may be presumed from a transfer, while insolvent, of a large portion of
3°
THE NATIONAL BANKRUPTCY LAW.
Intent Must be Proved. [Ch. III.
his property to a single creditor. When this is proved the burden is upon him
to show that he was ignorant of his insolvency and had reason to believe that
he could pay his debts in full. Toof v. Martin, 13 Wall. 10. The debtor's
insolvency must be shown at the date of the transfer. The provisions of
paragraph c (section 3) relate only to subdivision 1 of paragraph a. It is not
a defense, therefore, to a petition alleging acts of bankruptcy under subdivisions
2, 3, 4 and S> to prove solvency at the date of filing the petition. George M.
West Co. v. Lea (2 Am. B. R. 463), 174 U. S. 590, 19 Sup. Ct. 836."
Intent Must be Proved. — As in cases of fraudulent transfers,
intent must be proved. But it is a fact which may be inferred
from other proven facts. In law one is presumed to intend to do
that which is the necessary consequence of his acts, both the
natural and the legal consequence. The presumption may be
conclusive or disputable, depending upon the nature of the act
and the character of the intention. When by law the conse-
quence must necessarily follow the act done, the presumption is
ordinarily conclusive, and generally cannot be rebutted by any
evidence of a want of any such intention. As one is presumed
to know the law, he is presumed to know the legal results of his
acts and there is a consequent presumption that he intends the
legal results of those acts. (Morse v. Godfrew, Fed. Cas. 9,856;
3 Story, 391 ; Traders' Bank v. Campbell, 14 Wall. 87.) So there
is a presumption that one intends 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 results. (In re Dibblee, 3 Ben. 354; Fed. Cas. 3,885;
s. c. 2 N. B. R. 617; in re Drummond, 1 N. B. R. 231 ; Fed. Cas.
4,093; Curran v. Munger, Fed. Cas. 3,487; 6 N. B. R. 33.) The
principles just stated are general rules of the law of evidence.
Applying these principles in bankruptcy cases, it has been held
that payments by one knowing himself to be insolvent raise a con-
clusive presumption of an intent to prefer if they are in excess
of the pro rata share of the payee. (In re Silverman, Fed. Cas.
12,885; 4 N. B. R. 523; 1 Saw. 410; Driggs v. Moore, 3 N. B.
R. 602; Fed. Cas. 4,083; 1 Abb. C. C. 440; Farren v. Crawford,
Fed. Cas. 4,686; 2 N. B. R. 602; Rison v. Knapp, 1 Dill 187;
Fed. Cas. 11,861; 4 N. B. R. 349; Toof v. Martin, 4 N. B. R.
BANKRUPTS. 31
§ 3.] Intent Must be Proved.
488 ; s. c. i Dill 203 ; in re Oregon Printing Co. 13 N. B. R. 503 ;
Fed. Cas. 10,559; JM re Smith, Fed. Cas. 12,974; 3 N. B. R. 377;
in re Batchelder, Fed. Cas. 1,098; 3 N. B. R. 150.) Further a
debtor is presumed to know his financial condition, and if he is
in fact insolvent, the burden of proof is upon him to establish
his want of knowledge. (In re Silverman, supra; in re House,
1 N. Y. Leg. Obs. 348.) But if a debtor honestly believes him-
self to be solvent, if he establishes his want of knowledge as to
his financial condition, he then rebuts the presumption of an in-
tent to prefer which arises from the fact of actual insolvency.
This doctrine was applied in a bankruptcy case by the U. S.
Supreme Court, in the case of Toof v. Martin (13 Wall. 40). In
its opinion that court said :
" It is a general principle that every one must be presumed to intend the
necessary consequences of his act. The transfer in any case by the debtor of
a large part of all his property while he is insolvent, to one creditor without
making provision for an equal distribution of its proceeds 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. The burden of proof is upon
him in such case and not upon the assignee in bankruptcy."
These cases cited, as to the presumption of law that a person
has knowledge as to his own solvency are, still applicable not-
withstanding the new and changed definition of insolvency. It
will, of course, be conceded that one may not always in fact know
the fair valuation of his property, and whether or not it equals
the amount of his debts, which is necessary, in order to know
whether insolvency exists as the word is now used. When in-
solvency meant inability to pay debts as they matured, it was, of
course, difficult to conceive of one being an insolvent and not
knowing it, but the presumption which the law indulges in is not
so much a presumption of actual knowledge of insolvency as it
is a general arbitrary rule that a person is chargeable with knowl-
edge of his financial condition. (In re Silverman, supra; Wager
v. Hall, 16 Wall. 599.)
32 THE NATIONAL BANKRUPTCY LAW.
Intent Must be Proved. [Ch. III.
Under the Act of 1898 it has been held that where an insolvent
debtor has conveyed personal property to a creditor in payment
of an indebtedness, an intent to prefer such creditor will be in-
ferred since a preference is a natural result of such a transfer
and one must be presumed to intend the natural result of his own
acts. (Johnson v. Wald, et al. U. S. C. C. A. 5th Circuit [1899]
2 Am. B. R. 84; 35 C. C. A. 522; 93 Fed. 640. Compare In re
McLam, D. C. 3 Am. B. R. 245 ; 97 Fed. 922. )
Any fact which tends to establish the existence or non-exist-
ence of intent is admissible evidence. Thus it may be shown
that the transferrer has made other preferential transfers at
about the same time (Atkinson v. Bank, Crabbe, 529) ; and intent
may be inferred from any conduct of the debtor or any circum-
stance connected with the transaction, provided the facts are suffi-
cient to justify the inference. (Linkman v. Wilcox, Fed. Cas.
8,374; 1 Dill. 161 ; Beattie v. Gardner, 4 N. B. R. 323; Fed. Cas.
1,195; 4 Ben. 479; Giddings v. Dodd, 4 N. B. R. 657; Fed. Cas.
5,405; 1 Dill. 115.) The testimony of a party himself that he
had not a preferential intent is entitled to very little weight.
(Oxford Iron Co. v. Slafter, 13 Blatch. 455; Fed. Cas. 10,637;
14 N. B. R. 380.) Such testimony alone cannot overcome the
strong proof which the transaction itself affords. Actions in this
case speak louder than words. (Trader's Bank v. Campbell, 14
Wall. 87 ; 6 N. B. R. 353 ; s. c. below, 2 Biss. 423 ; 3 N. B. R.
498.) The fact that there are no other debts then due and pay-
able does not conclusively negative an intent to prefer. (Warren
v. Bank, 10 Blatch. 493; Fed. Cas. 17,202; 7 N. B. R. 481.) It
would be useless to cite any further cases showing facts which
have led courts to infer from them the existence of an intent to
prefer. All the circumstances in connection with a transaction,
the declarations and statements of the parties, their situation and
the relation which they bear to each other, — all these go towards
the forming of a proper inference as to the intent. Transfers of
all one's property afford a violent, almost conclusive presumption
of an intent to prefer, if there are creditors unprovided for. (In
re Waite, 1 Lowell, 207; Fed. Cas. 17,044.)
BANKRUPTS. 33
§ 3.] Intent to be Distinguished from Motive.
Intent to be Distinguished from Motive. — Whatever may have
been the motive of the debtor in making a transfer, is immaterial.
Motive is not to be confounded with intent. However honest or
proper may be the motive, yet if the intent to prefer exists, and
is coupled with the other essential elements, an act of bank-
ruptcy is the result. (Hardy v. Binninger, 7 Blatch. 262; Fed.
Cas. 1,420; 4 N. B. R. 262 ; in re Silverman, 4 N. B. R. 523 ; Fed.
Cas. 12,885; 2 Abb. C. C. 243; 1 Saw. 410; Farren v. Crawford,
Fed. Cas. 4,686; 2 N. B. R. 602; Warren v. Bank, 10 Blatch.
493; Fed. Cas. 17,202; 7 N. B. R. 481 ; Webb v. Sachs, 15 N. B.
R. 168; Fed. Cas. 17,325.) Accordingly a transfer is not the
less a preference because given in answer to a request, or in fulfill-
ment of a prior promise made at the time of contracting the debt.
(Arnold v. Maynard, Fed. Cas. 561; 2 Story, 349.) An agree-
ment to give security is a mere executory contract, and not a
conveyance. Such an agreement creates no higher legal obliga-
tion than the promise of payment implies in contracting the debt.
(Forbes v. Howe, 102 Mass. 427; Sawyer v. Turpin, 91 U. S.
114; 13 N. B. R. 271; Nat. Bank'z/. Hunt, 11 Wall. 391. These
cases must be considered as overruling to the contrary, Burdick v.
Jackson, 7 Hun, 488; s. c. 15 N. B. R. 318; in re Wood, 5 N. B.
R. 421 ; Fed. Cas. 17,937, and others.)
And it has been held under the Act of 1898, where an insolvent
person, prior to legal bankruptcy, in making efforts to extricate
himself from his embarrassments, has borrowed money and given
security therefor at the same time and the advances are made
in good faith upon such security to enable the insolvent debtor
to carry on his business, there is no violation of the terms or
policy of the Bankruptcy Act. (In re Wolf, 3 Am. B. R. 555 ; 98
Fed. 84.) And when in pursuance of a contract, valid and
equitable, theretofore executed, the creditor exercised his rights
in possessing himself of the bankrupt's property and making sale
of it under such contract, he was held not to have been guilty of
securing preferences. (Sabin v. Camp, 3 Am. B. R. 578; 98 Fed.
974.) In the Wolf case, supra, the court quotes with approval
(5)
34 THE NATIONAL BANKRUPTCY LAW.
Intent to be Distinguished from Motive. [Ch. III.
the language of Judge Dillon in Darby v. Institution (i Dill. 144;
Fed. Cas. No. 3,571), wherein it is said that:
" An insolvent person may properly make efforts to extricate himself from
his embarrassments, and therefore he may borrow money, and give at the time
security therefor, provided, always, the transaction be free from fraud in fact,
and upon the Bankrupt Act. And hence it is a settled principle of bankrupt
law, both in England and in this country, that advances made in good faith to
a debtor to carry on business, upon security taken at the time, do not violate
either the terms or policy of the Bankrupt Act."
And a distinction has been taken between an agreement to give
security generally and an agreement for the delivery of certain
specific property ; a conveyance in fulfillment of an agreement of
the latter character having been held not a preference if only a
reasonable time has elapsed. (Gattman v. Honea, Fed. Cas.
5,271 ; 12 N. B. R. 493. Compare in re Jackson Iron Co. 15 N.
B. R. 438; Fed. Cas. 7,153.) And when the period which has
elapsed between the promise to give the security (if made at the
time of the loan), and the giving of it, is so short that the two
acts can be regarded as one transaction, then in determining the
intent with which it was made, the whole thing is to be considered
as if it were transacted at one time, and as if the security were
for a present, not for an antecedent consideration. The intent
is to be inferred from the circumstances attending the whole
transaction, not from the mere giving of the security itself.
(Sparhawk v. Richards, Fed. Cas. 13,205; 12 N. B. R. 74; Gatt-
man v. Honea, Fed. Cas. 5,271 ; 12 N. B. R. 493; in re McKay,
7 N. B. R. 230; 1 Lowell, 561; in re Perrin, Fed. Cas. 10,995;
7 N. B. R. 283 ; in re Connor, 1 Lowell, 532 ; Fed. Cas. 3,1 18.) A
transfer is no less a preference, if made with intent to prefer,
simply because the transferrer yielded to coercion. (Arnold v.
Maynard, Fed. Cas. 561 ; 2 Story, 349.) It is wholly immaterial
whether the preference is made willingly, or by reason of threats.
The intent to prefer may concur with pressure on the part of a
creditor. (Clarion Bank v. Jones, 21 Wall. 325; 11 N. B. R.
381 ; Sawyer v. Turpin, 91 U. S. 114; 13 N. B. R. 271 ; Giddings
v. Dodd, 1 Dill. 115; Fed. Cas. 5,405; 4 N. B. R. 657.) Even
BANKRUPTS. 35
§ 3.] Intentions of Agents — Even Exchange.
although the transferrer made the transfer because advised that
he would be liable to a criminal prosecution if he did not do so,
the transfer is an act of bankruptcy. (Strain v. Gourdin, 2
Woods, 380; Fed. Cas. 13,521; 11 N. B. R. 156.) A transfer
to a creditor in payment of a fiduciary claim which cannot be
proved in bankruptcy, may yet be a preference. {In re Dibblee,
2 N. B. R. 617; Fed. Cas. 3,884; 3 Ben. 354.)
Intentions of Agents. — The intention of an agent to make a
preferential transfer or payment is in law imputed to the prin-
cipal. (Beattie v. Gardner, Fed. Cas. 1,195; 4 N. B. R. 323; 4
Ben. 479; Graham v. Stark, 3 N. B. R. 357; Fed. Cas. 5,676; 3
Ben. 520.)
Even Exchange. — The exchange of one set of securities by an
insolvent, or of one article of property for another of equal value
is not a preference. An even exchange is no robbery. If the
result of a transfer is, that the one making it gets back property
of equal value so that the creditors of his estate are not injured,
there is no preferential intent. A debtor may properly give se-
curity for a loan if given at the time the debt is created, and if the
transaction be free from fraud, and the value which the debtor
obtains is equal to that with which he parts, and if the security is
not disproportionate to the loan. In general it may be said that a
preference can arise only in cases of transfers to pay or to secure
an antecedent debt. (Burnhisel v. Firman, 22 Wall. 170; 11
N. B. R. 505; Clark v. Iselin, 21 Wall. 360; 11 N. B. R. 337;
Tiffany v. Boatman's Sav. Inst. 18 Wall. 376 ; Cook v. Tulliss,
18 Wall. 332; 9 N. B. R. 433; Sawyer v. Turpin, 91 U. S. 114;
13 N. B. R. 271, and see cases cited supra.) There is no prefer-
ence if no harm is done creditors (Winter v. R. R. Co. 2 Dill.
487; Fed. Cas. 17,890; 7 N. B. R. 289) ; as, for instance, when
property is transferred by a debtor to a creditor having a mort-
gage upon it for an amount greater than its value. (Livingston
v. Bruce, 1 Blatch. 318; Fed. Cas. 8,410; Coxe v. Hale, 10
Blatch. 56; Fed. Cas. 3,310; 8 N. B. R. 562; Catlin v. Hoff-
36 THE NATIONAL BANKRUPTCY LAW.
Manner of Transfer — " His " Property. [Ch. III.
man, 9 N. B. R. 342; Fed. Cas. 2,521.) (Compare also cases
cited under section 60.)
Manner of Transfer. — If a transfer is actually made with intent
to prefer creditors, it is immaterial in what way it is made, or
whether it is directly or indirectly made to the preferred creditor.
Thus a transfer of firm property by one partner to the other, made
for the purpose of enabling the individual creditors of the trans-
feree to secure a preference, is an act of bankruptcy (Collins v.
Hood, Fed. Cas. 3,015; 4 McLean, 186) ; and if one who is in-
solvent conveys his property to another who executes a mortgage
thereon in favor of a creditor of an insolvent, it may be shown to
be a preference. (Gibsons. Dobie, 5 Biss. 198; Fed. Cas. 5,394;
14 N. B. R. 157.)
So where a defendant in an involuntary bankruptcy proceeding
under the act of 1898, contended that the alleged act of bank-
ruptcy was not made out; that he had merely transferred his
property to a person partly in consideration of payment of checks
issued by the defendant which checks were an overdraft of the
defendant's account at his bank for which the transferee had
agreed to be responsible, it was held that whether the creditor in
the case was the bank or the transferee, since the transfer secured
the payment of one particular debt of the defendant over other
debts, such transfer was a preference, and being made with intent
to prefer was an act of bankruptcy. (Goldman, etc. Co. v.
Smith, 1 Am. B. R. 266; 93 Fed. 182.)
'.' His " Property. — The bankruptcy act gives no heed to any
payments or transfers which may be made by a third party as
payments to creditors of an insolvent. As such a payment does
not take away anything from the fund to which creditors of the
insolvent may look, they cannot complain if a friend of the in-
solvent pays in full certain of his debts. (Winslow v. Clark, 47
N. Y. 261; Windsor v. Kendall, 3 Story, 507.) Transfers in
order to be preferences must convey property liable to be admin-
istered in bankruptcy. A transfer by an insolvent of exempt
property, though made with intent to prefer, is not an act of bank-
BANKRUPTS. 37
§ 3.] Suffering or Permitting Preferences through Legal Proceedings.
ruptcy. (Rixz>. Bank, 2 Dill. 367; Fed. Cas. 11,869; Schlitz v.
Schatz, Fed. Cas. 12,459; 2 Biss. 248.)
Suffering or Permitting Preferences through Legal Proceedings.
— Section 3a (3). The most important fact to be noticed in con-
nection with this subdivision 3 is that intent is not expressly-
made an essential element to the commission of the act of bank-
ruptcy herein denned. Next to that, it should be noted that the
words used are " suffered or permitted," not " procured " — the
word which was used in the act of 184 1. By section 39 of the
bankruptcy act of 1867, it was provided, among other things, that
" a person who being bankrupt or insolvent, or in contemplation
of insolvency, should permit or suffer his property to be taken on
legal process with intent to give a preference to one or more of
his creditors, or with intent to defeat or delay the operation of the
act " was guilty of an act of bankruptcy ; and by the thirty-fifth
section of the same statute providing for the invalidating of
preferential transfers, it was declared that any attachment or seiz-
ure under execution of such person's property, " procured by
him," with a view to give a preference, should be void. Under
that act it was at first held by many of the district courts, that
when an insolvent debtor was sued by one creditor whose action
would necessarily result in his securing judgment and subse-
quently levying upon and obtaining all the property of the in-
solvent debtor to the exclusion of other creditors, if the debtor
did not take steps to go into voluntary bankruptcy and thereby
prevent the prosecuting creditor from obtaining the preference
which his action would give him, then the debtor must be pre-
sumed to have intended that a preference be secured. But the
Supreme Court of the United States in Wilson v. City Bank, 17
Wall. 473, finally held that no intent whatever could be inferred
from the mere neglect of the defendant, properly sued upon a just
claim, to interpose a defense when there was no valid defense ;
that while, when a person does a positive act, the consequences of
which he knows beforehand, he must be deemed to intend those
consequences, it cannot be inferred that a man intends the conse-
38 THE NATIONAL BANKRUPTCY LAW.
Suffering or Permitting Preferences through Legal Proceedings. [Ch. III.
quences of other persons' acts ( for instance, the act of the plain-
tiff), when he contributes nothing to their success. But a study
of Wilson v. City Bank shows most clearly that it turned upon
the fact that intent under that statute was an essential element.
Not any of the reasoning of the court in the decision in that case
justifies the conclusion that under the present statute of 1898.
mere suffering or permitting by an insolvent of the obtaining of a
preference by a creditor through legal proceedings is not an act
of bankruptcy. And with this view accords the general tenor of
decisions under the new act. The following excellent summary
of the act is taken from the opinion of Judge Coxe In re Rome
Planing Mills (3 Am. B. R. 123; 96 Fed. 812) :
" Section 3, subd. 3, provides that an act of bankruptcy by a person shall
consist of his having —
' 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 dis-
charged such preference.'
In order to succeed under this subdivision the petitioners must prove :
First. That a preference was obtained by a creditor through legal proceedings.
Second. That the debtor suffered or permitted the preference and did not
vacate or discharge the preference at least five days before a sale or final dis-
position of the property affected. Third. That the debtor was insolvent at the
time the preference was obtained. The burden of proof is upon the petitioners
precisely as under the preceding subdivision. The debtor's intent is not made
an ingredient. It is enough that the creditor has obtained a preference and
that the debtor has permitted it to remain undischarged. What was the
debtor's intent regarding the matter is wholly immaterial. It is not necessary
that he should do any affirmative act. If he remains passive and supine and
permits his property to be taken by one creditor at the expense of the others
he has ' suffered or permitted ' a preference to be obtained ; this is enough.
The present act differs from the act of 1867, where the language used (section
39), is ' procure or suffer.' The same words ' procured or suffered ' are found
in section 60, par. a, of the present act, relating to preferred creditors, and it
may be that a preference obtained through legal proceedings described in
subdivision 3 of section 3 cannot be voided by the trustee pursuant to section
60; but that permitting such a preference constitutes an act of bankruptcy,
there can be little doubt. In re Reichman, 91 Fed. 624; 1 Am. B. R. 17. The
words ' legal proceedings ' used in subdivision 3 of section 3 have reference to
any proceedings in a court of justice, interlocutory or final, by which the prop-
erty of the debtor is seized and diverted from his general creditors. The
observations regarding proof of insolvency under subdivision 2 are equally ap-
BANKRUPTS. 39
§ 3.] Suffering or Permitting Preferences through Legal Proceedings.
plicable to subdivision 3. It is not necessary that the creditor should wait
until a sale has actually taken place. It would be a strange construction of an
act designed to save and protect the debtor's estate, to hold that it can only
be set in operation after the estate has been plundered and dissipated. The
debtor has until five days before the day the sale is legally noticed in which to
vacate or discharge the preference. If he has not done so at that time the
creditor may proceed and file a petition and, upon a proper showing, may en-
join the sale. The act of bankruptcy is not consummated until the ex-
piration of the time in which the debtor may vacate or discharge the lien, and
the last day for doing this is five days before the day a sale of the property is
advertised. In the case of a judgment, therefore, the petitioners must prove
the entry of the judgment, the issue of an execution, the levy thereunder and
the debtor's insolvency at the time of the judgment and levy. They must
also prove that the property was actually sold at execution sale or that the sale
was advertised for a day certain, and that the debtor had permitted the levy
to stand until the sale was but five days distant."
And see to same effect In re Meyers (1 Am. B. R. 1, referee's
decision) ; In re Moyer (1 Am. B. R. 577; 93 Fed. 188) ; In re
Collins (2 Am. B. R. 1, referee's decision). In re Rome Mills,
supra, was a case where there was a levy under a judgment. It
was sent back to the referee to take further proof on question of
insolvency and finally the respondent was adjudged a bankrupt
upon the further report of the referee. (3 Am. B. R. 766.) In
re Moyer arose in the Eastern District of Pennsylvania, and
was a case where the debtor while insolvent having borrowed
money of relatives gave notes containing warrants of attorney to
confess judgment, and subsequently and within four months be-
fore the filing of an involuntary petition, the debtor being in-
solvent, the holder of the notes entered judgment and levied on
the debtor's goods. It was held that the debtor " suffered " the
taking of the judgment and the levy, and by not paying the same,
committed an act of bankruptcy. The Court (per McPherson,
J.) observed:
" The question presented by these facts is important. If the Bankrupt Act
of March 2, 1867, were still in force, the construction announced by the
Supreme Court in Wilson v. Bank, 17 Wall. 473, and in Clark v. Iselin, 21
Wall. 360, would probably require us to decide that Moyer did not commit
an act of bankruptcy. He was passive during the proceedings in November,
and did not in any degree procure the entry of the judgments or the issue of
4°
THE NATIONAL BANKRUPTCY LAW.
Suffering or Permitting Preferences through Legal Proceedings. [Ch. Ill,
execution with intent to secure a preference to the creditors controlling this
process. But, as we understand the Bankrupt Act of 1898, its provisions are
essentially different from the earlier act, and require the court to come now to
a different conclusion. Clause 3 of section 3 declares that it shall be an act
of bankruptcy if a person has ' 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.' It will be observed that
this clause says nothing about the bankrupt's intent to enable the creditor to
secure a preference ; neither does it use the word ' procure ' which might
seem to imply that the debtor must take some part in bringing the preference
about. The dominant fact seems to be the actual result that has been at-
tained by the creditor. If, through legal proceedings, he has succeeded in
obtaining a preference, — that is (referring to section 60 for a description of
preferred creditors), if the debtor is insolvent, and has either "procured or
suffered a judgment to be entered against himself, . . . and the effect of the
enforcement of such judgment . . . 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,' — if this is the actual result of legal proceedings taken against
an insolvent debtor, the clause in question requires the debtor to vacate or
discharge such preference within a specified time, and, if he fails so to do, de-
clares that he has committed an act of bankruptcy. How he is to vacate or
discharge the preference is not specified ; but the silence of the clause upon this
point presents no difficulty. Legal proceedings are of many kinds, differing
in the different States; but, whatever kind may be employed by the creditor,
if the result of the proceedings gives him a preference over other creditors of
the same class, the insolvent debtor is thereupon charged with a clearly implied
duty to vacate or discharge the preference within the time allowed him by the
act. For example, if he has a defence to the debt he may set it up ; or, if he
can overthrow the preference because the creditor's procedure has been de-
fective, he may choose that method of attack. If neither of these weapons is
available, he has still at command one sufficient weapon, of which he cannot
be deprived,— he can apply promptly to the court in bankruptcy, and ask that
his property should be ratably divided among his creditors. If he fails to
move his inaction is properly regarded as a confession that he is hopelessly in-
solvent, and as conclusive proof that he consents to the preference that he has
declined to strike down. This construction of the statute seems to us to be
the natural meaning of the clause in question, and to be in harmony with the
general purpose of the act. A similar conclusion was reached a month or two
ago in the District Court for the Eastern District of Missouri in in re Reich-
man, 91 Fed. 624 ; 1 Am. B. R. 17."
On the other hand the District Court for the Western District
of Wisconsin has followed Wilson v. Bank and held that to make
the entry of judgment an act of bankruptcy there must be some
BANKRUPTS. 41
§ 3.] Assignments for Benefit of Creditors.
fault on the part of the judgment debtor by way of procuring or
suffering the act to be done. In re Nelson, 1 Am. B. R. 63 ; 98
Fed. 76. The facts in this case were very similar to those in
that of In re Moyer except that in the case of In re Nelson no exe-
cution was issued and there was no threatened sale. It is there-
fore distinguishable from the other cases though the opinion seems
to proceed upon the grounds above stated. See In re Thomas,
103 Fed. 272; 4 Am. B. R. 571.)
Assignments for Benefit of Creditors. Section 3a (4). — The
provisions contained in subdivision (4) settle a question as to
which there was great conflict of authority under the former act
which contained no express enactment upon the subject. Al-
though late in the history of that act the majority of the courts
were inclined to hold any assignment for the benefit of creditors
an act of bankruptcy, whether such assignment created prefer-
ences or not, yet for a long period there was an array of authority
of almost equal number and weight which held a contrary opin-
ion, and the question could hardly be considered a settled one
under that act.
Under the present act it is very clear that a general assignment
for the benefit of creditors is an act of bankruptcy, although made
without preferences, without actually intending to defraud cred-
itors, and without insolvency. (In re Gutwillig, 1 Am. B. R. 388;
34 C. C. A. 377; 92 Fed. 337; West Co. v. Lea, 2 Am. B. R.
463; 174 U. S. 594; 19 Sup. Ct. 836.) But such an assignment
is voidable and not void and is good except as against proceedings
instituted in bankruptcy. (Patty- Joiner & Eubank Co. v. Cum-
mins, Texas Sup. Ct. June 1900; 4 Am. B. R. 269; 57 S. W.
566.) There is a very clear distinction between a voluntary
common law general assignment which is what is meant by this
section (though in many of the States the method of making such
assignment is regulated by statute), by which all the debtor's
property is absolutely assigned by him in trust for his creditors,
and a state insolvency law which provides for the discharge of the
debtor. Proceedings under state insolvency laws, since the pas-
(6)
42 THE NATIONAL BANKRUPTCY LAW.
Assignments for Benefit of Creditors. [Ch. III.
sage of the general Bankruptcy Act, are void whether or not
bankruptcy proceedings follow. General assignments are valid
unless invalidated by subsequent bankruptcy proceedings. The
adjudication of bankruptcy at the instance of the bankrupt's cred-
itors on the ground of a general assignment avoids such assign-
ment and subjects the property assigned to the jurisdiction of the
bankruptcy court to be administered under the Bankruptcy Act
which the creditors have invoked. (In re Sievers, D. C. Mo. i
Am. B. R. 117; 91 Fed. 366; In re Romanow, D. C. Mass. 1
Am. B. R. 461; 174 U. S. 594; In re Meyer, C. C. A. 2nd C.
3 Am. B. R. 559; 39 C. C. A. 368; 98 Fed. 976; West Co. v.
Lea. Bros. U. S. Sup. Court, 2 Am. B. R. 463; 174 U. S. 594;
In re Gray, N. Y. Sup. Ct. 3 Am. B. R. 647; 47 App. Div. 554.)
But it has been decided under the present act that a proceeding
to wind up a corporation and have a receiver appointed is not a
general assignment within the meaning of this section of the
Bankruptcy Act (In re Empire Metallic Bedstead Co. C. C. A.
2nd C. 3 Am. B. R. 575; 39 C. C. A. 372; 98 Fed. 981.) And
where a partnership has been dissolved by the death of one of the
partners the appointment of a receiver in a suit brought in equity
by the administrator of the deceased partner for the purpose of
liquidating the affairs of the partnership so dissolved, is not a
general assignment within the meaning of the Bankruptcy Act.
(Vaccaro v. Security Bank, C. C. A. 6th C. 4 Am. B. R. 474.) In
a rather peculiar case (Rumsey, etc. Co. v. Novelty & Mfg. Co.
3 Am. B. R. 704; 99 Fed. 699) defendant made a deed of trust
of all its property, providing that said property should be sold,
and after first deducting the costs and expenses of the trust, and
the debts of a preferential character under the State law, the pro-
ceeds should be distributed ratably among all its creditors, the
balance, if any, to be repaid to the defendant. Held, that though
this deed did not work a preference and was not a voluntary gen-
eral assignment, because containing a condition of defeasance
and an equity reserved to grantor after satisfaction of claims of
creditors, it was, notwithstanding, constructively fraudulent as to
creditors as tending to hinder, delay and defraud them in the
BANKRUPTS.
43
§ 3.] Admission of Willingness to be Adjudged. Bankrupt.
sense used in the Bankruptcy Act, and as tending to defeat the
scheme and purpose of that act.
It made no difference in this case what the learned judge called
the instrument. But it is submitted that his definition of what
constitutes a voluntary general assignment within the purview of
the Bankruptcy law, and at common law, is too narrow when ap-
plied to the facts in this case as stated by him. It is unquestion-
ably true that a deed of trust in the nature of a mortgage contain-
ing a power of sale, but reserving an equity to the mortgagor or
pledgor, is not, technically speaking, an assignment, because the
entire title to the property does not pass to the trustee. (Dun-
ham v. Whitehead, 21 N. Y. 131, and see Bishop on Insolvent
Debtors, 3rd ed. p. no et seq.) But where (as appears in this
case from the judge's statement of facts) there is an absolute con-
veyance of the title to the trustee for the benefit of all the cred-
itors, the instrument is none the less an assignment because it
provides that a possible surplus shall revert to the grantor, inas-
much as that is implied inlaw. See cases collected in Bishop, p. 250.
To avoid the conflict under the Act of 1867, as to whether a
general assignment non-preferential in its terms was a conveyance
" to hinder, delay or defraud " creditors, presumably, the present
law was intended to put an end to all doubt, and to cover any in-
strument in the nature of a general assignment which tends to
impede the orderly and prompt scheme of the Bankruptcy Act in
securing an absolutely equable distribution for all the creditors.
Compare West Co. v. Lea, 174 U. S. 594; 2 Am. B. R. 463; In
re Gutwillig (C. C. A. 2nd Circuit), 1 Am. B. R. 388; 34 C. C.
A. 377; 92 Fed. 337; In re Meyer (C. C. A. 2nd Circuit), 3
Am. B. R. 559; 98 Fed. 976; 39 C. C. A. 368. (But see In re
Empire Metallic Bedstead Co. supra.) Such an assignment,
though as a matter of fact untainted with fraud, is, if made within
four months of the filing of the petition, a fraud as a matter of
law upon the act. (See In re Gray, supra.)
Admission of Willingness to be Adjudged Bankrupt. Section 3a
(5) — In the case of a natural person such a proceeding is merely
44 THE NATIONAL BANKRUPTCY LAW.
Allegation of Insolvency. [Ch. III.
voluntary bankruptcy. Probably it was not expected by the law-
makers that this provision would be extended to corporations.
Indeed, in the District Court of Massachusetts (In re Bates Ma-
chine Co. i Am. B. R. 129; 91 Fed. 625) it was gravely ques-
tioned as to whether a petition could be filed by a corporation
under this subdivision as such petition would be in effect a volun-
tary one and hence an evasion of the terms of section 4, forbid-
ding corporations from becoming voluntary bankrupts. But
In re Marine Machine Co. (1 Am. B. R. 421; 91 Fed. 630), a
written admission of a corporation's inability to pay its debts in
full and its willingness to be adjudged a bankrupt, signed by the
president of the corporation and authorized by a majority of the
board of directors was held to be an act of bankruptcy, and when
given to its creditors was sufficient to support an involuntary peti-
tion in bankruptcy. ( Compare to same effect In re Humbert Co.
4 Am. B. R. 76; 100 Fed. 439.)
Allegation of Insolvency. Section 3b. — By paragraph b, it is
requisite that at the time the petition is filed the debtor shall be
an insolvent. The fact that insolvency exists at the time of the
petition must then be alleged and established. Insolvency at the
time of the commission of the act must also be alleged in those
cases where insolvency at that time is essential to the commission
of the act of bankruptcy. See subdivisions 2 and 3 referring to
fraudulent transfers and preferences, as to which see ante in this
chapter.
As to limitation of time (four months) within which the peti-
tion may be filed, compare section 60b, as to creation of voidable
preference.
The " notorious, exclusive or continuous possession " men-
tioned in this subdivision depends upon the character of the prop-
erty transferred and the usual and customary method of dealing
with such property. In order to be " notorious," the possession
need not be advertised to the public. All that the statute requires
is that there shall be no attempt at concealment of the possession,
BANKRUPTS. 45
g 4] Solvency as Defense — The Bond — Who May Become Bankrupts.
no effort to prevent its becoming known. (See opinion of Dil-
lard, Referee, In re Woodward, 2 Am. B. R. 233.)
Solvency as Defense. Section 3c. — The provisions of this sub-
division, confining the defense of solvency at the time of the filing
of the petition to paragraph " a " subdivision 1, do not, of course
exclude the defense of solvency at the time of the alleged act
of bankruptcy, which may be made under subdivisions 2 and 3.
Burden of Proving Solvency. Section 3d. — Compare what has
been said In re Rome Planing Mills (3 Am B. R. 123), quoted
ante under subdivision 2.
The Bond. Section 3c — The provision requiring the filing of
a bond is new. Such a bond is necessary only when an applica-
tion is made to take charge of and hold the property of an alleged
bankrupt, prior to the adjudication, and pending a hearing on the
petition. (Compare section 69.) There is no authority anywhere
under this act, for a surety company acting as surety on this bond.
Section 50 (g) authorizes it only in the cases of bonds of referees
and trustees. Doubtless the execution of a bond by a surety would
make him a party to the proceedings, subject to the jurisdiction
of the bankruptcy court. If such is the case, the court can sum-
marily hear and determine as to the damages which the alleged
bankrupt may have sustained by the taking of his property in case
the petition against him is dismissed, and such court may make a
summary order requiring the sureties to pay the same. This, at
any rate, was the express provision of this paragraph of this sec-
tion in the bankruptcy bill as it first passed the House and until
it came out of the hands of the Conference Committee.
Sec. 4. Who May Become Bankrupts. — a Any person who owes
debts, except a corporation, shall be entitled to the benefits of this
act as a voluntary bankrupt.
b Any natural person, except a wage-earner or a person en-
gaged chiefly in farming or the tillage of the soil, any unincor-
46 THE NATIONAL BANKRUPTCY LAW.
As to Who May Become Bankrupts — Debts — Infants. [Ch. Ill,
porated company, and any corporation engaged principally in
manufacturing, trading, printing, publishing, or mercantile pur-
suits, owing debts to the amount of one thousand dollars or over,
may be adjudged an involuntary bankrupt upon default or an im-
partial trial, and shall be subject to the provisions and entitled
to the benefits of this act. Private bankers, but not national
banks or banks incorporated under State or Territorial laws, may
be adjudged involuntary bankrupts.
Analogous Provisions of Former Acts: —
As to Voluntary Bankruptcy: R. S., § 5014; act of 1867, § 11; act of 1841,
§7.
As to Involuntary Bankruptcy: See Analogous Provisions given under
section 3 of this act.
As to Who May Become Bankrupts. — Any person owing debts
as defined in section 1 (11) may file a voluntary petition. The
present act does not in express terms require that the person shall
be insolvent or unable to pay all his debts in full, as did the act of
1867; and there seems to be no reason why, if a solvent person
cares to have his property distributed among his creditors in bank-
ruptcy, he should not be allowed to do so. It will not be necessary
to allege insolvency in the petition, nor to prove it to procure an
adjudication.
Bebts. — A debt absolutely owing as a fixed liability, though not
yet payable, evidenced by a judgment or instrument in writing
may be the foundation of a petition, section 63a (1). As to
time when it must have accrued see section 59b.
Infants. — Under the act of 1841 it was held that infants were
entitled to the benefits of the act, and that the proceedings might
be had in their own name without the appointment of a next
friend. This decision was made on the ground that the act did
not exempt infants from its operation. (In re Book, Fed. Cas.
1,637; 3 McLean, 317; in re Cotton, 2 N. Y. Leg. Obs. 370. See
also in re Smedley, 10 L. T. N. S. 432.) On the other hand,
BANKRUPTS. 47
§ 4-] Infants.
the District Court for the Southern District of New York held
that, under the act of 1867, infants were not the subjects of either
involuntary or voluntary bankruptcy in respect to their general
contracts, because the terms of the act did not embrace them.
(In re Derby, Fed. Cas. 3,815 ; 8 N. B. R. 106; 6 Ben. 232.)
So under the act of 1898. (In re Duguid, 3 Am. B. R. 794;
100 Fed. 274.)
With reference to contracts for necessities the court in these
cases expressly declined to give any opinion. But general con-
tracts of an infant, having no force or validity if disaffirmed by
the infant on coming of age, it would be a frivolous act for courts
to permit the institution and prosecution of proceedings which
might afterwards be practically annulled by such disaffirmance.
As to bankruptcy of an infant liable upon contracts for necessities,
there is no known adjudication expressly passing upon that par-
ticular question. In re Derby and in re Cotton and in Farris v.
Richardson (6 Allen, 118), the question was referred to, but not
decided. But where the infant is forbidden by statute to dis-
affirm a contract which has been made by him in a business in
which he engages as an adult and the other contracting party had
good reason to believe him adult, he may become an involuntary
bankrupt for goods sold him on credit under such circumstances.
(In re Brice, D. C. Iowa, 2 Am. B. R. 197; 93 Fed. 942, in which
cases are cited.) But except under such circumstances it is
doubtful if an infant can commit any act of bankruptcy which
involves a transfer of property, his transfers being voidable ; also
doubtful if a general contract creditor of his can prove a debt in
bankruptcy. If a transfer is made by an infant which would be an
act of bankruptcy if committed by an adult, and the transfer is
affirmed upon his attaining his majority, then a liability exists
and proceedings in bankruptcy voluntary or involuntary may
be instituted. But if the transfer is not affirmed, then it seems
that it is no act of bankruptcy and no proceedings can be instituted
by or against the person who did it, even after he becomes of age.
If proceedings are instituted upon it during the infancy of the
alleged bankrupt, no affirmance of the act after coming of age
48 THE NATIONAL BANKRUPTCY LAW.
Insane Persons — Married Women. Ch. III.
will give the court jurisdiction of the proceeding; but the pro-
ceeding must be instituted de novo. (In re Derby, supra; Belton
v. Hodges, 2 M. & Scott, 496; Ex p. Watson, 16 Ves. 265; Ex
p. Moule, 14 Ves. 603; Ex p. Barwise, 6 Ves. 601 ; Rex v. Cole,
1 Ld. Raymond, 443; Ex p. Barrow, 34 Ves. 554; Ex p. Hen-
derson, 34 Ves. 163; Ex p. Adam, 1 Ves. & B. 494.)
Insane Persons. — A person incapable of managing his own af-
fairs or judicially declared insane cannot commit an act of bank-
ruptcy. {In re Funk, 4 Am. B. R. 96; 101 Fed. 244.) But sec-
tion 8 provides that the death or insanity of a bankrupt shall not
abate the proceedings, and provides for their continuance. And
under the law of 1867 it was held that if an act of bankruptcy
has been committed by a person while sane, who afterwards be-
comes insane, he may be adjudged a bankrupt in involuntary pro-
ceedings. {In re Pratt, Fed. Cas. 11,371 ; 6 N. B. R. 276, citing
Robson on Bankruptcy, 84; Anon. 13 Ves. 590; Sumner's note
to in re Stamp, DeGex, 345; in re Marvin, 1 Dillon, 178; Ex p.
Layton, 6 Ves. 440.) In the matter of Pratt, a guardian had
been appointed for the insane person. (Compare in re Murphy,
Fed. Cas. 9,946; 10 N. B. R. 48.)
Married Women. — May become bankrupts either in voluntary or
involuntary proceedings where the laws of the states of their
residence have so far changed the common-law rule as to make
them liable upon their contracts or where they trade as femes sole.
{Ex p. Mear, 2 Bro. 266 ; in re Kinkeade, 3 Biss. 405 ; Fed. Cas.
7,824; 7 N. B. R. 439.) But wherever her coverture would be a
good defense to an action upon a debt, such debt cannot be made
the basis of a proceeding in bankruptcy (in re Schlichter, 2 N. B.
R. 336) ; and where she is liable only when she expressly charges
her own separate estate, or where the indebtedness is incurred in
relation to her own separate estate, — then it must clearly appear
in the petition that such debts were so charged or were for such
estate, else the petition will be dismissed. (In re Howland, Fed.
Cas. 6,791 ; 2 N. B. R. 357; in re Goodman, 8 N. B. R. 380; Fed.
Cas. 5,540; 5 Biss. 401.)
BANKRUPTS. 49,
§4.] Aliens — "Wage Earners" — "Farmers" — Executors.
Aliens. — Aliens may be adjudged bankrupts, either voluntary
•or involuntary, whether resident or not in the United States, if
they have property therein, and otherwise come within the terms
of section 2(1). In this respect the present act differs from the
act of 1867. See section 65d of this act. If the court cannot get
jurisdiction of the person of a non-resident alien, it can at least
get jurisdiction of the property within its district.
" Wage Earners " — " Farmers," etc. — The term " wage earner "
is defined in section 1 (27) as meaning " an individual who
works for wages, salary or hire at a rate of compensation not
exceeding one thousand five hundred dollars per year " who
with " farmers " and " tillers of the soil " may not be forced
into bankruptcy. But the fact that one changes his occu-
pation to one of the exempted class within four months after
an act of bankruptcy will not save him. (In re Luckhardt,
4 Am. B. R. 307; 101 Fed. 807.) In the phrase used in section
4b, providing that persons engaged " chiefly in farming or the
tillage of the soil " may not be adjudicated involuntary bankrupts,
the words " tillage of the soil " do not limit the remainder of the
phrase nor prevent the person who is engaged in raising live
stock from coming within the exemption. (In re Thomson, 4
Am. B. R. 340; 102 Fed. 287.)
The defense to proceedings to involuntary bankruptcy that the
person sought to be declared a bankrupt is within these excep-
tions is not simply personal to the bankrupt — it goes to the juris-
diction of the court, and may be raised by any creditor. The
fact that the bankrupt does not appear does not change the pro-
ceedings from an involuntary to a voluntary proceeding so as
to affect interests in property attached before proceedings in
bankruptcy are commenced. (In re Taylor, 4 Am. B. R. 515;
102 Fed. 728; C. C. A. 7th Circ.)
Executors. — An executor who as such has carried on business
and incurred debts pursuant to the will of his testator may in
England be adjudged a bankrupt, or may voluntarily petition.
(Ex p. Garland, 10 Ves. no; Ex p. Richardson, Madd. 138.)
(7)
5o THE NATIONAL BANKRUPTCY LAW.
Corporations. [Ch. III.
But in America the bankruptcy law does not extend to executors
and trustees, and persons acting in a fiduciary capacity, and al-
though such persons are authorized by a will or otherwise to carry
on a business as a part of the administration of an estate, they are
not liable to be adjudged bankrupt as such. (Graves v. Winter,
7 Pac. L. R. 165 ; s. c. 9 N. B. R. 357.)
Corporations.— Under the bankruptcy law of 1867, any business,
moneyed, or commercial corporation might become bankrupt vol-
untarily as well as involuntarily. Under the present act it can-
not become a voluntary bankrupt, and in order that a corporation
may be involuntarily adjudged bankrupt it is necessary that it
be actually and principally engaged in one of the lines of business
mentioned in the section. The fact that by its charter it may
engage in that business, is not sufficient. (In re N. Y. & West-
chester Water Co. 3 Am. B. R. 509; 98 Fed. 711.)
The corporation itself may be adjudged bankrupt, but not
its directors and stockholders, even though by statute they are
jointly and severally liable for its debts. (James v. Atlantic De-
laine Co. Fed. Cas. 7,179; 11 N. B. R. 390.) Notwithstanding
its dissolution in an action in a state court, if there are undis-
tributed assets or unpaid debts, a corporation may be put into
bankruptcy. Like a partnership, a corporation, even after dis-
solution, exists for the purpose of paying debts and distributing
the surplus among the persons entitled thereto. (In re Merchants'
Ins. Co. 3 Biss. 162; Fed. Cas. 9,441 ; 6 N. B. R. 43; in re Inde-
pendent Ins. Co. 6 N. B. R. 169; Fed. Cas. 7,018; s. c. 6 N. B. R.
260; Fed. Cas. 7,017; in re Washington Ins. Co. 2 Ben. 292; s. c.
2N. B. R. 648.)
In a recent case in the Circuit Court of Appeals for the 1st
Circuit (In re Marshall Paper Co. also reported as Marshall
Paper Co. v. Train, 4 Am. B. R. 468; 102 Fed. 872), it is held
that the discharge of a corporation does not prevent creditors
from taking judgment in a State court against the corporation in
such limited form as may enable them to reap the benefit of the
stockholders' or directors' liability. The rendering of such judg-
BANKRUPTS. Si
§ 4..] Manufacturing Corporations.
ment depends upon the authority of the State court under the
local law and there is nothing in the Bankruptcy Act to prevent
it. The judgment will not be against the person or property of
the bankrupt and has no other effect than to enable the plaintiff
to charge the directors in accordance with the State statute. See
for further discussion, subject of " Discharge," post.
Manufacturing Corporations. — The meaning of the word " man-
ufacturing " has been considerably discussed, particularly in con-
nection with the internal revenue laws that formerly existed and
also in connection with the corporation tax laws of the various
States. Presumably the use of the word in this statute is the
popular use, that is to say, manufacturing is to make by hand or
machinery. (Carlan v. Western Assur. Co. of Toronto, 57 Md.
526 ; Lawrence v. Allen, 7 How. U. S. 794. )
The Century Dictionary, page 3,620, is authority for saying
that " manufacture " means " The operation of making goods
or wares of any kind ; the production of articles for use from raw
or prepared materials, by giving to these materials new forms,
qualities, properties or combinations, whether by hand labor or by
machinery used more especially of production in a large way by
machinery or by many hands working co-operatively."
The N. Y. Court of Appeals, quoting Webster, defines manu-
facture to be " anything made from raw materials by hand, by
machinery or by art, as cloths, iron utensils, shoes, machinery,
saddlery, etc. The process of manufacture is supposed to pro-
duce some new article by the application of skill and labor to
the raw materials." (People ex rel. U. P. P. Co. v. Roberts,
145 N. Y. 377.)
As a general rule a natural product, substance or element
rendered more suitable for use by an artificial process or mere
manipulation is not a manufactured article. Thus hay pressed in
bales ready for market is not a manufactured article. (Frazee v.
Moffit, 22 Blatch. 267.) The mining of coal is not a manufac-
ture although it is a preparation of a natural substance for use.
(Byers v. Franklin Coal Co. 106 Mass. 131.) It has been held
52 THE NATIONAL BANKRUPTCY LAW.
Trading Corporations. [Ch. III.
under the present Bankruptcy Act that the mining of gold and
silver is not manufacturing. (In re Elk Park M. & M. Co. 4
Am. B. R. 131; 1 01 Fed. 422.) It has been held that one is a
manufacturer who works up lumber into timber although he pur-
chases the land as well as the standing timber. (In re Cowles,
Fed. Cas. 3,297; 1 N. B. R. 280; Hankey v. Jones, Cowp. 745;
in re Chandler, 4 N. B. R. 213; Fed. Cas. 2,591 ; 1 Lowell, 478;
Hall v. Cooley, 2 N. Y. Leg. Obs. 282.) It was also held under
the last act that one engaged in printing and publishing a news-
paper is a manufacturer (in re Kenyon, 6 N. B. R. 238; s. c. 1
Utah Ter. 47) ; but corporations engaged in printing and pub-
lishing, are by the present statute expressly made liable to be ad-
judged involuntary bankrupts.
For a discussion as to what constitutes manufacturing see
People ex rel. New England Dressed Meat, etc. Co. v. Roberts
( 155 N. Y. 408), in which it was held that a company engaged in
slaughtering and refrigerating mutton was not engaged in manu-
facturing.
Trading Corporations. — Most cases as to who are traders have
arisen in the English courts. Until the act of 24 and 25 Vict. ch.
134, no person but a trader could be made bankrupt. The ques-
tion occasionally arose under the last American Bankruptcy Act,
and also under the act of 1841. An elaborate note in Parsons on
Contracts, 7th ed. volume 3, chapter on Insolvency and Bank-
ruptcy collates all the English cases. The question is not so likely
to be a puzzling one when it arises in the case of a corporation
as in the case of an individual, since the latter may pursue many
occupations, while corporations are by their charter given a more
limited range of powers ; but it is thought the following cases may
be of service. To constitute trading, the transaction must not
be isolated ; there must be an intention to carry on the particular
pursuit as a livelihood or as a regular business ; one single act of
trading is not sufficient; but nevertheless the intention to trade,
rather than the quantity or frequency, is the test. (Heanny v.
Birch, 3 Camp. 233; Ex p. Moule, 14 Ves. 602; Ex p. Wilkes,
BANKRUPTS. 53
§4.] Trading Corporations.
2 Mont. & Ayr. 667.) But a single act may be enough if done
with the intention of making a business of trading. (Gimming-
ham v. Laing, 1 Rose, 472; Ex p. Lavender, 4 Deac. & C. H.
487; 2 Mont. & Ayr. 11; Newland v. Bell, Holt, 221; Gale v.
Halfknight, 3 Starke, 56; Patman v. Vaughan, 17 R. 572.)
In the case of the New York and Westchester Water Co.
(District Court, S. D. N. Y. , reported in 3 Am. B. R. 508; 98
Fed. 711) it was held that a company incorporated to buy and sell
water for power, manufacturing and hydraulic purposes which
had confined itself entirely to obtaining and furnishing water
for certain customers, cities and commercial boroughs, was not
engaged principally in either trading or mercantile pursuits, under
section 4b, on the ground that the furnishing of water was not
the direct sale of any specific amount of water, but was in the
nature of a use of the company's transportation service in return
for fixed sums in the form of rentals. This case has been affirmed,
upon opinion of the District Court, by the Circuit Court of Ap-
peals of the Second Circuit, on May 5th, 1900. The opinion of the
District Court contains a very valuable discussion of the author-
ities.
The following extract from the opinion of Judge Brown is in-
structive :
" I am of opinion that this water company is not within the provisions of
the Bankrupt Act, because not ' engaged principally in either trading or mer-
cantile pursuits,' in the sense in which I think those words are used. The ques-
tion depends entirely upon the proper construction to be given to those words,
since there are plainly no other words in the present act that could include
an incorporated water company like this.
The Act of 1898 is much more limited in its application to corporations than
the Act of 1867. By the latter act it was declared (sec. 5122, Rev. St.) to
' apply to all moneyed, business or commercial corporations and joint stock
companies.' The present act is restricted to corporations ' engaged principally
in manufacturing, trading, printing, publishing, or mercantile pursuits.'
The intention of Congress greatly to restrict the application of the present
act appears manifest, not only from comparison of the phraseology of the two
acts, but also from the report of the Congressional conference committee upon
this point, showing that at least railroad and transportation corporations and
banks were intended to be omitted and left to be dealt with under the State
laws. 31 Con. Rec. p. 6247, June 28, 1898. In the recent case of In re Cameron
54 THE NATIONAL BANKRUPTCY LAW.
Trading Corporations. [Ch. III.
Town Mut. Fire, Lightning & Windstorm Ins. Co. (D. C), 96 Fed. 756, 2
Am. B. R. 372, it was accordingly held, that the present act does not apply to
a mutual insurance company, and the petition in that case was dismissed. On
the point here considered, Phillips, J., observes:
' Can it be said that a company " organized for the sole purpose of
mutually insuring the property of the members, and for the purpose of pay-
ing any loss incurred by any member thereof by assessment," is principally
engaged in a mercantile pursuit? When the Legislature changed the stat-
ute from " moneyed, business or commercial corporations " to the language
" principally engaged in mercantile pursuits," it is to be presumed it was done
for a purpose. The word " mercantile," in its ordinary acceptation, pertains to
the business of merchants, and has " to do with trade, or the buying and selling
of commodities." A merchant is one who traffics, or who buys and sells goods
or commodities. . . . The term " mercantile pursuit " necessarily carries with
it the idea of traffic, the buying of something from another or the selling of
something to another, and is allied to trade. This concern has nothing in its
business of the character of mercantile pursuit. ' 96 Fed. 757, 758, 2 Am. B.
R. 374, 375-
The case of a water company like this, obtaining by purchase about two-
fifths of the supply which it furnishes to its customers, is not so clearly ex-
cluded as a mutual insurance company. But in each case as it arises the
limitations imposed by the act must be carefully observed. No such corpo-
ration can be subjected to the operation of the Bankrupt Law, nor can the
court acquire jurisdiction over it, unless it is found to be ' engaged principally
in trading or mercantile pursuits.' These words must be interpreted in the
sense in which they are commonly used and received, and not in any strained or
unnatural sense for the purpose of including or of excluding particular cor-
porations.
In Bouv. Law Diet, a trader is defined as 'one who makes it his business
to buy merchandise or goods and chattels and to sell the same for the purpose
of making a profit.' Black, Law Diet, says : ' One whose business is to buy
and sell merchandise or any class of goods, deriving a profit from his deal-
ings;' and the weight of authority seems to be that the proper description of
the business of a trader includes both buying and selling, either goods or
merchandise, or other goods ordinarily the subject of traffic. Per Lord
Ellenborough in Sutton v. Weeley, 7 East, 442; Thompson, C. J., in Wake-
man v. Hoyt, 28 Fed. Cas. 1,351 ; Lowell, J. , In re Chandler, 4 N. B. R. 213,
5 Fed. Cas. 447 ; In re Smith, 2 Low. 69, 22 Fed. Cas. 395 ; Love v. Love. 15
Fed. Cas. 999.
The words ' mercantile pursuits ' may have a little broader signification
than ' trading.' ' Mercantile ' is defined by the Century Dictionary as ' having
to do with trade or commerce; of or pertaining to merchants, or the traffic
carried on by merchants ; trading ; commercial.' It signifies for the most part
the same thing as the word ' trading ;' and by ' mercantile pursuits ' is meant
the buying and selling of goods or merchandise or dealing in the purchase and
BANKRUPTS.
55
§ 5.] Partners.
sale of commodities, and that too not occasionally or incidentally, but habit-
ually as a business. Norris v. Com. 27 Pa. St. 494 ; Com. v. Natural Gas Co.
32 Pittsb. Leg. J. 310.
Selling merely the natural products of one's own land, it has been held, does
not constitute trading, or a mercantile pursuit, even though some yearly pur-
chases may be made by the seller in order to keep up his regular supply.
In re Woods, 7 N. B. R. 128, Fed. Cas. No. 17,990; Port v. Turton, 2 Wils.
169; In re Cleland, 2 Ch. App. 466; Ex parte Gallimore, 2 Rose, 424. These
terms are restricted also to dealings in merchandise, goods or chattels, the
ordinary subj ects of commerce ; so that a railroad contractor, or a speculator
in stocks, whether on his own account, or as broker, is not deemed a trader
or merchant. In re Smith, 2 Low. 69, 22 Fed. Cas. 395; In re Marston, 5
Ben, 313, 16 Fed. Cas. 857; In re Woodward, 8 Ben. 563, 30 Fed. Cas. 542;
In re Moss, 19 N. B. R. 132, 17 Fed. Cas. 901, per Choate, J. It has also been
held that incidental purchases or sales by a person not otherwise a trader, will
not make him such. Lord Eldon, Ex parte Gallimore, 2 Rose, 424; Patten v.
Browne, 7 Taunt. 409; In re Duff (D. C), 4 Fed. 519, per Choate, J.; In re
Kimball (C. C), 7 Fed. 461, per Lowell, J.
No doubt the powers of a corporation are to be determined by its charter
and by the statutes applicable to it. The amendment of the charter of this
corporation authorized it ' to buy, sell, use and deal in water for power,
manufacturing and hydraulic purposes.' As above stated, however, the evi-
dence is that it did not furnish water for these purposes ; and under the Bank-
rupt Act the question is, not how extensive the company's powers may be, but
in what pursuits the corporation is in fact principally engaged, and whether
these pursuits are principally trading or mercantile."
In the case of In re San Gabriel Sanitorium Co. (2 Am. B. R.
408 ; 95 Fed. 271 ) it was decided that a sanitorium which charged
fees and did business as a private hospital was a trading cor-
poration. This decision does not commend itself to us as au-
thoritative.
As to other corporations becoming bankrupts under the pro-
visions of section 3a ( 5 ) , see that section, ante.
Sec. 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 bankruptcy which has jurisdiction of one of the
56 THE NATIONAL BANKRUPTCY LAW.
Definitions. [Ch. Ill
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 de-
termine.
/ The net proceeds of the partnership property shall be appro-
priated 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. 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
partnership property remain after paying the partnership debts,
such surplus shall be added to the assets of the individual partners
in the proportion of their respective interests in the partnership.
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.
h 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.
Analogous Provisions of Former Acts. —
R. S. § S121 ; act of 1867, § 36; act of 1341, § 14.
Definitions. — By section 1 (19), the word " persons " is made to
include partnerships; by (6) all " limited or other partnership as-
sociations organized under laws making the capital subscribed
alone responsible for the debts of the association " are included
in the definition of " corporations," so that this section applies
to general partnerships only, and only to partnerships which are
Such as between the parties. It does not extend to partnerships
BANKRUPTS. 57
§ 5.] Construction of the Section.
by estoppel or such as are partnerships as to creditors only. (In
re Kenney, 3 Am. B. R. 353 ; 97 Fed. 554.)
Construction of the Section. — In the case of In re Henry L.
Meyer, et al. also reported as Chemical Bank v. Meyer et al. (3
Am. B. R. 559; 39 C. C. A. 368; 98 Fed. 976) where the act of
bankruptcy alleged was an assignment for the benefit of creditors
purporting to transfer all the property of the partnership, and
made by one partner, Wallace, C. J., gives the following general
construction of this section :
" By the provisions of section 5 of the Bankrupt Act, ' a partnership,' dur-
ing the continuance of the business or after its dissolution and before the final
settlement of its business may be adjudged a bankrupt, and jurisdiction of all
the partners and the administration of the partnership and individual property
is conferred upon any Court of Bankruptcy having jurisdiction of one of the
partners. The section provides that the creditors of the partnership shall ap-
point the trustee; that the trustee shall keep separate accounts of the partner-
ship property and of the individual property; that the expenses shall be paid
from the partnership property and the individual property as the court may
determine; and that the net proceeds of the partnership property shall be ap-
propriated to the payment of the partnership debts, and any surplus added to
the assets of the individual partners, and the net proceeds of the individual es-
tate of each partner shall be appropriated to the payment of his individual
debts, and any surplus to the payment of the partnership debts. It authorizes
the partnership estate to prove against the individual estates, and vice vena
and directs the assets of the partnership estate and the individual estates to
be marshaled so as to prevent preferences, and secure the equitable dis-
tribution of the property of the several estates. It further provides that the
property of a partnership shall not be administered in bankruptcy when less
than all the members are adjudged bankrupt; and in that event the partner
not adjudged bankrupt is to settle the partnership business expeditiously, and
account for the interests of the adjudged bankrupt. The last provision ap-
plies to a proceeding by or against one partner, or any number less than all,
and means that the bankruptcy of one partner shall not preclude the other
from settling the partnership business, and, like those immediately preceding
it, is merely declaratory of a recognized equitable principle of administration
in bankruptcy. Amsinck a.Bean, 22 Wall. 403, 22 L. Ed. 801 ; Murray v. Mur-
ray, 5 Johns. Ch. 60; Colly. Partn. 854.
We are of the opinion that it is the scheme of these provisions to treat the
partnership as an entity which may be adjudged a bankrupt by voluntary or
involuntary proceeding, irrespective of any adjudication of the individual
partners as bankrupt, and upon an adjudication to draw to the administration
the individual estates of the partners as well as the partnership estate, and
(8)
5 8 THE NATIONAL BANKRUPTCY LAW.
When a Partnership is Insolvent. [Ch. III.
marshal and distribute them according to equity. The assets of the individual
estates and the debts provable against them can be ascertained without ad-
judicating the individual partners bankrupt. The language does not require
such an adjudication. The section is silent respecting a discharge of the
partners individually. It does not, by terms or by implication, preclude an
adjudication of the individual partners as bankrupt in the partnership proceed-
ing; and, if there is such an adjudication, there is nothing to prevent the
partners from receiving a discharge individually, if they are otherwise entitled
to it under the act. But, as the commission of an act of bankruptcy is in-
dispensable to jurisdiction in an involuntary proceeding, the individual mem-
bers cannot be adjudged bankrupts in such a proceeding who have not com-
mitted, or been participants in committing, one of the enumerated acts.
Section 5 differs significantly in its phraseology from that of the former acts
in regard to the bankruptcy of partners. It takes the place of section 14 of
the Bankruptcy Act of 1841, and of section 36 of the Bankruptcy Act of 1867.
These sections of the earlier acts authorized an adjudication of bankruptcy of
' persons who are partners in trade,' instead of ' a partnership ;' and, while pro-
viding for the administration of the joint and separate estates substantially like
section 5, provided, as section 5 does not, for granting or refusing a discharge
to each partner. By the language of these acts, it was a prerequisite that all
the persons comprising the partnership should be adjudged bankrupt before
the warrant could issue entitling the assignee to administer the joint estate,
and the provisions respecting a discharge show that such an adjudication was
contemplated.
When a Partnership is Insolvent.— It has been held in a recent
case in the Circuit Court of Appeals for the 6th Circuit (Vaccaro
v. Security Bank, 4 Am. B. R. 474) that where the joint assets
of a partnership are not sufficient to pay the liabilities of the firm,
but the individual property of all the members of the firm, in-
cluding the deceased partner, after deducting individual debts
and exemptions and the dower of the widow of the deceased
partner, are, added to the partnership assets, much more than
sufficient to pay the debts of the firm, the partnership is not in-
solvent within the meaning of section 3 of the Bankruptcy Act.
{I11 re Blair, 3 Am. B. R. 588; 96 Fed. 76.) This proceeds
from the general principle of the liability of the partners' indi-
vidual estates for the debts of the firm.
The differences indicate that Congress intended that a partnership should
be, for the purpose of the Bankrupt Act, in all respects ' a person,' as defined
by section 1, entitled to a discharge under section 14, and subject to be ad-
judged a bankrupt in involuntary proceedings if it has committed any of the
BANKRUPTS.
59
§ 5 ] Who Must Petition.
acts of bankruptcy specified in section 3. There are many provisions in the
act which refer to the personal immunities and duties of bankrupts, and are
not applicable to an entity like a partnership, but these are equally inapplicable
to a corporation.
Under the former acts, there could not be an adjudication of all the partners
unless a joint act of bankruptcy had been committed, and consequently there
could be no administration of the joint effects (see Redmond v. Martin, 9. N. B.
R 408, Fed. Cas. No. 11,632) ; and cases arose in which creditors were without
an adequate remedy. It may have been the purpose of Congress in the present
act to cure the defect."
Who Must Petition. — The section contains no express provision
as to who may become petitioners in proceedings to adjudge the
parties bankrupt, but under G. O. 8 and under the cases decided,
it is held in analogy to the Act of 1867 that co-partners may be
adjudged* bankrupt, 1st, where all unite in a voluntary petition;
2nd, where a creditor files an involuntary petition ; 3rd, where one
or more but not all the co-partners petition. The last case is pro-
vided for in G. O. 8, which is as follows :
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
petitioner 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 the
debtor petitioned against; and he shall have the right to appear at the time
fixed by the court for the hearing of the petition, and to make proof, if he can,
that the partnership is not insolvent or has not committed an act of bank-
ruptcy, and to make all defenses which any debtor proceded against is en-
titled to take by the provisions of the act; and in case an adjudication of
bankruptcy is made upon the petition, such partner shall be required to file a
schedule of his debts and an inventory of his property in the same manner
as is required by the act in cases of debtors against whom adjudication of
bankruptcy shall be made.
When a petition on behalf of part of the members of the firm
is filed in the clerk's office it is to be classed as a voluntary pro-
ceeding, and in the absence of the judge from the district or
division, the clerk must refer the case to the proper referee. If,
however, the non-joining partner or partners upon notification
should make defense to the petition then the proceeding would
become as to them an involuntary one and the rules prescribed for
•6o THE NATIONAL BANKRUPTCY LAW.
The Act of Bankruptcy. [Ch. III.
involuntary proceedings followed. (See In re Murray et al. 3
Am. B. R. 601 ; 96 Fed. 600; compare in re Russell, 3 Am. B. R.
91 ; 97 Fed. 32.) It is very clear where one of the members of
the firm desires a discharge from the firm as well as from in-
dividual debts he must set up in his petition that he is a member
of the firm and that he seeks such discharge. (In re Russell,
supra. )
Where one of the partners is an infant an adjudication should
be made against the partner who is of age and against the firm,
but as to the minor partner the petition should be dismissed on
the ground of minority. (In re Dunnigan Bros. 2 Am. B. R.
628; 95 Fed. 428; compare in re Duguid, 3 Am. B. R. 794; 100
Fed. 274.)
The Act of Bankruptcy. — To what extent an act of one partner
which is an act of bankruptcy may be imputed to the whole firm
has been somewhat questioned by the authorities. It would
seem that for any act done by one member which is within any
possible scope of delegated authority, the firm and all its members
would be liable in all civil proceedings, including bankruptcy
proceedings; but if an act of any one member of the firm, al-
though it is an act of bankruptcy, is not within the scope of his
authority, and has not been sanctioned or ratified by his co-part-
ners, and was not done by their direction or authority, then it
cannot be considered a firm act, and they cannot all be put into
bankruptcy because of it. (In re Meyer, 3 Am. B. R. 559; 39 C.
C. A. 368; 98 Fed. 976.)
Generally it will be found that the members of the firm can all
be charged with knowledge, or at least with a tacit sanction of the
act of the offending member. The circumstances attending the
transaction may be such that the law will presume that it was
authorized or ratified by all the members of the firm. But if
there has been no firm act of bankruptcy and no individual act
ratified by the other members of the firm, and no act of any one
member which was within the scope of a partner's authority, still
all the members of the firm may be adjudged bankrupt, if each
BANKRUPTS. 61
§ 5.] Who May be Adjudged.
of them individually has committed an act of bankruptcy. Com-
pare in re Perm, 5 N. B. R. 30; Fed. Cas. 10,927; 5 Ben. 89.)
Who May be Adjudged. — As has been pointed out (In re Meyer,
3 Am. B. R. 559; 39 C. C. A. 368; 98 Fed. 976) it has been held
that the individual partners may be adjudged as bankrupt in the
partnership proceeding.
In the Eastern District of North Carolina Judge Purnell has
recently held (In re Barden, 4 Am. B. R. 51 ; 101 Fed. 553) that
where a petition is filed by a partnership to have the firm ad-
judged bankrupt, and also petitions by the individual members of
the firm, each petition and the accompanying schedules constitutes
separate and distinct cases, and the referee and trustee are entitled
to separate fees in each case — one on the partnership petition and
one on the petition of each individual member.
But in the District of New Hampshire, Aldrich, J. held
(In re Gay, 3 Am. B. R. 529 ; 98 Fed. 870) separate petitions
necessary and further held that where a firm and the individual
partners become petitioners and set out the various accounts of
indebtedness and the assets and various interests, and ask to be
adjudged bankrupts, the practice adopted in New Hampshire is
to discharge from both partnership and individual indebtedness
in one proceeding, upon one petition, and only one filing fee is
necessary.
The learned Judge says that this is the practice in Maine and
Massachusetts and further says:
" Paragraph ' c ' of section 5 of the Bankrupt Law contemplates that the
Bankruptcy Court 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. Paragraph ' d ' provides that the trustee shall keep
separate accounts of partnership property and property belonging to the, in-
dividual partners ; and paragraph ' e ' that the expenses shall be paid from
the partnership property and the individual property in such proportion as the
court shall determine. So it would seem that in a proper case (and I mean
by that upon sufficiently comprehensive papers, and conditions warranting it)
the court may wind up the affairs and relieve from the indebtedness of the
partnership and the individual partners in one proceeding, and apportion the
expenses as equity may require. Furthermore, it may be said that Congress,
for the purpose of making the law a practical, working law, authorized and
62 THE NATIONAL BANKRUPTCY LAW.
After Dissolution. [Ch. III.
called upon the Supreme Court to promulgate necessary rules and forms to be
used in its administration. Form 2 of the rules prescribed by the Supreme
Court (18 Sup. Ct. xviii.) is entitled 'Partnership Petition;' and I assume
that it was intended to provide a form for putting the provisions of section 5
of the Bankrupt Law into practical operation, and that it was formulated in
accordance with the view of the Supreme Court as to what section 5 con-
templated should or might be done. That form, which was strictly followed
by the petitioners in this case, clearly contemplates that not only the partner-
ship assets may be inquired into, but the assets and liabilities of the individual
partners may be inquired into and wound up in one proceeding. Aside from
what seems fairly to follow from the different paragraphs of section 5, and the
form promulgated by the Supreme Court, it may be observed that the different
results may be more easily, conveniently and inexpensively reached in one
proceeding, upon proper papers, than upon several separate and distinct pro-
ceedings, involving different hearings, and what might be called circuity of
legal process."
To the same effect is In re Langslow. (No. District of N. Y.
1 Am. B. R. 258; 98 Fed. 869). It seems to be the better rule
that in order to secure a discharge from firm debts by a member
thereof, there must be an adjudication of the firm as bankrupt (see
In re Meyers, 2 Am. B. R. 707 ; 96 Fed. 408 ; s. c. 3 Am. B. R.
260; 97 Fed. 757.) But this rule is not without doubt. It is
held in England that if one member of a firm becomes bankrupt
and obtains a discharge he is relieved from all debts joint and
separate. (Ex parte Yale, 3 P. Wms. 24, note A; Thomas v.
Harding, 3 C. B. [N. S.J 254.)
After Dissolution. — The express provision in this section that a
partnership may be adjudged bankrupt even after its dissolution
and before the final settlement thereof, although it is simply de-
claratory of a general principle of law that a partnership con-
tinues as to creditors until all its assets are applied to the pay-
ment of any existing debts, yet settles a much, moo ted question
which arose under the former act.
In a recent case, Brown, J. (In re Hirsch, 3 Am. B. R. 344) of
the Southern District of New York says :
"Finding that there were no assets of the firm, the question is presented
whether the adjudication and discharge of the bankrupts in a joint proceeding
by them as partners can be sustained under the Act of 1898. Under the
BANKRUPTS. 63
§ 5.] Jurisdiction Over Partnership Estate in Case of Deceased Partner.
former Act of 1867, it was ruled in this district that a firm proceeding should
not be sustained where there were no assets at the time of the petition. This
was based in part on the peculiar wording of the Act of 1867. In re Crockett,
2 Ben. 514, Fed. Cas. No. 3,402; In re Hartough, 3 N. B. R. 422, Fed. Cas. No.
6,164; Hopkins v. Carpenter, 18 N. B. R. 339, Fed. Cas. No. 6,686. In other
districts there were divers adjudications, the majority being in favor of up-
holding the joint proceedings. In re Williams, 1 Low. 406, Fed. Cas. No.
17,703 ; Hunt v. Pooke, 5 N. B. R. 161, Fed. Cas. No. 6,896 ; In re Noonan,
10 N. B. R. 330, Fed. Cas. No. 10,292.
The language used in the present act seems to me to have been designed to
put an end to this doubt, since it authorizes a partnership to be adjudged bank-
rupt ' after its dissolution and before the final settlement thereof.' Section 5a.
The petition alleges the fact of dissolution, and that there has been no final
settlement of the firm affairs. The proof shows the existence of debts to a
considerable amount unpaid; and incontestably, it seems to me, there is no
' final settlement ' of the business of a firm, until its debts are paid or in some
way extinguished, by the Statute of Limitations, or otherwise. The decisions
to this effect under the present law seem to be fully justified by the terms
of the Act of 1898 {In re Levy [D. C], 95 Fed. 812 (2 Am. B. R. 21), In re
Altman, [D. G], 95 Fed. 263, 264, last sentence (2 Am. B. R. 407), In re
Freund, 1 Am. B. R. 25; although, in my own judgment a partner may
at his option proceed upon his individual petition for his own adjudication and
discharge without reference to the other partners, as under the Act of 1867
(In re Abbe, 2 N. B. R. 75, Fed. Cas. No. 4 ; In re Marks, Fed Cas. No. 9,094 ;
Crompton v. Conkling, 15 N. B. R. 417, 420, Fed. Cas. No. 3,408; Id. 9 Ben.
225, Fed. Cas. No. 3,407), where all are insolvent and there are no firm assets
whatever, inasmuch as partnership debts are all several, as well as joint. In re
Meyers (D. C), 96 Fed. 408, 2 Am. B. R. 707; In re Laughlin, 96 Fed. 589,
3 Am. B. R. 1 ; In re Winkins, 2 N. B. R. 349, Fed. Cas. No. 17,875 ; In re
Downing, 3 N. B. R. 748, Fed. Cas. No. 4,044. There is nothing in the present
act or rules necessarily excluding this course in such a case; it prejudices no
one ; and it is recommended by its simplicity and convenience in often avoiding
the useless burden of proceeding adversely and by publication against an in-
solvent partner who may be inimical, or whose whereabouts may be unknown,
and whose presence in the cause, real or constructive, would not be of the least
benefit to creditors.
Trie specifications are not sustained, and the discharge of the bankrupts
should be granted."
Jurisdiction of Bankruptcy Court Over Partnership Estate in Case
of Deceased Partner.— Where the bankrupt is a member of a firm,
the other member of which is deceased, and where his estate is in
course of administration, the bankruptcy court may obtain juris-
diction over the partnership estate provided possession of the
G# THE NATIONAL BANKRUPTCY LAW.
Rights of Trustee. [Ch. III.
assets can be obtained by the referee without forcible interference
with property in the legal custody of the administrator of the
deceased partner. (In re Pierce, 4 Am. B. R. 489; 102 Fed.
977-)
Rights of Trustee. — Independently of the express provision con-
tained in subdivision h of this section, where only one member
of the firm has become bankrupt, the solvent partner has the con-
trol and custody of the assets of the firm for the purpose of wind-
ing up the business. The trustee has no right to change the
possession or to make any specific division of the joint effects.
The only interest which he has in the property is an interest in
the surplus which may exist after the payment of all debts and ex-
penses. This interest is subject to all the rights and liens of the
other partners. (Story on Partnership, section 375.) The bank-
ruptcy works a dissolution of the firm, and the bankrupt mem-
ber is civiliter mortuus, and the solvent partners have the same
right to close up the business as if the firm had been dissolved by
actual death of the bankrupt. The only way in which the assets
of the firm can be administered in bankruptcy by the trustee is
by putting all the members into bankruptcy. (Amsinck v. Bean,
22 Wall. 395.) But where a petition is filed against a partnership
one of whose members is an infant, the provision of section 5I1
that the partnership property shall not be administered in bank-
ruptcy except by the non-bankrupt partner does not apply. (In
re Dunnigan Bros. 2 Am. B. R. 628; 95 Fed. 428.) Ruling in
this case was that the adjudication should be alone against the
firm and the adult partner. In the North Carolina District it has
been held that where a partnership is composed of an adult and
a minor, it may be adjudged bankrupt upon the petition of the
adult partner and the assets will pass into the hands of the adult's
trustee. (In re Duguid, 3 Am. B. R. 794; 100 Fed. 274.) Of
course if the non-bankrupt partner consents the partnership assets
may be administered as a partnership estate by the individual
trustee of the bankrupt partner. This has been held in a case
where after adjudication of the bankrupt as an individual a
BANKRUPTS. 65
§5.] Choice of Trustee.
secret partnership was discovered to have existed between the
bankrupt and another and the consent of the bankrupt partner
was implied from his standing by without protest. (See de-
cision of Remington, referee, In re Harris, 4 Am. B. R. 132,
which has since been affirmed by the Judge of the District Court
of that district.)
If one member of the firm has been so adjudged, the other
member may thereafter become bankrupt. (Hunt v. Pooke, 5
N. B. R. 161.) The solvent partner and the trustee are
tenants in common of the firm assets; but the courts deem
the solvent partner's equities the stronger, and will not dis-
turb him in his possession, nor prevent him from retaining or
distributing the funds, collecting the firm accounts and paying
the firm debts, or selling the firm assets, if he does so without
fraud. (Murray v. Murray, 5 Johns. Ch. 60; Ayr v. Brastow,
5 Law Rep. 498; Talcott v. Dudley, 5 111. 427.) If the solvent
partner is obliged to institute a suit at law and the trustee is a
necessary party to the record, he may be made such. In fact, the
action should be so brought. (Thompson v. Frere, 10 East, 418;
Burt v. Mould, 3 Tyr. 569; Cannon v. Wellford, 22 Gratt, 195;
Coe v. Whitbeck, 1 1 P. 42 ; Halsey v. Norton, 45 Miss. 703 ; Peel
v. Ringgold, 6 Ark. 546. ) While the right of a solvent partner to
administer the firm assets in cases where only one member is
adjudged bankrupt is generally recognized, yet, the court of bank-
ruptcy will give its equitable aid by its usual remedies in cases
where he does not promptly and faithfully administer the same.
(McLean v. Ihmsen, 1 West. L. J. 189; Parker v. Muggridge,
Fed. Cas. 10,743; 2 Story, 334; Ayr v. Brastow, 5 Law Rep.
498.)
Choice of Trustee.— If a firm is adjudged bankrupt, the creditors
of the individual members have no vote whatever in the election
of a trustee. This matter is by statute left entirely to the firm
creditors. This is true although there may be no firm assets.
(In re Phelps, Caldwell & Co. Fed. Cas. 11,071 ; 1 N. B. R. 525;
in re Scheiffer & Garrett, Fed. Cas. 12,445 ; 2 N. B. R. 591.)
(9)
66 THE NATIONAL BANKRUPTCY LAW.
Jurisdiction — Marshaling Assets. [Ch. III.
Jurisdiction. — Although the section 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 partnership and individual property, this it seems is only true
when the proceeding is to adjudge all the members as a firm bank-
rupt. G. O. 6 provides that where petitions are filed in different
districts against the same partnership or by different members
thereof, if the court in which the petition is first filed has juris-
diction, it retains such jurisdiction to the end, except that for the
greater convenience of parties such court may order the case
transferred.
Marshaling Assets. — The provisions of this section as they
appeared in former acts, were held to be merely declaratory
of the general equitable principle upon which courts distribute
the assets of bankrupt partnerships. The object of the enactment
according to this decision was to settle a disputed question as to the
right of a bankruptcy court (which is a court of special statutory
creation), to exercise the general powers of a court of equity in
regard to marshaling assets. (In re Collier, Taylor & Co. 12 N.
B. R. 266 ; Fed. Cas. 3,002 ; in re Melick, Fed. Cas. 9,399 ; 4 N.
B. R. 97.) Hence, in distributing the assets of bankrupt part-
nerships, the general rule of equity that partnership creditors have
priority of payment from partnership assets and individual credit-
ors priority of payment from individual assets, is to be followed ;
and it is equally true that all of the established exceptions to that
rule apply in bankruptcy as well as in equity.
An interesting qualification to the general rule arises in cases in
which there are no firm assets and no solvent living partner. In
such case it has been held both by the English and American
courts, that the firm creditors share pari passu with the individual
creditors. By the English rule, to give firm creditors this right,
two things are requisite, viz. an entire lack of firm assets, second,
no living solvent partner. If there is a solvent partner who is
dead, the exception nevertheless exists. (Story on Part. § 380;
Ex. p. Sadler, 15 Ves. 52; Ex p. Kensington, 14 Ves. 447.) The
BANKRUPTS. 67
§ 5 ] Marshaling Assets.
rule has been followed in America, although some of the courts
seem inclined to overlook the necessity of the existence of a living
solvent partner. (In re Mills, Fed. Cas. 9,611; 11 N. B. R. 74;
in re Downing, Fed. Cas. 4,044; 3 N. B. R. 748; 1 Dill. 33 ; in re
Goedde, Fed. Cas.5,500; 6 N. B. R. 295; in re Knight, 8 N. B.
R. 436; Fed. Cas. 7,880; 2 Biss. 518, disapproving Somerset
Pottery Co. v. Minot, 10 Cush. 592; in re McEwan, Fed. Cas.
8,783; 12 N. B. R. 11.) There is some conflict among the au-
thorities as to whether there must be absolutely no assets belong-
ing to the partnership or whether the fact that the assets of the
partnership are insufficient to pay expenses of administration is
sufficient. Both on authority and principle, it would seem that,
where the firm assets are not of sufficient value to leave any fund
whatever for distribution after the expense of their reduction to
cash, it should be deemed that there are no partnership assets. In
other words, after the payment of the expenses there must be
some net proceeds from the partnership assets. (In re Goedde,
supra; in re McEwan, supra; Story on Part. § 380 ; in re Mar-
wick, 8 Law Rep. 169; s. c. 2 Ware, 233 ; s. c. 3 N. Y. Leg. Obs.
286; Collyer on Part. B. 4, ch. 2, § 3, pp. 626 and 627, 2d ed. ;
Ex p. Leaf, 1 Deacon R. 176; in re Lee & Armstrong, 2 Rose, 54;
Ex p. Peake, 2 Rose, 54; Ex p. Hill, 5 Bos. & Pull. 191, A; Ex p.
Janson, 3 Madd. R. 229; Ex p. Kensington, 14 Ves. 447.) The
burden of proving that there are partnership assets rests upon the
individual creditors who claim a right of priority in the individual
assets. (In re Rice, Fed. Cas. 11,750; 9 N. B. R. 373; in re
Jewett, 1 N. B. R. 491 ; Fed. Cas. 7,304.)
There have been two District Court decisions under the Act
of 1898 dissenting from the English rule. (In re Wilcox, D. C.
Mass. 2 Am. B. R. 1 17 ; 94 Fed. 84 and in re Mills, D. C. Indiana,
2 Am. B. R. 667; 95 Fed. 269.) In the last mentioned case
Baker, J. held that where a partnership has been dissolved by. a
suit in a State court, and partnership creditors have received from
partnership assets a dividend of 55 per cent, they cannot there-
after share pari passu with individual creditors in individual
assets, which are being distributed in bankruptcy. Unless they
68 THE NATIONAL BANKRUPTCY LAW.
Marshaling Assets. [Ch. III.
first surrender the dividend received in the dissolution proceed-
ing, it would be inequitable for them to share with individual
creditors who in that proceeding had obtained nothing and it is
queried whether the exceptions frequently recognized by the
courts is well-founded law — viz. that in marshaling and distribu-
ting partnership and individual assets, if there is no living solvent
partner, joint creditors are entitled to share pari passu with in-
dividual creditors in individual assets. The Indiana rule is de-
clared to be opposed to the recognition of the exception.
The grounds upon which Judge Baker renders his decision
in this case seem to be the precise grounds upon which the de-
cision turned in the English case of Lodge v. Richard ( i DeGex.
J. & S. 610, discussed at length in In re Wilcox, 2 Am. B. R. 117
at 139), namely, the inequity of permitting the joint creditors to
first exhaust the joint assets, and then claim a right to share in
another fund (the individual assets) pari passu with individual
creditors. Yet it is to be noted that the exception that where there
is no living solvent partner and no joint assets, joint and in-
dividual creditors share pari passu, was recognized by the judges
in that case as being a fixed rule of distribution even though
possibly it was a rule hard to satisfactorily explain.
The opinion in In re Wilcox (94 Fed. 84; 2 Am. B. R. 117) is
a most scholarly review of all the leading decisions on the point,
both English and American, for the last two hundred years. It
is admitted in it that there has been not only much conflict be-
tween these decisions, but that there has been a wavering or
variance in the several decisions of the same forums. The learned
judge in that opinion reaches the conclusion that at least, under
the present Bankruptcy Law, the former well-recognized excep-
tion to the general rule as to marshaling and distributing the
property of insolvent partnership, viz. that in case of no joint
assets and no living solvent partner, joint and individual creditors
should share pari passu in individual assets, is no longer to be
recognized.
The decision of the judge in In re Wilcox seems to be a
courageous and independent determination to declare as no longer-
BANKRUPTS. 69
§ 5.] What are Firm Assets and What are Individual Assets?
good law an exception to a general rule, which exception al-
ways proved one difficult for courts and judges to justify upon
principle or reason. But a review of the cases nevertheless seems
to show that a large majority of them — even those considered in
In re Wilcox — regarded the exception as a fixed and well-
recognized one, and as a rule of law so long settled, that, upon
principles of public policy and upon the presumption' that con-
tracts are entered into and transactions are undertaken with ref-
erence to it, it should not be disturbed.
The language of the Statute of 1867 upon the subject of mar-
shaling and distributing partnership estates seems to have been
without material difference from that of the present act ; yet under
that act many of the courts, as will be seen by a review of the
cases cited above and also those discussed in In re Wilcox, held
that the exception above mentioned still existed.
What are Finn Assets and What are Individual Assets? — Ques-
tions as to whether assets are partnership or individual frequently
arise, sometimes from the nature of the property or more often
from transactions between the several partners or between the
firm and one partner.
Both personal property and real property may be held by the
partnership.
Real estate purchased by a partnership for partnership purposes,
with partnership funds, is regarded in equity, so far as the firm
and its creditors are concerned, as personal property. (Green-
wood v. Marvin, in N. Y. 423; 19 St. Rep. 612.)
The English doctrine is that partnership realty is ipso facto
converted into personalty, not only between the parties, but also
as affecting the rights of the heirs, administrators, etc. of a de-
ceased partner, unless the partners especially express their inten-
tion that it be otherwise.
The New York rule, which is the American rule, holds, in the
absence of any agreement to the contrary, that it retains the char-
acter of realty until the occasion arises for a conversion, and then
becomes personalty only to the extent required. The portion not
70 THE NATIONAL BANKRUPTCY LAW.
What are Firm Assets and What are Individual Assets ? [Ch. III.
required for partnership equities retains its character as realty,
and the rule leaves the laws of descent to their ordinary opera-
tion. (Darrow v. Calkins, 154 N. Y. 503; 61 Am. St. Rep.
637- )
The good-will of a partnership business is treated as a firm
asset. No matter how valuable or valueless it may be, it is subject
to sale with the other partnership assets upon the winding up of
the firm business. (Vonderbank v. Schmitt, 44 La. Ann. 264;
15 L. R. A. 462; 32 Am. St. Rep. 336.)
Questions as to what are partnership and what are individual
assets more frequently arise where there have been transfers of
property once belonging to the firm to one member thereof. If
a firm is solvent, it is perfectly legal and proper for one member
to purchase the firm assets upon an agreement to pay the firm
debts, or for other valuable consideration. If such a transfer is
made in good faith by a solvent firm, the property becomes, both
in law and equity, the individual property of the purchasing mem-
ber. Firm creditors may still look to all of the members for pay-
ment of their claims ; or, if they choose, they may accept the as-
suming member as their sole debtor. (In re Collier, Taylor &
Co. Fed. Cas. 3,002, 12 N. B. R. 266; in re Long, Fed. Cas.
8,476; 7 Ben. 141 ; s. c. 9. N. B. R. 227; in re Downing, Fed. Cas.
4,044 ; 1 Dill. 33 ; s. c. 3 N. B. R. 748 ; in re Wiley, Fed Cas.
17,656; 4 Biss. 214; in re Mills, Fed. Cas. 9,611 ; 11 N. B. R.
74.) But if a firm is insolvent and if a sale to one partner is made
with the intention of enabling the individual creditors of the pur-
chasing partner to obtain payment from a larger fund, thereby
giving them a preference ; or, if for any other reason, the trans-
fer is inequitable, it will be treated by the court of bankruptcy
as null and void, and the property will be disposed of as if it were
still partnership assets. (In re Cook & Gleason, Fed. Cas. 3,151 ;
3 Biss. 116; in re Byrne, Fed. Cas. 2,270; 1 N. B. R. 464; s. c.
7 A. L. Reg. 499. ) This, in fact, is nothing more than the invali-
dating of a preferential transfer, and distribution accordingly.
(See post under this section sub nom. Proving Claims of Part-
nership Estate against Individual Estates, etc.)
BANKRUPTS. 71
§ 5.] What are Firm Assets and What are Individual Assets ?
It is very clear, as already pointed out, that any scheme or
device resorted to by persons in contemplation of bankruptcy for
the purpose of charging the partnership assets with the individual
liabilities of the partners is violative of the provisions of the act.
In a recent case (In re Jones et al. D. C. Mo. 4 Am. B. R. 141 ; 100
Fed. 781) this rule was laid down where firm indorsements were
made at a time when the firm was in an embarrassed financial
condition without any new consideration moving from the in-
dividual creditor to the firm and within four months prior to the
involuntary firm petition in bankruptcy. In this case, Adams, J.
says:
" It seems to me that a statement of this case is enough to dispose of it.
Section 5, subd. ' g,' of the Bankruptcy Act provides that the court shall
marshal the assets of the partnership estate and individual assets so as to
prevent preferences, and secure the equitable distribution of the property of the
several estates. The same section provides that the net proceeds of the
partnership property should be appropriated to the payment of partnership
debts, and the net proceeds of the individual estates of each partner to the
payment of his individual debts. Any surplus of either after the satisfaction
of the claims of its appropriate class (and not until then) may be employed
for the satisfaction of the claims of the other class. Section 60 of the act
provides that any such transfer of property, or the effect of the enforcement
of such transfer, as will enable any one of the bankrupt's creditors to obtain
a greater percentage of his debt than any other of such creditors of the same
class, shall constitute a preference, and any such preference given within four
months before the filing of the petition for adjudication of bankruptcy shall be
voidable by the trustee. From these excerpts out of the Bankruptcy Act, as
well as from others, which are not necessarily here mentioned, it is perfectly
apparent what the general scheme of the Bankruptcy Act contemplates with
regard to partnership assets, namely, that they shall be in good faith applied
first to the payment of partnership debts ; therefore any scheme or device
resorted to by persons in contemplation of bankruptcy for the purpose of
charging partnership assets with the individual liabilities of the partners is,
in substance and effect, violative of the provisions of the act, and, inasmuch
as the court is required to so marshal partnership assets as to secure the
equitable distribution of the property of the several estates, it is clear that the
court must brush away all these attempts at evasion and hold the parties to
the requirements of the Bankruptcy Act administered broadly and equitably to
accomplish the objects intended by it. The scheme resorted to, as shown
in the statement of this case, by the bankrupts to foist upon the partnership
assets the payment of their individual liabilities, was at least devised for an
inequitable purpose within the purview of the Bankruptcy Act. The physical
72 THE NATIONAL BANKRUPTCY LAW.
"What are Partnership and What are Individual Debts ? [Ch. III.
and undisputed facts surrounding the case are also, in my opinion, sufficient to
stamp the transaction as fraudulent within the meaning of the Bankruptcy
Act."
What are Partnership and What are Individual Debts? — This
question arises frequently under two different sets of circum-
stances : first, where a member of a firm has assumed the firm in-
debtedness. Where such has been the transaction, firm creditors,
according to the well-established rule in the United States, may
avail themselves of the promise of the assuming member, and
treat him as their individual debtor. If the transaction is by a
solvent firm and is not tainted with fraud, then just as the pur-
chase of firm assets by one member is valid, as set forth in the
foregoing paragraph, so the assuming of the firm debts is equally
valid and the firm creditors may elect to become individual cred-
itors ; and in this case they share equally with the other individual
creditors in the distribution of the individual assets. (See in re
Downing, supra; in re Collier, Taylor & Co. supra; in re Long,
supra. ) The question whether an indebtedness is a firm or indi-
vidual indebtedness also often arises in cases where all the mem-
bers of a firm have incurred a written obligation by signing their
respective individual names, instead of the firm name. Where
this is the case, the weight of authority is, that it is an individual
indebtedness of each of the members of the firm, not a partnership
indebtedness. (In re Webb, Fed. Cas. 17,313; 2 N. B. R. 614;
in re Bucyrus Machine Co. 5 N. B. R. 303 ; Fed. Cas. 2,100; in re
Miller, 1 N. Y. Leg. Obs. 38; in re Herrick, Fed. Cas. 6,420, 13
N. B. R. 312 ; in re Roddin, Fed. Cas. 1 1,989 ; 6 Biss. 377 ; contra,
holding that in such cases there is merely a presumption that the
obligation is individual rather than firm, but that the presumption
may be rebutted, if in fact, it is a firm obligation ; in re Warren,
Fed. Cas. 17,191; 2 Ware, 322.) The decision of these ques-
tions is important in bankruptcy as it affects the question of the
marshaling of assets and the priority of creditors of the different
classes.
In a recent case, D. C. Pa. In re Lehigh Lumber Co. (4 Am. B.
R. 221; 101 Fed. 216) where more than four months prior to
BANKRUPTS.
73
| 5.] Rights of Firm Creditors in the Individual Assets.
bankruptcy a creditor of the bankrupt firm surrendered a claim
against the firm and took the note of one of the partners in lieu
thereof, which was renewed from time to time and judgment
finally entered thereon, within four months of the bankruptcy of
the firm, it was held that such creditor ceased to be a creditor
of the firm upon taking the individual note, and the giving of
such note and the judgment thereon did not constitute a voidable
preference within the meaning of the Bankruptcy Act as against
the firm, although there was evidence that interest on the note
had been paid by the firm.
Rights of Firm Creditors in the Individual Assets. — We have al-
ready seen that a firm creditor may elect to become the individual
creditor of one member of the firm who purchases the property
and assumes the firm debts. We have also seen in this section
that one member of the firm may be adjudged bankrupt involun-
tarily upon the petition of a creditor whose sole claim against him
is one incurred by the firm. This rests upon the general principle
of the law of partnership that each individual member is severally
liable for all the debts of the firm. In England, when a firm cred-
itor has thus instituted proceedings in bankruptcy against one
member of the firm, based upon the latter's individual liability,
there is a well-established exception to the general rule that part-
nership creditors are to be paid from partnership assets, and that
individual creditors are to have a priority of payment out of in-
dividual assets. This exception is that the petitioning partnership
creditor may share pari passu with the individual creditor. This
right is limited to the petitioning creditor and does not extend to
all the firm creditors. The exception is an arbitrary one, difficult
to justify. It has been criticized even by English judges, but is re-
garded as a fixed rule. (Twiss v. Massey, 1 Atk. 67 ; Ex p. Crispe,
i Atk. R. 133 ; Collyer on Part. B. 4, ch. 2, § 3, pp. 625 and 626,
2d ed. ; Ex p. Hodgson, 2 Bro. Ch. R. 5 ; Dutton v. Morrison, 17
Ves. 207 ; Ex p. Bolton, 2 Rose R. 389. ) We know of no Amer-
ican cases following it and its limitations, but it is regarded by
Judge Story in his work on Partnership as law even here. Al-
(10)
74 THE NATIONAL BANKRUPTCY LAW.
Rights of Creditors Holding Joint and Several Obligations. [Ch. III.
though the rule above given does not seem to have been adopted in
the United States in any adjudicated case, it has been held that the
general rule as to marshaling assets applies only to cases where
the joint estate, as well as the separate estate, is before the court
for distribution; and where there are joint creditors as well as
separate creditors. If only the separate estate is being admin-
istered in bankruptcy, then a partnership creditor may still prove
against the individual estate, inasmuch as each member is indi-
vidually liable to him for the debt; and therefore, as by coming
into the proceeding in individual bankruptcy he makes himself an
individual creditor, he shares pari passu with all the other indi-
vidual creditors. {In re Pease, Fed. Cas. 10,881 ; 13 N. B. R.
168; Lewis v. U. S. 92 U. S. 618; s. c. Fed. Cas. 15,595; *4 N.
B. R. 64.)
But this must be taken subject to the rule that in proceedings
affecting the individual member of the partnership alone the in-
dividual assets must first go to the individual creditors. This
however does not render the claim of the non-partnership cred-
itor non-provable. Whether a debt is provable depends upon the
nature of the liability, not upon whether there are any assets ap-
plicable thereto. {In re Bates, 4 Am. B. R. 56; 100 Fed. 263.)
Rights of Creditors Holding Joint and Several Obligations.— In
England the rule was formerly established that a creditor holding
the joint obligation of a firm secured by the individual obligation
of one or more members thereof, could not avail himself in bank-
ruptcy of his double security, but must elect which of the two he
would hold. According to this rule when creditors have once
elected they are excluded from any dividend from the other fund,
unless there remains a surplus after the discharge of all the debts
having preference therefrom ; but such a creditor is entitled to a
reasonable time to examine into and ascertain the true state of
each fund, and even after he has made an election, will sometimes
be allowed to recall it under equitable circumstances, when it will
not interfere with the positive rights actually acquired by others
(Story on Part. § 384; Gow. on Part. ch. 5, § 3, p. 286 3d ed •
BANKRUPTS.
75
§ 5.] Rights of Creditors Holding Joint and Several Obligations.
Cooke's Bankrupt Law, 259, 4th ed. ; Ex p. Rowlandson, 3 P.
Will. 405 ; Ex p. Bond, 1 Atk. 98 ; Collyer on Part. B. 4 ch. 2,
§ 8, p-. 651, 2d ed. ; Id. B. 4, ch. 2, § 4, p. 630, etc.; Watson on
Part. ch. 5, p. 289; Ex p. Edwards, 1 Mont. & McA'rth. 116.)
This rule has long been followed by the English courts and ap-
plies not only to creditors holding partnership claims secured by
the individual obligation of the members thereof, but to any joint
creditor who takes the separate security of one of the debtors as a
collateral to the joint obligation. {Ex p. Roxby, 1 Mont, on
Part. 124; Collyer on Part, supra; Gow. on Part, supra.) But
this rule even in England has always been subject to the excep-
tion that if a partnership creditor takes out a commission in bank-
ruptcy against one of the members and receives the dividend
under that commission out of the joint estate, he may bring an
action for the residue against the other partner. (Young v.
Hunter, 16 East, 258; Heath v. Hall, 4 Taunt. 326; Gow. on
Part, supra; Collyer on Part, supra; Story on Part. § 387. ) It
is to be noticed that Judge Story cites no American cases follow-
ing this rule; we know of none. The weight of American au-
thority favors the right of a creditor who has a contract joint as
to the firm and several as to one or more partners to prove against
the firm and the individual partners or partner, and to receive
dividends from the joint and individual assets (in re Bigelow &
Kellogg, Fed. Cas. 1,397, 2 N. B. R. 371, citing in re Farnum, 6
Law Rep. 21), holding that " a party who has demanded and ob-
tained two obligations, one joint and one several, has the right to
enforce both, and that that right should not be denied on account
of an arbitrary . English rule reprobated by the most eminent
judges and jurists in England, and never recognized in this coun-
try." In Massachusetts, after considerable discussion, the ques-
tion has been settled in favor of double proof and double divi-
dends. (Bank v. Hall, 160 Mass. 171 [1893]. Compare Bor-
den v. Cuyler, 10 Cush. 478. See also Mead v. Bank, Fed. Cas.
9,366; 2 N. B. R. 178; s. c. 6 Blatch. 180.) It is a daily occur-
rence that creditors before making loans or entering into con-
tracts, require firm contracts to be secured by the endorsement of
76 THE NATIONAL BANKRUPTCY LAW.
Proving Claims of Partnership Estate Against Individual Estates. [Ch. III.
individual members of the firm, for the very purpose of having
the individual security of the individual property in addition to
the security of the firm property. Since such endorsers could be
sued upon their liability if they were not bankrupt, and the firm
could also be sued, there seems no reason why in bankruptcy pro-
ceedings the creditor should not prove his claim and receive a
dividend from both the partnership and the individual assets.
(In re Stephenson, Fed. Cas. 13,374; 9 N. B. R. 256.) Such a
creditor is entitled to the advantage gained by his caution and dili-
gence, and can receive dividends from both funds. (Emery v.
Canal Bank, Fed. Cas. 4,446; 7 N. B. R. 217, holding that the
English rule as stated by Judge Story was exploded even in that
country. See also in re Howard, Cole & Co. Fed. Cas. 6,750; 4
N. B. R. 571.) A joint creditor having security upon the sepa-
rate estate of individual members, is entitled to prove against the
joint estate without giving up his security upon the separate es-
tate, and vice versa. He may prove against each for the full
amount of the claim and receive a dividend from each, provided
he does not receive from both in the aggregate more than the full
amount of his claim. (In re Howard, Cole & Co. supra; in re
Bradley, Fed. Cas. 1,772; 2 Biss. 515; Stephenson v. Jackson,
Fed. Cas. 13,374; 9 N. B. R. 255.)
Proving Claims of the Partnership Estate Against the Individual
Estates and Vice Versa.— Any claim which one member of the firm
has against it may be proven in bankruptcy and vice versa. In
the case of Mead v. Bank (Fed. Cas. 9,366; 2 N. B. R. 173 ; s. c.
6 Blatch. 180, see above), it was queried by the court whether in
a case, where a creditor has a firm obligation secured by the en-
dorsement of the individual partners which he proves against the
individual estates and secures a dividend from, the trustee as rep-
resenting the estate of the endorsing members could not prove
the payment of that dividend as a claim against the partnership
estate and recover for the benefit of the individual estate a divi-
dend from the partnership estate.
It is now well established that the right of subrogation exists
BANKRUPTS. 77
§ 5.] Marshaling of Assets Where One is a Member of Two Firms.
between a partnership estate and the estate of a member thereof.
In the case In re May et al. (Fed. Cas. 9,327), it was decided by
Lowell, J., that
" Partners and their estates come under the rule, for the reason that, in
bankruptcy, estates are settled separately; the joint creditors are to have the
joint estates, and vice versa, and although there is no contribution between
joint and separate estates, unless there should be a surplus of one over the
other, yet when the property of one is pledged for the debt of the other, a
court of equity will apply the right of subrogation precisely as it would if the
contracting parties were not partners, and thus do justice to the different
creditors."
And see to same effect In re Foote (Fed. Cas. 4,906, 12 N. B.
R. 337). And under the present act Judge Lowell has held {In re
Dillon, 4 Am. B. R. 63; 100 Fed. 627) that where upon the dis-
solution of a firm one partner agrees with his retiring co-partners
to become responsible for the payment of all firm debts and lia-
bilities, the retiring partners become in equity sureties for the
remaining partner, and this relationship is recognized in bank-
ruptcy. Hence where the retiring partner is compelled to pay a
debt of a firm in whole on in part he becomes subrogated to the
claim of the creditor, pro tanto. Where the original creditor has
not proved his claim the surety seeking to prove it must be re-
quired to prove it in the creditor's name. See further section 57i,
post, on the rights of sureties.
Marshaling of Assets Where one is a Member of Two Firms. — In
such cases the assets of the bankrupt will be so marshaled that the
creditors of each firm will have priority in the distribution of the
assets of the firms of which they are respectively creditors. It
would seem that if there is any surplus after paying the creditors
of one firm, it should go to the individual creditors of the bank-
rupt, rather than to the creditors of the other partnership. (Com-
pare in re Leland, Fed. Cas. 8,228; 5 Ben. 168; s. c. 5 N. B. R.
222; in re Hinds, Fed. Cas. 6,516; 3 N. B. R. 351.) If there is
a surplus of individual assets it should be distributed pro rata
among the creditors of both firms. (In re Dunkerson, 12 N. B.
R. 391; Fed. Cas. 4,159.)
78 THE NATIONAL BANKRUPTCY LAW.
Exemptions. [Ch. III.
Cross References. —
Transferring of Cases From One Jurisdiction to Another. — (Com-
pare section 32.)
As to Effect of Discharge of one Partner on Copartners. — (Com-
pare section 16.)
As to Effect of Discharge Where One Partner Only is Adjudged
Bankrupt. — (Compare sections 14 and 17.)
Rights of Partners to Exemption from Firm Assets. — (Compare
section 6.)
Sec. 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 domicil for the six
months or the greater portion thereof immediately preceding the
filing of the petition.
Analogous Provisions of Former Acts. —
R. S. § 5045 ; act of 1867, § 14 (amended by act of June 8th, 1872, ch. 330,
and by act of March 23, 1873, ch. 235) ; act of 1841, § 3; act of 1800, §§ 18, 34,
35, S3-
Exemptions.— The act of 1867 was more liberal than the present
act in the exemptions allowed a bankrupt, for it gave him, first,
certain specific articles necessary for a householder, such as are
usually declared exempt by the laws of all States ; second, such
other property as is exempt by the laws of the U. S. from levy and
sale upon execution; and, thirdly, such other property not in-
cluded in the foregoing as was exempted from levy and sale upon
execution by the laws of the state in which the bankrupt had his
domicil. The present act allows only those exemptions to which
the bankrupt would be entitled by the laws of the State wherein
he has had his domicil for the six months, or the greater portion
thereof, preceding the filing of the petition, which it will be re-
BANKRUPTS.
79
§ 6.] Constitutionality — The Trustee's Rights in Exempt Property.
membered is the necessary period of residence or domicil to give
the court jurisdiction over the bankruptcy proceedings. Section
2(1).
Constitutionality. — The provisions of the former bankruptcy act
as to exemptions were assailed upon the ground of being uncon-
stitutional, because of a lack of uniformity. The Constitution of
the United States gives to Congress the power to establish a uni-
form system of bankruptcy. As the exemptions prescribed by
the various State laws differ greatly in their character, value and
requirements, it was frequently contended that this occasioned a
lack of uniformity in the bankruptcy law, and that therefore it
was unconstitutional. The decisions of the courts all uphold the
constitutionality of such provision. The leading case upon the
subject is in re Beckerford (Fed. Cas. 1,209; I Dill. 45; s. c. 4
N. B. R. 203) a decision by the United States Circuit Court,
Judge Krekel, and sitting with him Justice Miller of the Supreme
Court. These cases hold that the " uniformity " required applies
to National laws alone.
The Trustee's Rights in Exempt Property. — Section 70 (a) ex-
pressly excepts exempt property from that, the title to which
passes to the trustee. That officer is charged by law with the
duty of designating or setting apart the exempt property for the
bankrupt (section 47a [n]) and the bankrupt is required by
section 7 (8) to make a claim in his schedule for the exemptions
to which he may be entitled. By section 2 (11), the court of
bankruptcy is given jurisdiction to determine all claims of a bank-
rupt to exemptions. The proper practice then, in designating and
securing exempt property, is clearly indicated in the statute, and
if followed there can be no question as to the rights therein of the
trustee and of the bankrupt.
While the voluntary bankrupt must file with his petition a claim
for his exemptions, and in case of involuntary bankruptcy the
claim must be preferred by him after adjudication, the severance
in fact of exempted property from the general estate must be
made by the trustee and its value is to be determined by the trus-
80 THE NATIONAL BANKRUPTCY LAW.
The Trustee's Rights in Exempt Property. [Ch. III.
tee, not by the debtor. (In re Friedrich [C. C. A.J, 3 Am. B. R.
801; 100 Fed. 284.) The method of setting apart the exemp-
tion is prescribed in General Order 17, which requires the trustee
to make a complete inventory of the property of the bankrupt im-
mediately upon entering upon his duties and to make a report to
the court within twenty days after receiving the notice of his
appointment of the articles set off to the bankrupt by him, with
the estimated value of each article (Form No. 47) and any cred-
itor may take exceptions to the determination of the trustee
within twenty days after the filing of the report, whereupon the
referee may require the exceptions to be argued before him and
shall certify them to the court for final determination at the re-
quest of either party. It seems to have been held by a number of
writers on the subject of bankruptcy that appraisers may be se-
lected to value the exemptions to be set apart to the bankrupt, but
this view has no support in the statute according to the decision
of the District Court of the Western District of North Carolina
(In re Grimes, 2 Am. B. R. 730; 96 Fed. 529.) In his opinion
in that case Judge Ewart says,
" The law as to the duties of trustees in setting apart the exemptions in
bankruptcy is mandatory. Bankruptcy Act 1898, sec. 47, subsecs. 10, 11, pre-
scribe that the trustees shall —
' (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; . . (11) set apart the bankrupt's exemption and report the items
and estimated value thereof to the court as soon as practicable after their
appointment.'
Exceptions to such allotment may be filed by the bankrupt, or by any
creditor, within twenty days after the same has been made and filed with the
clerk or referee. This duty cannot be performed by any other party. It is
wholly and entirely the duty of the trustee, and any agreement on the part of
the bankrupt or the creditors that the exemptions shall be allotted in any
other manner than that prescribed by the Bankruptcy Law, or through other
agencies than that of the trustee of the bankrupt, is a nullity. An impression
seems to prevail that appraisers may be selected to value the exemptions to be
set apart to the bankrupt, and even so careful a writer as Mr. Loveland, in
his most excellent work on the Law and Proceedings in Bankruptcy, in his
comments on the subject of exemptions, seems to have fallen into this error.
On page 348 he says : ' If it becomes necessary to appraise exempt property
BANKRUPTS. 8r
§ 6.] Waiver of Exemptions.
for the purpose of setting it off, it may be appraised, like other property of
the bankrupt, by three disinterested appraisers appointed by the court;' and
he cites, in his notes on the same page, Bankruptcy Act 1898, § 70, subsec. b.
On examination of this section, the only reference to the appointment of ap-
praisers is found in § 70, subsec. b. This prescribes that ' 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 ap-
proval 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.' It
will be observed that this subsection in no wise authorizes and empowers ap-
praisers to either value or set apart the bankrupt's exemptions. As a matter of
course, in many cases in bankruptcy where the assets are nominal, and do not
exceed the exemptions allotted, this appraisal is not necessary; but, where the
assets are in excess of exemptions, the statute clearly requires that the property
should be appraised. This inventory filed by appraisers may aid the trustee
in making his allotment, but he is not in any wise concluded by it, nor
has he any right to adopt it as his own. The object of the statute in requiring
an appraisal of the estate of a bankrupt is evidenced by the last clause of this
subsection, to wit : ' The real and personal property shall not be sold . . . for
less than seventy-five per centum of its appraised value.' There were other
exceptions to the allotment made by the appraisers of the bankrupts' exemp-
tions, consideration of which is not necessary, as the allotment was fatal, for
the reason above shown."
Waiver of Exemptions. — The right of a debtor to specifically
waive exemptions must, of course, depend upon the law of the
State, but the bankrupt may waive his right to have exemptions
set apart by not claiming them (In re Nunn, D. C. Ga. 2 Am. B.
R. 664), and it is held in the same district (Georgia) that a bank-
rupt claiming an exemption must make a full and fair disclosure
of his property and he forfeits his claim where he has been guilty
of fraud in withholding his assets. (In re Waxelbaum, 4 Am.
B. R. 120; 101 Fed. 228.)
If the exemption is of property of a certain kind which the bank-
rupt is entitled to specifically, regardless of the amount of it, or of
its value, or of his own circumstances, then it has been held that
his failure to claim it will not deprive him of his right to it. But
the general principle applicable to such cases is that he is bound to
claim his rights, and if he does not do so he will be deemed to have
waived them. (Green v. Blunt, 59 Iowa, 79; Wicker v. Corn-
stock, 52 Wis. 315; Pond v. Kimball, 101 Mass. 105; Spitley v.
(11)
82 THE NATIONAL BANKRUPTCY LAW.
Jurisdiction of Bankruptcy Court over Exempt Property. [Ch. III.
Frost, 15 Fed. Rep. 299; People v. Palmer, 46 111. 398; s. c. 95
Am. Dec. 418. Compare Vanderhorst v. Bacon, 38 Mich. 669;
s. c. 31 Am. Rep. 328; Clapp v. Thomas, 5 Allen [Mass.J 158.)
Although a law allowing exemptions is always to be construed
liberally and in favor of the debtor, yet, the burden of proving
that property comes within the list of exemptions rests upon the
claimant. He must bring himself and his property clearly within
the statute. (Guise v. State, 41 Ark. 249; Briggs v. McCul-
lough, 36 Cal. 542; Swan v. Stephens, 97 Mass. 7; Griffin v.
Sutherland, 14 Barb. [N. Y.] 456.)
But an exemption is a matter of right and does not rest in the
discretion of the trustee, who must allow it unconditionally. (In
re Brown, 4 Am. B. R. 46; 100 Fed. 441.)
Jurisdiction of Bankruptcy Court over Exempt Property. — Ex-
empt property never becomes assets in the bankruptcy court for
administration. The trustee has no title to it and has only a
qualified right of possession in it. The title to exempt property
remains in the bankrupt and the trustee can exercise no right and
owes no duty concerning it other than to set it apart to the bank-
rupt. (In re Camp, 1 Am. B. R. 165 ; 91 Fed. 745 ; In re Hill,
2 Am. B. R. 798; 96 Fed. 185, and cases cited.) The better
opinion is that the bankruptcy court has no jurisdiction either to
enforce a lien upon such exempt property, nor to determine the
rights of creditors asserting waiver against the property. (See
In re Grimes, 2 Am. B. R. 730; 96 Fed. 529; In re Camp, 1 Am.
B. R. 165; 91 Fed. 745; in re Hatch. 4 Am. B. R. 349; 102
Fed. 280, and cases cited.) There have been decisions the
other way under the present act. (See In re Garden, 1 Am. B.
R. 582; 93 Fed. 423; in re Woodruff, 2 Am. B. R. 678; 96
Fed. 317; in re Sisler, 2 Am. B. R. 760; 96 Fed. 402.) But
under the recent decision of the U. S. Supreme Court in Bardes
v. Bank (4 Am. B. R. 163; 178 U. S. 524) it is doubtful whether
these last mentioned decisions are good law. Under the Act of
1867 it was held that the bankruptcy court can not properly en-
tertain a proceeding to enforce a lien upon such property. (In re
BANKRUPTS. 83
{} 6.] Liens on Exempt Property.
Bass, Fed. Cas. 1,091 ; 15 N. B. R. 453.) But it has been held
that where a creditor holds two liens, one on exempt property and
the other on non-exempt property, a court of bankruptcy might
enforce the general equitable rule that where one creditor has a
security upon two funds, he can be compelled first to exhaust his
remedy against the fund upon which other creditors have no lien.
It is doubtful if a court would exercise a power so oppressive to a
debtor; and at any rate this would hardly be an exercise of juris-
diction over the property. It is rather a jurisdiction over the
person of the lienor. (In re Sauthoff, 14 N. B. R. 364; Fed! Cas.
12,379-)
It has been held in the District Court of Vermont that pension
money which is exempt by statute is still subject to payment of
statutory fees in bankruptcy on the ground that such fees are
primarily for the benefit of the bankrupt, and do not depend upon
property not exempt but Upon absolute inability. (See In re
Bean, 4 Am. B. R. 53 ; 100 Fed. 262 ; and see in re Collier, 1
Am. B. R. 182; 93 Fed. 191.) But the Circuit Court of Ap-
peals of the 5th Circuit has held contra, and is undoubtedly con-
trolling authority. ( Sellers v. Bell, 2 Am. B. R. 529 ; 36 C. C.
A. 513; 94 Fed. 811.)
Liens on Exempt Property. — From the fact that a court of bank-
ruptcy has no jurisdiction whatever over the exempt property
(other than to hear and determine the claims of the bankrupt, if
disputed) and that such property is not within the contemplation
of the act or affected by any of the proceedings pursuant thereto,
it follows that all liens upon exempt property remain unimpaired
and unaffected ; that transfers of such property though made with
an intent to give one creditor an advantage over others are not
" preferences ; " in short, that all interests in, and title to, the
property remain unchanged and undisturbed. The right of a
lienor upon exempt articles is a special property right which
Congress does not intend to confiscate. (In re Garrett, 1 1 N. B.
R- 493; Fed. Cas. 5,252; Jackson v. Allen, 30 Ark. no; in re
Preston, Fed. Cas. 11,394; 6 N. B. R. 545; in re Lambert, Fed.
84 THE NATIONAL BANKRUPTCY LAW.
Exemption from Partnership Assets. [Ch. III.
Cas. 8,026; 2 N. B. R. 426; in re Dillard, 9 N. B. R. 8; Fed. Cas.
3,912; in re Whitehead, Fed. Cas. 17,562; 2 N. B. R. 599; in re
Hutto, 3 N. B. R. 787; Fed. Cas. 6,960; in re Bass, Fed. Cas.
1,091; 15 N. B. R. 453; inreDeckert, Fed. Cas. 3,728; 10 N. B.
R. 1 ; s. c. 9 Alb. L. J. 390; s. c. 1 A. L. T. [N. S.J 336; in re
Broome, Fed. Cas. 1,966; 3 N. B. R. 343; s. c. 3 Ben. 488.) But
there are decisions to the contrary, holding that the securing of
an exemption is in the nature of a purchase by the bankrupt of
the exempt property, the consideration being the surrender of all
the rest of his estate, and that the supreme law of the land gives
him this exempt property by a title, free and clear of the claims
of all creditors, even though the claims be perfected liens. This
can hardly be true under the present statute ; it was questionable
under the act of 1867. (See in re Hambright, Fed. Cas. 5,973 ; 2
N. B. R. 498; in re Griffin, Fed. Cas. 5,813 ; 2 N. B. R. 254; in re
Owens, 12 N. B. R. 518; s. c. 6 Biss. 432; Fed. Cas. 10,632;
in re Stevens, 2 Biss. 373 ; Fed. Cas. 13,392 ; s. c. 5 N. B. R. 298;
in re Smith, Fed. Cas. 12,986; 8 N. B. R. 401, citing in re Kean,
8 N. B. R. 367; Fed. Cas. 7,630; in re Jordan, Fed. Cas. 7,514;
8 N. B. R. 180.)
Exemption from Partnership Assets. — There is a good deal of
conflict as to the right of the partner to be allowed exemptions
out of the partnership assets. This conflict arises mainly from
the differences in the State statutes and the different methods of
construing them. A few decisions under the present Bankruptcy
Law by the federal courts are all that can be profitably referred to
here. The case of In re Camp, D. C. Georgia, ( 1 Am. B. R. 165 ;
91 Fed.' 745) after laying down the rule that where the courts of
the State allow exemption from partnership assets, the courts of
bankruptcy are in duty bound to allow a bankrupt residing in that
State such an exemption, holds that no exemption from partner-
ship assets will be allowed to a partner unless his interest in the
firm property is equal in value to the exemption claim. This case
contains a valuable collection of authorities on this subject. (See
In re Grimes, D. C. North Carolina, 2 Am. B. R. 160; 96 Fed.
BANKRUPTS. 85
§ 6.] Right of Exemption in Property Fraudulently Conveyed.
529, which holds that where each member of a partnership has
consented to the claims of the others for exemptions from partner-
ship assets each partner is entitled to the exemptions allowed by
the laws of the State in which he is domiciled, such consent being
required by the State law. Compare also in re Stevenson, D. C.
North Carolina, 2 Am. B. R. 230 ; 93 Fed. 789. ) In Wisconsin
individual members of a partnership may each with the consent
of the other claim and receive from the partnership property the
exemption allowed them by law if they have no individual prop-
erty from which the exemptions may be secured. (In re Nel-
son, D. C. Wisconsin, 2 Am. B. R. 556.) And under a law of
the same State the co-partners may sever their joint interest in the
co-partnership property by common consent so as to permit
each of them to claim their exemption. (In re Friedrich,
3 Am. B. R. 801; 100 Fed. 284.) But in Maryland such ex-
emption is not allowed. (In re Beauchamp, 4 Am. B. R. 151;
101 Fed. 106.) The following cases decided by the highest State
courts on this subject are taken from In re Camp, supra. In
favor of such exemption see, Stewart v. Brown (37 N. Y. 350) ;
Newton v. Howe (29 Wis. 531) ; Worman v. Giddey (30 Mich.
151) ; Burns v. Harris (67 N. C. 140) ; Farmers, etc. Bank v.
Franklin (1 La. Ann. 393) ; Harrison v. Mitchell (13 La. Ann.
260) ; Russell v. McLennon (39 Wis. 570).
Contra: Pondz>. Kimball (101 Mass. 105) ; Guptil v. McFee (9
Kan. 35) ; Wright v. Pratt (31 Wis. 99) ; Kingsley v. Kingsley
(39 Cal. 665) ; Gaylord v. Imhoff (26 Ohio St. 317) ; Rhodes v.
Williams (12 Nev. 20); Hewitt v. Rankin (41 Iowa, 35).
Bight of Exemption in Property Fraudulently Conveyed. — On this
subject there is also conflict of authority. Two principles of
law here clash : first, that the trustee has no title to exempt prop-
erty; second, that a conveyance fraudulent as to creditors is
nevertheless valid between the parties thereto, and that by such a
conveyance the fraudulent grantor loses all his title and interest
in the property, although the trustee representing creditors may
bring an action to invalidate the transfer. If property is not
86 THE NATIONAL BANKRUPTCY LAW.
Purchasing Exempt Property on the Eve of Bankruptcy. [Ch. III.
specially exempt, the trustee may, perhaps, bring suit. As the
trustee in bringing such suit represents not the bankrupt, who has
lost all his title, but represents the creditors, who by law are vested
through the trustee with such property, we should say on principle
that a bankrupt cannot claim any of such property as exempt in
case the trustee should invalidate the fraudulent transfer. (Au-
thorities for this proposition are: Keating v. Keefer, Fed. Cas.
7,635 ; 5 N. B. R. 133 ; in re Dillard, Fed. Cas. 3,912 ; 9 N. B. R.
8 ; in re Graham, Fed. Cas. 5,660 ; 2 Biss. 449 ; in re Everett, 9
N. B. R. 90; Fed. Cas. 4,579. The contrary has been held in
Penny v. Taylor, 10 N. B. R. 200; Fed. Cas. 10,957; Smith v.
Kehr, Fed. Cas. 13,071; 7 N. B. R. 97; Cox v. Wilder, 2 Dill.
132; s. c. 7 N. B. R. 241; Fed. Cas. 3,308; in re Detert, Fed.
Cas. 3,829 ; 1 1 N. B. R. 293 ; Bartholomew v. West, 2 Dill. 290.
Fed. Cas. 1,071; s. c. 8 N. B. R. 12; McFarland v. Goodman,
Fed. Cas. 8,789; 11 N. B. R. 134; s. c. 6 Biss. in.)
In Comstock v. Bechtel, 63 Wis. 656, the court held that the
exempt property purchased with the proceeds of non-exempt
property was nevertheless exempt. See Wilcox v. Hawley, 31
N. Y. 648, in which the court held that though the debtor had
other property which he had disposed of, transferring the avails
to his wife, that the property exempt by law was not to be with-
held from those who had committed crimes or frauds, or from
those who had participated therein. And see also opinion of
Jones, Referee, In re Peterson (1 Am. B. R. 254).
Purchasing Exempt Property on the Eve of Bankruptcy. — Here
again we find a conflict of authority. On the one hand, 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;
that is, the transfer of the assets, given in exchange for the ex-
empt property, will be voidable as being made with intent to de-
fraud creditors. (In re Boothroyd, Fed. Cas. 1,652 ; 14 N. B. R.
223, citing Brackett v. Watkins, 21 Wend. 68; Grimes v. Byrne,
BANKRUPTS. 87
§ 6.] Exempting Encumbered Articles.
2 Minn. 89; in re Wright, Fed. Cas. 18,067; 8 N. B. R. 430; to
the contrary, O'Donnell v. Segar, 25 Mich. 367; in re Henkel,
2 N. B. R. 546; Fed. Cas. 6,361; s. c. 2 Saw. 305; Randall v.
Buffington, 10 Cal. 491, and see Comstock v. Bechtel, supra.)
Exemption of Property Subject to a Lien Dissolved by Adjudication
of Bankruptcy. — It has been held that where property of a bank-
rupt has been made subject to a lien obtained pursuant to an ac-
tion, which lien is dissolved by the adjudication of bankruptcy,
and such property has been sold before the dissolution of the lien,
the bankrupt is entitled to the same exemption out of the pro-
ceeds as he would have had in the property. (In re Ellis, Fed.
Cas. 4,400; 1 N. B. R. 154.) But the adjudication of bank-
ruptcy ought in no way to affect the lien if it was on exempt prop-
erty only.
Eights Fixed by Petition.— Under the Act of 1867 the rights of
a bankrupt as to exemptions are fixed by the laws existing at the
time of the filing of the petition. Any change in the laws, or even
a change of residence, will in no way affect his rights. (Com-
pare in re Kerr, 9 N. B. R. 566 ; Fed. Cas. 7,729 ; in re Dillard,
9 N. B. R. 8; Fed. Cas. 3,912.) The exemptions must thus be
allowed by the laws of the State of his residence (if he has been
a resident the greater part of six months), not by the laws of the
State where the property is located. (In re Stevens, 5 N. B. R.
298; Fed. Cas. 13,392; s. c. 2 Biss. 373.) But as the title to a
bankrupt's property does not now vest in the trustee till adjudi-
cation, it would seem as if, in case the bankrupt had in good faith
acquired exempt property between the filing of the petition and
the adjudication, he might claim it as exempt. The filing of the
petition determines merely what law shall apply ; it does not affect
the title. (Compare section 70a.)
Exempting Encumbered Articles.— As it is universally admitted
that exemption laws should be liberally construed so as to make
generous provision for the unfortunate debtor, if a bankrupt owns
88 THE NATIONAL BANKRUPTCY LAW.
Right of Exemption is Personal to Bankrupts — The State Laws. [Ch. III.
property which is unencumbered and which may be exempt by
the laws of his State, then such property should be set apart to
him. Encumbered property may be set apart, but only when
there is no other, and the exemption of the latter class of prop-
erty does not destroy liens; the bankrupt merely receives the
articles so set apart, subject to the liens. (In re Rupp, Fed. Cas.
12,141; 4 N. B. R. 95.)
Eight of Exemption is Personal to Bankrupts. — The bankrupt or
his family alone can claim the right of exemption. If they do
not claim it, a mortgagee of exempt property cannot assert it,
unless the exemption is waived in or by the mortgage. (Ed-
mondson v. Hyde. Fed. Cas. 4,285 ; 7 N. B. R. 1 ; s. c. 2 Saw.
205. ) The wife and children of a bankrupt may claim the exemp-
tion, the law being intended as much to protect them as the hus-
band ; thus the husband cannot deprive the family of the right to
an exempt homestead merely by absconding, so long as he leaves
his family in it. (In re Pratt, 7 Pac. L. R. 202.) The bankrupt
may claim his exemption through his attorney or agent. (Wilson
v. McElroy, 32 Pa. St. 82; Regan v. Zeeb, 28 Ohio St. 483.)
The State Laws. — As has been said the bankruptcy act does not
enact that any new exemption shall be allowed a bankrupt. It
merely provides that the allowance of those prescribed by State
laws shall not be affected, hence the statutes of the State of resi-
dence of a bankrupt must be studied in each case and followed;
and not only is the statutory law of the State to be recognized
and followed, by the courts of bankruptcy and the trustee in
bankruptcy in setting apart such exemptions, but the decisions
of the courts of those States as to the meaning and construction
of their respective laws are also to be followed. (Goodall v.
Tuttle, Fed. Cas. 5,533; 7 N. B. R. 193.) It is an established
and well-recognized principle that when a legislature adopts
a statute of another State, it is presumed to have adopted the
judicial construction given thereto. (Sedgwick on Stat, and
Con. Law. 428-431; Goodall v. Tuttle, supra.)
BANKRUPTS. 89
§ 7.] Duties of Bankrupts.
Sec. 7. Duties of Bankrupts. — a The bankrupt shall ( 1 ) attend
the first meeting of his creditors, if directed by the court or a
judge thereof to do so, and the hearing upon his application for
a discharge, if filed; (2) comply with all lawful orders of the
court; (3) examine the correctness of all proofs of claims filed
against his estate; (4) execute and deliver such papers as shall
be ordered by the court ; ( 5 ) execute to his trustee transfers of all
his property in foreign countries; (6) immediately inform his
trustee of any attempt, by his creditors or other persons, to evade
the provisions of this act, coming to his knowledge; (7) in case
of any person having to his knowledge proved a false claim
against his estate, disclose that fact immediately to his trustee;
(8) prepare, make oath to, and file in court within ten days, unless
further time is granted, after the adjudication, if an involuntary
bankrupt, and with the petition if 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 cred-
itors, showing their residences, if known, if unknown, that fact to
be stated, the amounts due each of them, the consideration there-
of, the security held by them, if any, and a claim for such exemp-
tions 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 bank-
ruptcy, 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 testimony given by him shall be offered in evi-
dence against him in any criminal proceeding.
Provided, however, That he shall not be required to attend a
meeting of his creditors, or at or for an examination at a place
more than one hundred and fifty miles distant from his home or
principal place of business, or to examine claims except when
presented to him, unless ordered by the court, or a judge thereof,
for cause shown, and the bankrupt shall be paid his actual ex-
penses from the estate when examined or required to attend at
any place other than the city, town, or village of his residence.
Analogous Provisions of Former Acts, — As to duty to obey orders and exe-
cute necessary papers: R. S. section 5104; act of 1867, section 26; act of 1800,
(12)
9o THE NATIONAL BANKRUPTCY LAW.
Duty to Attend Meetings, etc.— Executing Necessary Papers. [Ch. III.
sections 21, 33. As to executing transfers: R. S. section 5051; act of 1867,
section 14. As to voluntary bankrupt's duty to file schedule : R. S section
5014; act of 1867, section 11. As to involuntary bankrupt's duty to file sched-
ule: R. S. section 5030; act of 1867, section 42; amended, act of July 27, 1868,
ch. 258; section 2. As to contents of schedule: R. S. section 5015; act of
1867, section 11; act of 1841, section 1; also, R. S. section 5016; act of 1867,
section 11. As to verification: R. S. section 5017; act of 1867; section 11.
As to amendment of schedules: R. S. section 5020; act of 1867, section 26.
As to examination of bankrupt : R. S. section 5086 ; act of 1867, section 26 ;
act of 1841, section 4; act of 1800, sections 18, 23, 52. As to provisions analo-
gous to the matters mentioned in the other subdivisions, consult "Analogous
Provisions," under the sections cross-referenced to those subdivisions.
Duty to Attend Meetings. Section ya. (1) — Compare section
55 as to Meetings of Creditors.
Duty to Obey Orders of the Court. Section 7a (2) — The moment
a person voluntarily files a petition in bankruptcy he submits him-
self personally to the jurisdiction of the court and becomes bound
to obey its orders and directions, even before adjudication. (In
re Harris, 3 N. Y. Leg. Obs. 152.) By section 1 (4) the term
" bankrupt " includes a person against whom an involuntary
petition has been filed, and a bankrupt, even before adjudication,
is subject to the orders of the court. (In re Bromley, 3 N. B. R.
686.) Disobedience to the order of the court is punishable as a
contempt. For the practice in punishing contempts before ref-
erees, see section 41, and see as to general power to punish for
contempt, section 2 ante, and note on that subject.
Duty to Examine Claims. Section 7a (3)— Compare section 57
on Proof and Allowance of Claims and G. O. 21.
Executing Necessary Papers. Section 7a (4)— Although the
trustee becomes vested by law, without any formal assignment,
with title to the bankrupt's property including his rights of action,
frequently it is necessary or advisable that there should be a
record for filing. Any paper which the court thus deems neces-
sary or advisable, it may order the bankrupt to execute; for in-
stance, he may be required to execute such papers as will enable
the trustee to be admitted to prosecute in his own name a suit pend-
BANKRUPTS. 91
§ 7.] Informing Trustee of Evasions, etc.— Filing Schedules.
ing in a State court, under the power conferred on him by section
1 1 ; and the court may enjoin the bankrupt from prosecuting such
action or taking any steps therein. (Samson v. Burton, 5 Ben.
325; Fed. Cas. 12,285; s- c- 4 N. B. R. 1; in re Clark, 4 Ben.
88; Fed. Cas. 2,798; s. c. 3 N. B. R. 491.)
So the court may order the bankrupt to execute an assignment
of a license (In re Fisher, 3 Am. B. R. 406; 98 Fed. 89), or to
assign his interest in an insurance policy. {In re Diack, 3 Am.
B. R. 723; 100 Fed. 770.)
Executing Transfers. Section 7a (5) — Compare "Foreign
Bankruptcies," section 17, as to title of the trustee to property in
foreign countries.
Duty to Inform Trustee of Evasion of Act or Proof of False Claim.
Section 7a (6) (7) — Compare section 29 post as to Crimes
Against the Act.
Schedule to be Filed. Section 7a (8) . — The filing of a schedule,
if neglected, may be ordered by the court ; and disobedience to the
order will be punished as a contempt. The provisions of section
39 (6), that the referee shall prepare and file the schedules when
the bankrupt neglects to do so, imposes upon that officer that
duty, only in those cases where the bankrupt cannot be com-
pelled personally to do it. The Supreme Court of the United
States, pursuant to section 30, has prepared a form for schedules
which is very complete and which renders it unnecessary to dwell
upon the details, (see Form No. 1). G. O. 5 provides that all
petitions and schedules shall be written or printed plainly without
interlineation or abreviation, except for purpose of reference.
G. O. 9 provides that in case 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 of the date of ad-
judication a schedule giving names and places of residence of all
creditors of the bankrupt according to the best information of
such creditor. If the debtor is found and is served with notice
to furnish a schedule of creditors and fails to do so, the petition-
92 THE NATIONAL BANKRUPTCY LAW.
Schedule to be Filed. [Ch. HI.
ing creditor may apply for an attachment against the debtor or
may himself furnish such schedule as aforesaid.
If these rules and the very complete form are followed so far as
the circumstances of each case will permit, there will be little
trouble arising in the making of schedules. A few points should
be emphasized. Ditto marks should not be used and the names
of creditors should in every case be written in full if possible.
(In re Mackey, Opinion of referee Collier, i Am. B. R. 593.)
It will be noticed that schedule " A " in the form has reference to
debts and includes all kinds of debts, secured and otherwise. In
this connection it is well to remember that where an individual
member of a firm petitions for a discharge he should petition
specifically for the discharge from firm debts as well as of in-
dividual debts and his firm as well as individual debts should be
scheduled. (In re Laughlin, 3 Am. B. R. 1 ; 96 Fed. 589.)
The purpose of inserting names of creditors is to give to cred-
itors and the trustee full, accurate and early information as to
the condition of the estate. With regard to debts, although the
act only requires that the residence of the creditor shall be stated,
it will be advisable to state the post-office address as well. If the
residence cannot be ascertained, that fact must be stated, and the
proper practice requires that the bankrupt shall state what efforts
he has made to ascertain the fact. (In re Pulver, Fed. Cas.
11,466; 1 Ben. 381; s. c. 1 N. B. R. 46.) The insertion of the
name of a creditor is not an admission of his claim, which in any
way binds the trustee or the other creditors. The creditor must
still prove his claim and have it allowed, in order to secure a
dividend. In inserting debts due to a firm, they should be stated
as due to the firm and not to the individual partners (Anon. 1
N. B. R. 123) ; but it would be well to give the names of the in-
dividual members of the firm. Whether debts barred by the stat-
ute of limitations are provable in bankruptcy or not, see notes to
sections 63 and 17. It has been held, however, that such debts
should be inserted in the schedule. Even creditors whose claims
are outlawed are entitled to notice of the bankruptcy proceedings,
and for this reason their claims should appear in the schedule.
BANKRUPTS.
93
§ 7.] Omission of Creditors from Schedule — Inventory of Property.
Placing such claims upon the schedule does not revive the obli-
gations so as to take them out of the statute of limitations; but
in order that in no way may it appear to be in the nature of a
promise to pay, or an admission of an existing indebtedness, it
will be proper for the bankrupt in his schedules to mention that
these claims are barred by limitation. (In re Kingsley, Fed. Cas.
7,819; 1 N. B. R. 329.) Under the statute of 1841 it was held
that a judgment previously confessed though without considera-
tion was proper to be inserted in the schedule, though not binding
on the assignee. (In re Robertson, 1 N. Y. Leg. Obs. 20.)
It is proper for a bankrupt to schedule a claim which has been
reduced to judgment by the creditor and appears by the records
to be an unsatisfied judgment owing to such judgment creditor
even if the judgment has been assigned and the bankrupt has
knowledge of such assignment. (Sellers v. Bell, 2 Am. B. R.
529; 36 C. C. A. 513; 94 Fed. 811.)
Omission of Creditors From the Schedule. — As to its effect upon
their claims, see section 17 (3) and notes. Whether it is an
offense when willfully done, see section 29 (2) ; if an offense,
then it bars a discharge, section 14b (1).
The Inventory of the Property. — The schedule of the bankrupt's
property should be an itemized list of all the articles, title to
which vests in the trustee under section 70; and it has been held
that it is the bankrupt's duty to insert not only that to which he
himself might claim title, but also all his property which might
come into the hands of his trustee as the representative of credit-
ors, although the bankrupt theretofore has conveyed that prop-
erty in trust for the benefit of creditors, if the trust is one which
would be voidable under the Bankruptcy Act (in re Pierce & Hol-
brook, Fed. Cas. 11,141; 3 N. B. R. 258; Ashley v. Robinson,
29 Ala. 112); also property fraudulently conveyed. (In re
O'Bannon, Fed. Cas. 10,394; 2 N. B. R. 15 ; in re Hussman, Fed.
Cas. 6,951 ; 2 N. B. R. 437.) But under the act of 1841 it was
held that the bankrupt is bound to set forth in his schedules only
such property as he has a right and interest in at the time of
94 THE NATIONAL BANKRUPTCY LAW.
Verification of Schedules — Amendment of Schedules. |"Ch. Ill,
petitioning, and if prior to that time he has lost his property
rights in it, though by negligence, gaming, donation, extrava-
gance or even fraud, it need not be set forth in the schedule. (In
re Robertson, i N. Y. Leg. Obs. 20.) Vested interests in re-
mainder should be included (In re Wood, 3 Am. B. R. 572 ; 95
Fed. 946) ; and all contingent interests. (In re Connell, 3 N.
B. R. 443; Fed. Cas. 3,110.) All rights of action which are as-
signable, even though the damages are unliquidated, should be
inserted in the schedules (In re Orne, 1 Ben. 361 ; Fed. Cas.
10,581 ; s. c. 1 N. B. R. 57), but not rights of action which die
with the person. (Crockett v. Jewett, Fed. Cas. 3,402; 2 Ben.
514; s. c. 2 N. B. R. 208.) It seems that the bankrupt should
include all property as to which he has or claims title, even
though another may adversely claim it. (Compare in re Beal,
2 N. B. R. 587; Fed. Cas. 1,156; s. c. 1 Lowell, 323.) Property
which one owns should be included in the schedules, even though
it has been levied upon, as there is still a property right in it.
The interest which one has in a firm should be stated, but not
any of the specific articles, unless they are held in such a way as
to show that the property right in them has been transferred
from the firm to the partner. (In re Norcross, 1 N. Y. Leg.
Obs. 100; in re Beal, Fed. Cas. 1,156; 2 N. B. R. 587; s. c. 1
Lowell, 323.)
Verification of Schedules. — The schedule may be verified before
any officer mentioned in section 20.
Amendment of Schedules.— G. O. 1 1 provides that the court may
allow amendments to the petition and schedules on application
of the petitioner and that such amendments shall be printed,
written, signed and verified like the original. In the application
for leave to amend the petitioner must state the cause for the
error in the original paper.
Amended schedules should be filed whenever there have been
material errors or omissions. It may be done voluntarily or it
may be required. Section 39 (2) makes it the duty of the referee
to examine all schedules of property and lists of creditors filed
BANKRUPTS. 95
§ 7.] Examination of Bankrupt.
by the bankrupts, and cause such as are incomplete or defective
to be amended. This power should be exercised, even although
creditors or the trustee do not seek the aid of the referee. (In re
Orne, 1 Ben. 420; Fed. Cas. 10,582; s. c. 1 N. B. R. 79.) Omis-
sions are no longer a ground for refusing a discharge to the bank-
rupt unless the circumstances are such that the act becomes an
offense under section 29. The schedules must be verified, and by
the second subdivision of that section one may be punished by
imprisonment if he has made a false oath or account in or in re-
lation to any proceeding in bankruptcy. It follows that a veri-
fication of a schedule known to be incorrect or false constitutes
an offense under this clause and is a ground for refusing a dis-
charge. The bankrupt should promptly correct such errors and
supply such omissions. If he does not do so as soon as they
come to his knowledge it will be strong evidence of an intent to
falsify. Amendments may be made before the bankrupt's dis-
charge, even after objections to his discharge have been filed by
creditors. (In re Heller, Fed. Cas. 6,339; 5 N. B. R. 46; in re
Connell, Fed. Cas. 3,110; 3 N. B. R. 443; in re Preston, Fed.
Cas. 11,392; 3 N. B. R. 103.) It seems that the bankrupt can
amend his schedules without an order from the referee or the
judge permitting it, and that the application is ex parte, and that
no notice is necessary to creditors, and that no creditor has a
right to oppose the application to amend. (G. O. 11.)
Examination of Bankrupt. Section 7a (9) — Under the Act of
1898 the examination of the bankrupt may be had at any time
within the discretion of the court. In addition to this section,
section 21 post under the head of " Evidence " gives the right to
compel any person (including the bankrupt), who is a competent
witness under the laws of the State to be examined concerning the
acts, conduct or property of the bankrupt, under which heading
the rules of evidence relative to the examination of bankrupts and
other persons will be discussed. The intent of this section seems
to be that the bankrupt shall be subject at the request of his
creditors to at least one thorough, complete and exhaustive ex-
96 THE NATIONAL BANKRUPTCY LAW.
Examination of Bankrupt. [Ch. III.
amination. In the case of In re Mellen (3 Am. B. R. 226; 97
Fed. 326), Brown, J., said:
" The practice hitherto followed, which I have no doubt is the correct prac-
tice, is to require the bankrupt to attend for examination whenever reasonably
required by creditors for the purpose of establishing their objections to his
discharge. The bankrupt must plead his privilege, if any privilege legally
exists, to the particular questions propounded, and the proper rulings can
then be made. The attendance of the bankrupt on the return day of the
order to show cause is required for the purpose of enabling creditors to form
specifications against his discharge. If an examination be then had, it may be
used in the subsequent proceedings in support of the specifications before the
referee; but this does not necessarily supersede a further examination of the
bankrupt if on application by objecting creditors, the referee shall deem a fur-
ther examination reasonable and necessary."
In another case decided by the same judge, (In re Price et al,
I Am. B. R. 419; 91 Fed. 635), the question arose as to the
right of creditors to have an examination of the bankrupt to see
if there were sufficient grounds for opposing his application for a
discharge. The following opinion is instructive in this respect.
" Certain creditors of the bankrupts not having attended at the first meeting
when the bankrupts were present and ready for examination, but having after-
wards been admitted to prove their claim, applied to the referee to order an
examination of the bankrupts in their behalf after the bankrupts had filed their
application for discharge. The referee declined to order the examination until
specifications in opposition to the discharge should be filed. The question has
been certified to me.
I do not find anything in the Bankrupt Act or the rules which limits the
examination of the bankrupt to any particular time or occasion. Under
subd. 9 of section 7 it would seem that such an examination may be ordered
at any time during the pendency of the proceedings. It is not unreasonable,
I think, to allow creditors to examine the bankrupt concerning the mode of
conducting his business for the purpose of ascertaining whether there had been
any such offense committed, or failure to keep books, as would furnish a just
ground for refusing a discharge ; and therefore I think such applications should
be allowed before specifications are filed, if applied for on the return day of
the notice of the debtor's application for discharge, and no prior examination
of that kind has been had. In re Baum, 1 N. B. R. 7; s. c. Fed. Cas. 1016; in
re Brandt, 2 N. B. R. 215 ; s. c. Fed. Cas. 1813 ; in re Mawson, 1 N. B. R. 271 ;
s. c Fed. Cas. 9320 ; in re Seckendorf, 1 N. B. R. 626 ; s. c. Fed. Cas. 12,600 ;
In re Vogel, 5 N. B. R. 396; s. c. Fed. Cas. 16,984.
Section 58, however, requires that creditors shall have at least ten days'
notice by mail of 'all examinations of the bankrupt,' so that such an ex-
BANKRUPTS. 97
§ 7.] Subject-matter of the Examination.
amination cannot proceed until after ten days' notice to all creditors, unless
the notice of application for the bankrupt's discharge mailed to the creditors
contained also a notice of the bankrupt's examination. Hereafter the pub-
lished and mailed notices of application for a discharge should contain a
notice of examination of the debtor to avoid the necessity of further notice
to all creditors in case such an examination is allowed. Only one such ex-
amination as respects the discharge should ordinarily be had ; since the statute
in requiring that all creditors shall have notice of it, presumably intends that
all should be equally allowed to participate in it, once for all, and not further
harass the bankrupt. In re Vogel, 5 N. B. R. 396; s. c. Fed. Cas. 16,984."
The bankrupt is entitled to a reasonable time to prepare for
examination if he is to be examined upon complicated matters,
but not to time to consult counsel if the questions to be asked him
do not require anything more than a knowledge of affairs. Reason-
able time will be allowed him to shape his affairs so as to attend
the examination. If he is present in court, the court may, upon re-
quest of a creditor or on its own motion, require him forthwith to
answer any pertinent questions. (In re Bromley & Co. 3 N. B.
R. 686.) Even before adjudication it is within the power of
the court to require one against whom a petition has been filed
to appear for examination. A proper case for such an examina-
tion might arise where the bankrupt has refused to deliver over
property (which it is claimed he possesses) to a marshal holding
a warrant issued pursuant to section 69.
In a recent case in the Eastern District of New York, In re
Franklin Syndicate (4 Am. B. R. 224; 101 Fed. 402), it was held
a bankrupt could be required to attend an examination prior to
the appointment of a trustee for the purpose of enabling the
referee to prepare schedules. And after the discharge of the
bankrupt and within a year therefrom a creditor may petition
a court of bankruptcy for an order to examine such discharged
bankrupt to ascertain whether he has concealed after his dis-
charge any property from his trustee. See opinion of Referee
Olmstead, In re Peters (1 Am. B. R. 248), construing section 7
and section 15 of this Act.
Subject-matter of the Examination.— The matters as to which
the bankrupt may be examined are set forth in detail in this sec-,
(13J
98 THE NATIONAL BANKRUPTCY LAW.
Subject-matter of the Examination. [Ch. III.
tion. Very little need be added. While he cannot be asked as to
property acquired after the adjudication, that being his own
free from the claims of the creditors; nor as to business done
after that time; and while he cannot be examined as to property
which he does not own; yet questions upon these matters are
proper when they will tend to shed light upon the bankrupt's own
property rights or his business dealings, or if it is probable that
he has any interest in such property which by law vests in the
trustee, or when there is a connection between his ownership of
the property mentioned and of the property passing to the trustee.
(In re Clark, Fed. Cas. 2,805; 4 N. B. R. 237; in re McBrien,
Fed. Cas. 8,666; 3 N. B. R. 345.) As the referee in bankruptcy
under the present act has all the powers vested in a court of bank-
ruptcy with respect to examination of persons as witnesses, except
the power of commitment, (section 38 [2] ) it follows that when
the examination is before him he may pass upon the materiality,
relevancy and propriety of any question asked. Refusal to answer
any proper question, as well as leaving the examination before its
conclusion, will be a contempt of the referee. (Section 41.) The
bankrupt may undoubtedly be attended by counsel. His counsel,
after the examination on the part of the creditors has been con-
cluded, may undoubtedly ask him any questions tending to explain
his answers or to give further information explanatory of his acts.
Under the former act the register could not pass upon the mate-
rialty or propriety of questions asked, and if there was an issue
raised, he was obliged to adjourn the matter into court for the
decision of the judge. The examined party under that practice fre-
quently felt a desire to consult with his counsel, and the existence
and the extent of the right of consultation was a subject of dispute.
It was generally held that whether or not he should be permitted
to consult his counsel was entirely within the discretion of the
register. Under the present act, as the referee can pass upon the
propriety of questions, it would seem as if there were very few
cases when it would be proper to allow any consultation. If the
question is improper the bankrupt's attorney may state his objec-
tions. While in attendance upon his examination the bankrupt
BANKRUPTS. 99
§ 7.] Refusal to Answer — Unsatisfactory Answers.
is performing one of the duties which entitle him to protection
under section 9, but he is not a witness in the technical sense of
the word. He may be entitled to his expenses as set forth in the
proviso to this section, but he cannot' exact witness fees under
the proviso to section 41. He does not fall within the class of
persons mentioned in that proviso. Section 38 (5), authorizing
the referee, upon the application of the trustee to order the em-
ployment of a stenographer, shows that the examination should
be reduced to writing.
Refusal to Answer. — Unsatisfactory Answers. — A refusal to an-
swer lawful questions is a contempt, and is punishable accord-
ingly. So, also, is a false answer. The court has a right to de-
mand a complete and satisfactory answer if it is within the power
of the examined party to give it. If a fact is necessarily within
the knowledge of the bankrupt, his statement that he cannot
recollect it may in some cases be a contempt. (Compare Ex p.
Legge, 22 L. J. Q. B. 345 ; s. c. 17 Jur. 415 ; in re Bradbury, 25
Eng. Law & Eq. Rep. 252.) The cases last cited were decided
in the English courts and lay down the rule that when a bank-
rupt says, in answer to a question, that " he does not remember,"
or " does not recollect," he must give some reason for not re-
membering, else, if all the circumstances tend to contradict his
statement as to his lack of memory, he may be punished for con-
tempt, as if he had given a false answer ; but no commitment can
be made in such cases unless the examination has been full, fair
and searching. (In re Bradbury, 18 Jur. 189.) In England it
has also been held that a bankrupt may be committed by the
court for answers upon his examination, which, on the whole,
are unsatisfactory, and which do not truly impart information
the bankrupt must possess ; as where his answers are so clearly of
an improbable character that they cannot be believed. (In re
Martin, 11 Jurist, 461; Ex p. Lord, 11 Jurist, 186; 10 Mees &
W. 462; 16 L. J. Exc. 118.) There are few American cases
upon the extent of the power of the court to punish one for con-
tempt because his answers are unsatisfactory. The English cases
THE NATIONAL BANKRUPTCY LAW.
Refusal to Answer — Unsatisfactory Answers. [Ch. III.
are reviewed in re Salkey & Gerson ( 1 1 N. B. R. 423 ; Fed. Cas.
12,253). In ^at case it was shown that there was in the posses-
sion of the bankrupts at a certain time property worth twenty
thousand dollars which was not contained in their schedule, and
of which they gave no account. It appeared that the parties had
concealed the twenty thousand dollars' worth of property so as
to defraud their creditors and had refused to account for the
same. Upon examination the parties said that " they had no
account to render," that they " had told all that they knew upon
the subject," and refused to answer any further because they
" knew no more about the matter." The district court punished
them for contempt, and the circuit court, before whom the matter
was brought on a writ of habeas corpus, upheld the district court.
But the punishment for contempt can as a rule only be im-
posed after the most careful investigation and for disobedience
to turn over property upon order. In the case of In re Schles-
inger (3 Am. B. R. 342; 97 Fed. 930), arising under the Act of
1898, it was shown that the bankrupt had received considerable
sums of money during the seven or eight months preceding the
filing of his petition. No account could be extracted from him
as to what was done with this money except that it was all paid
out. To all inquiries for particulars his answer was, " I don't
know " or " I don't remember ". The trustee applied for an
order directing him to pay over these sums of money. The ref-
eree denied the application except as to a certain sum admitted
in the schedules to be in the bankrupt's possession. In the re-
view of the referee's decision Judge Brown said :
" It is seldom, I think, that so open a defiance of the requirements of the
Bankruptcy Law is met with. The examination of the bankrupt was begun
on May 9th, while his business transactions were yet recent. The ignorance
he professed in regard to the disposition of his money, is altogether incredible.
I cannot regard his testimony on this subject as other than a tissue of per-
juries. The destruction of vouchers while his papers in bankruptcy were pre-
paring, is not consistent with any other inference than the intent to conceal
the facts and defraud his creditors. In re Salkey, Fed. Cas. No. 12.253. It
is no doubt correct, as the referee observes, that no order for the payment of
money ' should be made unless the testimony in the case is such as to satisfy
one beyond a reasonable doubt that the same is in fact in the possession or
BANKRUPTS.
§ 7.] Criminating Questions.
under the control of the bankrupt;' and great caution should no doubt be
observed in applying this remedy. In re McCormick (D. C. Nov. 17, 1899),
97 Fed. 566; 3 Am. B. R. 340. A debtor, however, is not to go scot-free be-
cause the precise amount of his frauds and concealments is not ascertain-
able; nor should the Bankrupt Act be suffered to be paralyzed, as respects
the interests of creditors, by such means. An order may be entered accord-
ingly."
In the case of In re McCormick, referred to above, application
had been made to punish the bankrupt for not complying with
the orders of the referee made on the examination of the bank-
rupt before him, directing him to pay the sums of $1,500 and
$450 respectively to his trustee. Judge Brown in this case said :
" There can be no doubt of the authority of the court to enforce obedience to
all ' lawful orders ' and to punish contempts by virtue of the provisions above
referred to. As such punishment may involve imprisonment, however, this
power should be cautiously exercised, and in cases only where willful disobedi-
ence by the bankrupt is proved beyond reasonable doubt, as in a criminal case."
***********
So it was held in In re Deuell, D. C. Mo. (4 Am. B. R. 60; 100
Fed. 633) that where the bankrupt, a woman, fails to account
for a relatively large amount of goods which she had purchased
prior to her bankruptcy, and fails to keep any book accounts, and
fails to make any explanation of the great discrepancies in the
amount turned over to the trustee and the amount which she
should have had on hand, and where the husband and son who
carried on business for her have testified that they did not ap-
propriate or have the goods or the money, she must either ac-
count for this money or pay the penalty by being committed for
contempt until she accounts for and turns over to the trustee the
sum which, after making all possible allowances in her favor, rep-
resents the amount unaccounted for.
See for further discussion of this question the subject of con-
cealment of assets under the head of " Discharge."
Criminating Questions. Section 7a (9)— It is very doubtful
whether the provision of the section gives the witness the privi-
lege against self-crimination which is contemplated by the federal
constitution. And so it has been held in three District Court
102 THE NATIONAL BANKRUPTCY LAW.
Criminating Questions. [Ch. III.
cases. (In re Scott, I Am. B. R. 49; 95 Fed. 816; in re Rosser, 2
Am. B. R. 755 ; 96 Fed. 305 ; in re Feldstein, 4 Am. B. R. 321 ;
103 Fed. 269. ) On the other hand the Circuit Court of Appeals of
the 9th Circuit, in Mackel v. Rochester (4 Am. B. R. 1 ; 102 Fed.
314), has held that the provision that no testimony given by the
bankrupt shall be offered in evidence against him in any criminal
proceeding, grants him constitutional immunity against prosecu-
tion and penalty, and hence compels him to give any testimony
relevant and material to the inquiry. But the opinion of Judge
Morrow in this case is not satisfactory in that it does not pass
upon the real question.
It will be noticed that this section 7a (9), after requiring the
bankrupt to submit to an examination concerning his business,
etc. provides that " no testimony given by him shall be offered in
evidence against him in any criminal proceeding." In this re-
spect it is similar to section 860, U. S. R. S. which provides that
" No pleading of a party, nor any discovery or evidence obtained
from a party or witness by means of a judicial proceeding in this
or any foreign country, shall be given in evidence, or in any
manner used against him or his property or his estate, in any
court of the United States, in any criminal proceeding, or for the
enforcement of any penalty or forfeiture: Provided, that this
section shall not exempt any party or witness from prosecution
and punishment for perjury committed in discovering or testi-
fying as aforesaid."
It was held in the celebrated case of Counselman v. Hitchcock,
(142 U. S. 547), that the last quoted section does not take away
the privilege given by the Fifth Amendment of the United States
Constitution, which declares that " No person . . . shall be
compelled in any criminal case to be a witness against himself."
It is true the constitution speaks of a " criminal case," but it was
distinctly held in Counselman v. Hitchcock, which was a pro-
ceeding before a grand jury engaged in investigating and in-
quiring generally into certain alleged violations of the interstate
commerce law, and in the language of Mr. Justice Blatchford,
that " It is impossible that the meaning of the constitutional pro-
BANKRUPTS. 103
§ 7.] Criminating Questions.
vision can only be, that a person shall not be compelled to be a
witness against himself in a prosecution against himself. It
would doubtless cover such cases; but it is not limited to them.
The object was to insure that a person should not be compelled,
when acting as a witness in any investigation, to give testimony
which might tend to show that he himself had committed a crime.
The privilege is limited to criminal matters, but it is as broad as
the mischief against which it seeks to guard."
By reason of the decision of the court in Counselman v. Hitch-
cock, Congress amended the Interstate Commerce Act in 1893,
so as to make it provide that the witness shall have absolute im-
munity from prosecution regarding the subject-matter as to
which he testifies or produces documentary evidence (27 Stat,
at L. 443). It was under this amended statute that the case of
Brown v. Walker (161 U. S. 591), upon which Judge Morrow
relies in Mackel v. Rochester, was decided. It will be observed
that the amended statute secures absolute immunity from prose-
cution, instead of merely providing that the testimony shall not
be offered against witness in evidence.
It is an ancient principle of the law of evidence that a witness
shall not be compelled in any proceeding to make declarations or
to give testimony which will tend to criminate him or subject him
to fines, penalties or forfeitures. (Rex v. Slaney, 5 Carr. & P.
213; 1 Greenlf. Ev. section 451; Wharton Crim. Ev. 9th ed.
461; Southard v. Rexford, 6 Cow. 254; People v. Maher, 4
Wend. 229.)
In a comparatively recent case in New York (People ex rel.
Taylor v. Forbes, 143 N. Y. 219) the relator was adjudged
guilty of contempt by the judge presiding at the trial term, for
refusing to answer questions asked him before the grand jury
held in conjunction with that court. The grand jury had been in-
structed by the court to institute an inquiry with the view of as-
certaining who were guilty of the death of a certain person
arising out of a " hazing " affair at Cornell University. The re-
lator refused to tell who his room-mate was on the ground that
it might tend to criminate him. The provision of the New
io4 THE NATIONAL BANKRUPTCY LAW.
Criminating Questions. [Ch. III.
York Constitution is the same as that of the United States Con-
stitution (N. Y. Const, article i, section 6). In overruling the
conviction of the relator, O'Brien, J. in the Court of Appeals,
after referring to the constitutional provision in question, says:
" These constitutional and statutory provisions have long been regarded as
safeguards of civil liberty, quite as sacred and important as the privileges
of the writ of habeas corpus or any of the other fundamental guaranties for
the protection of personal rights. When a proper case arises they should be
applied in a broad and liberal spirit in order to secure to the citizen that
immunity from every species of self-accusation implied in the brief but com-
prehensive language in which they are expressed. . . . The right of a witness
to claim the benefit of those provisions has frequently been the subject of
adjudication in botn the Federal and State courts. The principle established
by these decisions is that no one shall be compelled in any judicial or other
proceeding against himself, or upon the trial of issues between others, to
disclose facts or circumstances that can be used against him as admissions
to prove his guilt or connection with any criminal offense of which he may
then or afterwards be charged, or the sources from which or the means by
which evidence of its commission or of his connection with it may be obtained.
. . The question was fully discussed at an early day by Chief Justice
Marshall on the trial of Aaron Burr, and every phase of it so completely
explained and exhausted, that his views were followed in the subsequent
decisions. A single quotation from the language used will illustrate the scope
and extent of the immunity which the witness can lawfully claim. ' Many
links frequently compose that chain of testimony which is necessary to convict
an individual of a crime. It appears to the court to be the true sense of the
rule that no witness is compelled to furnish any one of them against himself.
It is certainly not only a possible, but a probable case, that a witness by
disclosing a single fact may complete the testimony against himself, and to a
very effectual purpose accuse himself as entirely as he would by stating every
circumstance which would be required for his conviction. That fact of itself
would be unavailing, but all other facts without it would be insufficient.
While that remains concealed in his own bosom he is safe, but draw it from
thence and he is exposed to a prosecution. The rule that declares that no
man is compellable to accuse himself would most obviously be infringed by
compelling a witness to disclose an act of this description.' All the leading
authorities were elaborately reviewed in the recent case of Counselman v.
Hitchcock (142 U. S. 547) in the Supreme Court of the United States. In that
case the grand jury was engaged in the investigation of certain alleged
offenses by railroad companies against the recent act of Congress for the regu-
lation of interstate commerce, and the witness, a commission merchant and
dealer in grain, refused to answer certain questions as to the tariff of rates
allowed to him by some of the railroads, on the ground that it might tend
to criminate him. The case in all its essential features was similar to this,
and the court, sustaining the privilege contended for on behalf of the witness',
BANKRUPTS. roS
§ 7. Criminating Questions.
held that the object of the constitutional provision was to insure that a person
should not be compelled, when acting as a witness in any investigation, to
'give testimony which may tend to show that he himself has committed a
crime, and that its meaning was that a witness is protected from any com-
pulsory disclosure of the circumstances of his offense, or the source from
which, or the means by which, evidence of its commission, or of his connection
with it, may be obtained, or made effectual for his conviction, without using his
answers as direct admissions against him. This conclusion was reached,
although there is a general Federal statute providing that in such cases the
testimony given by the witness at the investigation shall not be given in evi-
dence against him, subsequently, in any civil or criminal proceeding (U. S.
R. S. § 860). It seems that in such cases nothing short of absolute immu-
nity from prosecution can take the place of the privilege by which the law
affords protection to the witness."
In the constitutions of many of the States of the Union, such
as Virginia, Massachusetts and New Hampshire, it is broadly-
provided that a witness shall not be compelled to accuse himself
or to furnish evidence against himself, with no limitation to
" criminal cases," as in New York and under the Federal Con-
stitution. In speaking of this distinction, Mr. Justice Blatchford
says, in Counselman v. Hitchcock, supra, page 602 : " It is con-
tended on the part of the appellee that the reason why the courts
in Virginia, Massachusetts and New Hampshire have held that
the exonerating statute must be so broad as to give the witness
complete amnesty, is that the constitutions of those States give to
the witness a broader privilege and exemption than is granted
by the constitution of the United States, in that their language
is that the witness shall not be compelled to accuse himself, or
furnish evidence against himself, or give evidence against him-
self ; and it is contended that the terms of the constitution of the
United States, and the constitutions of Georgia, California and
New York are more restricted. But we are of opinion that, how-
ever this difference may have been commented on in some of the
decisions, there is really in spirit and principle, no distinction
arising out of such difference of language."
For decisions in these States, see Emery case (107 Mass. 172) ;
State v. Nowell (58 N. H. 314) ; Temple v. Commonwealth (75
Va. 892) ; and cases cited in Counselman v. Hitchcock. If, then,
the constitutional provision is broad enough to apply to proceed-
(14)
106 THE NATIONAL BANKRUPTCY LAW.
Death or Insanity of Bankrupts. [Ch. III.
ing in bankruptcy, section 7 (9) fails to afford the requisite con-
stitutional protection in all cases. (But see In re Franklin Syn-
dicate, 4 Am. B. R. 511; 103 Fed — , apparently following
Mackel case.) But where the bankrupt files a voluntary
petition and invokes the benefits of the bankruptcy law, he
may not withhold his books of account upon the assertion
that they contain criminating evidence or matter. So held by the
District Court for the Eastern District of Wisconsin, In re
Sapiro (1 Am. B. R. 296; 92 Fed. 340). This latter decision is
analogous to the general rule that where one has voluntarily
offered testimony upon a given point, he may not thereafter on
cross-examination refuse to answer questions which are relevant
to the testimony which he himself has offered.
The modern rule as to whether a question is incriminating or
not seems to be that if to the witness' mind the answer sought
may constitute a link in the chain of evidence sufficient to convict
him, or put him in jeopardy, if other facts are shown, he may
remain silent, unless it be perfectly clear that he is mistaken and
that the answer cannot possibly injure him or subject him to
the peril of prosecution. See People ex rel. Taylor v. Forbes,
supra.
It is quite possible that Congress will amend the Act so as to
give complete immunity.
The executive committee of the National Association of Ref-
erees in Bankruptcy, in their report of March, 1900, recom-
mend that a bankrupt refusing to answer any question ap-
proved by the court shall be denied his discharge. But this
remedy seems to be of doubtful constitutionality, as it would tend
to punish one who simply insists upon a constitutional right, and
so become an indirect violation of the constitution
Examinations of Third Parties.— Compare section 21 (a).
Sec. 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
BANKRUPTS. 107
§ 8.] Can a Discharge be Granted After the Death of a Bankrupt ?
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 of Former Acts. —
R. S., section 5090 ; act of 1867, section 12 ; act of 1800, section 45.
No Abatement. — The former act provided that the proceedings
should not be abated by the death of the bankrupt after the issu-
ing of the warrant which followed the adjudication. Under the
present act, proceedings do , not abate if they have been com- '
menced, that is, if the petition has been filed. Proceedings
against a partnership do not abate by reason of the death of one
partner, and it was held under the former act that they did not,
even if the death occurred before the adjudication. (Hunt v.
Pooke, Fed. Cas. 6,896; 5 N. B. R. 161. Compare Ex p. Hall, 1
DeGex, 332.)
Can a Discharge be Granted After the Death of a Bankrupt? —
By the former act it was provided that one could not obtain a
discharge without taking certain oaths. It was held that the
word " proceedings," in the section providing that proceedings
should not be abated by the death of the bankrupt, did not include
a discharge, that is, that it did not include any proceeding unless
there could be a compliance with the requirements of the act, and
that as a deceased bankrupt could not take the oaths which en-
titled him to a discharge, his personal representatives could not
continue that special proceeding and obtain a discharge.
But even under the Act of 1867 it was held that if the bank-
rupt died after his uncontested application for discharge had been
submitted to the court a discharge might be entered nunc pro tunc
as of the date when the report of the register was filed. (Young
v. Ridenbaugh, 11 N. B. R. 563; 2 Dill. 239; Fed Cas. 18,173.)
Under the present Act as there are no statutory provisions re-
quiring that an application for discharge shall be verified, there
io8 THE NATIONAL BANKRUPTCY LAW.
Dower Rights, etc. — Protection and Detention of Bankrupts. [Ch. Ill
is no obstacle in the way of personal representatives procuring
a discharge of the estate of the bankrupt if they so desire, unless
objections thereto are sustained.
Eights of Dower and Allowance. — The provision in this section
is a new enactment. But apart from statute, the wife's common
law inchoate right of dower is no part of the estate of the hus-
band and is not affected by proceedings in bankruptcy against
him. (Porter v. Lazear, 109 U. S. 84.) There seems to be as yet
no discussion on the rights of the surviving wife to any allow-
ances which she may take under a State statute and which are
not inchoate before the death of her husband. Where property
of the husband has been disposed of by the trustee to purchasers
during the lifetime of the husband it is presumable that no rights
of the wife will attach except such as were inchoate prior to the
husband's death. (Compare Hawk v. Hawk, 102 Fed. 679; 4
Am. B. R. 463.)
The last mentioned case holds the principle by analogy. In
that case a wife who had begun proceedings for divorce but not
yet obtained such divorce, it was held, could not enjoin the distri-
bution of one-third of her husband's property as against his trus-
tee in bankruptcy under a statute of the State of Arkansas pro-
viding that the wife when granted a divorce against her husband
should be entitled to one-third of her husband's property.
Sec. 9. Protection and Detention of Bankrupts. a A bank-
rupt 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 is-
sued from a State court having jurisdiction, and served within
such State, upon a debt or claim from which his discharge in
bankruptcy would not be a release, and in such case he shall be
exempt from such arrest when in attendance upon a court of
thS act °r Cngaged in the Performance of a duty imposed by
b The judge may, at any time after the filing of a petition bv
or against a person, and before the expiration of one month after
BANKRUPTS. I09
§ 9 ] Purpose and Character of the Protection.
the qualification of the trustee, upon satisfactory proof by the
affidavits of at least two persons that such bankrupt is about to
leave the district in which he resides or has his principal place of
business to avoid examination, and that his departure will defeat
the proceedings in bankruptcy, issue a warrant to the marshal,
directing him to bring such bankrupt forthwith before the court
for examination. If upon hearing the evidence of the parties it
shall appear to the court or a judge thereof that the allegations
are true and 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 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 of Former Acts — As to protection from arrest: R.
S. § 5107; act of 1867, § 26; act of 1800, §§ 22, 38,. 60.
As to arrest of bankrupt : R. S. § 5024 ; act of 1867, § 40.
Purpose and Character of the Protection. — An examination of
the section shows that one purpose of the protection afforded is
to preserve unimpaired the authority of the bankrupt court over
the subject-matter and also over the persons of the parties to the
proceeding. This is shown by the exemption which allows an
arrest under process from that court. It is further shown by the
fact that an arrest founded upon a debt which would be released
by a discharge cannot be made at any time; and still further
shown by the fact that an arrest in an action whether founded
upon a debt which would be released or not released by a dis-
charge, cannot be made at times when it would interfere with
proceedings in bankruptcy; that is, while the bankrupt is in at-
tendance upon a court of bankruptcy or engaged in the per-
formance of a duty imposed upon him by the bankruptcy law
or by an order of the bankruptcy court. Protection from arrest
in actions founded upon dischargeable debts is simply in ac-
cordance with the general scope and purpose of the Bankruptcy
Act. Protection from arrest while performing duties required
by the act or by orders of the court, is in accordance with the
THE NATIONAL BANKRUPTCY LAW.
Purpose and Character of the Protection. [Ch. III.
general principle that courts will protect witnesses who come in
obedience to their subpoena, and parties to actions pending before
them, and officers who are obeying or serving their mandates,
from arrest and from service upon them of summons or other
process. The provisions of the Bankruptcy Act as to the pro-
tection of witnesses do not restrict the common-law rule. (Lam-
kin v. Starkey, 7 Hun, 479.) This right to protection extends
not only to witnesses, but to persons appearing as parties, espec-
ially if they are parties defendant. It includes also the attorneys
in fact for such parties. ( Matthews v. Tufts, 87 N. Y. 568, citing
Person v. Grier, 66 N. Y. 124; also Van Lieuw v. Johnson, de-
cided by the New York Court of Appeals, March, 1871 ; Cole v.
Hawkins, Andr. 275; s. c. 2 Str. 1094; Arding v. Flower, 8 T.
R. 534; Miles v. McCullough, 1 Binn. "j"j; Hayes v. Shields, 2
Yeates, 222 ; Parker v. Hotchkiss, 1 Wall. Jr. 269 ; Juneau Bank
v. McSpedan, 5 Biss. 64; Halsey v. Stewart, 1 South [N. J.],
366; Miller v. Dungan, 8 Vr. [N. J.] 182; in re Healey, 53 Vt.
694.) It includes parties attending bankruptcy proceedings
simply as creditors. (Ex p. List, 2 Ves. & B. 373 ; Ex p. King, 7
Ves. Jr. 312; Selby v. Hills, 8 Bing. 166; Arding v. Flower, 8
T. R. 534; Matthew v. Tufts, 87 N. Y. 568.)
We have then two different kinds of protection from arrest:
First, the protection from arrest while in attendance upon court,
which we have seen is a common law right. And, second, the pro-
tection from arrest upon civil process from any State court upon
a debt or claim from which a discharge in bankruptcy would be a
release. It will be noticed upon examination that General Order
30 is apparently much broader than the statute in that it provides
that a bankrupt may be released from any arrest in a civil action
for the collection of a claim provable in bankruptcy. The ap-
parent inconsistency between the Section and the General Order
is perhaps best discussed in a quotation from the opinion of Judge
Hook in the case of In re Baker (3 Am. B. R. 101 ; 96 Fed. 954),
which is as follows :
" Sees. 752 and 753 of the Revised Statutes authorize the granting of the
writ of habeas corpus where the prisoner in jail is in custody on violation of
BANKRUPTS. ITI
§ 9.] Purpose and Character of the Protection.
the Constitution or of a law of the United States. General Order in Bank-
ruptcy No. 30 supplements the statute, and among other things provides :
' If the petitioner, during the pendency of the proceedings in bankruptcy, be
arrested or imprisoned upon process in any civil action, the District Court upon
his application may issue a writ of habeas corpus to bring him before the court
to ascertain whether such process has been issued for the collection of any
claim provable in bankruptcy, and if so provable he shall be discharged ; if not,
he shall be remanded to the custody in which he may lawfully be.'
Sec. 9 of the Bankruptcy Act, in providing for exemption of the bankrupt
from arrest upon civil process, makes an exemption when the process is ' issued
from a State court having jurisdiction, and served within such State, upon a
debt or claim from which his discharge in bankruptcy would not be a release.'
It will be observed that the language of the order is more comprehensive
than the terms of the statute. The former provides for the bankrupt's release
upon habeas corpus if the arrest or imprisonment complained of is upon a
claim provable in bankruptcy, while sec. 9 of the act permits of his arrest if
it is based upon a debt or claim from which his discharge in bankruptcy would
not Be a release. A similar variance in phraseology existed between sec.
26 of the Bankruptcy Act of 1867 and No. 27 of the General Orders made pur-
suant to that act.
The concluding clause of sec. 26 of the Act of 1867 is as follows :
' No bankrupt shall be liable to arrest during the pendency of proceedings in
bankruptcy in any civil action, unless the same is founded on some debt or
claim from which his discharge in bankruptcy would not release him.'
General Order No. 30 under the Act of 1898 and No. 27 under the Act of
1867 are identical except in a single instance where the word ' referee ' in the
former replaces the word ' register ' in the latter.
The order must yield to the terms of the statute 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 de-
mand. 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 White-
house, 1 Lowell, 429."
In a later case, {In re Lewensohn, 3 Am. B. R. 594; 98 Fed.
576,) Judge Brown of the Southern District of New York in
discussing the question attempts to reconcile these provisions and
also holds as will be seen from the following quotation that the
protection may be granted upon terms.
"By section ga, subd. 2, the bankrupt is declared entitled to be exempt
from arrest on civil process, except upon a debt or claim from which his dis-
charge would not be a release. This imports that the bankrupt shall not be
exempt from arrest where the debt or claim would not be released by his dis-
H2 THE NATIONAL BANKRUPTCY LAW.
Purpose and Character of the Protection. [Ch. III.
charge, except to the limited extent provided; namely, when the bankrupt is
' in attendance upon a Court of Bankruptcy or engaged in the performance of
a duty imposed by the act.'
This latter exception is new; there was no similar provision in the Act of
1867. How far does this exception extend? Is it to be construed as applying
to the whole period during which the bankrupt has duties to perform, or only
to the particular occasions when he is actually performing them? Section 7
imposes numerous duties upon the bankrupt which continue at least up to the
time of the hearing on his discharge. In most important cases his attendance
for examination is required on numerous occasions from time to time, not
merely upon his original examination, and on his examination upon the ap-
plication for a discharge, but on many other questions that frequently arise
with reference to his assets or to disputed or doubtful liens or claims against
the estate.
For the bankrupt it is contended that a liberal construction should be given
to this exemption, in order to avoid the perpetual embarrassments in the
bankruptcy proceedings which would be caused by his incarceration under
State process. Opposed to this it is urged, that the exemption should be
limited to the particular occasions when the bankrupt is actually in attendance
in court, or actually performing a required duty, differing little from the
ordinary right of a witness to exemption while in attendance on the court, to
which exemption he was held entitled under the Act of 1867 without any ex-
press provision. In re Kimball, 1 N. B. R. 193, 14 Fed. Cas. 474.
In General Order 12 (18 Sup. Ct. vi.) the Supreme Court, in prescribing
the precise extent of the bankrupt's protection from arrest, seems virtually to
have given its own construction to this section, by providing that the bankrupt
shall attend before the referee on a day named ; ' and from that day shall be
subject to the orders of the court in all matters relating to his bankruptcy, and
may receive from the referee a protection against arrest to continue until the
final adjudication on his application for a discharge, unless suspended or
vacated by order of the court.'
General Orders 30 (18 Sup. Ct. viii.), being presumably limited in its oper-
ation to the same, period of time (Loveland, Bankr. 514), becomes thereby
practically compatible with section ga, subd. 2. In the case of In re Baker (D.
C), 96 Fed. 954; 3 Am. B. R. 101 ; the exception in section 9a, subd. 2, is
not considered.
The construction apparently given to that section by General Order 12
does not seriously interfere with the creditors' right to arrest in cases where
the discharge is not a bar. It merely suspends the exercise of that right for
a certain limited period. The bankrupt is not entitled to postpone his applica-
tion for a discharge beyond a year from the adjudication, and no extension
of time would be granted by the court merely to prolong his freedom from
arrest.
As this court may suspend or vacate the protection from arrest provided by
rule 12, the court may grant it on terms, and hence under section 2, subd 15,
may require security that the bankrupt during its continuance will obey all
BANKRUPTS. „3
§ 9.] When the Right of Protection Begins— How Enforced.
orders of the court and not meanwhile depart from its jurisdiction. Upon the
bankrupt's giving a bond to that effect, with approved security, the stay should
be continued for a period not exceeding twelve months from the date of ad-
judication, unless an application for discharge be then pending, and in that
case, until the final determination of that application."
When the Right of Protection Begins.— The section states that
" a bankrupt shall be exempt from arrest " etc. The word
"bankrupt" means, (section i[4]), a person against whom an
involuntary petition, or an application to set aside a composi-
tion, or to revoke a discharge has been filed or who has filed a
voluntary petition or who has been adjudged a bankrupt. Con-
sequently from the time of the filing of the petition the bankrupt
is protected from arrest.
How the Right of Protection is Enforced. — The State court will,
in the exercise of comity, order the release of the bankrupt on
motion, but if it refuses to grant such relief the duty of ordering
the release is imposed on the bankruptcy court. The practice
is prescribed by General Order 30, which provides that
" If, at the time of preferring his petition, the debtor shall be imprisoned, the
court, upon application, may order him to be produced 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 matter relating to his bankruptcy; and, if com-
mitted 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 dis-
charge him from such imprisonment. If the petitioner, during the pendency
of the proceeding in bankruptcy, be arrested or imprisoned upon process in any
civil action, the district court upon application may issue a writ of habeas
corpus to bring him before the court to ascertain whether such process has
been issued for the collection of any claim provable in bankruptcy, 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 opportunity of appearing and being heard before the granting of the
order."
It will be noticed that this order seems to have reference simply
to voluntary proceedings, but the power of the court extends
to any case. (In re Wiggers, 2 Biss. 71 ; Fed. Cas. 17,623 ; in re
Williams & McPheeters, 11 N. B. R. 145; Fed. Cas. 17,700).
(15)
ii4 THE NATIONAL BANKRUPTCY LAW.
Determination Whether the Debt is Dischargeable. [Ch. III.
Determination Whether the Debt is Dischargeable. — There has
been a conflict of authority upon the question whether courts of
bankruptcy in considering applications of bankrupts for release
from arrest will go behind the face of the papers and consider
disputed questions of fact. Most of the cases decided under the
act of 1867 hold that the bankruptcy court will not try such dis-
puted questions of fact; and if it appears upon the face of the
papers, that a debt is not dischargeable, the bankruptcy court will
not pass upon the question of fact and decide to the contrary.
This is in accordance with the general principle that while courts
of bankruptcy determine whether or not a bankrupt is entitled
to a discharge, all questions as to whether any particular debt is
released by that discharge are left to be determined by the State
courts in which thereafter an action upon the debt may be
brought. In examining the papers to see whether or not they
state all the facts showing that a debt is not dischargeable, the
court will look not only at the order of arrest, but at the affidavit
used on the motion, and at the complaint in the action if it is in
any way connected with the other papers or referred to in them.
According to the rule mentioned the bankruptcy court examines
the papers, not to see if the order was granted, in an action
founded on a debt which is in fact dischargeable, but to see if the
State court in granting the order of arrest, intended to found it
on a debt which was not dischargeable. (In re Robinson, 2 N.
B. R. 342; Fed. Cas. 11,939; s- c- 36 How. Pr. 176; s. c. 6
Blatch. 253; in re Valk, 3 N. B. R. 278; s. c. Fed. Cas. 16,814;
3 Ben. 431; in re J. H. Kimball, Fed. Cas. 7,769; 2 N. B. R.
354; s. c. 6 Blatch. 292; s. c. below, Fed. Cas. 7,768; 2 N. B.
R. 204; s. c. 2 Ben. 554 [in which case Judge Blatchford disap-
proved of his own previous decisions, in re Glaser, 1 N. B. R.
336; Fed. Cas. 5,474; s. c. 2 Ben. 180; and also in re George
W. Kimball, 1 N. B. R. 193; Fed. Cas. 7,767]. See also in re
Devoe, Fed. Cas. 3,843 ; 2 N. B. R. 27 ; in re Migel, Fed. Cas.
9,538; 2 N. B. R. 481.) The authorities holding the contrary
doctrine, viz., that the bankruptcy court may examine into the
merits of the arrest and hear the disputed facts which will de-
BANKRUPTS. 115
§ 9.] In What Actions is One Exempt From Arrest?
termine whether or not the debt is one which would be released
by the discharge are, in re Williams & McPheeters (11 N. B. R.
145; s. c. 6 Biss. 233) ; in re Glaser, supra; in re George W.
Kimball, supra (the latter two afterwards disapproved by the
same judge who rendered the decisions) ; and in re Alsberg (Fed.
Cas. 261 ; 16 N. B. R. 116).. In the last case all the others were
reviewed and it was held that : It was the duty of the court to
examine diligently all legal evidence brought before it from any
quarter whatever, tending to show that a debt not dischargeable
by the discharge of the bankrupt had been contracted; that the
question whether one was properly under arrest was a question of
fact; that the liability to imprisonment or the immunity from
imprisonment depended upon the fact whether the debt for which
he was arrested was released by the discharge of the bankrupt;
that Congress intended to prevent the arrest of the bankrupt
where a debt was dischargeable, and the bankruptcy courts who
were charged with the duty of protecting the bankrupt, were in
duty bound to inquire into all the facts; and that no ex parte
evidence made in the State courts as to the character of the debt
contracted would be permitted to interfere with the full examina-
tion of all sources of evidence on the simple fact, whether the debt
was dischargeable under the bankruptcy act; that it was the
character of the debt which was the subject of investigation and
not the grounds of arrest which were stated in the order of arrest
and the other papers; that the provisions of law in reference to
the writ of habeas corpus contained in the U. S. Revised Stat-
utes were conclusive on the judge or court hearing the case, to
determine all legal evidence touching the right to retain in cus-
tody, whenever the petitioner claimed the protection.
And this latter view seems to be in accordance with the pro-
visions of G. O. 30 quoted in .the last preceding paragraph. For
further discussion see section 1 1 as to what actions will be stayed
by the bankruptcy court.
In What Actions is One Exempt From Arrest?— Compare section
17 as to debts not released by discharge. Compare the cases
ii6 THE NATIONAL BANKRUPTCY LAW.
Detention of the Bankrupt. [Ch. III.
under section 17 (4) as to debts created by fraud and debts
created by one acting in a fiduciary capacity.
Detention of the Bankrupt. — The bankrupt's sole purpose in
leaving the district must be to avoid examination. In presenting
its report on the bankruptcy bill to the 55th Congress, on Decem-
ber 16, 1897, the judiciary committee of the House said, with
reference to this section (then section 8), which had been
amended in committee so that this provision with reference to
the motives of the bankrupt in leaving the district read exactly
as it here appears : "In the section where provisions are made
for taking into custody the bankrupt when he is about to leave
the district and where his departure would tend to delay the
proceedings in bankruptcy, an amendment has been made limit-
ing the departure to cases in which the bankrupt was leaving for
the sole purpose of avoiding the examination. If he left for
other purposes, such as to better his condition, the provisions of
the law will not apply to him." Every particular fact required
in order to give one a right to move for the arrest of the bankrupt
must be clearly shown to exist. The language of the section
implies that before the court can issue a warrant it must not only
find it to be true that the bankrupt leaves to avoid examination,
but that it is necessary that he be detained, that it is necessary
that he be examined, and that in no other way than by detention
by the marshal can his presence be secured.
But it has been recently held (In re Lipke, 3 Am. B. R. 569 ; 98
Fed. 970) by the District Court of the Southern District of New
York that the court in its efforts to prevent the bankrupt from
departing from its jurisdiction is not necessarily confined to the
provisions of section 9b, but may resort to a writ of ne exeat
under the broad provisions of section 2(15) giving the courts of
bankruptcy jurisdiction to make all orders in addition to those
specifically provided for which may be necessary for the enforce-
ment of the provisions of the act. A quotation from the opinion
of Brown, J., on this subject follows.
BANKRUPTS. 1I?
§ 9.] Detention of the Bankrupt.
" I think the better practice, however, would be to conform to the provisions
of section gb as respects all the matters and objects covered by it. But under
the broad powers at law and in equity conferred upon the District Courts in
bankruptcy proceedings by section 2 and subdivision 15 of that section, it is
competent, I think, for the court to issue an order in the nature of a writ of
ne exeat as broad as that provided by section 717 of the Revised Statutes,
whenever such process is ' necessary for the enforcement of the provisions '
of the Bankrupt Act. By section 2 the District Courts are expressly invested
' with such jurisdiction at law and in equity as will enable them to exercise
original jurisdiction in bankruptcy proceedings, . . . (15) to make such
orders and issue such process ... in addition to those specifically pro-
vided for, as may be necessary for the enforcement of the provisions of this
act.'
The writ of ne exeat is one of the orders or writs in familiar use in equity
against one who ' designing to avoid the justice and equity of the court, is
about to go beyond the sea, so that the duty will be endangered if he goes.'
Wyatt, Prac. Reg. 289; 2 Story, Eq. Jur. p. 800, sec. 1470, note; 3 Daniell, Ch.
Prac. (2d Am. ed.) p. 1925.
The necessity of the occasional exercise of this power for the efficient ad-
ministration of the Bankrupt Law is evident. Without it the bankrupt might
easily defy, and largely nullify, all adverse proceedings against him, by
absconding with his assets.
Under the fortieth section of the Act of 1867 (Rev. St. sec. 5024) it was
held by Gray, C. J., in Usher v. Pease, 116 Mass. 440; 12 N. B. R. 305, that
the warrant of arrest did not extend beyond the hearing and adjudication upon
the petition, and was for the purpose of securing the bankrupt's attendance
thereon, and to prevent his absconding meanwhile or putting his property out
of reach. The scope of section 9b of the present act is somewhat broader;
but it seems still to be limited to a detention of the bankrupt for the purpose of
examination after adjudication, and for his appearance from time to time for
that purpose, not exceeding in all ten days, and for his obedience to all lawful
orders made in reference to his examination. The issue of the warrant is
further limited to a period of one month after the qualification of the trustee.
In the present act there is no express authority to issue a warrant in order
to prevent the bankrupt from absconding with assets, except incidentally and
under the above limitations of section 9b; and considering the manifest in-
sufficiency of that section to secure an effective administration of the act, I
cannot doubt that it was intended by the compact and broad language of section
2, subd. 15, to authorize the court to make all orders and to issue any other
process, agreeable to the recognized principles of law, that might be found
necessary for that purpose. The Act of 1867 contains no such general grant
of power as is found in section 2 above quoted. See Rev. St. sees. 4972, 4976,
5024. The limitations of that act, therefore, are not applicable to the present
act.
The writ of ne exeat under section 717 is not to be issued ' unless a suit in
n8 THE NATIONAL BANKRUPTCY LAW.
Seizing Bankrupt's Property — Extradition of Bankrupts. [Ch. III.
equity is commenced.' This was the existing rule of law as to the issuance of
writs of tie exeat. Beames, Ne Exeat, 26; 3 P. Wms. 312; Mattocks v. Tre-
main, 3 Johns. Ch. 75. Section 2 of the Act of 1898, in giving the District
Courts equitable jurisdiction 'in bankruptcy proceedings,' would seem to
make the commencement of such proceedings the equivalent of a suit in
equity for the purpose of the issuance of such a writ. Mackintosh v. Ogilvie,
1 Dickens, 119. In view of the broad provisions of section 2, subd. 15, how-
ever, it seems quite unnecessary to resort to section 717 for authority to
prevent bankrupts from absconding, either with or without their assets, when
their detention is necessary for the proper enforcement of the act."
Seizing Possession of Property of Bankrupt. — Compare section
69; also section 2(3).
Sec. 10. Extradition of Bankrupts. — a Whenever a warrant for
the apprehension of a bankrupt shall have been issued, and he shall
have been found within the jurisdiction of a court other than the
one issuing the warrant, he may be extradited in the same man-
ner in which persons under indictment are now extradited from
one district within which a district court has jurisdiction to an-
other.
No Analogous Provisions in Former Acts.
The power of removal referred to is contained in section 1,014
U. S. R. S., which is as follows :
" For any crime or offense against the United States the offender may, by
any justice or judge of the United States, or by any commissioner of a circuit
court to take bail, or by any chancellor, judge of a supreme or superior court,
chief or first judge of common pleas, mayor of a city, justice of the peace, or
other magistrate, of any State where he may be found, and agreeably to the
usual mode of process against offenders in such State, and at the expense of
the United States, be arrested and imprisoned, or. bailed, as the case may be
for trial before such court of the United States as by law has cognizance of
the offence. Copies of the process shall be returned as speedily as may be
into the clerk's office of such court, together with the recognizances of the
witnesses for their appearance to testify in the case. And where any offender
or witness is committed in any district other than that where the offense is
to be tried, it shall be the duty of the judge of the district where such offender
or witness is imprisoned, seasonably to issue, and of the marshal to execute,
a warrant for his removal to the district where the trial is to be had."
BANKRUPTS. 119
§ 11.] Suits by and Against Bankrupts.
Sec. 11. Suits By and Against Bankrupts. — a A suit which is
founded upon a claim from which a discharge would be a release,
and which is pending against a person at the time of the filing of
a petition against him, shall be stayed until after an adjudication
or the dismissal of the petition ; if such person is adjudged a 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.
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 bank-
rupt estate subsequent to two years after the estate has been
closed.
Analogous Provisions of Former Acts. —
As to right to maintain an action against a bankrupt: R. S. section 5105;
act of 1867, section 21 ; act of 1841, section 5. As to stay of suits against a
bankrupt: R. S. section 5106; act of 1867, section 21. As to trustees' con-
tinuance of pending suits against a bankrupt: R. S. section 5047; act of
1867, sections 14 and 16; act of 1841, section 3; act of 1800, section 13. As
to limitations of actions against the trustee : R. S. section 5057 ; act of 1867,
section 2; act of 1841, section 8. Also R. S. section 5056; act of 1867 sec-
tion 14.
Statutory Provisions, Old and New. — There are marked differ-
ences between the provisions of the former and the present act
with regard both to the maintenance and continuance of actions
against a bankrupt. The former act as it appeared in the Re-
vised Statutes contained two provisions. Section 5105 in sub-
stance enacted that the proving of a debt was a waiver of all
right of action, and that thereafter the creditor should not be
allowed to maintain any suit at law or in equity. This, it will be
seen, prevented the institution of new actions as well as the con-
tinuance of pending actions, provided the debt was proved. Sec-
tion 5106 of the Revised Statutes declared that no creditor whose
THE NATIONAL BANKRUPTCY LAW.
Suits By and Against Bankrupts. [Ch. III.
debt was provable should be allowed to prosecute to final judg-
ment any suit at law or in equity therefor, against the bankrupt
until the question of his discharge should have been determined,
and that all such suits must be stayed until the question of dis-
charge was considered by the court, provided there was no un-
reasonable delay on the part of the bankrupt in attempting to
obtain his discharge, and provided also that, if there was a dis-
pute as to the amount of the debt, a court of bankruptcy might
allow the action to proceed to judgment for the purpose of ascer-
taining the amount due, which amount might be proved in bank-
ruptcy, but execution was to be stayed. Comparing those pro-
visions (which appear more fully in the copy of the act printed as
an appendix to this book) with the provisions of the section under
consideration, it will be seen that the present act expressly pro-
vides only for the stay of pending actions ; that it makes no refer-
ence to the institution of new actions; that a suit will not be
stayed simply because it is founded upon a debt which is provable,
but the debt must be one which would be released by a discharge.
It will be further seen that the present statute makes a stay from
the time of filing the petition until an adjudication or the dis-
missal of the petition, compulsory; but that after that time it is
discretionary. Moreover there are no express grounds required
for the court to give as its reason for permitting the continuance
of the action. It will be further seen that the old act, in cases
where creditors did not prove their claims and thereby waive all
right of action, only required that the action should not be allowed
to be prosecuted to final judgment, and that even to this there were
some express exceptions; but under the present act, if a stay is
granted no further proceedings whatever can be taken.
The general purpose and object of these laws authorizing the
stay of actions against a bankrupt are to prevent his being har-
assed with suits, while he is proceeding in good faith to obtain his
discharge, and until the question of his discharge is determined
and it is either granted or refused. Another purpose is to pre-
vent a race of diligence between creditors.
The law intends that creditors having provable claims shall
BANKRUPTS.
§11.] Suits by and Against Bankrupts.
secure their remedy in bankruptcy proceedings, and that if the
claim is dischargeable the bankrupt shall not be annoyed by pro-
ceedings in any other court pending the application for a dis-
charge. If he receives the discharge he may of course plead it as
a defense. If he is refused a discharge, the right of a creditor to
sue for his debt or the balance of it over and above any dividend
received, remains unimpaired. But still the question remains : Has
a creditor, between the time of the filing of the petition and the
granting of the discharge, a right to institute a new suit upon his
claim against the bankrupt, simply because the act does not in
terms provide that new suits shall not be instituted, nor that a
new suit if instituted shall be stayed ? When will the courts allow
such suits ? If such a suit were instituted and prosecuted to judg-
ment, it would in no way give the creditor any right or lien upon
the property with which the trustee becomes vested by law. If
prosecuted to judgment, and a discharge is thereafter granted,
the discharge may be pleaded as a defense to any further action on
thcjudgment or any proceedings to enforce it. (McDonald v. Da-
vis, 105 N. Y. 508.) If a discharge is granted, there is then no
advantage accruing to the creditor by reason of the institution of
his action, unless it be to liquidate his claim so that the amount
may be proven under section 63 ( 5 ) . He will have incurred the
expense of his litigation to reap only this advantage, because
under the provision of section 63, his costs incurred in the suit
will not be a provable debt. But if the discharge is refused, then
any judgment which he recovers will be a prior lien upon the sub-
sequently acquired property of the bankrupt.
Under the act of 1867, which provided in the case of creditors
who did not prove their claims, only, that the courts should not
allow the prosecuting of suits to judgment, it was held that the
act did not in terms prohibit the commencement of a suit to en-
force provable debts, and that therefore a court of bankruptcy
might in its discretion refuse to enjoin the commencement or the
prosecution of such action. {In re Ghiradelli, Fed. Cas. 5,376;
4 N. B. R. 164; s. c. 1 Saw. 343 ; and see Eyster v. Gaff, 91 U. S.
521.)
(16)
122 THE NATIONAL BANKRUPTCY LAW.
Suits by and Against Bankrupts. [Ch. III.
The true rule seems to be that where the bankruptcy court has
taken into its possession the custody and control of the bankrupt's
estate, it will enjoin any person from bringing any action which
would interfere with that possession or embarrass its administra-
tion of the estate. In the case of In re Chambers, Calder & Co.
(3 Am. B. fe. 537; 98 Fed. 865) the District Court for the Dis-
trict of Rhode Island passed upon this question under the present
act. That was a case on the petition of the trustee (who was also
the receiver) of the bankrupt for an injunction against proceed-
ings in the State court, which relief was granted. The facts and
the conclusions drawn therefrom appear in the following extracts
from Judge Brown's opinion.
" This petition seeks to enjoin the Industrial Trust Company from pro-
ceeding by action of ejectment in the State court to recover possession of real
estate leased to the bankrupts, Chambers, Calder & Co. who were in possession
at the date of the adjudication of bankruptcy. In the leased building was a
large stock of goods appropriate to the business of wholesale druggists.
Though the rent was overdue for more than fifteen days, and under General
Laws R. I. c. 269, sec. 7, the landlord was thereby authorized to re-enter or
recover possession discharged from the lease, no action amounting to an
election to discharge the lease had been taken prior to November 25, 1899, the
date of the adjudication of bankruptcy and the appointment of a receiver. W.
B. Persons was appointed receiver of the estate of the bankrupts, and was
authorized to continue the business until further order of the court. He duly
qualified, entered upon the premises, and carried on the business. Afterwards,
on December 4th, the trust company brought its action of ejectment against
Persons and the bankrupts in the State court. On December 6th the trust
company made proof of claim before the referee for the full amount of rent
overdue. On December 7th, Persons was elected trustee by the creditors, and
duly qualified. It thus appears that this court had taken into its custody
and control the entire estate of the bankrupts, including the leased building,
before the beginning of any proceedings in the State court. It is a firmly es-
tablished rule that, where property is in the possession of one court of compe-
tent jurisdiction, such possession cannot be disturbed by process issued out of
another court. Byers v. McAuley, 149 U. S. 608, 13 Sup. Ct. 906, 37 L. Ed.
867; Ex parte Johnson, 167 U. S. 120, 17 Sup. Ct. 735, 42 L. Ed. 103; Jordan
V;J^X°r (Cir' Ct- Dist Mass- Dec- 29> 1899), 98 Fed. 643; Keegan v. King
(D. G), 96 Fed. 758; 3 Am. B. R. 79; Chapin v. James, 11 R. I. 87. Execution
in ejectment would, in the present case, interfere with the possession of this
court, and on that ground alone might be enjoined. It is furthermore ap-
parent that it would most seriously embarrass this court in the administration
of the bankrupt's estate, and result in unnecessary loss to the creditors.
BANKRUPTS. I23
§ ii.] Suits by and Against Bankrupts.
* * * Whatever may be the right of the landlord, process or judicial
authority for its enforcement must now be sought in this court, upon which
the Bankruptcy Act has conferred equity powers adequate to meet a situation
in which the strict and immediate enforcement of a legal right would lead to
unnecessary and disproportionate loss to others, or would result collaterally
in conferring an inequitable advantage. A court of equity, while giving the
fullest recognition to a legal right, may so regulate the time and manner of its
enforcement as not to cause unnecessary loss to others. Deweese v. Reinhard,
165 U. S. 386, 390, 17 Sup. Ct. 340, 41 L. Ed. 757. The jurisdiction of this
court having attached to the exclusion of jurisdiction at law, the right of the
landlord can be enforced only upon equitable terms. Neither receiver nor trus-
tee in bankruptcy is bound to accept property of an onerous or unprofitable
character, or to assume a lease of the bankrupts, unless for the benefit of the
creditors. File Co. v. Garrett, no U. S. 288, 4 Sup. Ct. 90, 28 L. Ed. 149. If
they are confronted with the alternative of an immediate ejection from the
premises, with the consequent depreciation of the personal estate, or the as-
sumption of an undesirable lease and the payment of a large sum for unr
secured rent, whereby an unsecured creditor will secure a preference, a court of
equity should relieve them from the coercion of the situation. If time is es-
sential for an equitable adjustment of the various rights, the court may impose
such delay as is reasonably necessary upon the enforcement of any particular
right, making pecuniary compensation therefor whenever that is adequate.
* * * As it appears that at the time of bringing the action of ejectment the
receiver was in possession, and carrying on the business under the orders of
this court, he is entitled to the protection of an injunction as prayed in his
petition. The draft decree may be presented accordingly."
And the Circuit Court of Appeals of the Second Circuit has re-
cently laid down very much the same doctrine (In re Russell
el al. 3 Am. B. R. 658; 101 Fed. 248) as will be seen from the
following extract from the opinion of Wallace, C. J. :
" April 15, 1899, the United States District Court for the Northern District
of New York adjudged Russell & Birkett bankrupts, and appointed Wise trus-
tee in bankruptcy. The trustee duly qualified and entered upon the discharge
of his duties, and took into his custody certain property in the possession of
the bankrupts claimed to belong to the Machinists' Supply Company. June 10,
1899, the Machinists' Supply Company brought an action of replevin against
the trustee in the Supreme Court of the State of New York to recover posses-
sion of such property. Thereupon the trustee applied to the District Court for
the Northern District of New York, as a court of bankruptcy, for an order
enjoining the Machinists' Supply Company from prosecuting its action of
replevin, and for such other relief as the court might deem proper to grant.
The application was based upon a petition by the trustee, and an order by the
court to show cause, both of which were personally served upon the Ma-
124 THE NATIONAL BANKRUPTCY LAW.
Suits by and Against Bankrupts. [Ch. III.
chinists' Supply Company. Upon the return day the Machinists' Supply
Company resisted the application, but an order was made by the court enjoin-
ing the prosecution of the action, and as a preliminary to a final adjudication of
the rights of the parties, referring ' the claim of said Machinists' Supply Com-
pany ' to a referee in bankruptcy to take proofs and report. It is now insisted
by the Machinists' Supply Company that it was entitled to bring and prosecute
its action in the State court; that the stay of its proceedings by the Bank-
ruptcy Court was an erroneous exercise of power; and that the Bankruptcy
Court was without jurisdiction to compel it to litigate its title to the property
in question in that court in a summary proceeding upon a petition. * * *
Under the Bankrupt Act of 1867 the State courts had cognizance of such
actions, not by express grant, but because the act did not divest them of
jurisdiction. As was said in Eyster v. Gaff, 91 U. S. 521 : ' The debtor of a
bankrupt, or the man who contests the right to real or personal property with
him, loses none of those rights by the bankruptcy of his adversary. The same
courts remain open to him in such contests, and the statute has not divested
those courts of jurisdiction in such actions. If it has for certain classes of
actions conferred a jurisdiction for the benefit of the assignee in the Circuit or
District Courts of the United States, it is concurrent with, and does not divest
them of, the State courts.' This doctrine was approved in Claflin v. Housman,
95 U. S. 130, where many decisions of other tribunals to the same effect are
cited. Upon the same considerations the State courts have cognizance since
the present act, not being divested of jurisdiction by any of its provisions.
We should entertain no doubt that the Machinists' Supply Company was
entitled to bring an action of trespass or trover for the recovery of the value of
the property against the trustee in the State court. But the action brought,
being replevin, is one for the seizure of property in the custody of the Bank-
ruptcy Court, because in the custody of its officer, which, upon the principle
decided in Freeman v. Howe, 24 How. 450, it is protected from any interference
by the State process or by the process of any other court not exercising super-
visory jurisdiction. When property is in the actual possession of a court this
draws to it the right to decide upon conflicting claims to its ultimate posses-
sion and control (Rouse v. Letcher, 156 U. S. 47, 49), and as between two
courts exercising concurrent jurisdiction, the court which first acquires posses-
sion will maintain its possession intact. In Taylor v. Carroll, 20 How. 594,
it was said : ' The Court of Chancery does not allow the possession of its
receiver, sequestrator, committee, or custodee, to be disturbed by a party,
whether claiming by title paramount, or under the right which they were ap-
pointed to protect, as their possession is the possession of the court.' The
power of protecting itself from such a disturbance is co-extensive with the
right of self-preservation, and if not inherent in every tribunal, is in all having
the powers of courts of equity. A Federal court will neither interfere with
property in the lawful custody of a State court, nor tolerate interference by a
State court with property in its custody. Sumner v. White, 36 U S App 39s •
Louisville Trust Co. v. City of Cincinnati, 47 U. S. App 36. Authority to
Courts of Bankruptcy to protect the property in their custody from such inter-
BANKRUPTS. 125
§ 11.] Effect of Proof of Claim on Right of Action.
ference would seem to be specifically conferred by that provision of section 2
of the act permitting them to make such orders and issue such processes as
may be necessary for enforcing their jurisdiction. The prohibition of section
720 of the Revised Statutes against enjoining the proceedings of a State court
does not apply when any law relating to bankruptcy authorizes an injunction,
nor does it where the proceedings sought to be enforced have been commenced
after the jurisdiction of the Federal court has attached. Fish v. Union Pa-
cific R. R. 10 Blatch. 518; French v. Hay, 22 Wall. 250; Dietsch v. Heyde-
koper, 103 U. S. 494.
We conclude that the order under review, so far as it stayed the prosecution
of the replevin action, was properly made, and that unless leave is obtained of
the Court of Bankruptcy the Machinists' Supply Company must bring its
action in that court."
And compare In re Cobb (3 Am. B. R. 129 ; 96 Fed. 821 ) ; Kee-
gan v. King (3 Am. B. R. 79 ; 96 Fed. 758) ; in re Endl (3 Am. B.
R. 813; 98 Fed. 915). From this it will be seen that the better
opinion is that the jurisdiction of the bankruptcy court to stay
any proceedings not within the terms of this section must come
from priority in its possession and control of the subject matter,
and its right to prevent interference therewith, and to that extent
only.
Effect of Proof of Claim on Right of Action. — Where a creditor
proves his debt, all the authority of decided cases is that by such a
proceeding he has made an election of remedies by choosing to en-
force his debt through the bankruptcy proceedings, and that he
thereby waives his right to enforce his claim by any other legal
proceedings unless a discharge is refused to the bankrupt. These
decisions do not all appear to be based upon statutory provisions ;
they seem rather in many cases to rest upon a general principle,
that if the creditor elects to pursue one of two remedies he thereby
waives the right to pursue the other. Thus, in England, it has
been held that the proof of a debt is to be considered an election
not to proceed against the bankrupt, by action; such proof ope-
rates as a statutory discontinuance of all other legal and equitable
remedies in respect to the debt proven; and the courts of that
country will enjoin the proving creditor from any other legal pro-
ceedings, or require him to expunge his proof {Ex p. Diack, 2
Mont. & Ayr. 675 ; Ex p. Bernasconi, 2 Glyn. & J. 381) ; and the
126 THE NATIONAL BANKRUPTCY LAW.
What Suits May be Stayed. [Ch. III.
same was the decision of the United States courts even under the
bankruptcy act of 1841. Thus, in Haxtun v. Corse, 4 Edw. Ch.
585; s. c. affirmed 2 Barb. Ch. 506, at 531, and in Stewart v.
Isidor, 5 Abb. Pr. (N. S.) 68, it was held that a creditor who
proved his debt, elected to become a party to the proceedings in
bankruptcy, and although he had a judgment previously recov-
ered, he could not institute a judgment creditor's action. Under
the act of 1867, there were numerous decisions to the same effect;
but these, it is to be noted, were required by the express terms of
the act, the only question under that act being whether the proof
of a debt was an absolute waiver of the claim which would by the
terms of the statute prevent the creditor from instituting any fur-
ther proceedings, even in cases where a discharge was refused.
The weight of authority was that it was only a suspension of ac-
tion until the time of discharge, and if a discharge was refused,
then the creditor might institute legal proceedings to collect the
balance of his claim over and above dividends received.
This construction of the statute was afterwards embodied in an
amendment of the section, passed in 1874, which appears in the
Revised Statutes. Under the act of 1841, it was likewise held
that a' creditor who took a dividend under the estate of a bank-
rupt was not thereby estopped from collecting the remainder of
his debt if the bankrupt was refused a discharge. (Haxtun v.
Corse, 4 Edw. Ch. 582 ; s. c. on appeal, 2 Barb. Ch. 506; Hamlin
v. Hamlin, 3 Jones Eq. Rep. [N. C] 191.)
And it would seem to be a general principle that if two or more
forums are open to a suitor, he is bound by his election. See In re
Chambers, etc., cited to preceding section; Re Vogel, Fed. Cas.
16,982; 3 N. B. R. 198; 7 Blatch. 19; Moran v. Sturges, 154
U. S. 256; Bear v. Chase, 3 Am. B. R. 746 and note; s. c. 99
Fed. 920; 40 C. C. A. 182.
What Suits May be Stayed. Section 1 ia.— The intent of the act
seems to entitle the bankrupt to a stay of actions at law, actions
in equity, and in fact any legal proceedings, whatever their nature,
if they were instituted to recover upon a claim which would be
BANKRUPTS. 127
§ 11.] What Suits May be Stayed.
released by a discharge. The word " suit " is wide enough in its
scope to embrace all forms of procedure. The act of 1867 au-
thorized a stay of suits at law or in equity. It was held that it
applied to all cases where the personal liability of the debtor was
sought to be fixed or determined by a final judgment, pending the
determination of the question of discharge. (In re Rosenberg, 2
N. B. R. 236; Fed. Cas. 12,054; s. c. 3 Ben. 14.) But where
an action by a creditor did not tend to enforce any claim against
the debtor, and did not deprive the trustee of any right or control
over the property, proceedings taken after the injunction order
were not a disobedience to it. (In re Hirsch, 2 N. B. R. 3 ; Fed.
Cas. 6,529; compare McKay v. Funk, 13 N. B. R. 334; s. c. 37
Iowa, 661.) But even an action to foreclose a mortgage may be
stayed in so far as the aim is to enforce a personal liability of the
mortgagor, as for instance, for a deficiency. (McKay v. Funk,
supra.) As to continuance of actions to enforce liens, compare
next paragraph. An action cannot be stayed unless it is founded
' upon a claim which would be released by a discharge. The mere
fact that the claim is provable is not sufficient as under the former
act. Proceedings supplementary to execution may be stayed.
(Zimmerw. Schleehauf, 115 Mass. 52; In re Delong [Ref. Dec],
1 Am. B. R. 66. ) And it would seem that appeals might be stayed.
Under the former act, there was some conflict of authority as to
this class of cases, but it arose over the question whether a judg-
ment by a subordinate court from which an appeal had been taken
should be considered " a final judgment," the law requiring courts
of bankruptcy not to allow the prosecution of suits to final judg-
ment. It was held that such appeals might be stayed if the bank-
rupt was the appellant; and that motions for further security on
such appeals were proceedings which could be stayed. (In re Met-
calf & Duncan, 2 Ben. 78; Fed. Cas. 9,494; s. c. 1 N. B. R. 201.)
Contra, holding that " it is not the purpose of the statute to sus-
pend the right of the plaintiff to maintain in the appellate court the
correctness and validity of a judgment from which a bankrupt
might choose to take an appeal, until the determination of the
question of his discharge," and the proceedings on appeal will not
128 THE NATIONAL BANKRUPTCY LAW.
Staying Proceedings to Enforce Lien. [Ch. III.
be stayed when the bankrupt is the appellant. (Merritt v. Glidden,
39 Cal. 559; s. c. 5 N. B. R. 157; s. a 2 Am. Rep. 479, with
notes.) A suit in the nature of a judgment creditor's bill may
also be enjoined. {In re Whipple, 13 N. B. R. 373; Fed. Cas.
17,512.) 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
or knowledge of the bankruptcy proceedings.
It must be remembered, however, that under section 67 all
levies, judgments, attachments, or other liens obtained through
legal proceedings against an insolvent person within four months
of the filing of the petition in bankruptcy are annulled. And this
is true irrespective of the character of the claim under which such
lien is obtained.
Staying Proceedings to Enforce Lien.— Where a lien against a
debtor's property, which is acquired more than four months be-
fore bankruptcy and which is otherwise valid, is sought to be fore-
closed, such foreclosure cannot as a rule be stayed by the federal
court. The trustee takes the property of the bankrupt subject to
all valid liens, and while unsecured creditors having claims are
parties to the proceeding, it must be remembered that the secured
creditor, as such, is not a party to the bankruptcy proceedings,
because if his security is valid the court has no control over him,
nor can he share in the assets without surrendering his security.
But sec. 57h, providing for the determination of the value of the
security held by secured creditors, and for the payment of a divi-
dend upon the unpaid excess of the debt over the value of the
securities, would, it seems, bring a secured creditor in such case
within the jurisdiction of the bankruptcy court to the extent that
perhaps it might restrain proceedings to collect the lien until the
validity and value of such lien could be determined. But as pre-
sumably the determination as against an adverse claimant must be
had in the State court, it would seem to be correct practice for the
BANKRUPTS. 129
§ 11.] To What Court is the Application for a Stay to be Made ?
trustee to go by permission into that court and there obtain a
stay.
An interesting discussion of this question will be found in a
recent case Taylor v. Taylor, N. J. Ch. (45 Atl. 440; 4 Am. B. R.
211, with note). See also In re San Gabriel Sanatorium Co. as re-
ported in 4 Am. B. R. 197 with note, and In re Gerdes (4 Am. B.
R. 346; 102 Fed. 318).
Where the bankrupt made a valid sale of property before the
proceedings in bankruptcy were instituted, and part of the pur-
chase money was retained by the vendee to discharge any liens
which might be established against the property sold, and subse-
quent to the sale various persons filed mechanics' liens against the
buildings sold and brought suits against the vendee and the bank-
rupt to enforce the same in a State court, the trustee of the bank-
rupt, though interested in the result of the litigation, was held not
to be entitled to have the proceedings in the action in the State
court stayed, or to have the controversy transferred to the bank-
ruptcy court for adjudication. (In re Greater American Exposi-
tion [In re Horton], C. C. A. 8th Circ. ; 4 Am. B. R. 486; 102
Fed. 986.)
As to power of the court to order a sale of the bankrupt's prop-
erty free of liens and incumbrances, see commentary under section
70 on this subject.
To What Court is the Application for a Stay to be Made? — The
bankruptcy law is binding upon State courts as well as federal
courts and it is to be applied by both in all matters coming before
them; hence a State court should stay the action if application
is made to it to do so.
Indeed it has been directly held under the present act that a
bankrupt who is defendant in a suit pending in a State court and
who desires to procure a stay in said court should file in such court
a proper pleading setting forth the pendency of the proceedings
in bankruptcy, and thereupon should ask for a stay as provided
for in section n. This is the proper procedure for the reason
(17)
130 THE NATIONAL BANKRUPTCY LAW.
To What Court is the Application for a Stay to be Made ? [Ch. III.
that the creditors who are the plaintiffs in the suit sought to be
stayed are parties to the action in the State court and are subject
to its jurisdiction and will be bound by its action in the premises.
Of course if the State court does not grant the stay an applica-
tion may then be made to the bankruptcy court. Compare In re
Geister (3 Am. B. R. 228; 97 Fed. 322). The U. S. Revised
Statutes, section 720, provide that the writ of injunction shall not
be granted by any court of the United States to stay proceedings
in any court of a State except in cases where such injunction may
be authorized by any law relating to proceedings in bankruptcy,
so that it is clear that the stay under the Bankruptcy Statute must
be strictly construed. Therefore it follows that the application
should be made to the State court always in the first instance.
The application for a stay may be by the affidavit of the bankrupt
and when presented to the court in which the action is pending
ought to entitle him to a stay until his application for a discharge
is determined, unless there are good reasons for the discontinu-
ance of the suit. (In re Frostman & Hicks, 15 N. B. R. 41.)
The application may also be made by the trustee, but it has been
held that it cannot be made by the plaintiff in the action. If the
bankrupt declines to avail himself of the privilege granted to him,
the cause must proceed to trial or be dismissed, with like effect as
if the bankrupt had not been so adjudged, the plaintiff has no
more right to suggest the bankruptcy of the defendant as a reason
for staying the suit than he would have to plead the bankrupt's
certificate of discharge. If an action is not stayed, but proceeds
to judgment and a discharge is granted before judgment, the
bankrupt cannot afterwards set it up as a release from the judg-
ment. If the discharge be granted after the judgment, he may
use it as a defense. (McDonald v. Davis, 105 N. Y. 508.) Fur-
thermore, it is not the duty of the State court to stay the proceed-
ing merely because the bankruptcy of the defendant has been sug-
gested to it (Eyster v. Gaff, supra; Stone v. Bank, 39 Ind. 284) ;
and the court is under no duty to take judicial notice of the bank-
ruptcy of any of the parties to proceedings before it. It must be
informed of the facts by proper pleadings, and if the allegations
BANKRUPTS. 131
§ 11.] Jurisdiction of State Courts in Action Stayed — Stay is Discretionary.
of bankruptcy are denied, they must be proven by the record.
(Johnson v. Bishop, 8 N. B. R. 533; Fed. Cas. 7,373.)
It should not be forgotten, however, that as between courts of
concurrent jurisdiction, the court first acquiring jurisdiction will
not be interfered with by another court and a stay of proceed-
ings will then be proper if addressed not to the court but to the
suitor. See Ward v. Todd (103 U. S. 327).
State Courts do Not Lose Jurisdiction Even if Action is Stayed. —
The injunction is addressed to the suitor, not to the court. If
the suitor disobeys it he may be punished for contempt, but the
State court does not lose jurisdiction to proceed. It has been
held that the court in which the action was pending was not bound
to take notice of the fact that the suitor had been enjoined and
that in prosecuting the action he was in contempt of the bank-
ruptcy court, but that if he moved the cause, it must proceed to
judgment, and the only effect would be that the suitor was liable
to punishment. (Ewart v. Schwarz, 48 N. Y. Super. 390.)
Failure to obtain a stay or the setting aside of a stay, once se-
cured, with permission to plaintiff to proceed with his action as
if never restrained, and in case he obtains judgment permitting
him to take any other proceedings that the law and practice of the
State courts allow, does not prevent the defendant, who, after the
judgment has been obtained, is discharged in bankruptcy, from
setting up the discharge for the purpose of stopping supple-
mentary proceedings on the judgment, or other proceedings to
enforce it. (McDonald v. Davis, 105 N. Y. 508.) The rule
that the court does not lose jurisdiction over the pending proceed-
ing and that the suit will proceed unless the bankruptcy of the
defendant is brought to its notice, applies equally to appeals. If
a defendant is adjudged bankrupt after he has taken an appeal, an
affirmance of the judgment in the absence of a suggestion of his
bankruptcy is not a nullity. (Flanagan v. Pearson, 14 N. B. R.
37; s. c. 42 Tex. 1.)
Stay is Discretionary. — With the exception of the period inter-
vening between the filing of the petition and the adjudication it is
132
THE NATIONAL BANKRUPTCY LAW.
The Duration of the Stay. [Ch. III.
discretionary with the court whether or not to grant a stay. In
general, suits should not be allowed to be prosecuted. A good
reason must be shown before an exception will be made. The
fact that the amount of the debt is in dispute would be such a
reason.
As a rule the exercise of this discretion, will not be interfered
with unless it has been abused and therefore it has been held that
where the only effect of the staying order upon the proceedings
in the State court will be to prevent examination of the bankrupt
in supplementary proceedings for the purpose of obtaining in-
formation which might be useful in the prosecution of a creditor's
bill and where such information can be easily obtained in the
bankruptcy court, there is no reason for reviewing the exercise
of discretion on the part of the last named court. ( See In re Les-
ser, Court of Appeals, 2nd Circuit, 3 Am. B. R. 758 ; 40 C. C. A.
177; 99 Fed. 913.)
The Duration of the Stay.— Proceedings must be stayed from the
time of the filing of the petition until the adjudication. " Ad-
judication " means the time of the entry of the decree that the
defendant in a bankruptcy proceeding is a bankrupt, or if such
decree is appealed from, then the time when such decree is finally
affirmed. (Section 1 [2].) The filing of a petition against one
includes the filing of a petition by him. (Section 1 [1].) The
language of the injunction should be in accordance with the stat-
ute, that is, it seems it should be in the alternative; viz., a stay
of twelve months from the time of the adjudication " or if within
that time such person applies for a discharge, then until the ques-
tion of such discharge is determined." The injunction only con-
tinues in force as long as the question of discharge is undeter-
mined. The granting of a discharge gives to the bankrupt an ab-
solute defense. The refusal to grant him a discharge terminates
the stay. It has been held that no motion for a dissolution of
the injunction is necessary after the application for a discharge
has been passed upon ; that no order is required to show that the
stay is terminated. (In re Rosenberg, 2 N. B. R. 236; Fed. Cas.
BANKRUPTS. 133
§ 11.] Debts Released by Discharge — Continuance of Pending Suits.
12,054; s. c. 3 Ben. 14; in re V. Thomas, Fed. Cas. 13,890; 3
N. B. R. 38 ; in re Belden, Fed. Cas. 1,239 > 6N. B. R. 443 ; Din-
gee v. Becker, Fed. Cas. 3,919; 9 N. B. R. 508.) The right of a
creditor of a bankrupt to maintain an action against him revives
immediately upon the rendition of a judgment by the court of
bankruptcy passing upon the bankrupt's application for a dis-
charge, and the right to bring and maintain such action is not
restricted by the fact that the bankrupt has filed a petition to re-
view the judgment refusing him a discharge and that the proceed-
ings for such review are still pending. (Storrs v. Plumb, 30
Hun, 319, citing as to judgments being final though appealed
from, Fisher v. Hepborn, 48 N. Y. 41 ; Sixth Ave. R. R. v. Gil-
bert, 71 N. Y. 430, and distinguishing Musgrave v. Sherwood,
76 N. Y. 194.) A stay of proceedings " until the further order
of the court," is vacated by the bankrupt's subsequent discharge
per se; and a creditor whose action has been stayed thereby, may
proceed. (Cox v. Dorwin, 29 Hun, 293.)
Inquiry as to Whether Debts are Released by Discharge. — The ex-
isting act makes it necessary for the bankruptcy court, when an
application for a stay is made, to inquire whether the claim on
which the suit is founded,- is dischargeable or not.
The better authority seems to be that the court will examine
into the matter to determine whether the action is one which is
dischargeable or not, and not be bound by the face of the plead-
ings. (Compare In re Basch, 3 Am. B. R. 235; 97 Fed. 761;
Bear v. Chase, 3 Am. B. R. 746; 40 C. C. A. 182; 99 Fed. 920.)
Continuance of Pending Suits. — Unless ordered by the court the
trustee is not bound to enter appearance and defend a pending
suit; without its approval he will not be permitted to prosecute
any pending suit. Unless ordered, he must exercise his own
discretion as to the wisdom of defending any pending suit. He
is not obliged to seek his remedy in these actions. (Trader's
Bank v. Campbell, 14 Wall. 87; s. c. 6 N. B. R. 353; s. c. below,
2 Biss. 423 ; s. c. 3 N. B. R. 498. ) The language of the present
i34 THE NATIONAL BANKRUPTCY LAW.
In What Suits Can Trustee Intervene. [Ch. III.
act differs in some details from the act of 1867, but it would seem
that the words were still permissive rather than mandatory, and
that a trustee, unless ordered, is not obliged to either prosecute or
defend an action unless it is for the interest of the estate. (Reade
v. Waterhouse, 10 N. B. R. 277; s. c. 52 N. Y. 587; s. c. below,
28 Hun, 78. ) It would seem that the trustee could not be made
a party against his will except by order of the court ; but if a suit
is pending against a party at the time he is adjudged a bankrupt,
notice may be given to the trustee that it will be prosecuted
against him in his representative capacity, and if he makes no
objection to the jurisdiction and the bankruptcy court does not
arrest the proceedings, the case may be prosecuted to judgment.
Compare Bear v. Chase, supra. Such a judgment may be filed
with the trustee as an ascertainment of the amount due to the
creditor by the bankrupt, and as a basis of dividends, but it is
effectual and operative for that purpose only. (Norton v. Swit-
zer, 93 U. S. 355.) If the action which has been instituted is one
affecting property which vests in the trustee, and he does not make
himself a party thereto, he is affected by the judgment in the same
way as any purchaser pendente lite. The State court will not
stay a foreclosure already commenced against the owner of the
equity of redemption, who is thereafter adjudged a bankrupt, un-
less the bankruptcy court actually issues an injunction order. The
suit does not become defective for lack of parties, even though the
trustee is not made a party. (Lenihan v. Haman, 55 N. Y. 652;
Cleveland v. Boerum, 24 N. Y. 613.)
In What Suits Can Trustee Intervene? Section lib, c. It has
been held the trustee may intervene in any pending legal proceed-
ing affecting the property of the bankrupt or the rights of cred-
itors. If a fund is in the hands of a receiver appointed by a State
court, he may as the representative of the bankrupt and his cred-
itors make himself a party to the proceedings, and contest any
claim against the fund. (Louden v. Blanford, 56 Ga. 150.) He
may bring a writ of error to review a judgment which was en-
tered against the bankrupt before the adjudication, and he alone
BANKRUPTS.
135
§ ii.] Pending Actions, Continued by Whom ?— Liability for Costs.
can bring such writ ; he may also take an appeal from such judg-
ment. (Knox v. Bank, 12 Wall. 379; Sandford v. Sandford,
58 N. Y. 67; s. c. 17 Am. Rep. 206, with notes.)
Bights of Bankrupt to Maintain Fending Actions. — There is some
conflict of authority as to the right of the bankrupt to continue
pending actions brought by or against him. All his rights of
action except those causes of action which are for personal in-
juries and which die with the person pass to the trustee. From
the time that the latter acquires them the bankrupt has no further
interest in them. It has been accordingly held that after that
time neither the bankrupt nor his attorney has any authority to
settle a suit which is then pending in his name ; that if such a suit
is dismissed after the title vests in the trustee in bankruptcy, the
trustee may move to have the same reinstated, and need show only
that the settlement was made without his authority. (Home
Ins. Co. v. Hollis, 53 Ga. 659.) On the other hand, just as the
trustee may abandon worthless property or may refuse to accept
a lease which would prove unprofitable, he may decline to con-
tinue the prosecution of a worthless cause of action. Further
than this it has been held that until the appointment of a trustee
the title to all the property, including rights of action, remains in
the bankrupt, notwithstanding it may afterwards relate back to
the adjudication, and that until some one with a better right to
prosecute appears, he may continue the prosecution. (Gilmore v.
Bangs, 55 Ga. 403 ; Sutherland v. Davis, 42 Ind. 26.)
In Whose Name is the Action Continned ? — If the trustee inter-
venes, the suit will be continued in his name, and this seems to be
the rule even where the common-law doctrine prevails, that an
assignee must sue in the name of the assignor. (Ames v. Gil-
man, 51 Mass. 239.)
Liability of the Substituted Trustee for Costs. — Costs cannot
properly be taxed to the trustee before he becomes a party to the
suit. After that time he is liable for the costs. (Norton v.
Switzer, 93 U. S. 355 ; citing Reade v. Waterhouse, 12 Abb. Pr.
136 THE NATIONAL BANKRUPTCY LAW.
Limitation of Actions. [Ch. III.
[N. S.J 255 ; s- c- 52 N- Y- 5885 s- c- IO N- B- R- 277'' Holland v.
Seaver, i Fost. 387 ; Penniman v. Norton, 1 Barb. Ch. 248, and
Smith v. Gordon, 6 Law Rep. 314.) But he is not personally
liable unless the court shall direct the same to be personally paid
by him because of his mismanagement or bad faith in the action.
(Reade v. Waterhouse, supra.) As to his personal liability for
the amount of a judgment, see Norton v. Switzer (93 U. S. 355).
Limitation of Actions. Section nd. — The provisions of the
present act as to the limitation of actions against or by a trustee
are totally different from those of the act of 1867. This section
is an absolute, arbitrary rule, forbidding the commencement of
any suit or action after two years from the time of the closing of
the estate. It is immaterial when the right of action accrued, or
whether it sprang from the fraud of another, or is founded on
contract. The maxim, interest rei publicae sit finis litium, is here
embodied in this section; and no exceptions are allowed. It is
within the power of Congress to pass such a statute of limitations
and it necessarily supersedes all State laws of limitations which
would otherwise affect the same actions. (Peiper v. Harmer, 5
N. B. R. 252.) It has been held that this statute is an inde-
pendent provision having no connection with any State statute
on the subject ; that regardless of the time when an action would
be barred by a State statute, it extends until- two years after the
estate is closed whether the State statute would terminate the
right to bring suit at an earlier or later date. (Freelander &
Gerson v. Holloman, Fed. Cas. 5,081; 9 N. B. R. 331.) Suits
in State and Federal courts both fall within the terms of the
statute. In the term " suit " as used in the bankruptcy act are in-
cluded all prosecutions of a demand in courts of justice whether
the proceedings be at law or in equity (Bailey v. Weir, 21 Wall.
342) ; and regardless of the nature of the proceedings or the
character of the tribunal. Thus a venire to assess damages for
land taken under the right of eminent domain is a proceeding
which will be barred by this statute. (Union Canal Co. v. Wood-
side, 11 Penn. 176.) The limitation exists notwithstanding
BANKRUPTS. 137
§ 12.] Asssignment of Cause of Action — Closing Estate — Compositions.
action is brought in the name of the trustee for the use of a third
person. (Ames v. Gilman, 51 Mass. 239.) It applies also to
writs of error sued out to review a State judgment, as well as to
suits originally commenced. (Jenkins v. Bank, 106 U. S. 571 ;
Walker v. Towner, Fed. Cas. 17,089; 4 Dill. 165; Payson v.
Coffin, Fed. Cas. 10,858; 4 Dill. 386.)
Does Not Affect Jurisdiction. — Failure to bring the suit within
the time herein prescribed is a good defense to an action when
brought, if pleaded; but it does not affect the jurisdiction of the
court. (Chemung Bank v. Judson, 8 N. Y. 254.)
Assignment of Causes of Action. — Where the trustee has a claim
against which the statute of limitations has run, he cannot by as-
signment confer a right of action upon another and thus avoid
the statute. (Cleveland v. Boerum, 24 N. Y. 613.)
When is the Estate Closed. — The only provision of the statute
as to when an estate is closed is that in section 2 (8), which im-
plies that the estate is closed when an order is made approving
the final account of the trustee and discharging him. But perhaps
in view of the context the " closing of the estate " in this section
refers to the time when the question of discharge is determined.
Sec. 12. Compositions, when Confirmed. — a A bankrupt may
offer terms of composition to his creditors after, but not before,
he has been examined in open court or at a meeting of his cred-
itors, and filed in court the schedule of his property and list of his
creditors, required to be filed by bankrupts.
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 consideration to be
paid by the bankrupt to his creditors, and the money necessary
to pay all debts which have priority and the cost of the proceed-
ings, have been deposited in such place as shall be designated by
and subject to the order of the judge.
(18)
138 THE NATIONAL BANKRUPTCY LAW.
History of Composition as an Incident of Bankruptcy Proceedings. [Ch. III.
c A date and place, with reference to the convenience of the
parties in interest, shall be fixed for the hearing upon each appli-
cation 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 ( I ) 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 bar 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 dis-
missed. Whenever a composition is not confirmed, the estate
shall be administered in bankruptcy as herein provided.
Analogous Provisions of Former Acts. —
R. S. section 5103 A. (Passed June 22, 1874.)
History of Composition as an Incident of Bankruptcy Proceedings.
— The Bankruptcy Acts of 1800 and 1841 and the original act
of 1867 contained no provision for a composition by a bankrupt
with his creditors. The first United States statute on the subject
was section 5103 A, Revised Statutes, passed in 1874. The first
English statute permitting an arrangement with creditors was
that of 6 Geo. IV. ch. 16, passed in 1825, but that did not release
the compounding party from the debts due creditors who dis-
sented. The first English statute permitting a composition which
would act as a discharge of all debts, those of dissenting as well
as assenting creditors, was that of 12 & 13 Vict. ch. 106, passed
in 1849. That act required, however, that the compounding bank-
rupt must make a cessio bonorum — that is, must turn over all his
property to his creditors, in order to make the composition valid
in case there were dissenting creditors. The act of 186 1, 24 &
25 Vict. 134, permitted a composition without a cessio bonorum.
Our act of June 22, 1874, was modeled on the 126th section of the
English Bankruptcy Act of 1869 (32 & 33 Vict. ch. 71), which
authorized such a composition without the institution of a bank-
BANKRUPTS. 139
§ 12.] Constitutionality of the Section.
ruptcy proceeding, but which in all other respects was substan-
tially adopted in the U. S. act. The section of the present act
differs in many details, especially in regard to procedure, from
the act of 1874. In particular the present act permits a composi-
tion only after adjudication of bankruptcy, while the act of 1867
permitted it after petition and before or after adjudication.
(Compare in re Reiman, Fed. Cas. 11,673; n N. B. R. 21 ; s. c.
7 Ben. 455; s. c. on appeal, 12 Blatch. 562; Fed. Cas. 11,675; 13
N. B. R. 128.) The sections of the English act as to composi-
tion and those of the U. S. act of 1874 appear in parallel columns
in the opinion in re Scott, Collins & Co. (Fed. Cas. 12,519; 15
N. B. R. 73).
Constitutionality of the Section. — The analogous section of the
former act (section 5103 A, R. S.) was assailed as unconstitu-
tional on the ground that the power given to Congress to establish
a uniform system of bankruptcy was a power to enact laws of
bankruptcy as the word " bankruptcy " was understood at the
time of the adoption of the Constitution. It was urged that a
bankruptcy law necessarily required that all the property of the
bankrupt should be turned over for distribution in some uniform
manner among his creditors, and that an act which discharged a
person from his debts without the consent of his creditors, when
the debtor was not required to make a cessio bonorum, was not a
" bankruptcy " law, and that Congress had no power to enact such
a law. But the constitutionality of the law was upheld by the
District Court for the Southern District of N. Y. which held that
the power of Congress to legislate on the subject of bankruptcy
was not limited to passing only such laws of bankruptcy as had
been passed by the British Parliament at the time we adopted
our Constitution, and that a law authorizing one's release from
all his debts if a composition agreement is made with a majority
of his creditors, is valid if by the provisions of the composition
and of the proceedings under which it is conducted the property
of the debtor is substantially appropriated to his creditors, and if
each creditor obtains substantially as great a pro rata share of
140 THE NATIONAL BANKRUPTCY LAW.
Constitutionality of the Section — Construction. [Ch. III.
such property as it can pay or can reasonably be expected to pay.
If there is such a cessio bonorum as the practical result of the
composition, although there is no intervention of an assignee or
trustee, and even though such cessio bonorum is the result only
of a provision requiring that the composition is not binding until
ratified, and that it shall not be ratified by the court unless it
appears for the interest of all the creditors, then the law is con-
stitutional, because unless the composition does substantially ap-
propriate all the debtor's property to the payments of his debts,
the court will be obliged to refuse to confirm it.
The fact that the determination of the question whether the
bankrupt shall be released from his debts is left to the majority of
his creditors does not make the law unconstitutional. Congress
has plenary power to legislate on the subject of bankruptcy. The
" subject of bankruptcy " is not, properly, anything less than the
subject of the relations between an insolvent or non-paying debtor
and his creditors. "It is a well-established principle that in making
laws necessary and proper to carry into execution the powers
vested by the Constitution, Congress possesses the choice of
means, and may use any means which are in fact conducive to the
exercise of a power granted by the Constitution." (United States
v. Fisher, 2 Cranch 358, 396; McCulloch v. Maryland, 4 Wheat.
316, 321; the Legal Tender Cases, 12 Wallace, 457, 539.) The
subject of bankruptcy includes the distribution of the property
of the insolvent debtor among his creditors, and the discharge
of the debtor from his contracts and legal liabilities, as well as
the intermediate and incidental matters tending to the accom-
plishment or promotion of these two principal ends. Congress
has full power over this subject, with the one qualification that
its laws must be uniform throughout the United States.
Construction.— This section which compels the dissenting cred-
itors in composition to be bound by the action of the majority in
number and amount and to accept the discharge of their claims
which the majority of the creditors see fit to accept, being in
derogation of common law rights, should be strictly construed.
BANKRUPTS. 141
§ 12.] Compositions — How Consent of Creditors is to be Obtained.
( See valuable discussion on this subject In re Rider, 3 Am. B. R.
178; 96 Fed. 808, which is one of the few cases decided under
the Act of 1898.)
What Bankrupts May Make Compositions With Creditors. — The
act restricts the right to no particular class. Corporations and
partnerships as well as individuals may make such arrangements
with creditors. A corporation under this law may apply for and
secure a discharge, a right not accorded under the act of 1867.
(In re Weber Furniture Co. Fed. Cas. 17,330; 13 N. B. R. 529;
s. c. on appeal, Fed. Cas. 17,331 ; 13 N. B. R. 559.) In the case
of partnerships or other joint debtors the composition and ap-
plication for its cpnfirmation may be made by any one of the
several joint debtors; it is not necessary that it be made by the
entire firm. (Pool v. McDonald, Fed. Cas. 11,268; 15 N. B. R.
560.)
When May a Composition he Made. Section 12a. — Under the
present act a composition can be made only after the filing of the
schedules, and after examination of the bankrupt, and after the
claims of at least some of his creditors have been allowed ; hence,
not till after adjudication of bankruptcy, in this respect differing
from the former act.
How Consent of Creditors is to be Obtained. Section 12b. — The
present act provides no special manner in which the consent of the
creditors is to be obtained. As the purposes for which a meeting
was called under the provisions of the act of 1874, viz. the ex-
amination of the bankrupt and the filing of a schedule of assets,
must, under the terms of the present act, be accomplished before
even the offer to make a composition is made, there would be no
advantage in a meeting, unless for the purpose of conference.
Under the Act of 1874, which required first a meeting of creditors
and thereafter a confirmation of the action of the meeting, evi-
denced by the signatures of a certain number of creditors, it
was held that such confirmation need not be obtained at a meet-
ing, but the debtor might procure it within any reasonable time
142 THE NATIONAL BANKRUPTCY LAW.
What Consent Must be Obtained. [Ch. III.
thereafter. (In re Spillman, Fed. Cas. 13,242; 13 N. B. R. 214;
in re Scott, Collins & Co. Fed. Cas. 12,519; 15 N. B. R. 73.)
The consent, it would seem, might now be obtained by personally
and privately circulating the paper among creditors. The rights
of those who are not called upon or who choose to dissent will be
fully protected at the hearing which must be appointed by the
judge, to hear objections to the confirmation of the com-
position.
No construction will be adopted, however, which would permit
the bankrupt to select a time when but few creditors have proved
and then to present his terms only to creditors friendly to his
interests, keeping others in the dark. (See In re Rider, supra.)
And the Supreme Court in adopting Form No. 60 covering a peti-
tion for meeting to consider composition, has evidently intended
to provide for a proceeding analogous to that under the Act of
1874.
What Consent Must be Obtained. Section 12b. — The debtor's
offer of composition must be accepted by a majority both in num-
ber and in amount of all creditors whose claims have been allowed.
There are no restrictions whatever upon any class of creditors;
however large or small their claims, they will be entitled to vote
and to be counted both in considering the number of creditors and
the amount of allowed claims. In this respect the present act
differs from the former one. But only creditors whose claims
are allowed can join in the composition, and the majority must
be of all which have been allowed, not of those assembled at any
particular meeting as under the former act.
But it is very clear that the offer should be made to all his
creditors whether they have proved all their debts or not. It is
not essential that proofs shall be made before or at the first meet-
ing. They may be made at any time within a year after adjudi-
cation. It is not necessary that they should be filed in the first in-
stance with the referee. (Section 57c. n; In re Rider, supra.)
And by section 58 creditors should receive at least. ten days' notice
of all examinations and meetings of creditors. Creditors may
BANKRUPTS. 143
§ 12.] Proceedings Preliminary to Application and Confirmation.
act through their duly appointed attorneys in fact; see section
1 (9) ; section 56a; G. O. 21, subdiv. 5.
Proceedings Preliminary to Application and Confirmation. — After
requiring that the consent of the majority in number and amount
of the creditors shall have been obtained in writing, the Act re-
quires that the consideration to be paid by the bankrupt to his
creditors as well as the money necessary to pay all costs and all
debts having priority, shall first be deposited. The use of the
word " money " with reference to the deposit for claims having
priority and for costs may imply that something other than money
can be deposited as the consideration for compounding creditors.
The use of the word " paid " and the use of the word " deposit "
would seem, however, to exclude the idea of a consideration being
anything else than money or negotiable instruments — orders for
the payment of money. The Act further requires that the con-
sideration shall be distributed by the judge, and that as soon as
distributed the case is to be dismissed. As the composition can-
not be made before adjudication, and examination, and the filing
of the schedules and the allowance of some claims, it will in
practice, at least, rarely be made before the appointment of a
trustee, by which time all the property of the bankrupt will have
become vested in the trustee. As this title remains in the trustee
until after the composition is confirmed, and as a composition
cannot be confirmed until the property has been deposited for dis-
tribution, it would seem that the " consideration " to be paid to
compounding creditors could not be the property of the bankrupt
in specie. This inference is further required by the provision that
the consideration shall be distributed. The Act permits the com-
position to be effected before the trustee has converted the bank-
rupt's property into cash; indeed, the very purpose of a com-
position is to save the expense of the administration of the estate
in bankruptcy, to prevent a sacrifice sale, and to save that margin
which can usually be saved by the management of a business by
one familiar with it instead of by one a stranger to it, even
though the latter may possess, in general, greater capacity. If,
T44 THE NATIONAL BANKRUPTCY LAW.
Amount of the Consideration. [Ch. Ill,
then, the debtor's property is not to be the consideration to be
distributed among his creditors, the consideration must be either
after acquired property, which in the ordinary case will be a
mere pittance; exempt property, which will rarely be of greater
value, or money borrowed by the bankrupt from some friend ; or
else the bankrupt's own notes. Under the Act of 1874, which re-
quired a payment in money, it was held that the money might be
paid in installments, and that notes might be accepted as promises
to pay in money, but not as an absolute payment (in re Hurst,
Fed. Cas. 6,925; 13 N. B. R. 455) ; but under that act the pro-
ceeding was not dismissed as soon as the composition was con-
firmed. The court retained jurisdiction to enforce the provisions
of the composition. The present act makes the confirmation of
the composition operate as a dismissal of the proceeding; it is at
an end, although the court may, under certain circumstances, set
aside the composition and reinstate the case just as courts in
general may open judgments. It cannot, however, enforce prom-
ises to pay. But that promises to pay may constitute the con-
sideration is implied by the provision in 14 (c) to the effect that
the confirmation of the composition shall discharge the bankrupt
from his debts other than those agreed to be paid by the terms of
a composition and those not affected by a discharge. As to the
effect of non-payment of such notes, see below, paragraph on
Effect of a Composition.
Amount of the Consideration.— Whatever is the nature of the
consideration, it must, in value, be substantially as much as the
property of the bankrupt can reasonably be expected to yield
to the creditors ; else the court will be in duty bound to refuse to
confirm the composition on the ground that it is not for the interest
of creditors. If the consideration offered does equal the amount
which the bankrupt's property will probably yield when admin-
istered by the trustee in bankruptcy, then, in the absence of fraud,
the judge should not refuse to confirm the composition simply
because the bankrupt might have offered more. " As it is estab-
lished by all experience that a man can make more out of his
BANKRUPTS. 145
§ is.] Deposit of Money to Pay Debts Having Priority.
own assets than assignees of more general capacity than he, and
entirely honest can realize, there is an undoubted margin in many
cases which the debtor may save by offering less than he might
offer, but more than his creditors could obtain by process of
law." (In re Morris, Fed. Cas. 17,513; n N. B. R. 443; in re
Whipple, Fed. Cas. 17,330; 11 N. B. R. 524. As to the amount
of margin, see In re Weber Furniture Co. Fed. Cas. 17,331 ; 13
N. B. R. 529; s. c. on appeal, Fed. Cas. 17,331.; 13 N, B. R.
559-)
Deposit of Money to Pay Debts Having Priority. — The present
act provides that before the application for the confirmation of the
composition shall be filed in a court, the money necessary to pay all
debts which have priority and the cost of the proceedings shall
have been deposited pursuant to the order of the judge. What
sum must be deposited before a composition can be made, if the
assets of the estate are insufficient to pay in full the creditors
having priority? Is one prevented from making a composition
in such cases unless he procures from some source, by borrowing
or otherwise, enough money to pay in full these claims having
priority and these costs? The former- act provided that "the
composition should, subject to the priorities declared in said Act,
provide for a pro rata payment, etc." In re Chamberlain, de-
cided in the southern district of N. Y. in 1876, and reported in
Fed. Cas. 2,580; 17 N. B. R. 49, it was held by Judge Blatch-
ford, that all that was meant by this provision of the Revised
Statutes, and all that was preserved by the composition law,
was a priority of payment out of the assets of the debtor.
Further than that there was no priority, and when there
were no assets and the composition money was to be ad-
vanced by other parties and from other sources than the property
of the bankrupt, the preferred debt under the statute had no
•higher claim than that of general creditors. In this case the
State of New York, as a creditor, contended that the composition
could not be confirmed without first paying it in full, whether the
assets were sufficient or not for that purpose. The differences
(19)
146 THE NATIONAL BANKRUPTCY LAW.
" Parties in Interest"— Proceedings on Application. [Ch. III.
between the two statutes render it doubtful if the case cited is
any longer applicable. Compare, however, section 6$e.
" Parties in Interest." — This is a broader term than " credit-
ors " but probably in this section does not mean any more than
the creditors who have proved their claims. After the terms
have been made known to all the creditors they should have a
reasonable time to decide whether they will accept the offer or not
but in order to qualify themselves to vote upon the proposition
they are required to prove their claims. (In re Rider, supra.)
The creditors who are secured do not come under the section be-
cause the bankruptcy court has nothing to do with them except
so far as their claims may exceed their security, or they may elect
to surrender their security.
Proceedings on Application. Section I2d, e. — The proceedings
on the application for the confirmation of the composition are quite
similar to proceedings for discharge (q. v.). The bankrupt makes
a petition (Form No. 60,) in which, having stated that a compo-
sition of a given percentage of all secured debts not entitled to
priority and in satisfaction of such debts has been proposed by
him to creditors and that he verily believes that the composition
will be accepted by a majority, in number and amount, of the
creditors, he prays that a meeting of the creditors may be called
to consider the composition. An order is then entered calling
a meeting and notice is sent to all creditors in accordance with
section 58, and also published under said section as the court may
direct. This meeting, as has been pointed out above, does not
seem to be imperatively demanded by the statute but is customary
and the better practice as prescribed by the forms. The terms
are either agreed to or discarded by the requisite vote. If they
are accepted the bankrupt makes a further application (Form
No. 61) reciting the acceptance in writing by a majority, in num-
ber and amount, of the creditors, the deposit of the money re-
quired by the statute in a depository designated by the judge for
such purpose, and prays confirmation. This application or peti-
BANKRUPTS. 147
§ 12.] Proceedings on Application.
tion is filed with the clerk. An order to show cause why the com-
position should not be confirmed is then entered by the clerk which
states the time and place of the hearing and directs that a desig-
nated referee give notice to all creditors or other persons in in-
terest, as provided in section 58. The notice must be mailed and
published at least once within ten days prior to said hearing, and
proof of mailing and publication must be presented on the return
day of the order. The application for the confirmation of the
composition must be made to the judge, section 38 (4), but the
issues arising thereon may be referred to a referee to ascertain
and report the facts, which is ordinarily done (G. O. 12). By
G. O. 32 a creditor opposing the application for the confirmation
of the composition must enter his appearance on the day when the
creditors are required to show cause and must file a specification
in writing of the grounds of his opposition within ten days after
unless the time is enlarged. This specification must be of the
same character and nature as the specification in opposition to dis-
charge (q. v. post). After the hearing has been had and the re-
port of the referee made the court then confirms or rejects the
composition. Form of order confirming the composition will
be found in Form No. 62. Subsequent to its confirmation an
order decreeing distribution is made. (Form No. 63.)
Where no evidence aliunde the offer and the acceptance of the
offer is presented, the composition, as a nearly universal rule,
should be confirmed. The only exception is where it manifestly
appears there was some fraud, accident or mistake — such a con-
tingency as would incline the court, in any other case of ordinary
practice ex mero motu, to refuse to proceed, and upon notice to
all parties concerned require the exceptional and suspicious cir-
cumstances to be explained. Unless such fraud appears it is the
duty of the objecting creditors to show by evidence sufficient
grounds why the court should refuse to confirm. The presump-
tion exists that the action of the majority is for the interests of all
the creditors until it is attacked by those who are interested in
showing it to be erroneous. ( So held in re Weber Furniture Co.
Fed. Cas. 17,331 ; 13 N. B. R. 559.)
148 THE NATIONAL BANKRUPTCY LAW.
Specific Grounds for Refusing to Confirm. [Ch. III.
Specific Grounds for Refusing to Confirm. — ( i ) Not for the In-
terest of Creditors. The composition should not be confirmed
if the amount offered does not equal that which is likely to be
yielded to creditors if the proceeding in bankruptcy is carried
through and the property administered in it, taking into consid-
eration the fact that at a forced sale it will probably bring less
than at a private sale, and also taking into consideration the delay
which will ensue.
The statute clearly imposes upon the judge the duty of ex-
amining the offer and acceptance, and ascertaining whether the
composition will be beneficial to the parties. As was said by Judge
Lowell (In re Morris, nN.B. R. 443) : " A burden is cast upon
the court that is not easily sustained of instructing parties con-
cerning their own interests. In the absence of fraud and con-
cealment the question for the court seems to be, not whether the
debtor might have offered more, but whether his estate would pay
more in bankruptcy. The English statute makes the determina-
tion of the creditors final on that point in the absence of fraud,
and I dare say it will be found that the practical application of
our law must be very similar." This judge intimated that a gross
difference between the probable value of the assets and the con-
sideration offered in composition would require the court of its
own motion to refuse to confirm the composition. (In re Whip-
ple, Fed. Cas. 17,513; 11 N. B. R. 524; compare in re Reiman
& Friedlander, 1 r N. B. R. 21, at page 40; s. c. 7 Ben. 455 ; Fed.
Cas. 11,673.) In re Weber Furniture Co. (Fed. Cas. 17,330;
13 N. B. R. 529), which arose in the bankruptcy court for the
eastern district of Michigan, it was held that a composition which
is palpably opposed to the best interests of the creditors as a body
will not be confirmed. The court cited Latham v. Lafone, L. R.
2 Exch. 115, and other English cases, laying down the rule that
where the composition offered was so unreasonable as to be evi-
dence that the creditors who signed it were induced, by reason of
their friendliness towards the debtor, to accept a composition
greatly disproportionate to the assets, the court was bound to
reject it. In the case of The Weber Furniture Co. supra, it was
BANKRUPTS. i49
§ 12.] Specific Grounds for Refusing to Confirm,
held, in the decision given in the district court, that while it is
sufficient prima facie evidence that the composition was for the
best interests of all, to show that the requisite majority of credit-
ors have accepted, and that the burden of proof is then thrown
upon the dissenting creditors, still where the record (the sched-
ules) shows upon its face that an estate is able to pay a much
larger dividend, the dissenting creditors may rely upon this state-
ment and are not bound to prove the facts by affidavit ; while they
are not bound by the debtor's statements, yet if they desire they
may accept them as true. But in the decision of the Circuit Court,
to which this case was appealed, it was held that the mere fact
that there is a discrepancy between the estimated value of the
assets as appearing in the schedules and the terms of composi-
tion offered, even if that discrepancy is so great as to make the
composition appear unreasonable, does not justify the court in
refusing absolutely to confirm. It would be in the last degree in-
convenient if whenever an apparent discrepancy existed between
the stated value of the assets and the terms of the composition,
the court was required to examine into the matter and inquire as
to the reasonableness of the offer, and act as the guardian of the
interests of creditors, who, as a rule, must be capable of taking
care of themselves.
2. Performance of Acts or Failure to Perform Duties
Which would Bar a Discharge. The provision that a com-
position by a bankrupt, who has done acts or failed to perform
duties which would be a bar to a discharge, shall not be con-
firmed, is new. As to what will be a bar to a discharge, see sec-
tion 14 (b). There does not seem to be anything to prevent one
making a composition merely because the statutory time within
which he must apply for a discharge has expired, provided he has
done nothing which would prevent his getting a discharge if ap-
plied for, and has not failed to perform any of the duties, failure
to perform which would be a bar to securing a discharge. The
evident intent of the act is to prevent one from making a compo-
sition with creditors, and thereby gaining a discharge by virtue
of the action of a majority of his creditors, if he has done any-
150 THE NATIONAL BANKRUPTCY LAW.
Specific Grounds for Refusing to Confirm. [Ch. III.
thing which would prevent his getting it in court. The statute
fixes no time within which a composition must be made, other
than the provision that it cannot be till after examination, etc.
The refusal to confirm a composition must be because of acts done
or failure to perform duties, which would be a bar to a discharge,
not because a discharge cannot be applied for.
3. Good Faith — No Improper Influences. — Fraud is made
a sufficient cause for the revocation of a composition which has
been confirmed ; a fortiori, is it a cause for refusing to confirm a
composition. The knowledge of the debtor that the composition
is procured by fraud is not always, necessary, in order to induce the
court to refuse to confirm. Compositions are agreements not
only between the debtor and the creditors, but between the several
creditors, each with the others. Fraud on the part of any one of
them or improper means, acts, or promises by any of them, or
want of good faith by any of them, vitiates the composition, at
least so far as injured creditors are concerned. (In re Sawyer,
Fed. Cas. 12,395 ; 14 N. B. R. 241 ; s. c. 4 Cent. L. J. 470; in re
Whitney, Fed. Cas. 17,580; 14 N. B. R. 1.) The courts require
very slight evidence to induce them to impute to the debtor a
fraud perpetrated by another when the fraud works to the in-
terest of the debtor. (In re Sawyer, supra; in re Whitney,
supra; Robson v. Calze, Doug. 228; Holland v. Palmer, 1 Bos.
& P. 95 ; Ex p. Butt, 10 Ves. 359; Ex p. Hall, 17 Ves. 62.) In
such cases, if it is shown that the bankrupt is absolutely innocent,
the courts will sometimes permit him to make a new offer of
composition and file a new acceptance. (Ex p. Harrison, 2 Buck.
247 n. ) Independently of any statute and without .regard to who
makes the payment, the giving of money to one creditor to induce
him to sign the composition vitiates it. (Jackson v. Lomas, 4
Term R. 166; Leicester v. Rose, 4 East 372; Dauglish v. Ten-
nent, L. R. 2 Q. B. 49 ; Phillips v. Dicas, 15 East 248.) Whether
or not our present Bankruptcy Act, in subdivision 3 of paragraph
d of this section, changes these general principles of law as to
composition, and authorizes the- court to refuse to confirm them
only when the bad faith or the improper conduct is directly im-
BANKRUPTS. j5i
1 12.] Specific Grounds for Refusing to Confirm.
putable to the bankrupt may be a question. (Compare in re
Whitney, Fed. Cas. 17,580; 14 N. B. R. 1.) But it seems doubt-
ful if the act intends in any way to alter the fact that a composi-
tion is an agreement between the several creditors themselves as.
well as between the creditors and the debtor, or whether there is
anything in it intended to disturb the fundamental principle that
fraud by any party to a contract makes it voidable by any of the
defrauded parties. The good faith required of the debtor is of
the highest order. Misrepresentations as to the amount of his
debts or the value of his assets, or as to the willingness of other
creditors to enter into the composition, or as to any matter which
would influence their action, vitiate the composition and render it
liable to be rejected by the court. (See Almon v. Hamilton, 100
N. Y. 527; Irving v. Humphrey, Hopk. Ch. [N. Y.] 284;
Graham v. Meyer, 99 N. Y. 611 ; Whiteside v. Hyman, 10 Hun,
218; Coolong v. Noyes, 6 T. R. 263; Seving v. Gale, 28 Ind.
486. ) Any secret advantage given to one creditor to induce him
to assent to the composition vitiates it and a court is justified in
presuming if such action was for the benefit of the bankrupt that
it was done by him or through his agency. (In re Sawyer, Fed.
Cas. 12,395 ; 14 N. B. R. 241 ; s. c. 4 Cent. L. J. 470; in re Whit-
ney, Fed. Cas. 17,580; 14 N. B. R. 1 ; Bean v. Amsinck, Fed. Cas.
1,167; 8 N. B. R. 228> Knignt v- Hunt, 5 Bing. 432; Anshall v.
Denby, 6 Hurl & N. 788; Bean v. Brookmire, Fed. Cas. 1,170;
7 N. B. R. 568. ) Improperly inducing one^ to withdraw oppo-
sition is equally as fraudulent as to induce one to assent. (In re
Sawyer, supra; citing Browne v. Carr, 7 Bing. 508, 516; Hall v.
Dyson, 17 Q. B. 785; Dexter v. Snow, 66 Mass. 594.) Pur-
chasing claims for the purpose of using them in favor of a compo-
sition may or may not be fraudulent according to the circum-
stances of the case, there being a strong tendency to regard it as
fraudulent, or at least to require very little evidence to establish
the fact. Unless there is clear proof that the motive was proper,
there will always exist a presumption that it was done in behalf
of the debtor and for improper purposes. (In re Whitney, supra;
[53 THE NATIONAL BANKRUPTCY LAW.
Specific Grounds for Refusing to Confirm. [Ch. III.
'w re Sawyer, supra.) A mere omission of assets or the names
)f creditors from the schedules or the insertion of debts which
n reality do not exist is no ground for refusing to confirm a
composition, if the errors are not in amount so great as to re-
quire an alteration in the terms of the composition and provided
:hat there was no fraudulent intention, especially if the creditors
mew of the error at the time of the composition. (In re Reiman
k Friedlander, Fed. Cas. 11,673; u N. B. R. 21; s. c. 7 Ben.
(.55; s. c. affirmed, 12 Blatch. 562; s. c. Fed. Cas. 11, 675; 13 N.
3. R. 128; in re Scott, Collins & Co. 15 N. B. R. 73.) But it has
)een held that where an insolvent has been legally released from
lis obligations by a composition with his creditors, the debt of
)ne of such creditors, who accepted the composition on the ex-
cess condition that none of the other creditors should receive
1 larger sum, is not revived by the payment by the insolvent after
;uch release of additional sums to other creditors, there being
10 previous agreement to make the additional payments. (In re
sturgis, Fed. Cas. 13,565; 16 N. B. R. 304.) For one creditor
o secure fifty per cent, in cash at once, instead of seventy per
:ent. on time, is a fraud which will void the composition. (Bean
1. Amsinck, 10 Blatch. 361 ; s. c. below, Fed. Cas. 1,167; 8 N. B.
I. 228.) Such fraudulent agreements not only vitiate the com-
)osition, but the agreements themselves are unenforceable. On
grounds of public policy the courts will give no aid to the suitor.
[Bean v. Amsinck, supra, citing 1 Story's Eq. Juris, sections 378
ind 379; Clark v. White, 12 Peters, 178 and 199; Russell v.
Rogers, 10 Wendell, 473 and 479; Wiggin v. Bush, 12 Johns.
506 and 309; Bean v. Brookmier, Fed. Cas. 1,170; 4 N. B. R.
[96; s. c. 1 Dill. 151; Dauglish v. Tennent, Law Rep. 2 Q. B.
[8 and 54 ; Breck v. Cole, 4 Sandf . 79 ; Carroll v. Shields, 4 E. D.
Smith, 466; Pinneo v. Higgins, 12 Abb. Pr. 334.) And the con-
sideration of the fraudulent agreement may be recovered even by
he debtor who paid it (Bean v. Amsinck, supra, citing Smith v.
Bromley, Doug. R. 696; Jackman v. Mitchell, 13 Ves. 581;
Wood v. Barker, Law Rep. 1 Eq. Cases, 139), or by the trustee
n bankruptcy. (Bean v. Amsinck, supra, citing Bean v. Brook-
BANKRUPTS. 153
§ 12.] Good Faith by the Creditors.
mier, 4 N. B. R. 196; s. c. 1 Dill. 151; Fed. Cas. 1,170; also
Knowlton v. Moseby, 105 Mass. 136.) Such is the common-law
rule, and such were the adjudications under the Act of 1874.
Whether that rule is altered by section 13, which provides the
cases in which compositions may be set aside, and which prevents
them being collaterally attacked; and whether it is in any way
affected by section 21 (f), which provides that 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
the fact that the order was made, quaere. It would seem that
under section 13 the composition could be attacked, even for
fraud, only in the bankruptcy court and only in the time and
manner specified therein. Compare notes to section 15.
Good Faith by the Creditors. — Good faith on the part of those
who accept the composition implies that their motive shall be to
do that which is for the best interests of the creditors. If they
are actuated by motives inconsistent with this, for instance, if
they, through friendship for or sympathy with the bankrupt, and
to enable him to procure a discharge, consent to take less than
the creditors would probably receive if the estate is administered
in bankruptcy, or to take that which would not be for the in-
terests of all the creditors, bearing in mind the expense and the
delay of administration in the regular way, then they are guilty
of bad faith to the dissenting creditors, and the court is bound
to refuse to confirm the composition. The chief duty of the cred-
itors in this respect is towards each other, not towards the debtor.
In the leading case {Ex p. Williams L. R. 10 Eq. 55), it was said :
" Benevolence, generosity and forbearance may well be exercised,
but not at the expense of other people ; " and in that case it was
decided that as the composition provided for the acceptance of
a shilling to the pound when the assets were worth seven shillings
to the pound, either the debtor must have fraudulently concealed
the true state of his affairs, or else the assenting creditors know-
ing the value of the assets, must have been guilty of bad faith to-
(20)
154 THE NATIONAL BANKRUPTCY LAW.
Dismissal of the Case — Effect of Composition. [Ch. III.
wards the other creditors. (Compare Ex p. Russell, 10 Chan.
App. 255 ; Ex p. Cowen, L. R. 2 Ch. 563 ; Hart v. Smith, 4 Q.
B. 61 ; Ex p. Cobb, L. R. 8 Ch. App. 727.)
Dismissal of the Case. Section 12c — The composition being con-
firmed and the consideration distributed, the case is to be dis-
missed. All proceedings are then at an end, unless the compo-
sition thereafter is set aside under the provisions of section 13.
The trustee's office expires; the title of the bankrupt's property
revests in the bankrupt. (Section 70 [f].)
Effect of Composition. — The confirmation of the composition re-
leases the bankrupt from all his debts other than those agreed to
be paid by the composition and those not released by a discharge.
(Section 14 [c].) No other discharge is needed than the order
confirming the composition. (In re Bechet, 12 N. B. R. 201 ;
3. c. 2 Woods, 173.) As to what debts are not released by a dis-
:harge, see section 17. Although creditors' names do not appear
in the schedules, and are not included in the composition, their
claims are barred if they had notice or actual knowledge of the
proceedings in bankruptcy. But if fraudulently omitted, the
composition may be set aside under section 13. Under the Act
oi 1874 creditors omitted from the composition were not affected
by it. Partners, sureties and guarantors are not released because
fteir joint debtor or principal has made a composition which has
Deen confirmed. (Section 16, post; Mason & Hamlin Organ Co.
v. Bancroft, 1 Abb. N. C. 415; s. c. 4 Cent. L. J. 295; Ex p.
Jacobs, 44 L. J. B. 34.) The general rule of law that a creditor
who by a composition releases the principal debtor also releases
:he surety, unless he expressly reserves his rights against the
latter, is thus modified in bankruptcy. If the principal is dis-
:harged by operation of law by becoming bankrupt, the liability
3f the surety is not affected. A discharge of a debtor under a
imposition is a discharge by operation of law. (Ex p. Jacobs,
J4 L. J. B. 34.) Debts are not unaffected by the composition
simply because the amount of the debt is incorrectly stated in the
schedule; the error must have been substantial or intentional.
BANKRUPTS. 155
§ 12.] Pleading the Composition — Conclusiveness of Decree of Confirmation.
(Beebe v. Pyle, 1 Abb. N. C. 412; in re Trafton, Fed. Cas.
14,133; 14 N. B. R. 507.) The composition is not effective to
discharge the debtor from the debts agreed to be paid, unless the
amount is actually paid. In all cases, deeds of composition or
accord and satisfaction must be completely executed to be opera-
tive. The delivery of notes pursuant to a composition does not
of itself cancel the debt. The effect and meaning that must be
given to the language in section 14 (c) that " a composition shall
discharge the bankrupt from his debts, other than those agreed
to be paid by the terms of the composition " is that those which
are agreed to be paid, if not paid according to the terms of the
composition are payable in their original amount. (In re Hurst,
Fed. Cas. 6,925 ; 13 N. B. R. 455 at 465 ; in re Reiman & Fried-
lander, Fed. Cas. 11,673; u N. B. R. 21 ; s. c. 7 Ben. 455; s. c.
affirmed, Fed. Cas. 11,675; 13 N. B. R. 128; s. c. 12 Blatch.
562; Edwards v. Coombe, 7 L. R. Com. Pleas. Div. 519; in re
Hatton, L. R. 7 Ch. App. 723 ; Newall v. Van Praagh, 9 L. R.
Com. Pleas Div. 96; Goldney v. Lording, L. R. 8 Q. B. 182.)
Pleading the Composition. — The composition, like a discharge,
is a defense that may be waived. If not pleaded, when one is
sued upon a debt after it is confirmed, it is deemed to be waived.
The court will not thereafter relieve the party from the result
of his laches. (In re Tooker, Fed. Cas. 14,096; 14 N. B. R. 35;
compare McDonald v. Davis, 105 N. Y. 508; Dimock v. Revere
Copper Co. 117 U. S. 559; Revere Copper Co. v. Dimock, 90
N. Y. 33.)
Conclusiveness of Decree of Confirmation. — The confirmation can-
not be impeached collaterally, if the decree was made by a court
having jurisdiction of the subject-matter and of the persons.
Where jurisdiction is shown to have attached all the subsequent
proceedings are presumed to be regular, as much as those of a
court of general jurisdiction, and its decision as to whether or not
the sufficient number of signatures have been obtained, and upon
every other question that properly arises in the proceeding is
valid and binding in all courts till reversed by an appellate court.
156 THE NATIONAL BANKRUPTCY LAW.
Finality of Refusal to Confirm. [Ch. III.
Every presumption is in favor of the regularity of the proceed-
ings. Such questions conclusively settled by the order of con-
firmation are that the proper number of consents have been ob-
tained, that proper and sufficient notice has been given, that the
consideration deposited is valid, that the papers are properly
executed and that every act required by the statute has been duly
and properly done. (Smith v. Engle, 14 N. B. R. 481.)
Finality of Refusal to Confirm. — The District Court has held
in Tennessee {In re Adler, 103 Fed. 444; 4 Am. B. R. 583)
that whether it be to the interest of creditors to confirm a com-
position is purely a question of fact and consequently there is no
appeal nor right to supervision of the decision of the District
Court refusing to confirm such composition. The following
quotation from the opinion of Hammond, J., gives the general
reasoning of the decision.
" The proceeding by composition proceeds solely on the theory of promot-
ing the interest of the creditors, and not that of the bankrupt. It is a contro-
versy really between creditors, and not with him, and that is the controversy
the bankrupt seeks to carry into the court of appeals. And, unless he has
some ulterior motive, like that of protecting the alleged fraudulent vendees
under the disguise of this appeal, for example, he has no concern in the
■question. His discharge is not involved; for, if the composition be not ap-
proved by the court, he may be discharged, nevertheless, in the regular way,
and just as certainly released of his debts. It is true that, if the composition
be confirmed, he has, by operation of the agreement in writing required to
accomplish it, a release from his debts, and he does not need a discharge
in the regular way ; nor can he get it, for the bankruptcy proceedings are to be
dismissed. Act 1898, section 12a. But this is only an incidental, or at most
a secondary, result, and the composition is not projected for that purpose
or in that interest. So, again, it may be for the best interest of the bankrupt
and those who hold disputed titles from him that the bankruptcy proceed-
ings should be dismissed and the composition approved; but, again, this is
only incidental, and not at all an object to be promoted by or with which the
bankruptcy statute is concerned. Neither he nor they have a right to demand
this benefit to them, nor the benefit of a release by this method to him; the
theory of the statute being that this is all a matter solely pertaining to the
creditors and their interest. And yet by this proposed appeal he and they are
demanding the incidental benefits not within the care of the statute, — all in
his name, and upon the strained construction that by the nonapproval of his
offer his discharge is denied. This cannot be the purpose of the appeal pro-
BANKRUPTS. 157
§ 13.] Compositions, When Set Aside — Fraud the Sole Ground.
vided for by section 25a, cl. 3. He might as well claim that the refusal of
his creditors to approve his offer of a composition is a denial of his discharge.
It so operates just as much as the disapproval of the court. It requires the
combined action of court and creditors in the process. As well might any
other disputed question of fact be carried to the court of appeals, among the
vast interests involved in the proceedings in bankruptcy. All he has a right
to demand is his discharge in the regular way, and, if that be denied him, he
may appeal under this section ; but he cannot have two appeals under it, — one
on the disaproval of the composition, and the other on the denial of his certi-
ficate of discharge. If the appeal on this controversy is permissible, it should
be taken by the parties to the controversy, namely, the assenting creditors as
against the opposing creditors, who are to determine whether there ought to
be a composition or proceedings in the ordinary way. The court has deter-
mined that it is better for the creditors that they shall proceed in the regular
way. If there be an appeal, it is theirs, but the statute has not given the bank-
rupt an appeal from that decision, neither by direction nor indirection. The
bankrupt has not lost anything which he has a right to claim, and has no
grievance to be redressed by appeal. Having gone into voluntary bankruptcy,
he has only the right to proceed in the regular way. He may offer to proceed
in another way, but he has not at all been given by the statute any right to
demand that the case shall be dismissed and a composition substituted, be-
cause, forsooth, if a composition be adopted he would be released of his debts.
That important right has not been indicated by apt language, but is claimed
as an inference only upon a right to offer. If it be not adopted, he may still
be released. Therefore his discharge has not b°en affected by the failure of
his offer of composition. Not having a right to demand a composition, he
has not the right to an appeal if it fail. In other words, it is optional, wholly,
with the creditors and the court whether he shall be discharged by a compo-
sition. He has only a bare right to offer. This seems to me the plain mean-
ing of the statute."
Sec. 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 composi-
tion, and that the knowledge thereof has come to the petitioners
since the confirmation of such composition.
Analogous Provisions of Former Acts.—
R. S., section 5103 A.
Fraud the Sole Ground. — The sole ground upon which, under
the present statute, a composition may be set aside, is fraud in
5 THE NATIONAL BANKRUPTCY LAW.
'roceedings After Re-instatement — Discharges, When Granted. [Ch. III.
^curing it, unknown to the petitioner at the time of the con-
nation. See notes to section 12 as to what constitutes fraud
such cases and also what acts, means and promises are for-
den. The Act of 1874 authorized the court to set aside a
nposition if it was shown that the' agreement could not be
ried out without injustice or delay to the creditors, but now,
ud is the only ground for revoking. Section 2 (9), which in
leral terms gives courts of bankruptcy jurisdiction to set aside
npositions is limited by the terms of section 13 (In re Rud-
:k, 2 Am. B. R. 114; 93 Fed. 787.) Where there has been a
nposition in a bankruptcy proceeding it will not be set aside
the ground that a creditor has failed to get notice of the pro-
dings because his address was by mistake incorrectly given in
schedules. In re Rudwick, supra, holding in re Dupee (2
w. 18; Fed. Cas. 4,183) inapplicable under the present Act.
e practice is the same as upon revocation of discharges. (Sec-
n I5-)
Proceedings After Re-instatement.— Compare sections 2 (9) 44
d.
Sec. 14. Discharges, When Granted.— a Any person may, after
expiration of one month and within the next twelve months
•sequent to being adjudged a bankrupt, file an application for
ischarge in the court of bankruptcy in which the proceedings
pending; if it shall be made to appear to the judge that the
ikrupt was unavoidably prevented from filing it within such
ie, it may be filed within but not after the expiration of the next
months.
> The judge shall hear the application for a discharge, and such
ofs and pleas as may be made in opposition thereto by parties
interest, at such time as will give parties in interest a reason-
e opportunity to be fully heard, and investigate the merits of
application and discharge the applicant unless he has ( 1 ) com-
:ted an offense punishable by imprisonment as herein provided ;
(2) with fraudulent intent to conceal his true financial con-
on and in contemplation of bankruptcy, destroyed, concealed
failed to keep books of account or records from which his true
idition might be ascertained.
BANKRUPTS. 159
I 14.J Application for Discharge and Proceedings Thereon.
c The confirmation of a composition shall discharge the bank-
rupt from his debts, other than those agreed to be paid by the
terms of the composition and those not affected by a discharge.
Analogous Provisions of Former Acts. —
As to application for discharge : R. S. section 5108 (amended act of July
26th, 1876, ch. 234, section 1), act of 1867, section 29; act of 1841, section 4.
As to the hearing upon application: R. S. section 5109; act of 1867, section
29; act of 1841, section 4. As to grounds for refusing a discharge: R. S.
section 51 10; act of 1867, section 29; act of 1841, section 4; act of 1800, sec-
tions 36 and 37. As to proofs and pleadings in opposition, R. S. section sin ;
act of 1867, section 21 ; act of 1841, section 4. Compare, also, as to assets of
one asking for a discharge, R. S. section 5112; act of 1867, section 33; act of
1868, ch 258, section 1. Also R. S. section 51 12 A. As to oaths and verifica-
tion: R. S. section 5113; act of 1867, section 29. As to proceedings, certificate
of discharge and second applications: R. S. sections 5114, 5115, 5116; act of
1867, sections 30 and 32; act of 1841, section 12; act of 1800, section 57.
Discharges. — When Granted. — The time is fixed by the adjudi-
cation. The application cannot be filed until one month has ex-
pired ; it may be made as of course within the next twelve months
subsequent to the adjudication. The statute contemplates that
when a petition for discharge is not filed within twelve months
after the adjudication the same may be thereafter filed within
the next six months upon the order of the judge, based upon
satisfactory evidence that the bankrupt was unavoidably pre-
vented from filing the application within the twelve months after
adjudication. The express and positive statement in the section
as to the time when the application can be made seems to take
it out of the power of the court to extend such time except, per-
haps, when the delay is the fault of the court, when in accordance
with the general rules of practice an order nunc pro tunc may be
granted. (See for construction of this part of the section In re
Wolff, 4 Am. B. R. 74; 100 Fed. 430.) As to method of com-
puting time under this Act see section 31.
Application for Discharge and Proceedings Thereon. Section 14b.
— The statute says that the judge shall hear the application for
So THE NATIONAL BANKRUPTCY LAW.
Application for Discharge and Proceedings Thereon. [Ch. III.
ischarge and by section 38 (4) questions arising on the bank-
ipt's application for such discharge are expressly beyond the
irisdiction of the referee to determine, but by G. O. 12 (3) any
)ecified issue of fact arising upon such application may be sent to
le referee to ascertain and report upon. The first step in the
pplication is the petition for the discharge which by G. O. 31
iall state concisely, in accordance with the provisions of the act
id the orders of the court, the proceedings in the case and the
:ts of the bankrupt. The petition for the discharge is to be filed
ith the clerk. Thereupon an order to show cause why the dis-
large should not be granted is entered by the clerk or deputy
erk which states the time and place of the hearing and directs
lat the referee give notice, as provided in section 58, to all cred-
ors and persons having any interest in the application, which
Dtice must be given and published at least ten days before the
taring. A form of the bankrupt's application and the order of
3tice thereon to show cause is given in Form No. 57. By G. O.
2 a creditor opposing the application for discharge must enter
is appearance in opposition thereto on the day on which the
•editors are required to show cause and file a written specifica-
on of the grounds of his opposition within ten days thereafter
uless the time is further enlarged. The form of such specifica-
on is given in Form No. 58. See as to cases when notices are
• be published under order of the court, section 28 and G. O. 32.
The specifications to be filed hy the creditors must be clear and
jecific. It is uniformly held that specifications of objections to
ischarge must contain a distinct averment of the facts bringing
le case within the denunciation of the statute. Mere conclu-
ons of law or alternative averments will not suffice; the speci-
:ations are to be tested by the general rules applying to criminal
eadings. (See especially In re Hirsch, 2 Am. B. R. 715; 96
ed. 471; in re Kaiser, 3 Am. B. R. 767; 99 Fed. 689; in re
iolman,' 1 Am. B. R. 600; 92 Fed. 512; in re Quackenbush, 4
m. B. R. 274; 102 Fed. 282; in re Morgan, 4 Am. B. R. 402;
01 Fed. 982; in re McGurn, 4 Am. B. R. 459; 102 Fed.
13.) A valuable collection of authorities on this subject
BANKRUPTS. 161
§ 14.] Application for Discharge and Proceedings Thereon.
will be found to the report, in 4 Am. B. R. 274, of In re
Quackenbush, which report also includes the referee's opinion.
It is there held that sufficiency of specifications in opposition to
the discharge may be attacked before the referee to whom the
issue is referred. Where fraud is alleged, scienter must be
alleged, id..
It is discretionary with the court to allow an extension of time
to file specifications and amendments to such specifications are
liberally allowed. (See In re Frice, 2 Am. B. R. 674; 96 Fed.
611; in re Quackenbush, 4 Am. B. R. 274; 102 Fed. 282.) As
the statute says " parties in interest " are to have an opportunity
to be heard, the right to object to discharge is not restricted to
creditors who have proven up their claims. Any persons having
a pecuniary interest in resisting the discharge of the bankrupt
from his debts even though they have not proved their claims,
are entitled to go into court and object. (See In re Frice,
supra. )
If a party in interest who files objections to the granting of
the discharge, afterwards declines to prove them, other creditors
may be allowed to do so. {In re S. S. Houghton, Fed. Cas. 6,730;
10 N. B. R. 337, citing Foster v. Goulding, 9 Gray, 50 ; contra, in re
D. A. McDonald, Fed. Cas. 8,753; J4 N- B- R- 477-) Compare
section 59 (f ) as to the right of creditors other than original peti-
tioners to join in the petition to have one adjudged a bankrupt
involuntarily. While the objections are not to be pleaded with the
strictness of an indictment perhaps, it is necessary that the facts
be alleged, and that such allegations be distinct, specific, and defi-
nite so as to clearly inform the bankrupt what he is to disprove.
See ante under this section. If they are vague and general, the
court will dismiss them or compel the objecting party to be more
definite. (In re Hill, Fed. Cas. 6,482; 1 N. B. R. 275; s. c. 2
Ben. 136; in re Burk, Fed. Cas. 2,156; 3 N. B. R. 296; in re Bellis
& Milligan, Fed. Cas. 1,275; 3 N. B. R. 496; in re Waggoner,
Fed. Cas. 17,037; 1 Ben. 532; in re Tyrrel, Fed. Cas. 14,314; 2
N. B. R. 200.) The bankrupt may answer or demur, or may
move for a dismissal of the objections for insufficiency appearing
(21)
THE NATIONAL BANKRUPTCY LAW.
General Grounds for Refusing Discharge. [Ch. III.
the face of the papers. (In re Burk, supra; in re Rosenfeld,
d. Cas. 12,057; 8 A. L. Reg. 44; s. c. 2 N. B. R. 117.)
But he is not required to answer or demur to raise an issue upon
) specifications. In the case of In re Logan, 4 Am. B. R. 525 ;
2 Fed. 876, passing upon this point, Evans, J., said :
It is insisted by the creditor, inasmuch as the bankrupt made no response
the specifications of objections to the discharge, that the charges made
the creditor therein should be taken as confessed; and we are cited to
reland, Bankr. sec. 281, in support of this view. We cannot agree with
t learned author in the proposition that further pleading was necessary.
:re is no rule in bankruptcy which requires in such cases any further plead-
by a bankrupt. By the mode of procedure, uniform in this district, at
it, the bankrupt files a petition for a discharge, in which he avers that he
complied with all the provisions of the Bankrupt Act. This is his plead-
, and upon it the proper notice is served upon all creditors. The prayer of
petition will be granted as of course, unless some creditor objects, and
:ifies his grounds of objection. If the grounds are specified, the case goes
:he referee as the next step to ascertain and report the facts. Unless the
:ified grounds are established by the proof, the discharge is granted.
;hing is taken for grante.d, and the onus is on the creditor. Failure to
.blish the objections by evidence cannot be a ground for refusing the dis-
rge, and it follows logically and inevitably from this fact that no further
iding is necessary upon the part of the bankrupt. The proof must be
;n in any event, and without proof the creditor fails. The bankrupt may
upon the presumption of innocence. This no doubt explains why no
eral rule has been made by the Supreme Court requiring further plead-
> in such cases. The issues are made by the bankrupt's petition for a dis-
rge and the creditors' specifications of objections thereto, and the only
1 the rules require after this in order to a settlement of the question is
reference to ascertain and report the facts, unless the court itself does that,
which event the same rules would apply. And it may add stress to this
v that, excepting one not alleged in this case, all the specifications of ob-
ions, to be sufficient in law, must charge what is a criminal act upon the
t of the bankrupt, and the law in such cases itself enters a plea of not
ty, unless in cases where there is a voluntary and express plea of guilty."
Fury Trials. — As to jury trials see section 19 post.
Grounds for Refusing a Discharge. — In General. — It was said in
rior edition of this work that a discharge would be refused when
was shown that the court had no jurisdiction. If the court
i no jurisdiction of the subject-matter, this is probably true
:ause that question of jurisdiction may be raised at any time,
: clearly where the objection goes only to the jurisdiction over
BANKRUPTS. 163
§ 14.] Specific Grounds for Refusing Discharge.
the person it is the better opinion that such an objection must be
taken promptly and it will be too late to raise it upon the bank-
rupt's application for discharge. (Compare In re Mason, 3 Am.
B. R. 599; 99 Fed. 256; in re Clisdell, 4 Am. B. R. 95; 101 Fed.
246 and cases cited.)
Moreover the fact that the bankrupt owes debts which a dis-
charge would not bar or release is no ground for refusing him a
discharge, the right to a discharge being one thing, the effect of
it when granted quite another. (In re Rhutassel, 2 Am. B. R.
697; 96 Fed. 597; in re Thomas, 1 Am. B. R. 515 ; 92 Fed. 912.)
Specific Grounds for Refusing a Discharge. — It follows then that
the only grounds for refusing a discharge are those contained in
the statute.
Under the Bankruptcy Act of 1867, there were ten distinct
grounds for refusing a discharge. In the bankruptcy bill which
was afterwards enacted as the Bankruptcy Law of 1898 (the
present law), during all the legislation on the subject down to
the time of the report of the con conferrees, there were also nine or
ten grounds for a refusal of a discharge. In fact in the original
bill, the failure by the bankrupt to perform almost any of the
several duties imposed upon him by section 7 was a sufficient
ground for denying a discharge. The reduction of this number
to the grounds specified in the section under consideration was
one of the many concessions made by those advocating the bill
to those who at first opposed it upon the ground that it was op-
pressive towards the unfortunate debtor.
The first ground is that the bankrupt has committed an offence
punishable by imprisonment which is provided in the Act which
has reference to section 29b. It is not necessary that there should
be conviction for such an offence. Section 14 makes the mere
commission of the offence a ground for refusing a discharge.
The remaining ground for refusing discharge is, as stated in
section 14b, the destruction, concealment or failure to keep books
or records with fraudulent intent to conceal the bankrupt's true
financial condition and in contemplation of bankruptcy.
>4 THE NATIONAL BANKRUPTCY LAW.
Specific Grounds for Refusing Discharge. [Ch. III.
It will be noticed that the commission of any of the offences
entioned in 29b as grounds for refusing a discharge must be
ade " fraudulently and knowingly." (In re Pierce, 4 Am. B.
. 554; 103 Fed. 64.) It is also to be noted that the
aud must have been committed prior to the law making it a
ime in order to bar a discharge. (See In re Webb, 3 Am. B.
. 204 ; 98 Fed. 404. ) As a rule, the burden of proof rests upon
ose opposing the discharge to establish the grounds of oppo-
:ion. (See In re Boasberg, 1 Am. B. R. 353; in re Hixon, 1
m. B. R. 610; 93 Fed. 440; in re Thomas, 1 Am. B. R. 515 ; 92
:d. 912; in re Idzall, 2 Am. B. R. 741; 96 Fed. 314; in re
jrnell, 3 Am. B. R. 172; 97 Fed. 29; in re Philips, 3 Am. B. R.
.2; 98 Fed. 844.) There may be cases, however, where the
oof of the existence of assets and their sudden disappearance
thin a short time prior to bankruptcy, or the suspicious des-
iction of, or failure to keep, books of account will transfer to
e bankrupt the burden of proof on the question of concealment
assets. (See In re Meyers, 2 Am. B. R. 707; 96 Fed. 408;
re Rosser, 2 Am. B. R. 746 ; 96 Fed. 305 ; in re Purvine, 2 Am.
R. 787; 96 Fed. 192; in re Tudor, 2 Am. B. R. 808; 96 Fed.
2; in re Dews, 3 Am. B. R. 691 ; 101 Fed. 549; in re Finkel-
:in, 3 Am. B. R. 800; 101 Fed. 418; in re Mendelsohn, 4 Am.
R. 103; 102 Fed. 119; in re Cashman, 4 Am. B. R. 326; 103
d. 67; in re Hoffman, 4 Am. B. R. 331 ; 102 Fed. 979.)
The offences thus punishable under section 29b, are when the
rikrupt has " knowingly and fraudulently," ( 1 ) concealed while
bankrupt or after his discharge from his trustee any of the
Dperty belonging to his estate in bankruptcy; or (2) made a
se oath in relation to any proceedings in bankruptcy; or (3),
2sented under oath any false claim or proof against his estate,
used any such claim in composition, personally or by, or as
ent, proxy or attorney; or (4), received any material amount
property from his bankrupt estate, after the filing of the peti-
n, with intent to defeat this Act; or (5), extorted or attempted
extort any money or property from any person as a considera-
n for acting or forbearing to act in the bankruptcy proceedings.
BANKRUPTS. 165
§ 14.] Concealment of Property from Trustee During Bankruptcy.
In addition to these enumerated offences, perhaps, should be
added contempt of court, which is made a punishable offence by-
section 2 (13) (16).
We will now consider these various grounds for refusing a
discharge in detail.
1. Concealment of 'Property from Trustee During Bankruptcy. —
The word " conceal " is denned in section 1 (22) as including
" secrete, falsify and mutilate."
In order to warrant the refusal of a discharge under this sub-
division it is necessary that the creditors shall establish the fol-
lowing propositions beyond a reasonable doubt :
First. That the bankrupt has concealed property from his
trustee in bankruptcy.
Second. That the property so concealed belongs to the bank-
rupt's estate.
Third. That the concealment occurred while he was a bank-
rupt or after his discharge.
Fourth. That the concealment was made knowingly and fraud-
ulently.
In other words, it is necessary to show that the bankrupt, since
he has been adjudicated a bankrupt, has knowingly and fraudu-
lently concealed from his trustee property which belongs to his
estate and should be divided by the trustee among his creditors.
(See opinion of Coxe, J., In re Quackenbush, 4 Am. B. R. 271 ;
102 Fed. 282.)
The fraudulent intent that would bar a discharge must be
proved, but that, of course, is to be gathered from all the circum-
stances. Compare section 3 ante, sub nom. Intent Must Be
Proved. An omission to include property in the schedules under
an honest mistake as to law or fact will not bar a discharge. (In
re Wetmore, 3 Am. B. R. 700; 99 Fed. 703; in re Crenshaw,
2 Am. B. R. 623; 95 Fed. 632; in re Hirsch, 2 Am. B. R. 715;
96 Fed. 471, and cases cited.) Indeed the mere omission of prop-
erty from the schedules is not ipso facto a fraudulent conceal-
ment. (Cases supra.)
THE NATIONAL BANKRUPTCY LAW.
False Oath by Bankrupt. [Ch. III.
Where the bankrupt has conveyed property in fraud of his
editors it has been held in many cases that the omission of such
■operty from his schedules constitutes fraudulent concealment
i well as false oath. (See In re Hussman, 2 N. B. R. 437; Fed.
as. No. 6,951 ; in re Rathbone, 1 N. B. R. 536; 2 N. B. R. 260;
ed. Cas. No. 11,583; in re Hill, 1 N. B. R. 431 ; Fed. Cas. No.
483, which are collected in the opinion of Referee Wise in in
McNamara, 2 Am. B. R. 566, subsequently aff'd by District
idge).
See on the other hand opinion of Referee Hotchkiss In re
tireck (1 Am. B. R. 366), following in re McCarthy (Fed. Cas.
o. 8,684 ) > and in re Robertson ( Fed. Cas. No. 1 1 ,92 1 ) , in which
was held that the verification of a schedule by a bankrupt from
hich he has omitted property which he has theretofore fraudu-
ntly conveyed, is not the making of a false oath under sections
j and 14; and further held that the mere fact of omission of
le fraudulently conveyed property was not in itself sufficient
> justify the refusal of an application for a discharge. While
is clear that any fraudulent transfer consummated before the
ankruptcy Act is not a ground for refusing a discharge, it has
sen held under the present Act that where a transfer made by
le bankrupt before bankruptcy is a mere subterfuge which leaves
im in control of the property such transfer will constitute a con-
nuing concealment which will bar discharge. (In re Hoffman,
Am. B. R. 331 ; 102 Fed. 979.) In a case decided by the District
burt for the Northern District of New York (In re Quacken-
ush, 4 Am. B. R. 274; 102 Fed. 282), the objectionable trans-
:rs were made long before the Bankruptcy Act, but the bank-
upt continued to manage the business connected with the prop-
rty which was the subject of the transfer, although not in his
wn name. He set up the facts in his schedules. This was held
y Coxe, J., to be a continuing concealment. This case, however,
5 an extreme one and seems to be of doubtful authority.
2. False Oath by Bankrupt.— This offence is covered generally
y what has been said in the preceding paragraph on concealment
BANKRUPTS. 167
§ 14.] False Oath by Bankrupt.
of property. There can be no false oath unless it be taken with
full knowledge and intent to deceive and the rules which govern
prosecutions for perjury presumably control in this respect. Thus
in a recent case decided by the District Court of the Eastern
District of Pennsylvania (In re Goldsmith, 4 Am. B. R. 234;
101 Fed. 570), it was held that where, upon objections to dis-
charge, stenographer's notes of the bankrupt's former testimony
at the creditors' meeting are introduced by stipulation between
counsel, " to have same force and effect as if the said testimony
was originally taken before the referee in this proceeding," state-
ments contained in such notes cannot be used to base a charge
of false oath under section 29, because the bankrupt took no oath
before the referee that his former testimony was true, and he
cannot be bound by his counsel's stipulation so far as to base a
prosecution for perjury against him.
A false oath cannot be predicated upon an examination taken
under section 7 prior to specifications in opposition to discharge
being filed. Inasmuch as what the bankrupt: then swore cannot
be introduced in evidence against him in any criminal proceeding
(section 7 [9]), it is, in legal contemplation, impossible for him
to be punished for having committed such an offense, and such tes-
timony cannot be used against the bankrupt either under indict-
ment or in opposing a discharge, to prove a criminal act on his
part. Or in other words the false oath which will warrant re-
fusal of discharge must be one takin in the proceeding to dis-
charge. (In re Marx, 4 Am. B. R. 521; 102 Fed. 676; in re
Logan, 4 Am. B. R. 525; 102 Fed. 876; Fellows v. Freudenthal,
C. C. A. 7th Circ. ; 4 Am. B. R. 490; 102 Fed. 731.)
The offence being usually committed either in connection with
the verification of the schedules or in false statements to the
trustee, it must appear that the bankrupt has intentionally omitted
to include in his schedules the sum of his assets or has knowingly
testified falsely as to the ownership of such assets. (See In re
Lowenstein, 2 Am. B. R. 193.) Where a bankrupt clearly had a
vested interest in remainder under his father's will and with full
knowledge of the facts omitted to state such remainder as assets,
1 68 THE NATIONAL BANKRUPTCY LAW.
Failure to Keep Books of Account. [Ch. III.
it was held he was guilty of fraudulent concealment and false
oath and his discharge was denied. (In re Wood, 3 Am. B. R.
572; 98 Fed. 972.) For full discussion of this question see In re
Hirsch, 2 Am. B. R. 715; 96 Fed. 471.
The remaining grounds under section 29b, viz : the presenting
of false claims, the receiving of any material amount of property
from the bankrupt estate, and the extortion of money from any
person as a consideration for acting or forbearing to act in the
bankruptcy proceedings are seldom applicable to a bankrupt and
do not need discussion. Such acts must be done " knowingly and
fraudulently."
3. Failure to Keep Books of Account in Contemplation of Bank-
ruptcy.— Under the act of 1867 the failure to keep books of ac-
count by a merchant or tradesman after the passage of that act
was a bar to discharge independently of intent. But under the
present act the failure to keep such books of account must be in
contemplation of bankruptcy and with fraudulent intent, which
intent is to be gathered from all the circumstances. (Compare
Sellers v. Bell, 2 Am. B. R. 529; 36 C. C. A. 513; 94 Fed. 811 ;
In re Shertzer, 3 Am. B. R. 699; 99 Fed. 706.) But it is the in-
tent of the Bankruptcy Act that every trader should keep honest
books of account and record, and the court will take judicial notice
of the custom of traders to keep such accounts. (Opinion of
Wise, referee, concurred in by Brown, J., In re Berkowitz, 4 Am.
B. R. 37.) And where a person of intelligence keeps books in
such a condition as to be suspicious on their face a discharge will
be denied. (In re Dews, 3 Am. B. R. 691 ; 101 Fed. 549. Com-
pare In re O'Gara, 3 Am. B. R. 349; 97 Fed. 932.)
Under the act of 1867, which required that a tradesman or mer-
:hant should keep proper books of account, it was held that it was
unnecessary that the books be of any prescribed form. If from
them, a competent person was able to ascertain the true condition
Df the bankrupt's affairs, they were sufficient, even though the
accounts had been kept upon detached sheets, but such accounts
should show receipts, payments, assets, and liabilities, as well as
BANKRUPTS. 1 69
§ 14.] Failure to Keep Books of Account.
stock on hand. (In re Mackay, 4 N. B. R. 66; in re Solomon,
Fed. Cas. 13,167; 2 N. B. R. 285; in re Newman, Fed. Cas.
10,175; 2 N. B. R. 302; s. c. 3 Ben. 20; in re Bellis & Milligan,
Fed. Cas. 1,275 > 3 N. B. R. 496; s. c. 4 Ben. 53.)
It has been held in a number of cases under the present act that
the words " in contemplation of bankruptcy " mean not merely
contemplation of insolvency but bankruptcy under the present act.
(In re Holman [D. C], 1 Am. B. R. 600; 92 Fed. 512; in re
Dews, 2 Am. B. R. 483; 96 Fed. 181 ; in re Shorer [D. C], 2
Am. B. R. 165 ; 96 Fed. 90; in re Hirsch, 2 Am. B. R. 715 ; 96
Fed. 741 ; in re Carmichael, 2 Am. B. R. 815 ; 96 Fed. 594; in re
Morgan, 4 Am. B. R. 402; 101 Fed. 982.)
The cases under the act of 1867 also hold that it is not suffi-
cient that the debtor shall have contemplated a state of insolvency;
he must have contemplated an act of bankruptcy, or an application
by himself to be declared a bankrupt. (Buckingham v. McLean,
13 How. 151, overruling the following cases, so far as they hold
to the contrary : Arnold v. Maynard, 2 Story, C. Ct. 349 ; Fed.
Cas. 561 ; Hutchins v. Taylor, Fed. Cas. 6,953 > 5 Law Rep. 289 ;
Wakeman v. Hoyte, 5 Law Rep. 310; Fed. Cas. 17,051; Morse
v. Godfrey, Fed. Cas. 9,856; 3 Story C. Ct. 364; Everett v. Stone,
3 Story, 446; Fed. Cas. 4,577; Ashby v. Steere, Fed. Cas. 576;
2 Woodb. & M. 347; Collins v. Hood, Fed. Cas. 3,015; 4 Mc-
Lean, 186; Exp. Beeneman, Crabbe, 456; Atkinson v. The Far-
mers' Bank, Crabbe, 529 ; Dennett v. Mitchell, Fed. Cas. 3,789 ;
1 N. Y. Leg. Obs. 356; Jones v. Sleeper, Fed. Cas. 7,496; 2 N.
Y. Leg. Obs. 132.) The expression " in contemplation of bank-
ruptcy," means in contemplation of committing an act of
bankruptcy. The act of bankruptcy, the commission of which
must be contemplated, is such an act as the- statute declares an act
of bankruptcy. A debtor may become a bankrupt or commit an
act of bankruptcy by filing a petition or by doing some act which
is declared by the statute to be the commission of an act of bank-
ruptcy. It is not necessary in order that one should have contem-
plated becoming a bankrupt, that he should have contemplated
having a petition filed against him, and being adjudged a bank-
(22)
170 THE NATIONAL BANKRUPTCY LAW.
Effect of No Objections Upon Discharge. [Ch. III.
rupt thereon, provided he contemplated committing an act which
is defined as an act of bankruptcy, or contemplated filing a peti-
tion voluntarily. (In re Goldschmidt, Fed. Cas. 5,520; 3 N. B.
R. 165; 3 Ben. 379, followed in re Freeman, Fed. Cas. 5,082; 4
N. B. R. 64; s. c. 4 Ben. 245.)
Effect of No Objections Upon Discharge. — Under the act of 1867
it was held that if creditors do not raise objections to discharge
they will be deemed to have assented to the discharge and the
court will hold that no grounds exist for opposing such dis-
charge. In a very well considered opinion of Judge Lowell, In re
Marshall Paper Co. (2 Am. B. R. 653; 95 Fed. 419), it was held
that under the existing Bankruptcy Act the duties of the judge
are more onerous than those under the act of 1867. He is directed
to " investigate the merits of the application " and hence is not
confined to the consideration of those objections to discharge
which are properly set forth by the creditors.
But the decision of Judge Lowell in this case was reversed on
another point by the Court of Appeals of the First Circuit (4 Am.
B. R. 468; 102 Fed. 872, and see paragraph post, sub nom. Dis-
charge in Partnership Cases, Etc.) In the course of the
opinion the court uses the following language in regard to the
judge's duties on an application for discharge :
"By this provision (§ 14b) the judge shall hear the application and dis-
charge the applicant unless he is found guilty of some one of the prescribed
offenses. The court is not authorized to deny the application for discharge
upon a ground not set forth in this section. In re Black (D. C), 97 Fed.
493, 4 Am. B. R. 471, a refusal to grant a discharge cannot be said to rest
in the discretion of the judge. The words, " investigate the merits of the ap-
plication,'' must be taken in connection with the context. To construe these
words as if they stood alone and disconnected from what follows would be
to leave the whole question of discharge to the discretion of the court. Look-
ing at the entire section, we do not think these words will bear such a con-
struction, however desirable it may seem to the court in a particular case to
so interpret them. It seems to us that Congress in this section clearly
specifies the only causes for which a discharge can be denied, and leaves to the
court the sole duty of deciding, after due hearing, whether such cause exists.
"When the bankrupt files his petition for a discharge, the only facts
pleadable in opposition thereto are those which show that, under the provisions
BANKRUPTS. i?I
§ 14.] Discharge in Partnership Cases and of Corporations.
of section 14, he is not entitled to a discharge. In other words, it must be
shown that he has committed some one of the offenses described; otherwise,
the judge ' shall ' discharge the applicant."
and see In re Logan (4 Am. B. R. 525 ; 102 Fed. 876).
Effect of Discharge. — See section 17 post.
Discharge in Partnership Cases and of Corporations. — The ques-
tions peculiar to partnership proceedings have already been dis-
cussed under section 5.
In the case of In re Marshall Paper Co. (2 Am. B. R. 653; 95
Fed. 419), it was seriously doubted by the District Court of Mas-
sachusetts whether a corporation was entitled under the act to a
discharge. In that case Judge Lowell quoted as follows from
Mr. Justice Clifford in New Lamp Chimney Co. v. Ansonia Brass
& Copper Co. (91 U. S. 656, 666) :
" Good and sufficient reasons may be given for granting a discharge from
prior indebtedness to individual bankrupts which do not exist in the case of
corporations, and equally good and sufficient reasons may be given for with-
holding such a discharge from corporations which do not in any sense apply
to individual bankrupts. Certificates of discharge are granted to the in-
dividual bankrupt 'to free his faculties from the clog of his indebtedness,'
and to encourage him to start again in the business pursuits of life with fresh
hope and energy, unfettered with past misfortunes, or with the consequences
of antecedent improvidence, mismanagement, or rashness. Many corporations,
it is known, are formed under laws which affix to the several stockholders an
individual liability to a greater or less extent for the debts of the corpo-
ration, which, in case certain steps are taken by the creditors, become in the
end the debts of the stockholders. Such a liability does not, in most cases,
attach to the stockholder until the corporation fails to fulfil its contract, nor
in some cases until judgment is recovered against the corporation, and exe-
cution issued, and return made of nulla bona. Stockholders could not be held
liable in such a case if the corporation is discharged, nor could the creditor
recover judgment against the corporation as a necessary preliminary step to
the stockholder's individual liability. Consequences such as these were never
contemplated by Congress ; and the fact that they would flow from the theory
of the defendants, if adopted, goes very far to show that the theory itself is
unfounded and unsound."
But the case of the Marshall Paper Co. having been appealed to
the Circuit Court of Appeals of the 1st Circuit (102 Fed. 872; 4
Am. B. R. 468), it was definitely held that a corporation was enti-
172 THE NATIONAL BANKRUPTCY LAW.
Discharges, When Revoked — History. [Ch. III.
tied to a discharge under the express provisions of the statute. In
the case of Hill v. Harding, 130 U. S. 699, the unqualified state-
ment of Mr. Justice Clifford above quoted that stockholders could
not be held liable in such case of the corporation's discharge was
practically repudiated and in the Marshall Paper Co. case in the
Circuit Court of Appeals it is expressly laid down that a discharge
of a corporation does not prevent creditors from talcing judgment
in the State court against the corporation in such limited form as
may enable them to reap the benefit of the director's or stock-
holder's secondary liability, under a state statute. Judge Lowell
in the court below doubted the right of the creditors of the cor-
poration to reach the secondary liability of stockholders and di-
rectors unless a judgment was first obtained against the corpora-
tion. The decision of the Circuit Court of Appeals settles this
question.
Sec. 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.
Analogous Provisions of Former Acts. —
R. S. section 5120; act of 1867, section 34; act of 1841, section 4; act of
1800, section 34.
History.— In its general provisions as to the grounds upon
which a decree of discharge may be impeached and the courts in
which impeachable, the act of 1898 is similar to the act of 1867,
but both differ materially from the acts of 1841 and 1800. The
act of 1 84 1 provided that a discharge might be impeached " in
all courts of justice " for certain causes and in a manner in the act
stated. The act of 1800 in effect provided that a discharge might
BANKRUPTS.
[73
§ 15.] History.
be impeached when pleaded as defense, by proving the same facts
as would have prevented the granting of it, had they been shown
in a court of bankruptcy. Neither act contained any provision
for a direct proceeding to annul the discharge in the court of bank-
ruptcy.
The only ground for revocation of discharge under the present
act is fraud. But few cases have been decided under this section.
In the case of In re Meyers (3 Am. B. R. 722; 100 Fed. 775), an
application was made within the year based upon the testimony
of the bankrupt in subsequent proceedings, tending to show that
he had considerable property at the time of his bankruptcy and
application for discharge, which was concealed. His verified
schedules stated no assets and therefore no trustee was appointed.
The court granted a petition for revocation of discharge, laying
stress upon the fact that the application made within the year
showed that a knowledge of the facts indicating fraud was first
acquired by the petitioner long after the discharge, and that no
evidence of laches was attributed to the petitioner. The practice
on an application for revocation of discharge, which is nowhere
outlined in the statute or general orders, is indicated by this case.
A petition is filed with the clerk of the court and a reference is
thereupon ordered to ascertain and report upon the facts alleged
in the petition upon due notice to the bankrupt to take such evi-
dence as may be offered by the parties. Presumably the practice
is analogous to that upon applications for discharge (q. v.).
Another case arising in the same district (the Southern District
of New York) was In re Dietz (3 Am. B. R. 316; 97 Fed. 563),
where the fraud alleged was the buying off through the procure-
ment or privity of the bankrupt of the opposition of the creditor,
which was held prima facie evidence that the bankrupt was not
entitled to discharge.
It must not be forgotten that though this is the only section in
the Bankruptcy Act which directly bears upon the question of
revocation there is nothing to negative the right of courts to recall
their own decrees and vary or annul them as justice may require
if the application is promptly made. This power however only
174 THE NATIONAL BANKRUPTCY LAW.
Discharge Cannot be Collaterally Attacked. [Ch. III.
extends to cases of actual default under circumstances which ren-
der the exercise of such power equitable. See In re Dupee (6 N.
B. R. 89; 8 Fed. Cas. 108).
As to jury trials under this section see section 19, post.
Discharge Cannot be Collaterally Attacked. — Although the decis-
ions of the courts under the act of 1867 were not all in
harmony, the weight of authority was that a discharge once
granted by a court having jurisdiction was unassailable in
any court except the court of bankruptcy, for any cause
which would have prevented the granting of it, or which
would have been sufficient ground for annulling it. That a
discharge shall not be collaterally impeached for any cause
which might have been urged against granting it, is but an
application of the general principle of law that a judgment of a
court of competent jurisdiction is conclusive of all matters ad-
judged, as between the parties thereto, and cannot be collaterally
attacked or questioned before any tribunal. A discharge in bank-
ruptcy is an adjudication between the bankrupt and all the defend-
ants, his creditors, a decree binding and conclusive on all who are
made parties in accordance with the provisions of the act. The
creditors having had notice of the proceedings must be treated as
also having had opportunity to make objections; and having
neglected to do so, they ought not to be allowed to impeach the
adjudication collaterally. Bankruptcy proceedings are in the na-
ture of proceedings in rem before a court of record having juris-
diction, and it is well settled that in proceedings in rem a decree
is conclusive against all parties having the right under the pro-
ceedings to control the decree. Jurisdiction confers the power
to render the judgment and it is binding (even if irregularities
or errors exist), until set aside by the court in which it was ren-
dered, or some court of appeal or review, in an action for that pur-
pose. (Hudson v. Bingham [Sup. Ct. Tenn.], 8 N. B. R. 494,
citing Shawhan v. Wherritt, 7 How. 627; Dolson v. Pierce, 12
N. Y. 156, and Kinnier v. Kinnier, 45 N. Y. 535; Reed v. Bul-
lington, 11 N. B. R. 408; s. c. 49 Miss. 223, citing Voorhees v.
BANKRUPTS. 175
§ 15.] Impeaching the Discharge by One Creditor, for Fraud.
U. S. Bank, 10 Pet. 449; Sturges v. Crowninshield, 4 Wheat.
122 ;• in re Winn, Fed. Cas. 17,876; 1 N. B. R. 499; Pennington
v. Sale, et al. Fed. Cas. 10,939; l N. B. R. 572; in re Barrow,
et al. Fed. Cas. 1,057; r N. B. R. 481 ; Cassard, et al. v. Kroner,
4 N. B. R. 569; Markson, et al. v. Heany, Fed. Cas. 9,098; 4
N. B. R. 510; in re Snedaker, 3 N. B. R. 629; in re Salmons,
Fed. Cas. 12,268; 2 N. B. R. 56; in re Brinkman, Fed. Cas.
1,884; 7 N. B. R. 421 ; in re Sacchi, Fed. Cas. 12,200; 6 N. B.
R. 497 ; Stevens v. Brown, 1 1 N. B. R. 568, citing Ocean National
Bank v. Olcott, 46 N. Y. 15 ; Alston v. Robinett, 9 N. B. R. 74;
s. c. 37 Tex. 56; Stetson v. The City of Bangor, 56 Me. 286.)
Not only is the discharge a conclusive judgment as to all mat-
ters which might have been urged as an objection to granting it,
but by the better opinion the jurisdiction conferred by the bank-
ruptcy act upon courts of bankruptcy to revoke a discharge, pre-
vents any other court from revoking it upon any of the grounds
upon which it may be revoked by the bankruptcy court. The
mode of impeaching the validity of a discharge, prescribed by the
statute excludes all other modes. The impeaching tribunal being
specified, this designation, according to well-established principles
of interpretation, forms a part of the remedy and excludes all
others. (Corey v. Ripley, 4 N. B. R. 503 ; s. c. 57 Me. 69, citing
Dudley v. Mayhew, 3 N. Y. 10; Stevens v. Evans, 2 Barr. 1,157;
City of Boston v. Shaw, 1 Met. 130.) Congress under the power
conferred upon it to establish a uniform system of bankruptcy,
may prescribe not only the conditions on which a discharge may
be granted, but the effect of it. (Way v. Howe, 4 N. B. R. 677
s. c. 108 Mass. 502, citing Payson v. Payson, 1 Mass. 283 ; Burn-
side v. Brigham, 8 Met. 75.)
Impeaching the Discharge by One Creditor, for Fraud. — It is to be
noted, however, that under the act of 1867 the discharge was re-
vocable for what were termed fraudulent acts, but which were in
fact acts done, not in procuring the discharge, but done prior to
it, and made by law grounds for refusing a discharge. While the
law said that the discharge could be revoked " if fraudulently ob-
176 THE NATIONAL BANKRUPTCY LAW.
Impeaching the Discharge by One Creditor, for Fraud. [Ch. III.
tained," it limited the right of revocation to one of the acts speci-
fied as grounds for refusing a discharge. In other words the
effect of that section was to permit a proceeding to reopen the
judgment of discharge if new evidence was discovered, which
tended to establish any ground for refusing a discharge ; rather
than a proceeding to revoke the decree because of fraud in its pro-
curement. These fraudulent acts, considered with reference to
the proceeding to secure a discharge, were fraudulent only in so
far as the applicant had to swear in his application for a discharge
that he was guilty of none of them. It was said in the case of
Poillon v. Lawrence (jj N. Y. 207, at 214), " There is no provis-
ion authorizing (under the act of 1867) an application to annul a
discharge on the general ground that the discharge was fraudu-
lently obtained." And in this case it was held that the remedy
by an application to the bankruptcy court for a revocation of the
discharge was exclusive only when the invalidity of the discharge
was based upon some of the grounds upon which a discharge
could have been refused, but that where the fraud was of a pecu-
liar and exceptional nature, not one of those specified in the act
as a ground upon which the bankruptcy court could revoke the
discharge, and not one which necessarily affected the validity of
the discharge except as to the creditor upon whom the fraud was
specially practiced, then it was competent for the defrauded party
to impeach the discharge for such fraud. And following Batch-
elder v. Low (43 Vt. 662; s. c. 8 N. B. R. 571), a distinction was
taken between a proceeding in the bankruptcy court to set aside
the discharge in toto, and an impeaching of the discharge by one
individual creditor, when the discharge was pleaded as a defense
to his action.
This case seems to have been opposed to the weight of authority
even under the old law. (See cases cited, supra.) And it is very
doubtful whether it applies at all under this law, which makes the
fact that a discharge was obtained through the fraud of the bank-
rupt the sole ground for revocation.
The intention of Congress in giving a proceeding by which any
creditor, whose debt was proved or provable, may upon proving a
BANKRUPTS.
177
§ 15.] Impeaching the Discharge by One Creditor, for Fraud.
fraudulent act of the bankrupt, have the discharge set aside or
annulled, if that act was unknown to him before the discharge was
granted, but not otherwise, appears to have been, that the ques-
tion of the discharge of the bankrupt from all debts and claims
whatever (except of those classes which are declared not to be
affected by any certificate of discharge) shall be finally and con-
clusively settled by the court of bankruptcy within a moderate
time, leaving the bankrupt, if he prevail in such trial of that issue,
free from future suit, molestation, or embarrassment on account
thereof ; and that every creditor shall be obliged to try the ques-
tion of the validity of the discharge, if at all, while the facts upon
which it depends are comparatively recent, and in such manner as
to inure to the benefit of all the creditors if the discharge is an-
nulled, and shall not be allowed to wait until the period prescribed
by the general statutes of limitations has nearly expired, and the
bankrupt has perhaps established himself anew in business and
suffered the means of disproving the charges against him to pass
beyond his reach, and then bring a suit to which the other cred-
itors are not parties, and thus harass him on account of his old
debts and obtain an inequitable advantage over him. It follows
that the remedy given by application to a bankruptcy court to re-
voke the discharge is exclusive of any other mode of impeaching
the validity of a discharge, either in the Federal or in the State
courts. (Way v. Howe, 4 N. B. R. 677; s. c. 108 Mass. 502.)
It will undoubtedly be conceded by all that nowhere is there any
authority or principle of law permitting a proceeding to revoke
the discharge in toto except under the terms of this section. That
one creditor should not be allowed in any other court to show that
it is inoperative as to him ; in other words, that the law will not
allow a piecemeal revocation, will, we think, also be conceded
when the effect of such a practice is considered. To allow such
individual attempts to impeach the judgment, will be to destroy
all uniformity. With reference to this right of the individual
creditor to impeach the decree in an action in a State court, it was
said by the court in the opinion in Hudson v. Bingham (8 N. B.
R. 494; s. c. 12 A. L. Reg. 637) :
(23)
178 THE NATIONAL BANKRUPTCY LAW.
Effect of Revocation of Discharge — Co-Debtors of Bankrupt. Ch. III.
" The bankrupt may have had the very same grounds urged against the
granting of his discharge by one creditor and the matter have been decided
in his favor, or there may have been an attempt by another creditor to annul
his discharge within the statutory period, and the court may have decided that
issue again in his favor; yet if the discharge is assailable in a State court,
another creditor may still require him to try the same question over again.
Further than this, his discharge may have been, under this view of the law,
contested and declared void by a State court within the year, and yet on pro-
ceedings instituted under the statute by other creditors in the bankruptcy court
having full jurisdiction over the whole question, it may have been adjudged
valid and not subject to be annulled for the causes stated. Which judgment
is to be held correct, and which shall relieve him from his embarrassments?
This view of the law enables the State courts, having no jurisdiction over the
original question, to practically nullify the effect of the adjudication of the
courts of the United States, having exclusive jurisdiction over the whole sub-
ject, and is incompatible with the powers granted to the federal government
to grant a discharge in bankruptcy. No such construction ought to be given
to the act of Congress unless its terms imperatively demand it."
Effect of Revocation of Discharge. — See section 64c, providing
that " in the event of the confirmation of a composition being set
aside, or a discharge revoked, the property acquired by the bank-
rupt in addition to his estate at the time the composition was con-
firmed or the adjudication was made shall be applied to the pay-
ment 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."
Sec. 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 th« discharge of such bank-
rupt.
Analogous Provisions of Former Acts. —
R. S. section 5118; act of 1867, section 33; act of 1841. section 4; act of 1800,
section 34.
Scope of Section.— In a recent case decided in the District of
Massachusetts (In re Marshall Paper Co. 2 Am. B. R. 653 ; 95
BANKRUPTS.
179
§ 16.] Scope of Section.
Fed. 419), reversed on another point, holding inter al. that the
secondary liability of the directors of a corporation is not dis-
charged by the discharge of the principal, the following quotation
from Judge Lowell is a good statement of the intention of the sec-
tion:
" It would seem that, when one is liable to a creditor for the debts of another,
he must be either co-debtor with or else surety for that other (Bank v. Warren,
52 Mich. S57, 561 ; 18 N. W. 356) ; but in any case it is plain that sec. 16 was
intended to include not only co-debtors, guarantors, and sureties, using those
words in a narrow and technical sense, but to declare a general intention and
to indicate a general proposition applicable to all persons in like situation.
The directors in this bankrupt corporation are in some manner a surety for
it, even if they are not its sureties in the narrowest sense. See Willis v.
Mabon, 48 Minn. 140, 155; 50 N. W. mo. As the existing Bankrupt Act, then,
has in substance provided that the statutory liability of the directors, of a
corporation shall not be altered by the discharge of a bankrupt, this court is
bound to abstain from doing anything which shall hinder the enforcement of
that liability."
Indeed the section is merely declaratory of general legal prin-
ciples.
The contract of suretyship as it is understood in the com-
mercial world. is always conditioned that the surety shall not be
discharged by the bankruptcy of his principal.
So as to joint liability the discharge does not affect the liability
of others who are jointly or as sureties liable with the bankrupt.
Legal proceedings against the former need not be discontinued
because of the bankruptcy. Judgments obtained against them
or security received from them or liens on their property by way
of mortgage or otherwise may be enforced. (In re Levy & Levy,
Fed. Cas. 8,297; 1 N. B. R. 327; s. c. 2 Ben. 169; Payne v.
Able, 4 N. B. R. 220; s. c. 7 Bush. [Ky.] 344.)
A discharge releases only the personal liability of the bank-
rupt; it does not affect the debt as to other persons. No one
else can plead it. So purely personal is the privilege that it is
not available to a grantee to whom the bankrupt has fraudulently
conveyed property, to defeat a judgment creditor's suit brought
against the debtor and the transferee, where the judgment debtor
i So THE NATIONAL BANKRUPTCY LAW.
Creditor's Failure to Prove — Attachment Bonds. [Ch. Ill,
(the bankrupt) fails to appear and plead his discharge. (Moyer
v. Dewey, 103 U. S. 301.) Even if a creditor assents to the dis-
charge of his debtor in a case where he might have urged an ob-
jection which would have induced the court to refuse a discharge,
and even though the creditor is requested by the surety of the
bankrupt to oppose the discharge, the creditor, loses only his
rights against the principal, not against the surety, because the
discharge is deemed to be by operation of law, and not of the
debtor's own volition. (Ex p. Jacobs, 44 L. J. B. 34; Mason &
Hamlin v. Bancroft, 1 Abb. N. C. 415; s. c. 4 Cent. L. J. 295;
contra, in re McDonald, Fed. Cas. 8,753; *4 N. B. R. 477.)
Where a discharge of the principal is entirely independent of any
judicial proceeding, the well-established principle of law is that
the surety will be discharged. (Ex p. Jacobs, 44 L. J. Bank. 34;
Brown v. Carr, 7 Bing. 508 ; s. c. 5 M. & P. 497 ; Sigourney v.
Williams, 1 Gray, 623; Mason & Hamlin v. Bancroft, 1 Abb.
N. C. 415; s. c. 4 Cent. L. J. 295.) Compare commentaries on
section 12.
Creditor's Failure to Prove.— The creditor's failure to prove his
claim does not release the joint obligor or surety. There is no
obligation resting on the creditor to make himself a party to the
bankruptcy proceeding and to collect what he can from the estate.
(Clopton v. Spratt, 52 Miss. 251.) The surety may protect him-
self under the provisions of section 57 (i), (q. v.).
Attachment Bonds.— The question of the effect of a discharge
on the liability of sureties on bonds given by the bankrupt to re-
lease property of his which has been attached, where the suit
is pending at the time of the bankruptcy, was one which was
variously decided under the Act of 1867. The decisions of the
State courts and the courts of bankruptcy were almost equally
divided. As the condition of a bond to dissolve an attachment
is to pay any judgment that may be rendered against the prin-
cipal, there can be no liability until a judgment is secured. The
variance between the courts arose over this question : When a
BANKRUPTS. 181
§ 16.] Attachment Bond.
discharge has been granted to a bankrupt pending a suit in which
an attachment on his property has previously been dissolved by
the giving of a bond, can a judgment, be subsequently entered up
against him or his sureties, so that the latter may be holden on
the bond; or must the bankrupt be permitted to plead his dis-
charge by supplemental answer so that no judgment can be en-
tered up against him, and no liability accrue against the sureties ?
The Supreme Court of New York, in the case of Holyoke v.
Adams (10 N. B. R. 270; s. c. 1 Hun [N. Y.] 223; affirmed in
59 N. Y. 233), took the ground that as the attachment was valid
under its laws and was not invalidated by the bankruptcy law,
the bond given to dissolve it was in the nature of a substituted
security; that a perpetual stay of the action pending proceedings
in bankruptcy would not be allowed, as it would work injustice
to the creditors, the obligees in the bond ; and also that it would
not allow a subsequently granted discharge to be set up in a sup-
plemental answer, as the effect would be to prevent the judgment
from being entered. The court further held that upon motions
for leave to interpose a supplemental answer, the court should
exercise its discretion, and deny the motion whenever it would
work an injustice, and that to permit the pleading of discharge
which would prevent the accruing of the liability of the sureties
on a bond given to dissolve a valid lien, and which would de-
prive the lienor of all rights, would be an act of injustice. Or
this latter ground the case was affirmed in the Court of Appeals :
followed in McCombs v. Allen (18 Hun 190; affirmed 82 N. Y,
114) ; to same effect, Bond v. Gardner (4 Binn. 269). The U. S,
District Court for the eastern district of Michigan {in re Al-
brecht, Fed. Cas. 145; 17 N. B. R. 287), held that inasmuch as a
plaintiff in an action in which there had been garnishment pro-
ceedings (which had been discontinued by the giving of a bond),
would, under the bankruptcy law, have had a right to prosecute
his suit, at least so far as to protect his lien upon the property
which has been taken in garnishment, a fair construction of the
statute demanded that he should be allowed to prosecute hi;
action to judgment, so as to hold the sureties upon the bone
1 82 THE NATIONAL BANKRUPTCY LAW.
Attachment Bond. [Ch. III.
which he had taken in lieu of his security. (Compare Zoller v.
Janvrin, 49 N. H. 114.) On the other hand, the courts of
Massachusetts repeatedly laid down a different rule. By them
it was held that the bond was a mere personal obligation ; it was
not substituted property subject to a lien. If the debtor obtained
a discharge in bankruptcy he had a right to plead it, and as no
final judgment could be entered against him the bond was dis-
charged by the determination of the contingency upon which it
was made to depend. The liability of the surety was not avoided
by it ; no liability ever accrued. " The bond does not restore
the property to the possession of the debtor subject to the attach-
ment : it dissolves the attachment utterly. It is not given for the
property itself nor as security for its value, but for the payment
absolutely of the judgment when recovered in the suit, whatever
may be the amount of the judgment. The bond does not become
of the nature of a debt until the contingency arises on which it
is to be made operative, to wit : a judgment against the principal
which he is bound to pay. A final judgment against the de-
fendant is necessary in order that the bond may be enforced, and
that judgment the court cannot enter if a discharge is pleaded."
The Massachusetts courts (unlike the courts of New York and
Michigan) never appear to have felt justified in refusing to the
bankrupt the right to plead such discharge by supplemental or
amended answer. Such was the Massachusetts rule as laid down,
first in the case of Carpenter v. Terrill (100 Mass. 450), and fol-
lowed by the same court in Hamilton v. Bryant ( 14 N. B. R. 479 ;
s. c. 114 Mass. 543), Braley v. Boomer (12 N. B. R. 303; s. c.
116 Mass. 527), and Johnsons. Collins (12 N. B. R. 70; s. c. 117
Mass. 343), the last three cases even holding that if the bond to
dissolve the attachment was not given till after adjudication of
bankruptcy, still the sureties could not be held to have incurred
liability. If, however, it was not given till after judgment was
rendered, then the liability had been incurred and could not be
divested by a discharge of the principal. (Compare also to the
same effect Payne v. Able, 4 N. B. R. 220; s. c. 7 Bush [Ky.j
344J Williams v. Atkinson, 36 Tex. 16; Bates v. Tappan 3
BANKRUPTS. 183
§ 16.] Attachment Bond.
N. B. R. 647 ; s. c. 99 Mass. 376.) There was no express adjudi-
cation on this question by the U. S. Supreme Court, but there are
two dicta apparently contradictory of each other. In Wolf v.
Stix (99 U. S. 1 ), it was said : " The cases are numerous in which
it has been held, and we believe correctly, that if one is bound as
surety for another to pay any judgment that may be rendered
in a specified action, if the judgment is defeated by the bank-
ruptcy of the person for whom the obligation is assumed, the
surety will be released. The obvious reason is that the event has
not happened on which the liability of the surety was made to de-
pend. Of this class of obligations are the ordinary bonds in at-
tachment suits, to dissolve an attachment, appeal bonds, and the
like."
In the case of Hill v. Harding (107 U. S. 631), the Supreme
Court of the United States held that under section 5,106 R. S.
which prohibited the prosecution of a suit to judgment against a
bankrupt, pending his application for a discharge, a State court
in which an action against the bankrupt upon a debt provable
in bankruptcy was pending, must, on the bankrupt's application,
stay all proceedings to await the determination of the bankruptcy
court upon his application for a discharge, even if an attachment
had been made in the action more than four months before the
commencement of the proceedings in bankruptcy, and had been
dissolved by giving a bond with sureties to pay the amount of the
judgment to be recovered. But the court said (obiter) : " If a
discharge is granted, the court in which the suit is pending may
then determine whether the plaintiff is entitled to a special judg-
ment for the purpose of enforcing an attachment made more
than four months before the commencement of the proceedings
in bankruptcy, or for the purpose of charging the sureties upon a
bond given to dissolve such an attachment."
The whole force of the argument of the New York and Michi-
gan and kindred cases is that, as the Bankruptcy Act does not
invalidate the lien of the attachment if that lien bona fide exists,
the courts ought not to prevent a creditor from enforcing the
personal obligation of others, given to release the property from
1 84 THE NATIONAL BANKRUPTCY LAW.
Sureties on Appeal Bonds — Replevin Bonds. [Ch. II
the attachment. They seem to regard the bond as a substitute*
security. The complete answer to their proposition is that th
bankruptcy law protects certain bona fide liens created pursuan
to State laws, but that these State laws, so far as attachment pro
ceedings are concerned, usually provide that the lien may be de
stroyed if one gives a personal obligation. After the bond ii
given there is no lien in existence ; nothing but a contingent per
sonal liability.
Sureties on Appeal Bonds.— As in the case of attachment bonds
the question here is not whether a discharge of the principal re-
leases the liability of the sureties, but whether the discharge pre
vents the happening of the contingency upon which the liability
of the sureties is to arise. If a discharge can be pleaded in the
appellate court and is so pleaded, so that no judgment can be
rendered against the defendant, then no liability ever exists or
the part of the surety. The discharge of the bankrupt principal
prevents the surety from incurring liability rather than releases
him. (Odell v. Wootten, 4 N. B. R. 183; s. c. 38 Ga. 225.)
But, on the other hand, in those States where the practice is such
that the discharge does not affect the appeal, or stay proceedings
upon it, or prevent a judgment of affirmance, — where the appel-
lant cannot set up any matters in the appellate court other than
those set up in the case in the court of original jurisdiction, as,
for instance, in New York, there the liability attaches, and the
discharge of the principal does not prevent the sureties incurring
liability. (Knapp v. Anderson, 15 N. B. R. 316; s. c. 7 Hun, 295;
affirmed 71 N. Y. 466; citing Cornell v. Dakin, 38 N. Y. 253;
Poppenhausen v. Seely, 3 Abb. Ct. of App. Dec. 615; Hall v.
Fowler, 6 Hill [N. Y] 630; Flagg v. Tyler, 6 Mass. 33; Burr v.
Carr, 7 Bing. 508; Southcote v. Braithwaite, 1 T. R. 624.)
Replevin Bonds.-The discharge of the principal in a replevin
bond, where the replevied articles have passed into the hands of
his trustee, does not prevent his sureties from becoming liable,
nor in any way release them when that liability has been incurred,
BANKRUPTS. 185
§ 16.] Bonds to Release One from Arrest.
because a judgment may still be obtained determining the title
to the property and the determination of that question, is what
fixes the liability. (Flagg v. Tyler, 6 Mass. 33.)
Bonds to Release One from Arrest — " Jail Liberty Bonds " —
" Poor Debtors' Bonds." — In all these bonds one condition, express
or implied, is that the sureties may be released by a surrender of
the principal before there has been a breach of the other con-
ditions of the bond. The question which arises is, whether the
discharge in bankruptcy of the principal makes a surrender un-
necessary. As in the case of attachment bonds and appeal bonds,
the discharge will not release the sureties from any liability
which they may have actually incurred, but it may in some cases
prevent the contingency which is to fix that liability. If there
has been a breach of the conditions of these bonds before a dis-
charge of the bankrupt principal has been granted, the liability of
the sureties has become fixed and is unaffected by the subsequent
discharge in bankruptcy of the debtor (Dyer v. Cleveland, 18
Vermont, 241), notwithstanding the breach did not occur till
after bankruptcy proceedings had begun. The correct . rule is
that if the discharge in bankruptcy is received before there has
been a breach of the terms of the bond, the sureties may be re-
leased on motion because they may at any time terminate their
liability by surrendering their principal; and inasmuch as he,
upon his surrender by them, would be entitled to an immediate
release because of his discharge in bankruptcy, courts to avoid
circuity of action release such sureties on motion without re-
quiring the formality of a surrender which is useless. But after
the liability has become fixed they are not released by the dis-
charge of their debtor. (Knapp v. Anderson, 71 N. Y. 466;
same case in lower court, 7 Hun, 295 ; s. c. 15 N. B. R. 316. See
also Kirby v. Garrison, 21 N. J. 176, holding that if the bank-
rupt leaves jail limits after his discharge, the discharge is a good
defense to an action against the sureties.) Thus it will be seen
that the general rule is that the discharge of the principal in
bankruptcy acts as an exoneretur , if the liability of the surety has
(24)
1 86 THE NATIONAL BANKRUPTCY LAW.
Partners — Endorsers — Discharge of One of Several Co-sureties. [Ch. III.
not become fixed, and the surety (bail) may plead such a dis-
charge of the principal during the time in which he has the right
to surrender the principal. (Richardson v Mclntyre, 4 Wash.
C. C. 412; Kane v. Ingraham, 2 John. Cas. 403; Hayton v.
Wilkinson, 1 Hall's Am. L. J. 260; Olcott v. Lilly, 4 Johns. 407;
Thorne v. Brown, 9 Watts. 288.) But if the liability has become
fixed, as for instance, if the time allowed for a surrender has
expired before the discharge is granted, then the discharge will
not release the sureties from their liability. (Woolley v. Cobbe,
1 Barr. 244; Olcott v. Lilly, 4 Johns. 409; Bennett v. Alexander'
1 Cranch C. C. 90.)
Partners— This section in itself alone is an implied provision
that one member of a firm may obtain a discharge, although a
discharge is refused his co-partner. See what is said under sec-
tion 5 ante.
Endorsers.— The discharge of the maker in no way affects the
endorsers. (Clopton v. Spratt, 52 Miss. 251; King v. Central
Bank, 6 Ga. 257.)
Joint Debtors as Necessary Parties.— One of the several joint
debtors discharged in bankruptcy may still be made a party. The
discharge is a privilege that may be pleaded; if not pleaded, there
is nothing to prevent the entry of judgment. No court' takes
judicial notice of a discharge. The discharged debtor is as nec-
essary a party as if he had not been discharged. His discharge
simply gives him an additional defense. (Jenks v. Opp, 12 N. B.
R. 19; s. c. 43 Ind. 108; Camp v. Gifford, 7 Hill, 169.)
Discharge of One of Several Co-sureties.-If one of several co-
sureties is himself discharged in bankruptcy so that he is released
from his liability as such, he is also released from the duty of
contribution to his co-surety, for the right to contribution in the
absence of express agreement depends upon the payment by one
of the sureties of a demand against the principal which all the
co-sureties were equally under legal obligation to pay. (Tobias
BANKRUPTS. 187
§ 17.] Debts Not Affected by Discharge— Debts Dischargeable.
v. Rogers, 13 N. Y. 59. Compare, however, apparently to the
contrary, Miller v. Gillespie, 59 Mo. 220.)
Sec. 17. Debts Not Affected by a Discharge. — a A discharge
in bankruptcy shall release a bankrupt from all of his provable
debts, except such as ( 1 ) are due as a tax levied by the United
States, the State, county, district, or municipality in which he
resides; (2) are judgments in actions for frauds, or obtaining
property by false pretenses or false representations, or for willful
and malicious injuries to the person or property of another; (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 officer or in
any fiduciary capacity.
Analogous Provisions of Former Acts. —
As to the discharge as a release: R. S. section 5119; act of 1867, section 34;
act of 1841, section 4; act of 1800, section 34. As to debts not affected by a
discharge: R. S. section 5117; act of 1867, section 33; act of 1841, section 1.
As to taxes : R. S. section 5101 ; act of 1867, section 28; act of 1800, section 62.
Debts Dischargeable. — As all provable debts, other than those
explicitly excepted, are dischargeable it becomes important to
collate with this section, section 63 which is as follows :
Sec 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 evi-
denced 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 prose-
cute 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
1 88 THE NATIONAL BANKRUPTCY LAW.
Discharge no Extinguishment — No Release Unless a Discharge. [Ch. III.
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 applica-
tion 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.
b 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.
The Discharge Not an Extinguishment of the Debt. — The dis-
charge is not per se an extinguishment even of the bankrupt's
liability. It is a release which may be pleaded. No court other
than the court of bankruptcy is bound to take judicial notice of
the discharge. When the bankrupt is sued upon a debt if he fails
to plead and prove his discharge, he thereby waives it as a de-
fense, and a valid and unimpeachable judgment may be entered
against him. Compare Discharge Waived Unless Pleaded
and Pleading the Discharge, post, this section.
No Release Unless There is a Discharge. — The present law con-
tains no provision, as did certain former laws that the proving
of a claim in bankruptcy, shall be a waiver of all other suits and
proceedings to enforce it. Unless there has been a discharge
which is thereafter pleaded and proved, a creditor who has
proved his claim in bankruptcy and taken a dividend may still
obtain judgment in an action, upon the balance due him and en-
force the same. Nothing arising in the proceedings can protect
the bankrupt from subsequent suit except a discharge. The pay-
ment of a dividend on a proved claim is merely equivalent to a
payment in part. The taking of the debtor's property in bank-
ruptcy and applying it pro rata on the claims of creditors have no
greater effect than the taking of property on execution and apply-
ing the proceeds on a judgment. It is a satisfaction pro tanto,
not a discharge. Consequently a plea of an adjudication in bank-
ruptcy is not a good defense to an action. The proving of the
debt is neither an absolute extinguishment nor a satisfaction. If
the discharge is refused the creditor is remitted to all his former
rights and remedies. (Dingee v. Becker, Fed. Cas. 3,919; 9
N. B. R. 508; Whitney v. Crafts, 10 Mass. 23.)
BANKRUPTS. 189
§ 17.] Discharge Releases Only the Personal Liability— Debts Due to Aliens.
Discharge Eeleases Only the Personal Liability. — Nothing but the
bankrupt's personal liability is released by the discharge. Specific
liens upon his property are in no way affected. Whatever their
character if they are valid by the laws of the State, and not ren-
dered void by the provisions of section 67 or other sections of the
Bankruptcy Act, the bankrupt's discharge will not prevent their
enforcement. Any proceeding to enforce a right against the bank-
rupt's property may be maintained which does not seek to en-
force the personal liability of the debtor. Compare section, 67
as to the effect of bankruptcy upon liens, and section 70 as to the
trustee taking title subject to liens.
Provable Debts are Released Even if Not Proved. — The failure of
the creditor to prove his debt, if it is provable, does not prevent
it from being released by the discharge ; not even in those cases
where it was omitted from the schedules of debts and where the
creditor was not served with a notice of the proceedings; unless
the creditor can bring himself within the provisions of exception
(3) of this section, which is new. (Compare In re Stansfield,
Fed. Cas. 13,294; 16 N. B. R. 268; s. c. 4 Sawyer, 234; in re
Archenbrown, Fed. Cas. 504; n N. B. R. 149; Lamb v. Brown,
Fed. Cas. 8,011; 12 N. B. R. 522.)
Debts Due to Aliens. — A discharge in bankruptcy is as much a
release of a debt due to an alien as of one due to a citizen of the
United States. The purpose of the statute is to relieve the un-
fortunate bankrupt of all his provable debts upon his complying
with the terms of the act, and as the alien may if he desires prove
his claim, it is discharged whether or not he proves it. There is
no need of any express provision extending the Act to debts due
to aliens. (Ring v. Eickerson, 2 McCrary, 259; Murray v. De
Rottenham, 6 Johns. Ch. 52 ; Ruiz v. Eickerman, 12 Cent. L. J.
60; Pattison v. Wilbur, 12 N. B. R. 193; s. c. 10 R. I. 448.
Compare McDougal v. Carpenter, 17 Cent. L. J. 476.) And the
discharge is a bar to the debt due an alien even though he was not
a party to the proceeding, refused to consent to a discharge, and
190 THE NATIONAL BANKRUPTCY LAW.
Effect of Foreign Discharge — Debts of Married Women. [Ch. III.
in the courts of his own country prosecuted his claim to judgment
and even though in that action in the foreign country the bank-
rupt failed to plead his discharge as a defense, which, in fact, he
could not do. (Moore v. Horton, 32 Hun, 393.) And in a suit
brought in the United States on the foreign judgment the dis-
charge may be pleaded and will be a bar to a further recovery.
Effect of Foreign Discharge.— But a foreign discharge is no de-
fense in an American court to the claim of a creditor who re-
sides in one of the States and who was not a party and did not
appear in the foreign proceedings. (Phelps v. Borland, 103
N. Y. 406.) The discharge is considered as local, and although
an assignee of an individual who has become a bankrupt in a
foreign country will, in most of the courts of this country, be
allowed to maintain an action in his own name as assignee, yet
our courts will not recognize the discharge as a bar to debts con-
tracted in this country or due to citizens of this country. But a
discharge under our laws operates on debts due to citizens of
another country, to this extent that such aliens will not be per-
mitted to sue therefor in the courts of our country. (In re
Zarega, 1 N. Y. Leg. Obs. 40.) If a debt due from an alien is
released by a foreign discharge, it may nevertheless be proved
against him, if thereafter he is adjudged a bankrupt by an Ameri-
can court.
But this is not the English rule which proceeds on principles
of international comity. See Story on Conflict of Laws, chap-
ter IX ; Parsons on Contracts, chapter XII ; Bankruptcy, and In-
solvency ; for further discussion of these principles.
Debts of Married Women.— Probably there are few States where
the common-law rule as to the husband's liability for his wife's
debts incurred by her dum sola has not been altered by statute.
But wherever that rule exists, it may be said that a discharge
granted to the husband releases him from the debts of his wife,
incurred by her before marriage ; and as long as he lives and
his liability to pay those debts continues, not only is he dis-
BANKRUPTS. *9i
§ 17.] Effect of Discharge — Debts to the United States, etc.
charged, but the wife's separate estate cannot be taken in pay-
ment of them. The marriage suspends her liability ; the discharge
releases him from his liability. (Vanderhayden v. Mallory, 1
N. Y. 452.) So if a woman marries after filing a petition in
bankruptcy and thereafter procures a discharge, such discharge
will not only release her but also her husband. The status of
the claim is fixed at the time of the petition. (Chadwick v Star-
rett, 2,-j Me. 138.)
Effect of Discharge Granted to Members of a Firm. — This subject
has been sufficiently discussed under section 5 ante relating to
proceedings peculiar to partnerships.
Effect of Statute of Limitations on Debts. — While the general
tenor of the decisions is that debts barred by the statute of limita-
tions are not provable, there is some conflict of authority. The
question will be discussed under section 63.
Effect of a Discharge Determined by the Court in Which Subse-
quent Action is Brought. — Although a discharge can no more be
impeached in a collateral proceeding than any other judgment of
a court of competent jurisdiction, yet the extent of its operation,
that is, the question whether or not any particular debt is released
by it, is left to be determined by the court in which an action is
brought to enforce that particular claim. Such court will pass
upon the question, if the discharge is pleaded, and its determina-
tion will be binding as between the parties thereto. " The issue
upon the effect of a discharge will arise when a creditor seeks
to enforce a judgment or claim and the debtor pleads his dis-
charge in bar thereof." (In re Rhuitassel, 2 Am. B. R. 697 ; 96
Fed. 597; in re Thomas, 1 Am. B. R. 515; 92 Fed. 912; in re
Mussey, 3 Am. B. R. 592; 99 Fed. 71.)
Debts to the United States, etc. Section 17a (1)— Under the act
of 1867 it was finally decided by the Supreme Court, in U. S. v.
Herron (20 Wall. 251), that debts due the U. S. were not
provable in bankruptcy and consequently not released by a dis-
1 92 THE NATIONAL BANKRUPTCY LAW.
Debts to the United States, etc. [Ch. III.
charge. This decision was put upon various grounds, among
them that many of the provisions of the statute describing the
rights, duties, and obligations of creditors were inapplicable in
their nature to the United States, and that if held to include the
United States, could not fail to become a constant and irreme-
diable source of inconvenience and embarrassment. It was also
held that the United States, not being named in any of the pro-
visions of the Act (except in one which provided that all debts
clue the United States and all taxes and assessments under the
laws thereof should be entitled to priority or preference) under
a generally recognized principle of construction the United
States, as the sovereign power enacting the law, could not be held
to be bound by it ; citing as to this last proposition : i Deacon on
Bankruptcy (3d ed.), 784; Shelf ord on Bankruptcy, 303; Craw-
ford v. Atty. Gen. 7 Price, 5; Robson on Bankruptcy (2d ed.),
553 ; Eden on Bankruptcy, 143 ; Woods v. DeMattos, 3 Hurlst.
& Colt. 995; U. S. v. King, Wall. Circ. Ct. 18; People v. Herki-
mer, 4 Cow. 348; Com. v. Hutchinson, 10 Barr. 406; Hilliard on
Bank. (2d ed.), 295; U. S. v. Knight, 14 Pet. 315; U. S. v.
Hoar, 2 Mass. 311; Com, v. Baldwin, Watts. 54 ; Regina v.
Edwards, 9 Exch. 50; Dollar Sav. Bank v. U. S. 19 Wall. 227.
It has been believed by some that section 17 of the Act of 1898,
providing that debts due as taxes levied by the United States,
etc., shall not be released by a discharge, would on the principle
of expressio unius exclusio alterius be fairly construed as a pro-
vision that, as to debts other than taxes, the United States and
other political divisions therein mentioned are in the position of
other creditors, and that all debts due to the United States, etc.
except taxes, are discharged. But the weakness of this view
is that there was substantially the same provision in regard to the
non-dischargeability of taxes contained in the Act of 1867. (See
section 28, L. 1867.) On the whole it is believed that U. S. v.
Herron governs under the act of 1898. The best reasoning on the
subject in this act is to be found in the case of In re Baker (D. C.
Kansas), 3 Am. B. R. 101 ; 96 Fed. 964. That was a case in
which it was held that a judgment against a father for the sup-
BANKRUPTS. Ig3
§ 1 7-] Debts to the United States, etc.
port of a bastard child was not a civil debt but one in the nature
of a police regulation which was not released by a discharge in
bankruptcy. In the course of his opinion Hook, J., says :
" It is familiar doctrine in England that where an Act of Parliament is
general and thereby any prerogative, right, title or interest is divested or taken
from the king he shall not be bound thereby unless there are express words
extending the provisions of the statute to him. Thus it is held that the ordi-
nary statutes of limitation do not apply to the government unless made so by
express terms; and it has frequently been decided that debts due the crown
are not released by a discharge in bankruptcy under the English Bankruptcy
Acts. It is said that ' the most general words that can be devised do not ef-
fect the King in the least, if they may tend to restrain or diminish any of his
rights and interests.' (Magdalen College case, n Reports, 74.) And the Su-
preme Court in Savings Bank v. United States, 19 Wall. 233, holds that ' the
rule thus settled respecting the British crown is equally applicable to this
government and it has been applied frequently in the different States and
practically in the Federal courts.'
Various State courts have held that this exemption from general terms of
legislative enactments applies to the States not only in their united but also
in their separate sovereignties, and that the claims of a State are not within
the provisions for the release of debts owing by the bankrupt upon his dis-
charge in bankruptcy unless expressly made so. The legislature will not be
taken to have postponed the public right to that of an individual except in
cases where such purpose has been most plainly manifested. Commonwealth
v. Hutchinson, 10 Pa. St. 466; Saunders v. Commonwealth, 10 Grat. (Va).
494 ; Conn. v. Shelton, 47 Conn. 400 ; Johnson v. The Auditor. 78 Ky. 282.
So far as concerns this question, there are two points of difference between
the Act of 1867 and the one now in force. Sec. 57, clause j, of the present
act, provides that debts owing to the United States or a State or some sub-
division thereof as a penalty or forfeiture shall not be provable except for the
amount of the pecuniary loss sustained with costs and interest. No such
provision appears in the Act of 1867. Sec. 17 of the present act exempts from
release of provable debts such as are due as a tax levied by the United States,
the State or some subdivision thereof. Language of the same import appears
the Act of 1867 and the one now in force. Sec. 57, clause j, of the present
bankrupt's debts. These differences are insufficient to indicate an express
intention on the part of Congress in the passage of the present Act to es-
tablish a different rule as to the divesting of the government, National or State,
of its rights or remedies than that which obtained under the Act of 1867, as
construed by the Supreme Court in United States v. Herron, supra. If Con-
gress had intended that the bankrupt's discharge should operate as a release of
his debts owing to the government it would undoubtedly have so provided in
unmistakable terms, especially in view of the rule of construction which has
been established and so uniformly followed for so many years."
(25)
i94 THE NATIONAL BANKRUPTCY LAW.
Effect of a Discharge upon Judgments Against the Bankrupt. [Ch. III.
But in a case arising in the District of West Virginia, In re
Alderson (3 Am. B. R. 544; 98 Fed. 588), it was held that a judg-
ment obtained in a State court against a bankrupt for fines upon
indictment for unlawful retailing was a dischargeable judgment.
It does not seem that this case is authoritative because it would
result in a pardon of a criminal offense which cannot be con-
sidered to be the legislative intent. On the whole In re Baker
must be considered to govern. See further what is said under
section 63 as to what are provable debts.
" Assessments " are presumably included in the word " taxes ".
At all events, as the indebtedness, due to a municipality is not re-
leased by a discharge, under the view we have taken of the statute,
this question becomes immaterial. (As to payment of taxes, see
section 64a.) Moreover taxes, including assessments, are liens
upon the property which cannot be affected by bankruptcy.
Effect of a Discharge upon Judgments Against the Bankrupt. Sec-
tion 17a (2). — In considering the provisions of this section, pro-
viding for exemption from release by a discharge of the bankrupt
of judgments against him in actions for fraud or obtaining prop-
erty by false pretenses, or for wilful and malicious injury to
person or property, it is necessary to collate with it the provisions
of subdivision 4 of the same section exempting from release such
provable debts as are created by fraud, embezzlement, misappro-
priation or defalcation while acting in an official or in a fiduciary
capacity. It is necessary also to keep in mind that by section
63, subdivisions 1 and 5, any fixed liability evidenced by a judg-
ment absolutely owing at the time of the petition or founded
upon a provable debt reduced to judgment after the filing of
the petition and before the consideration of the discharge, is a
provable debt. Under the act of 1867 it was somewhat doubt-
ful as to whether a judgment for fraud by merger of the original
debt made the discharge operative upon it. These subdivisions
were probably enacted to clear up this doubt. (See In re
Rhutassel, 2 Am. B. R. 697; 96 Fed. 597; in re Thomas,
.1 Am. B. R. 515; 92 Fed. 912.) It follows that any judgment
BANKRUPTS. 195
§ 17.] Effect of a Discharge upon Judgments Against the Bankrupt.
obtained prior to the filing of the petition, and, if on a
provable debt, obtained prior to consideration of discharge,
is dischargeable unless it falls within the exceptions of subdi-
vision 2. That is to say, under this subdivision the question of
the form of the debt, as well as of its original nature, is an
essential in determining whether the particular debt will be barred
by a discharge. That clause does not except from the effect of
the discharge, claims created by fraud or by obtaining property
by false statements or by wilful and malicious injury to the
person or property of another, but does except judgments ren-
dered upon causes of action of this nature. The judgment read
in connection with the pleadings upon which it is based must es-
tablish the fact that the claim sued on and merged in the judg-
ment was created through fraud, or by false pretenses, or by wil-
ful and malicious injury to the person or property of another.
(See In re Rhutassel, supra.)
This is the better opinion although the construction of the
section is not free from doubt. In the case of In re Lewensohn
(3 Am. B. R. 596; 98 Fed. 576), Judge Brown of the Southern
District of New York, passing upon the question of a stay asked
for by the bankrupt of an action in a State court based upon
fraud, said:
" Nor is there any doubt that if the charges of false representations are sus-
tained, these debts would be barred from the operation of the discharge by
subdivision 2 of section 17, or by subdivision 4, of the Bankruptcy Act.
Different views have been entertained of the scope of these paragraphs. Para-
graph 4 may be regarded as merely a brief substitute for section 5117, Rev.
St., and thus applicable to frauds generally; and section 2, as respects frauds,
to be designed merely to remove the doubts which arose under the Act of
1867, whether a judgment for such frauds, ty merger of the original debt, did
not make the discharge operative upon it. On the other hand, subdivision 2
might be construed as requiring that for all frauds other than official or
fiduciary ones, judgments should be obtained in order to prevent their being
barred; and the frauds referred to in subdivision 4 deemed limited to those
committed by a person acting in an official or in a fiduciary capacity. Love-
land, Bankr. 625 ; Coll. Bankr. 135, 172 ; Low, Bankr. 307, 308 ; in re Thomas
(D. G). 92 Fed. 912; 1 Am. B. R. 515; In re Rhutassel (D. C), 96 Fed.
597, 2 Am. B. R. 697 ; Howland v. Carson, 16 N. B. R. 372, 28 Ohio St.
625."
196 THE NATIONAL BANKRUPTCY LAW.
Effect of a Discharge upon Judgments Against the Bankrupt. [Ch. Ill
Of course judgments obtained after the discharge cannot be
affected except that the discharge may be pleaded against them
in case they fall within the classes of dischargeable debts. In this
connection it is important to point out that section 67, annulling
liens obtained by legal proceedings within the four months of
bankruptcy, while it prevents a judgment obtained during that
period from becoming a lien, does not necessarily thereby affect
its provability as a claim.
Section 33 of the Act of 1867 was as follows. "No debt
created by the fraud or embezzlement of the bankrupt, or by his
defalcation as a public officer, or while acting in a fiduciary
character, shall be discharged under this Act." Under that Act
the question as to whether a debt was dischargeable or not
turned entirely upon the act of fraud. The words " wilful and
malicious injury to the person or property of another " in the Act
of 1898 are new. They enlarge the meaning of section 33 of the
former law. " Malicious " means something more than " wil-
ful " and holds within it the ideas of illwill, hatred and absence
of just cause. It applies, therefore, to judgments for libel,
slander, malicious prosecution, etc. In a learned opinion by
Referee Hotchkiss of the Northern District of New York, In re
Sullivan (2 Am. B. R. 30), from which the above statements have
been taken, it was held that a claim based upon a verdict assess-
ing damages for seduction was not within the meaning of " wil-
ful and malicious injury." In like manner a judgment for breach
of promise to marry has been held to be dischargeable under the
present Act. (In re McCauley, 4 Am. B. R. 122 ; 101 Fed. 223.)
As the subdivision tends to limit the right of a bankrupt to a
discharge and thus to impair the remedy, the statute being highly
remedial, the exception should be so construed as to impair the
remedy as little as required by its express terms. The division
of torts made by Mr. Bigelow in his work on that subject is
worthy of consideration in this connection. His division of the
subject is as follows : " Looking to one class of cases, a tort is a
breach of duty committed by fraud or by malice. Looking to a
second, a tort is a breach of duty absolute, regardless of fraud,
BANKRUPTS. 197
§ 17.] Character of Debt Determined by Record — Omitted Claims.
malice, intention, or negligence (in other words, these elements
may or may not exist). Looking to a third class, a tort is a
breach of duty committed by negligence." (Bigelow on Torts,
6th Stud. ed. p. 15.) As to judgments in the second class of
torts, the circumstances of each case will have to be considered,
in determining whether they are released by a discharge. And
it must be borne in mind that by the better opinion unless a judg-
ment rendered before the petition is filed, comes within the excep-
tions of subdivision (2) it is provable even though for tort, and
is dischargeable.
There are other judgments as for fines, penalties, alimony, etc.,
which are not properly considered debts at all and hence are not
dischargeable. On the question of alimony, however, there is a
division of opinion under the present Act. For further dis-
cussion of this subject see section 63 on " provable " debts.
Character of the Debt to be Determined by the Record. — The fact
that the judgment was in an action for fraud or wilful or mali-
cious injury may, perhaps, not appear by the judgment itself.
That is not necessary ; it is sufficient if it appear from the record
of the case. If the record show that the action was for any of the
causes specified, then the judgment is not barred by a discharge.
(Compare In re Patterson, Fed. Cas. 10,817; * N. B. R. 307;
in re Whitehouse, Fed. Cas. 17,564; 1 Lowell, 429; Warner v.
Cronkhite, Fed. Cas. 17,180; 13 N. B. R. 52; s. c. 6 Biss. 453.)
The action must have been based on the fraud or the wilful or
malicious injury. It is not enough that there may have been in-
cidental or immaterial, false and fraudulent representations in
connection with the transaction, if the action is not based on
them.
Omitted Claims. Section 17a (3) — The provisions of sub-
division (3), are new and form one of the most important" changes
made by the present law. To fully appreciate their extent and
application it will be well first to consider the general rule as to
the necessity of notice to creditors in order that the court may
acquire jurisdiction over them. The preponderance of authority
198 THE NATIONAL BANKRUPTCY LAW.
Debts Created by the Bankrupt's Fraud, in Official, etc., Capacity. [Ch. III.
under the Act of 1867 was that jurisdiction in bankruptcy pro-
ceedings, and in the special proceeding to grant a discharge, did
not depend on the correctness of the schedules, nor even on the
giving of notice to the creditors, but on the petition and adjudica-
tion. If the court acquired jurisdiction of the bankrupt, and had
jurisdiction of the subject-matter, then its decrees were binding
on all creditors whether or not they had actual notice, the pro-
ceeding in bankruptcy being in the nature of a proceeding in rem.
(Ryal v. Lapham, 27 Ohio St. 452; Thurmond v. Andrews, 13
N. B. R. 157; s. c. 10 Bush. 400; Piatt v. Parker, 13 N. B. R.
14; s. c. 11 N. Y. Supreme, 135; s. c. 6 N. Y. Supr. 377; Lamb
v. Brown, Fed. Cas. 8,01 1 ; 12 N. B. R. 522 ; s. c. 7 C. L. N. 363 ;
Black v. Blazo, 117 Mass. 17; s. c. 13 N. B. R. 195.) Hence,
according to these cases just cited, under the Act of 1867 a dis-
charge duly granted by a court having jurisdiction of the bank-
rupt, was a release of all provable debts (other than the excepted
ones), whether or not they appeared on the schedules and whether
or not the creditors received personal notice of the proceedings
in bankruptcy or of the application for a discharge. In so far as
the cases just cited laid down the rule that the court has jurisdic-
tion to grant a discharge which would be a release of omitted
claims held by creditors who do not have personal notice of the
proceedings in bankruptcy, they apply equally by the present law,
for though these creditors have not been served with notice, yet
if they have actual knowledge of the proceedings, their claims
are released by the discharge. But unless they do have actual
notice or personal knowledge, then their claims, if omitted from
the schedules, are, by the present law, unaffected. In this latter
respect the act is diametrically opposed to the act of 1867.
Debts Created by the Bankrupt's Fraud, Embezzlement, Misappro-
priation or Defalcation While Acting in an Official or Fiduciary
Capacity. Section 17a (4) — It will be noted that if any of these
debts be reduced to judgment prior to the filing of the petition,
they will become dischargeable, except in the case of fraud which
is covered by subdivision 2, above. In most respects this pro-
BANKRUPTS. i99
§ 17.] Debts Created by Fraud.
vision is similar to the provision under the Act of 1867 with the
exception of the use of the word " misappropriation " which does
not appear in any former act. " Misappropriation " means
wrongful appropriation and does not differ materially from em-
bezzlement. While we are unaware of any decision bearing
directly upon the subject, under the principle of noscitur a sociis
it will be presumably construed to mean substantially the same
as embezzlement. The following are the parallel sections under
the prior Act.
The act of 1867 (§ 33, R. S. § 5,117), was as follows: " No
debt created by the fraud or embezzlement of the bankrupt, or
by his defalcation as a public officer, or while acting in any
fiduciary character, shall be discharged by proceedings in bank-
ruptcy; but the debt .may be proved, and the dividend thereon
shall be a payment on account of such debt." It will be noticed
that debts created by misappropriation were not mentioned. The
Act of 1841 provided that " debts created in consequence of a
defalcation as a public officer or executor, administrator, guar-
dian, or trustee, or while acting in any fiduciary capacity," should
not be released by a discharge. These terms have already been
defined under prior acts and the decisions are applicable under
the present Act.
Debts Created by Fraud. — The word fraud as used in this sec-
tion means positive fraud, or fraud in fact, involving moral turpi-
tude or intentional wrong, and not implied fraud or fraud in law
which may exist without the imputation of bad faith or immoral-
ity. Thus, where an executor sold at a discount certain bonds
which he had received as part of the property belonging to the es-
tate of his decedent, and which the will directed him to distribute
in a certain way, the sale of the bonds was held by the State court
to have been a misappropriation of them amounting to a devas-
tavit, in which the purchaser was held to be a participant and liable
to account for the value of the bonds purchased, not because he
was guilty of any actual fraud, but because in view of the circum-
stances attending his purchase he had committed constructive
200 THE NATIONAL BANKRUPTCY LAW.
Fraud Must Exist at the Inception of the Debt. [Ch. III.
fraud. The U. S. Supreme Court held that he was released, by
his subsequent discharge in bankruptcy, from such liability. The
debt or liability was not created by such fraud as the act contem-
plated. (Neal v. Clark, 95 U. S. 704; s. c. sub nom. Neal v.
Scruggs, 17 N. B. R. 102, reversing same case, sub nom. Jones v.
Clark, 25 Gratt. 642.)
Neither does the term " fraud " as here used include such fraud
as is implied by law from the purchase of property from a debtor
with the intent thereby to hinder and delay his creditors. (Wolf
v. Stix, 99 U. S. 1.)
See Forsyth v. Vehmeyer, decided by the Supreme Court,
April, 1900, 3 Am. B. R. 807; 177 U. S. 177, which, while hav-
ing reference to the statute of 1867, is also equally applicable to
the present statute. In that case it was held that a representation
as to an act made knowingly, falsely and fraudulently for the pur-
pose of obtaining money from another and by means of which
such money is obtained creates a debt by means of a fraud in-
volving moral turpitude and intentional wrong, and is non-dis-
chargeable.
Fraud Must Exist at the Inception of the Debt. — The statute ex-
pressly says that the debt must have been created by fraud. Sub-
sequent fraudulent conduct in connection with it, or immaterial
fraudulent representations at the time of the creation are insuffi-
cient to take the debt out of the statute and to prevent its being
discharged. Thus it has been held in a case where a claimant of
a ship, against which the U. S. has filed a libel and which has
been seized as liable to forfeiture for violation of the rules of
war, has given a bond to procure its release, and his defense was
unsuccessful, that the debt on the bond was not created by fraud ;
nor did the fact that in his defense he introduced the evidence of
false witnesses make the debt upon the bond one created by fraud.
On other grounds it was decided that, under the statute of 1867,
the debt was not released by a discharge, but it was expressly
held that the subsequent fraud did not affect it. (In re Rob Roy,
13 N. B. R. 235; s. c. 1 Woods, 42.)
BANKRUPTS.
§ 17.] Fraud of One Partner — Actions for Debts Created by Fraud.
So, too, it has been held that where the bankrupt has bought
the business of another in consideration of his paying the debts
of the seller, his discharge in bankruptcy thereafter releases him
from his debt to the seller, even though he falsely stated to him
that the debt had been paid, and thereby dissuaded the seller from
proving his claim. The fraud did not exist at the inception of
the debt. The debt was not created by fraud. (Brown v.
Broach, 52 Miss. 536.)
Partnership Debts Created by the Fraud of One Member. — If in
the conduct of partnership business, and with reference thereto,
one partner makes false and fraudulent misrepresentations of fact
to the injury of innocent persons who deal with him as represent-
ing the firm and without notice of any limitations upon his general
authority, his partners cannot escape pecuniary responsibility
therefor on the ground that such misrepresentations were made
without their knowledge; especially if the partnership has had
the benefit of the fraudulent act, although the other partners were
all innocent of any wrong in the matter. The debt being one
created by fraud and by actual fraud, even the innocent partners
are not released from it by a discharge in bankruptcy. (Strange v.
Bradner, 114 U. S. 555, affirming s. c. sub nom. Bradner v.
Strang, 89 N. Y. 299; Schroeder v. Fry, 60 Hun, 58; s. c. 37
N. Y. St. Reporter, 945; s. c. 35 N. Y. St. Reporter, 987; s. c.
affirmed, 114 N. Y. 265.)
Actions in Assumpsit for Debts Created by Fraud. — The action on
a debt created by fraud need not be in tort, in order to prevent a
discharge from being a release. The plaintiff need not base his
action upon the fraud or set up the fraud in his complaint. He
may sue on the debt or upon notes given therefor, and if a dis-
charge is set up as a defense, he may meet it by proof of the fraud.
A claim arising from fraud may be prosecuted in any proper form
of suit. While it is a general rule of law that where the party has
an election between two inconsistent rights or remedies (for in-
stance where he can rely upon a contract, or can renounce
(26) ,
THE NATIONAL BANKRUPTCY LAW.
Burden of Proof — Judgment for a Debt Created by Fraud. [Ch. III.
the contract and bring action for the fraud), and knowing his
rights chooses one of the remedies, he renounces the other; yet
as under the provisions of section 17, subdivision (4), a debt
created by fraud is not released, the plaintiff may sue on the con-
tract, and if the discharge is pleaded as a defense, may reply that
the debt was created by the fraud, because he sets up the fraud,
not for the purpose of renouncing the contract, but as a reason
why his action upon the debt is not barred by a discharge. He
sues to recover his damages upon the breach of the contract, not to
recover the damages occasioned by the defendant's fraud, and
only alleges the fraud in his replication as a ground for showing
that the defendant's defense is not good. He asserts not that the
debt was void for fraud, but that because of the fraud the defend-
ant is not discharged from the debt by a discharge in bankruptcy.
He asserts the fraud, not for the purpose of rescinding the con-
tract, but to show that the defendant has not been relieved from
his obligation to perform his part of the contract; not to show
that by reason of the fraud no debt was created; but that being
created by fraud, it was not discharged by the bankruptcy act.
There is thus no inconsistency between the replication and the
declaration. (Stewart v. Emerson, 8 N. B. R. 462; s. c. 51
N. H. 301.) See paragraph How Pleaded and Evidenced,
post this section.
Burden of Proof. — After a discharge in bankruptcy the burden of
proving that the debt was created by fraud, or by one acting in a
fiduciary capacity, is on the plaintiff. (Sherwood v. Mitchell, 4
Den. 435.) If he fails to make proof, judgment must go against
him.
Judgment for a Debt Created by Fraud. — The debt as we have
seen under subdivision 2, is not released by a discharge, although
in the form of a judgment. But the record must show that the
debt is so created. If a judgment is rendered in an action, the
record of which shows material traversable allegations of fraud
which were necessarily determined, then the judgment is conclu-
sive. (Flanagan v. Pearson, 14 N. B. R. 37; s. c. 42 Tex. 1.)
BANKRUPTS. 203
§ 17.] Conversion is not a Fraud — " Fiduciary Capacity."
And where a State court has decided that the action was for
fraud and deceit and has held that in order to have maintained
such action the fraud must have been proved as laid in the dec-
laration, it must be assumed (by the U. S. Supreme Court on a
Writ of Error) that the verdict and judgment in that action were
obtained only upon proof and a finding by the jury of the fact of
fraud. (Forsyth v. Vehmeyer, 3 Am. B. R. 807; 177 U. S.
177- )
Conversion is not a Fraud — " Fiduciary Capacity." — Although
there has been much conflict of judicial opinion as to whether the
conversion of property, held by pledgees and other persons in sim-
ilar capacities, creates a debt which should be considered " a debt
created by fraud or by one acting in a fiduciary capacity," yet the
decisions of the courts of last resort under the act of 1867, as well
as under the act of 1841, hold that such conversions do not fall
within the term " fraud " as used in those acts; and that they are
to be considered breaches of contract rather than violations of
trust. Consequently, under those statutes the damages springing
from such acts constitute debts not only provable in bankruptcy
but released by discharge. In so far as the question of conversion
being a fraud is concerned, the law must be considered to be set-
tled by the decisions of the U. S. Supreme Court rendered under
the act of 1867. The leading case decided under that act was
Hennequin v. Clews ( 1 1 1 U. S. 676, affirming yy N. Y. 427 ; s. c.
84 N. Y. 676). It is decisive not only of what constitutes "fraud"
as the word is used in the act, but also of what is meant by the
expression " a fiduciary capacity." The precise question deter-
mined in that case was whether a discharge in bankruptcy oper-
ated to release a bankrupt from a debt or obligation which arose
from his appropriating to his own use certain bonds left with him
as collateral security for the payment of money or the discharge
of a duty, and subsequently failing or refusing to return the same
after the money had been paid or the duty performed, or whether
it was a debt " created by fraud or while acting in a fiduciary ca-
pacity." The New York Court of Appeals had decided that the
2o4 THE NATIONAL BANKRUPTCY LAW.
Conversion is not a Fraud — " Fiduciary Capacity." [Ch. III.
giving of the bonds as collateral was an ordinary commercial
transaction, and inasmuch as it did not appear that there had been
any misrepresentation or deceit used to obtain possession of the
property afterwards converted, the only fraud was such as was
implied by the violation of the duty to return the property when
the debt for which it was collateral was paid. The relation be-
tween the pledgor and the pledgee of the security rested entirely
in contract, and the breach of duty was to be considered as a
breach of contract rather than a breach of trust.
The case was taken on a writ of error to the U. S. Supreme
Court, which affirmed the decision of the New York Court of
Appeals, basing its own decision to a great extent upon cases de-
cided under the act of 1841, especially upon Chapman v. Forsyth
(2 How. 202). The latter was a case in which a cotton factor had
received cotton on commission to sell the same as property of the
consignor and remit the proceeds. He sold it and converted the
proceeds to his own use; failed to make any remittance; after-
wards went into bankruptcy and procured a discharge and pleaded
it in answer to an action brought against him on the debt. The
contention of the plaintiff in the case was that the debt, being
created by fraud and while the debtor was acting in a fiduciary
capacity, was not released by a discharge, the bankruptcy act of
1841 providing that " debts created in consequence of a defalca-
tion as a public officer, or as executor, administrator, guardian or
trustee, or while acting in a fiduciary capacity," were not released
by a discharge; and further providing that "no person should
be entitled to a discharge who should apply trust funds to
his own use." In the Circuit Court the judges were equally di-
vided in opinion as to whether a commission merchant or factor
who sells for others is indebted in a fiduciary capacity within the
terms of the act, if he sells the property, receives the money on the
owner's account, but fails to pay it over. But the Supreme Court
in rendering its decision in this case (Chapman v. Forsyth) de-
clared that such debts were not created by one acting in a fiduciary
capacity, saying : "If the act embrace such a debt, it will be diffi-
cult to limit its application. It must include all debts arising from
BANKRUPTS. 205
§ 17.] Character of the Debt Not Determined by State Law.
agencies, and indeed all cases where the law implies an obligation
from the trust reposed in the debtor. In almost all the commer-
cial transactions of this country confidence is reposed in the punc-
tuality and integrity of the debtor, and a violation of these is, in a
commercial sense, a disregard of a trust. But this is not the rela-
tion spoken of in the act. (Act of 1841.) The cases enumer-
ated, viz., ' the defalcation of a public officer,' ' executor,' ' admin-
istrator,' ' guardian,' or ' trustee,' are not cases of implied trusts,
but of special trusts, and the ' other fiduciary capacity ' mentioned
must mean the same class. The act speaks of technical trusts,
not those which the law implies from the contract." Such was
the authoritative decision of the highest court of the land under
the act of 1841 ; and it was followed in Hayman v. Pond (7 Met.
328) ; Austill v. Crawford (7 Ala. 333) ; Commercial Bank v.
Buckner (2 La. Ann. 1023) ; and must be considered as over-
ruling Matteson v. Kellogg (15 111. 547), and Flagg v. Ely (1
Edm. Sel. Cas. 206).
So under the present act it has been held by the District Court
for the Southern District of New York, citing the cases above re-
ferred to, that subdivision 4 does not embrace debts arising in
commercial dealings between principal, agent or factor for the
sale of goods on commission. {In re Basch, 3 Am. B. R. 235 ;
97 Fed. 761.)
Character of the Debt Not Determined by State Law. — The char-
acter of the debt is to be determined in accordance with the con-
struction to be given to the words and terms used in the bankrupt
law, and that law, applying to the whole country the construction
of it, as well as the operation of it, should be the same all over the
country and not varied by local laws of the several States.
The mere fact that the law of the State where the contract was
made and where it was to be performed, and where the parties re-
sided, punishes criminally the conversion by a factor of the mon-
eys of his principal, does not fix the character of the debt incurred
by the factor, nor determine the relation he bears to his principal.
(Woolsey v. Cade, 15 N. B. R. 238; s. c. 4 Cent. L. J. 202.)
2o6 THE NATIONAL BANKRUPTCY LAW.
Course of Dealing as Determining Fiduciary Capacity — Agents. [Ch. III.
Course of Dealing as Determining Fiduciary Capacity. — The
courts have at times endeavored to show the peculiar circum-
stances which make factors occupy a position different from other
trustees. In Woolsey v. Cade (supra), which was a case of cot-
ton factors, the court said : " The business of a factor is not con-
fined to a single transaction with a single individual. It extends
to a number of persons and to varied transactions. A cotton factor
seldom sells and seldom can in one sale dispose of the cotton of
one person only. In the ordinary course of business he sells the
cotton of several persons at certain prices varying according to the
quality, and the aggregate proceeds of the sale are paid to him.
The cotton is the property of the several persons to whom he
must, after the sale, separately account, in proportion to their sev-
eral interests when it is ascertained how much of the differing
■qualities of cotton each owned. Until then he must deposit the
funds in his own name. If lost because of such deposit it cannot
be properly said that he is guilty of defalcation which imports a
breach of duty, legal or moral. (Vail v. Durant, 7 Allen, 408.)
In the usual course of business factors make advances on consign-
ments ; oftentimes these advances are in amount so great that the
forwarder is indebted to them ; hence the course of dealings is one
in which mutual debts are incurred; one of them may be the
debtor at one time, the other at another time."
This explanation may perhaps not be satisfactory, but it is evi-
dently an aim to show that the course of business affects and de-
termines the relation of factors to their principals, and that the
course of business is such that their liability is one of contract
merely, not of trust.
Agents. — If factors are not fiduciary debtors, agents clothed
with similar powers cannot be regarded as fiduciary debtors.
Thus agents authorized by agreement to make sales and to col-
lect moneys and carry them into account and pay over monthly
or at other regular intervals, are to be treated as debtors, not as
trustees. They do not occupy a fiduciary capacity. (Grover v.
Clinton, Fed. Cas. 5,845; 8 N. B. R. 312; s. c. 5 Biss. 324;
BANKRUPTS. 207
§ 17.] Agents.
Kaufman v. Alexander, 53 Texas, 562; Guilfoyle v. Anderson,
9 Daly [N. Y.], 64.) And persons who were made the agents of
others to procure the discount of certain notes and then to pay
the proceeds over have been held not to act in a fiduciary capacity,
and their act of converting the proceeds to their own use is not a
"fraud." (Compare Lawrence v. Harrington, 122 N. Y. 408;
Green v. Chilton, 57 Miss. 598; Noble v. Hammond, 129 U. S.
6S-)
And a deposit of bills of exchange, with instructions to collect,
apply the proceeds upon certain indebtedness, and remit the bal-
ance, does not create a fiduciary relation between the depositor and
the bailee. (Cronan v. Cotting, 4 N. B. R. 667; s. c. 104 Mass.
245, holding that the fiduciary relation must have existed prior to
and independently of the particular transaction from which the
debt arose, in order to fall within the term as here used. ) It has
further been held that if a maker of a promissory note gives
money to his surety to pay the note and the latter does not so
apply it, this does not create a fiduciary debt. (Bissell v. Cou-
chane, 15 Ohio 58. ) Contra to this last case, Matteson v. Kellogg
(15 111. 547) ; Kingsland v. Spalding (3 Barb. Ch. 341), hold-
ing that where one receives money to be used in a particular way
or for a particular purpose for the use of the principal, then the
money is held in a fiduciary capacity ; as, for instance, where he
receives money for the purpose of investment or for the pur-
pose of paying the debt of another. But the rule laid down in
the two cases last cited cannot be considered as correct, if the
agent or bailee, by agreement of the parties or by the usual course
of dealing, is allowed to handle the property and deal with it as
his own, subject only to the duty of returning it on demand. And
even when applied to other cases the rule would seem to be op-
posed to that established by the weight of authority. Both of the
cases mentioned have been criticised or disapproved in many of
the cases cited in this paragraph and in the paragraph on Con-
version is Not a Fraud. See in particular, Chapman v. For-
syth (2 How. 202), and Hennequin v. Clews (in TJ. S. 676).
In general, the relation between a banker and his depositor is
2o8 THE NATIONAL BANKRUPTCY LAW.
Auctioneers — Attorneys — Officers. [Ch. III.
that of debtor and creditor, and is not fiduciary (Bank of Madi-
son, Fed. Cas. 890; 9 N. B. R. 184) ; and this rule applies to any
bailee with whom money is deposited to be mixed with his own
and to be used by him till asked for by the depositor. Such a de-
posit creates merely an ordinary indebtedness.
Auctioneers. — Where such persons receive goods to be sold by
them at auction, the proceeds to be remitted, though they may be
called auctioneers, it is difficult to see how they sustain towards the
persons whose goods they sell any relation different than commis-
sionmen would. Their liability would seem to be the same, — a
mere indebtedness dischargeable in bankruptcy. The case of
Mayor v. Walker ( 1 1 N. B. R. 478 ; s. c. sub nom. Jones v. Rus-
sell), holding a contrary doctrine, was a case in which the auc-
tioneer was a city officer; and though the decision was not ex-
pressly based on that ground, in so far as it is an authority for
the statement that auctioneers act in a fiduciary capacity, it seems
to be opposed to the reasoning of the opinion in Hennequin v.
Clews (111 U. S. 676), and the other cases cited in the notes
above as to liability of factors and commissionmen and as to con-
version not being a " fraud." Expressly opposed to Mayor v.
Walker, is Gibson v. Gorman (44 N. J. 325).
Attorneys. — An attorney, who in his professional character col-
lects a debt for his client, acts in a fiduciary capacity. (White v.
Piatt, 5 Denio, 274; Flanagan v. Pearson, 14 N. B. R. 37; s. c.
42 Tex. 1. Contra, Wolcott v. Hodge, 81 Mass. 547.) But
if the attorney is not employed in a professional capacity, then he
incurs only the liability of an ordinary agent or bailee. (McAdoo
v. Lumiss, 43 Tex. 227.) In Flanagan v. Pearson, the court de-
clared that the relation of attorney and client was similar to the
express trusts mentioned in the act of 1841, viz., these of exec-
utor, administrator, guardian and trustee.
Officers. — The term officer does not include those who are sure-
ties for officers. Sureties are not officers, neither do they act in a
fiduciary capacity even though their principals are persons filling
BANKRUPTS 209
§ 17.] Testamentary Trustees — Discharge as Defense Must be Pleaded.
public offices or occupying technical trusts. A discharge granted
to the surety releases him from any liability actually incurred upon
his bond, even though his principal is guilty of a defalcation.
(Jones v. Knox, 46 Ala. 53 ; Fowler v. Kendall, 44 Me. 448; Reitz
v. People, 72 111. 435 ; Steele v. Graves, 68 Ala. 21.) Mere neg-
ligence of a public officer in collecting moneys which it is his duty
to collect is not a defalcation. (Courtney v. Beale, 84 Va. 692.)
Testamentary Trustees, Guardians. — Whenever a debt is due by a
testamentary trustee, executor, administrator or guardian, as
such, it is not released by a discharge. These are the " technical
. trusts " referred to in the act of 1841, and uniformly held to create
obligations not affected by a discharge. But the debt must be
one due from the trustee as such, not an individual indebtedness
of his, even though connected with the trust estate. Thus a sum
of money due from an executor to a legatee is a fiduciary debt,
and is not released by his discharge in bankruptcy. {In re Cris-
field, 55 Md. 192.) Where an executor gave his personal guar-
antee of a claim of a creditor against his testate's estate, the guar-
antee was rightly held to be an ordinary debt, not one created
while acting in a fiduciary capacity. (Amoskeag Mfg. Co. v.
Barnes, 49 N. H. 312.) And where an accounting trustee gave
his note under seal (importing a consideration) which was ac-
cepted in satisfaction, and a release given, it was held that the note
was not a fiduciary debt. (Coleman v. Davis, 45 Ga. 489; com-
pare Elliot v. Higgins, 83 N. C. 459.) If the note had not been
accepted in satisfaction and a release given, it would seem that the
note would constitute simply a new evidence of the old debt and
would not be released by the discharge. (Madison v. Dunkle,
114 Ind. 262.)
The Discharge as a Defense Must be Pleaded. — A court does not
lose jurisdiction of an action pending before it because the
defendant has been discharged in bankruptcy. It may, unless the
suit is stayed, proceed to final judgment. The discharge must be
pleaded if the defendant would avail himself of it. No court will
(27)
THE NATIONAL BANKRUPTCY LAW.
Right to Plead a Discharge Received Pendente Lite. [Ch. III.
take judicial notice of it and protect his rights because he has this
defense, any more than they will protect him because he may have
some other valid defense. (Horner v. Spellman, 78 111. 206, 410;
McDonald v. Davis, 105 N. Y. 508; Revere v. Dimock, 90 N. Y.
33; s. c. affirmed as Dimock v. Revere, 117 U. S. 559; Monroe
v. Upton, 50 N. Y. 593; Manwarring v. Kouns, 35 Tex. 171.)
See also cases cited heretofore in notes to this section, paragraphs
on The Discharge not an Extinguishment of the Debt, Judgments
Entered after Granting of the Discharge, Remedies against Judg-
ments, and Effect of a Discharge to be Determined by Court in
which the Action is Brought.
Right to Plead a Discharge Received Pendente Lite.— If the bank-
rupt receives a discharge pending a suit against him, and the dis-
charge might be a defense to such suit, in general he will be al-
lowed to plead it. (National Bank v. Taylor, 120 Mass. 124.)
Where there is a system of Code Pleading he must apply for leave
to set it up by a supplemental answer and generally will be per-
mitted to do so. (Lyon v. Isett, 34 N. Y. Supr. 41 ; Holyoke v.
Adams, 59 N. Y. 233; s.c. 13 N. B. R. 413.) And if the de-
fendant would avail himself of this defense, it must be pleaded in
actions in equity as well as those at law. It cannot be taken ad-
vantage of by motion. (Fellows v. Hall, Fed. Cas. 4,722; 3
MacLean, 281.) But the permission to set up the defense by a
supplemental answer will be denied if there has been great and in-
excusable delay ; and the court may in its discretion impose terms
as a condition of allowing one to plead it. (Medbury v. Swan,
8 N. B. R. 537; s. c. 46 N. Y. 200; Barstow v. Hansen, 2 Hun,
333.) In Medbury v. Swan, a delay of fifteen months was held
sufficient to justify a court in refusing permission to plead a dis-
charge by supplemental answer. The application for leave to
plead a discharge by means of a supplemental answer like all other
applications for leave to put in a supplemental answer is adressed
to the discretion of the court. On motions for such leave the
court has the same discretion as under the former practice a court
had upon a motion to strike from the file of a court a plea puis
BANKRUPTS.
§ 17.] How Pleaded and Evidenced.
darrein continuance. Leave may be denied, although the defense
sought to be interposed is strictly legal, where in the judgment of
the court, laches or fraud is shown, or it appears that injustice
will be wrought by allowing the defense. Thus in New York,
where in an action, an attachment, had been issued and levied
upon property of defendants, which attachment had been released
by the giving of an undertaking by sureties, conditioned for the
payment of any judgment recovered therein against the defend-
ant, the court denied a subsequent motion of the defendant to be
allowed to plead by supplemental answer a subsequent discharge
in bankruptcy, since the effect would be to prevent a judgment
being entered against him, and as the recovery of a judgment was
the contingency on which the sureties were to become liable to the
plaintiff upon the bond given to dissolve the attachment, to pre-
vent the entry of such judgment would be to work an injustice
against the plaintiff, and to deprive him of a proper advantage
lawfully obtained by his attachment. (Holyoke v. Adams, 59
N. Y. 233; s. c. 13 N. B. R. 413. Compare the notes to section
16, showing that the course of practice in Massachusetts is differ-
ent. ) Where a defendant, prior to bankruptcy, has suffered judg-
ment by default to be taken against him, and such judgment is a
valid lien on his land, if afterwards he institutes proceedings in
bankruptcy and procures a discharge he will not be allowed to
set up the discharge by a supplemental answer, the court in the
meantime having opened the default and given him leave to an-
swer, but having directed the judgment to stand as security ; for
to order that leave be given to plead the discharge by supplemental
answer would be to destroy the lien, and this the plaintiff was en-
titled to under the provisions of the bankrupt act. (Barstow v,
Hansen, 2 Hun, 333.)
How Pleaded and Evidenced. — The present act provides for a dis-
charge which is evidenced only by the record of a decree to that
effect. There is no provision for any instrument in the nature of
a certificate of discharge. The decree is the discharge, and it may
be evidenced by the record or by a certified copy. By section 21
THE NATIONAL BANKRUPTCY LAW.
Replication. [Ch. III.
(/) such certified copy is made evidence not only of the fact that
such order was made, but of the regularity of the proceedings
and of the jurisdiction of the court. The act contains no express
provision as to the manner in which the discharge may be pleaded.
The provision just referred to establishes only the evidentiary
value of the certified copy. Section 5,119 of the R. S. contained
a provision as to the manner of pleading the discharge under that
law, and further provided that the certificate should be conclusive
evidence of the fact and regularity of such discharge. Under
that act it was held that the plea should set forth facts showing
that the court had jurisdiction, but need not set forth facts show-
ing the regularity of the proceedings. Regularity was presumed
when jurisdiction was proven. (Stoll v. Wilson, 14 N. B. R.
571 ; s. c. 38 N. J. 198; see also, as to practice under act of 1841,
McCormick v. Pickering, 4 N. Y. 276; Varnum v. Wheeler, 1
Denio, 331.)
Replication. — Under the old system of pleading if the debt is
excepted from the operation of a discharge, the plaintiff need not
set up that fact in his declaration. The proper practice is to de-
clare as if there were no discharge, and when the discharge has
been set up in the plea, to set forth in a replication the facts to
avoid the discharge. (Brown v. Broach, 52 Miss. 536; Johnson
v. Ball, 15 N. H. 407.) If the plaintiff seeks to avoid the dis-
charge on the ground that the debt was created by fraud, or while
the defendant was acting in a fiduciary capacity, he must set up
the fact in his replication. (Cutter v. Folsom, 17 N. H. 139.)
But under the Code, in New York, and, presumably, in most Code
States, a reply is never necessary to the allegations in an answer,
unless directed by the court or unless a counterclaim has been set
up in the answer. The plaintiff need not allege that the debt
which is his cause of action was created by fraud and need not
reply to an answer setting up a discharge ; and yet may show that
his debt was one created by fraud. (Argall v. Jacobs, 87 N. Y.
no.)
BANKRUPTS. 213
§ 17. Proceedings in Appellate Courts After a Discharge.
Proceedings in Appellate Courts After a Discharge. — If a dis-
charge has been granted to a person after the entry of judgment
against him but while the case is in the appellate court, the en-
forcement of his remedies depends on the practice of the State
where the suit is brought. In New York the mere suggestion of
the discharge of the defendant while his appeal is pending can
have no effect. The appellate court will proceed as if no dis-
charge had been granted; and if the judgment is affirmed, the
defendant may then apply to the proper court for a perpetual stay
of execution. (Cornell v. Dakin, 38 N. Y. 253, citing Palmer v.
Hutchins, 1 Cow. 42; Baker v. Taylor, 1 Cow. 165.) In Ten-
nessee, it seems that the proper remedy for enforcing the right to
a discharge as against a judgment entered before the discharge
was granted but which at that time was on appeal, is by an equita-
ble action instituted after the appellate court has pronounced its
judgment of affirmance. There is no way in which the matter
can be brought before the appellate court. (Wolf v. Stix, 99
U. S. 1 ; Wolf v . Stix, 96 U. S. 541 ; Longley v. Swayne, 4
Heisk. [Tenn.J 506; Riggs v. White, 4 Heisk. 503; Ward V:
Tunstall, 58 Tenn. 319.) The rule in that State is: "On the
record when presented, to which alone the appellate court can
look, a judgment can be rendered and then if the debtor desires
to be relieved he will find no difficulty in being protected from
payment of improper judgments, either in the bankruptcy court
or by an original proceeding in the State court where he can make
such issues as will raise the question. As he is precluded from
interposing in the appellate court his defense arising out of his
discharge in bankruptcy, the judgment of affirmance will not
interfere in any way with his subsequent action for relief from
it." In that State, as in New York, there is no authority for the
appellate court to entertain a petition to set aside a judgment en-
tered by it after the granting of the discharge. If the court were
to receive a petition the opposite party ought to have the right to
controvert the facts stated in the petition and to show that the
discharge was not operative upon the judgment, and thus issues
2i4 THE NATIONAL BANKRUPTCY LAW.
Revival of Discharged Debt by a New Promise. [Ch. III.
would be raised which would constitute a new lawsuit. Neither
in the States mentioned and in others whose practice is similar,
can the discharge be made available in the appellate court by a
plea in abatement, though it was granted after the original judg-
ment. But in several States a discharge may be used in proceed-
ings on appeal. Thus, in Vermont, if a discharge is obtained
after the granting of the original judgment, the appellate court
may, in its discretion, reverse the judgment pro forma, if the dis-
charge is suggested to it, and will do so in order to enable the de-
fendant to plead his discharge. (Bank v. Onion, 16 Vt. 470.)
In Missouri it is within the power of the appellate court to order
that the appellant be discharged from the judgment. (Haggerty
v. Morrison, 59 Mo. 324.) In other States the appellate court
will either order a perpetual stay or dismiss the appeal.
Revival of Discharged Debt by a New Promise. — The moral obli-
gation to pay a discharged debt is a good consideration for a new
promise to pay it. The legal obligation of the bankrupt is by
force of positive law discharged, and the remedy of the creditor
to enforce payment of it by suit is barred. But the debt is not
paid, the moral obligation to pay remains, and a promise based on
it is upon sufficient consideration. (Dusenbury v. Hoyt, 10 N.
B. R. 313; s. c. S3 N. Y. 521; s. c. 14 Abb. Pr. [N. S.] 132;
Gardner v. Bowen, 23 Weekly Digest, 252.) This is an applica-
tion of the general rule that if a debtor is released from his debt
by provisions of positive law, his subsequent express promise to
pay the debt will be enforced, but where the subsequent promise
is to pay a debt released by the voluntary act of the creditor, the
promise will not be enforced. A discharge under a composition
made and confirmed under the provisions of the bankruptcy act
is a discharge by operation of law, and not a voluntary discharge ;
and this is as true of the claim of a creditor voluntarily signing
the composition as of the claim of one who dissented. An indebt-
edness thus discharged is a good consideration for a subsequent
promise to pay the original debt. (In re Merriman, 44 Conn.
587; s. c. 18 N. B. R. 411 ; Mason & Hamlin Organ Co. v. Ban-
DEFINITIONS. 215
§ 17.] New Promise Must be Definite — Expressions of Intention to Pay.
croft, i Abb. N. C. 415 ; s. c. 4 Cent. L. J. 295 ; Ex p. Jacobs, 44
L. J. Bank. 34.)
New Promise Must be Express, Definite, Unambiguous. — The
promise must be definite, express, distinct, unambiguous. ( Stern
v. Nussbaum, 5 Daly [N. Y.] 382; s. c. 47 Howard Pr. 489; Al-
len v. Ferguson, 9 N. B. R. 481 ; s. c. 18 Wall. 1.) The mere
subsequent acknowledgment of the justice of the debt or of its
existence cannot be considered a promise to pay. It is nothing
but a recognition of that which does in fact exist, viz., the moral
obligation to pay. (Porter v. Porter, 31 Me. 169; Murphy v.
Crawford, 114 Pa. St. 496; Brewer v. Boynton, 71 Mich. 254.)
Expressions of an Intention to Pay. — A mere expression of an
intention to pay is not a promise to that effect. In the case of
Allen v. Ferguson, the U. S. Supreme Court held (9 N. B. R.
481; s. c. 18 Wall. 1), that where a discharged bankrupt had
written to his creditor " Be" satisfied ; all will be right. I intend
to pay my just debts if money can be made from hired labor. All
will be right between me and my just creditors," — this language
could not be considered a promise to pay the debts. The promise
by which a discharged debt may be revived must be clear and un-
equivocal. The rule is different in regard to the defense of the
statute of limitations against a debt barred by lapse of time. In
that case acts or declarations recognizing the existence of the
debt as still an obligation, have often been held to take a case out
of the statute; not so in the case of debts discharged in bank-
ruptcy. Nothing is sufficient to revive such debts unless the jury
is authorized by it to say that there was an expression by the
debtor of the intention to bind himself to the payment of the debt.
Thus partial payments do not operate as a new promise to pay
the residue of the debt ; nor is the payment of interest a promise
to pay the principal. The mere expression of an intention to pay
is not sufficient. And in the same case the court said, with refer-
ence to an expression of intention to do " what was right " and to
pay " just debts," that the determination of what was " right "
or " just " in such cases was so impracticable that courts of law
2i6 THE NATIONAL BANKRUPTCY LAW.
Payments upon Discharged Debts — Actionvon New Promise ? [Ch. III.
could not undertake to ascertain the rights of parties under such
an expression. But it is not necessary that the word " promise "
be used to create an obligation. It has been said the true test is :
Did the party mean that he would pay the debt? If he did and
his words are susceptible of no other construction, then in law his
words amount to an express promise to pay. The question would
seem to be one of fact for the jury, whether from the words used,
considered in the light of all the circumstances of the case, there
was, as was said in Allen v. Ferguson (9 N. B. R. 481 ; s. c. 18
Wall. 1), "the expression by the debtor of a clear intention to
bind himself to the payment of the debt." The inquiry is : " Did
the party express his intention to reassume his legal obligation."
(Harris v. Peck, 1 R. I. 262; Craig v. Seitz, 63 Mich. 727.) In
deciding this question not only the words used may be considered
but all the attendant circumstances, such as whether they were ad-
dressed to the debtor or to third persons, and also the cause and
occasion of the use of the words. (Evans v. Carey, 29 Ala. 99;
Horner v. Speed, 2 Pat. & H. 616.)
Subsequent Payments upon Discharged Debts. — Subsequent pay-
ments do not revive the debt so as to make the debtor liable for the
residue, nor does the payment of interest make one liable for the
principal. Neither will such payments be evidence which alone
will justify a jury in finding that a new promise was made to pay
the debt. (Allen v. Ferguson, 9 N. B. R. 481 ; s. c. 18 Wall. 1 ;
Lawrence v. Harrington, 122 N. Y. 408; Wheeler v. Simmons,
60 Hun, 404; s. c. 39 N. Y. St. Rep. 797; Cambridge Institution
v. Littlefield, 60 Mass. 210.)
Must the Action be on the Original Debt or the New Promise?
There is much conflict of authority on this point. One line of
cases holds that the discharge bars the debt sub modo only, and the
new promise operates merely as a waiver of the defense which
the discharge gave, and that when the bankrupt has made a sub-
sequent promise to pay the debt, the creditor may bring the action
upon the original demand and may set up in his reply (if a reply
is necessary) the new promise in avoidance of the discharge set
BANKRUPTS. 217
§ I7-] Parol Promise.
out in the answer or plea. This is the rule in New York. (Du-
senbury v. Hoyt, 10 N. B. R. 313; s. c. 53 N. Y. 521; s. c. 14
Abb. P.r. [N. S.J 132. To same effect, Maxim v. Morse, 8 Mass.
127; Riggs v. Roberts, 85 N. C. 151; Graham v. O'Hern, 24
Hun, 221; Marshall v. Tray, 74 111. 379; Hopkins v. Ward, 67
Barb. 452; Badger v. Gilmore, 33 N. H. 361 ; Otis v. Glazen, 31
Me. 567; Apperson v. Stewart, 27 Ark. 619.) Considering the
new promise merely as a waiver of the defense of a release by the
discharge, the rule as laid down by the New York courts is that
a subsequent promise to pay, made any time before the rendering
of a verdict, even after the commencement of an action on the old
debt, and even though the discharge may have been previously
pleaded, is good as a waiver. (Decker v. Kitchen, 33 Hun, 268;
s. c. 19 Weekly Dig. 379, citing Rucker v. Hanna, 4 East, 604;
Yea v. Fouraker, 2 Burrows, 1099; Wright v. Steele, 2 N. H.
53. See also Clark v. Atkinson, 2 E. D. Smith, 1 12 ; Shipping v.
Henderson, 14 J. R. 178; McNair v. Gilbert, 3 Wend. 344; Wait
z. Morris, 6 Wend. 394; Fitzgerald v. Alexander, 19 Wend.
402.) But in many States the original debt is considered as
wholly extinguished ; an action, if brought, must be on the subse-
quent promise. (Eckler v. Galbraith, 12 Bush. 71 ; Carson, v.
Osborn, 10 B. Mon. 155; Murphy v. Crawford, 114 Pa. St. 496;
Egbert v. McMichael, 9 B. Mon. 44; Fleming v. Lullman, 11
Mo. App. 104; Ross v. Jordan, 62 Ga. 298.) In Horner v. Speed
(2 Pat. & H. 616), it was held that the creditor might elect to sue
on the new promise or on the original debt.
Parol Promise. — Unless required by the statute of the State where
the action is brought on the new promise, there is no law requiring
that such promise shall be in writing in order to be valid. It may
be by parol and be binding. (Henly v. Lanier, 10 N. B. R. 280;
s. c. 75 N. C. 172; Apperson v. Stewart, 27 Ark. 619; Mut. Re-
serve Assn. v. Beatty, 2 Am. B. R. 244; 35 C. C. A. 513 ; 93 Fed.
747.) But if a State law does require such promise to be in
writing in order that the promise may be proved, the law is gov-
erning even though the promise was in fact made before the pas-
(28)
218 THE NATIONAL BANKRUPTCY LAW.
Date of Promise — New Promise to Pay a Discharged Judgment. [Ch. III.
sage of the law requiring a written promise, as the law prescribes
merely the kind of evidence necessary to establish a fact and regu-
lates only the remedy. (Kingsley v. Cousins, 47 Me. 91.)
In New York the promise must be in writing (N. Y. Pers.
Prop. L.).
Date of the Promise. — It is immaterial whether the promise be
made between the filing of the petition and the granting of the
discharge, or after the discharge. A promissory note, given in
payment of an old debt, after the petition is filed, and before the
discharge, is not affected by the discharge. The discharge re-
lates back to the filing of the petition, but the moral obligation to
pay exists at all times, and before the discharge as well as after it
forms a sufficient consideration for the new promise. It is not
necessary that the bankrupt receive his discharge before his new
promise, in order that it be based on a good consideration. (Jer-
sey City Ins. Co v. Archer, 122 N. Y. 376 [citing Fraley v. Kelly.
67 N. C. 78; Hornthal v. McRae, 67 N. C. 21; Kirkpatrick v.
Tattersall, 13 M. & W. 766; Brix v. Braham, 1 Bing. 281 ; Knapp
v. Hoyt, 57 Iowa, 591 ; Lerow v. Wilmarth, 7 Allen, 463; Still-
well v. Coope, 4 Den. 225 ; Geery v. Bucknor, 4 N. Y. Leg. Oba.
344; Allen v. Ferguson, 9 N. B. R. 481 ; s. c. 18 Wall. 1], See
also Otis v. Gazlin, 31 Me. 567; Griel v. Solomon, 82 Ala. 85;
Corliss v. Shepherd, 38 Miss. 550; Roberts v. Morgan, 2 Esp.
736; Tooker v. Doane, 2 Hall, 538; Donnell v. Swaim, 3 Penn.
L. J- 393; Wheeler v. Wheeler, 28 111. App. 385.)
New Promise to Pay a Discharged Judgment. — It may well be
doubted if a new promise would give a right to a judgment cred-
itor to issue execution on a judgment released by a discharge. It
would seem that the plaintiff should sue on the judgment. The
court cannot, however, on a motion for leave to issue execution,
hear and determine whether or not there has been a new promise,
the evidence being conflicting. (Shuman v. Strauss, 10 N. B. R.
300; s. c. 52 N. Y. 404.)
CHAPTER IV.
COURTS AND PROCEDURE THEREIN.
Sec. i 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 pro-
cess 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 in
equity in courts of the United States.
b The bankrupt, or any creditor, may appear and plead to the
petition within ten days after the return day, or within such fur-
ther 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 jury 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.
f If the judge is absent from the district, or the division of the
district in which the petition is pending, on the next day after
the last day on which pleadings may be filed, and none have
been filed by the bankrupt or any of his creditors, the clerk shall
forthwith refer the case to the referee.
g Upon the filing of a voluntary petition the judge shall hear
the petition and make the adjudication or dismiss the petition. If
the judge is absent from the district, or the division of the district
219
220 THE NATIONAL BANKRUPTCY LAW.
Process, Pleadings, and Adjudications — Equity Rules as to Process. [Ch. IV.
in which the petition is filed at the time of the filing, the clerk shall
forthwith refer the case to the referee.
Analogous Provisions of Former Acts. —
As to service of process : R. S., section 5024 ; act of 1867, section 40 ; also
R. S., section 5025 ; act of 1867, section 40 ; act of 1841 section 1 ; act of 1800,
section 3. As to appearances, pleadings, trial, and adjudication; R. S., sec-
tion 5026 ; act of 1867, sections 41 and 42 ; act of 1841, section 1 ; act of 1800,
section 3; also R. S., section 5028; act of 1867 section 42.
Equity Rules as to Process. — Rule 7. The process of subpoena shall consti-
tute 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 com-
pelling obedience to any interlocutory or final order or decree of the court.
Rule 11. 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 12. Whenever a bill is filed, the clerk shall issue the process of sub-
poena thereon, as of course, upon the application of the plaintiff, 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; otherwise,
the bill may be taken pro confesso. Where there are more than one defendant,
a writ of subpoena may, at the election of the plaintiff, be sued out separately,
for each defendant, except in the case of husband and wife defendants, or a
joint subpoena against all the defendants.
Rule 13. 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 14. Whenever any subpoena shall be returned not executed 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 15. The service of all process, mesne and final, shall be by the marshal
of the district or his deputy, or by some other person, specially appointed by
the court for that purpose, and not otherwise. In the latter case the person
serving the process shall make affidavit thereof.
Rule 16. Upon the return of the subpoena as served and executed upon any
COURTS AND PROCEDURE THEREIN.
§ 18.] Procedure in Involuntary Cases.
defendant, the clerk shall enter the suit upon his docket as pending in the
court, and shall state the time of the entry.
Procedure in Involuntary Cases. — It will be noticed that the
above section with the exception of subdivision " g " applies ex-
clusively to involuntary proceedings and treats of the provisions
peculiar to such proceedings. After adjudication the procedure is
substantially the same in both classes of petitions. The petition
is filed by a creditor which ( Section i [9] ) may include any one
who has a claim provable in bankruptcy, and also includes his
duly authorized agent, attorney or proxy. As to the creditors,
in number and amount, who may file an involuntary petition see
section 59b. Petitions shall be filed in duplicate, one copy for the
clerk and one for service on the bankrupt. (Section 59c.) As
to the method of computing the number of creditors see section
59d and e. The word " creditors," it must be remembered, does
not apply to secured creditors except so far as they own debts in
excess of their security, or voluntarily waive their security. (See
section 57g.) As to what are provable debts see section 63. The
petition (Form No. 3) must be printed or written out plainly
without abbreviation or interlineation. (G. O. 5.) It must
show the jurisdictional facts, viz. : that the debtor is one who
may be declared an involuntary bankrupt under section 4, and
that he has committed an act of bankruptcy under the provisions
of section 3. It must also show the jurisdictional facts with ref-
erence to venue. The form of the verification will be found at-
tached to the form of the petition. (Form No. 3.) It must be
verified by three of the petitioners named if there is more than
one, under the provisions of section 59. Under the act of 1867
it seems that the verification of the petition might have been made
by an agent or an attorney in fact, but it has been declared in a
case under the present statute and rules that section 1 (9) does
not authorize the verification of a petition by the attorney of the
petitioning creditors, although such defect in verification may be
waived by the defendant by a failure to make an objection within
the time allowed for pleading. Lack of verification is not a juris-
dictional defect. (See in re Simonson et al. 1 Am. B. R. 197;
THE NATIONAL BANKRUPTCY LAW.
Procedure in Involuntary Cases. [Ch. IV.
92 Fed. 904; In re Soper et al. 1 Am. B. R. 193, referee's opin-
ion. ) As to the person before whom the verification may be made
see section 20. The petition must be filed within four months
after the commission of the act of bankruptcy. (Section 3b.)
Upon the filing of such petition the clerk enters an order re-
quiring that a copy of the petition with the writ of subpoena be
served upon the said bankrupt, that he appear and show cause
upon the return day why the prayer of the petitioner should not be
granted. This order and writ of subpoena must be served upon
him personally or by leaving the same at his last place of abode
within five days before the return day. ( See Form No. 4. ) Upon
this order a writ of subpoena is issued by the clerk (Form No. 5)
which is to be served as prescribed in the section.
As to the time when the petition is returnable see section 18a,
which also fixes the time and manner of service. And see further
Equity Rules with reference thereto quoted at the beginning of the
notes to this section, particularly Equity Rule 15. There is noth-
ing to prevent an appearance and waiver of service. (See In re
Columbia Real Estate Co. [C. C. A.] 4 Am. B. R. 411 ; 101 Fed.
965 ; and see Leidigh Carriage Co. v. Stengel, 2 Am. B. R. 383 ;
2,7 C. C. A. 210; 95 Fed. 637.) As to service by publication
provided for in section 18a, see 18 U. S. Stats, at L. 472; 1 Sup.
Rev. Stat. 176; Rev. Stat. sec. 738, providing in substance that
where a defendant is absent from the district in which the pro-
ceeding is brought the court may make an order directing such
defendant to appear to plead, answer or demur at a day to be
designated, and if such defendant cannot be served, such order
shall be published as the court directs for at least once a week for
six consecutive weeks, and upon proof of the due publication the
court obtains jurisdiction over the property which is within the
territorial jurisdiction of the court.
Upon the return day the bankrupt or any creditor may plead to
the petition. The pleading may consist of a demurrer or a de-
nial. The form of the denial is given in Form No. 6. If he de-
murs and the court overrules the demurrer, an absolute adjudica-
tion in bankruptcy may be entered up, but he may be allowed to
COURTS AND PROCEDURE THEREIN. 223
§ 18.] Proceedings in Voluntary Bankruptcy — Amendment of Petition.
answer over, and usually is, in the discretion of the court. If the
allegations of the petitions are indefinite and uncertain, the de-
fendant may decline to plead, and may move the court to dismiss
the petition. The court in its discretion may dismiss or may
enter an order requiring the petitioner to file a more definite pe-
tition. See what is said under the subject of Acts of Bankruptcy,
section 4. The burden of proof always rests upon the petitioner.
In pleading, the bankrupt is not confined to the forms and
orders of the Supreme Court but may set up any defense or coun-
ter-claim which will show him to have been solvent at the time
the act of bankruptcy was committed. (In re Paige, 3 Am. B. R.
679; 99 Fed. 538.) As to the preparation of the schedules in
involuntary proceedings see section 7 (8). As to order of pro-
ceeding where petitions are filed in different districts see section
32 ; G. O. 6. As to amendment of pleadings including petition
see G. O. 11. In the application for leave to amend the cause of
error should be stated. As to designation of newspapers in which
the notice shall be published see section 28. Upon the return day
as pointed out in the section, the determination is to be had.
Either the debtor is adjudicated a bankrupt or else the petition is
dismissed as pointed out in the section. Subsequent proceedings
are treated of in other parts of the statute.
Proceedings in Voluntary Bankruptcy. — As to who may file a
voluntary petition see section 59a and section 4. As to matters
of jurisdiction see section 2 (1). As to form of petition and
schedules see Form No. 1. As to amendments see G. O. 11.
After the adjudication the proceedings in voluntary bankruptcy
are the same as in involuntary bankruptcy.
Amendment of Petition. — Bankruptcy courts have the usual
power of courts of justice upon motion and for good cause, to au-
thorize amendments of pleadings, including petitions. They will
rarely do so if the purpose of the amendment is to introduce alle-
gations setting up an additional or new act of bankruptcy. But
even such an amendment will be allowed if clearly in furtherance
224 THE NATIONAL BANKRUPTCY LAW.
Cross References — Jury Trials. [Ch. IV
of justice, and if its omission from the original petition is properb
excused. (In re Craft, Fed. Cas. 3,317; 6 Blatch. 177; s. c
below, 2 N. B. R. in; in re Gallinger, Fed. Cas. 5,202 ; 4 N. B
R. 729; in re Leonard, Fed. Cas. 8,255 5 4 N. B. R. 563.)
Cross References. — As to who may be petitioners, as to thi
amount and character of their claims, as to the right of othei
creditors than the petitioners to intervene and support the peti-
tion, as to the duty of the court to refuse to permit the with-
drawal of a petition without notice to creditors and as to estoppe
of petitioners, see section 59. As to the designation of news-
papers in which notices shall be published, see section 28. As tc
the districts in which the petition may be filed, see section 2(1)
Sec. 19. Jury Trials. — a A person against whom an invol-
untary petition has been filed shall be entitled to have a trial bj
jury, in respect to the question of his insolvency, except as hereir
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 application is not filed within such time, a trial
by jury shall be deemed to have been waived.
& 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 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.
Analogous Provisions of Former Acts. —
As to jury trials in involuntary proceedings: R. S. section 5026; act of 1867
sections 41 and 42; act of 1841, section 1. As to jury trials upon specification:
COURTS AND PROCEDURE THEREIN. 225
§ 19.] Statutory Provisions as to Jury Trials.
filed against the granting of a discharge: R. S. section 5111 ; act of 1867, sec-
tion 31 ; act of 1841, section 4.
The Issue of Insolvency. — Compare section 3 (c) and (d).
Statutory Provisions as to Jury Trials. — U. S. Revised Statutes,
section 566, provides that " the trial of issues of fact in the district
courts in all causes (except cases in equity and cases of admiralty
and maritime jurisdiction, and except as otherwise provided in
proceedings in bankruptcy), shall be by jury." Section 648 pro-
vides that " the trial of issues of fact in the Circuit Court shall be
by jury (except in cases of equity and of admiralty and of mari-
time jurisdiction), and except as otherwise provided in pro-
ceedings in bankruptcy and by the next section." Section 649
provides that " issues of fact in civil cases in any Circuit Court
may be tried and determined by the court, without the interven-
tion of a jury, whenever the parties, or their attorneys of record,
file with the clerk a stipulation in writing waiving a jury. The
finding of the court upon the facts, which may be either general
or special, shall have the same effect as the verdict of a jury."
But it seems to be very clear that inasmuch as a bankruptcy
proceeding is a proceeding in equity the only issues to be sub-
mitted as of right to the jury are those referred to in section 19a,
and then only upon demand by the defendant. (Compare Simon-
son v. Sinsheimer, 3 Am. B. R. 824; 40 C. C. A. 474; 100 Fed.
426; in re Christensen, 4 Am. B. R. 99; 10 1 Fed. 802.)
There seems to be no provision for the impaneling of a jury to
pass upon questions of fact arising in a bankruptcy proceeding,
except by virtue of the provisions of section 19 of the bankruptcy
law ; but, as in all other equity cases, it is presumable that a specific
issue of fact may be framed and sent to a jury, but the court
is not bound by the findings of the jury upon the facts, and may
adopt or reject them altogether. (See McNaughton v. Osgood,
114 N. Y. 574; McClave v. Gibbs, 157 id. 413, and cases cited.)
Speaking of this question, the United States Supreme Court, per
Woods, J., in Barton v. Barbour (104 U. S. 126), said: " The
(29)
226 THE NATIONAL BANKRUPTCY LAW.
Oaths, Affirmations — Taking Oaths under Former Act. [Ch. IV.
bankruptcy court may and, in cases peculiarly requiring such a
course, will direct an action or an issue at law to aid it in arriving
at a right conclusion. But this rests in its sound discretion." It
would seem to follow from this that the bankruptcy court, like
any other court of equity, may frame issues for submission to a
jury, and the method of sending it to a jury would doubtless be
that prescribed in section 19b, which provides that the question
of fact may be certified for trial to a District Court or a Circuit
Court in the same district which has or is to have a jury first in
attendance.
What has been said does not of course apply to any collateral
proceedings of either civil or criminal nature arising out of bank-
ruptcy in which the right of jury trial is constitutional.
Sec. 20. Oaths, Affirmations. — a Oaths required by this act,
except upon hearings in court, may be administered by (1)
referees; (2) officers authorized to administer oaths in proceed-
ings 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.
Analogous Provisions of Former Acts. —
As to verification of schedules and inventory: R. S. section 5017; act of
1867, section 11. As to oaths and proof of claims: R. S. section 5079; act of
1867, section 22; act of July 27, 1868, ch. 258, section 3; also R. S. section 5076;
act of 1867, section 22 ; act of July 27th, 1868, ch. 258 section 3 ; act of 1841 sec-
tions 5 and 7 ; also R. S. section 5076a.
Taking Oaths under the Former Act.— The liberal provisions of
this act as to taking oaths did not prevail under the Act of 1867.
Not until that act was amended by section 5,076a, Revised Stat-
utes (passed June 22, 1874), could notaries public take proof of
claims. Before that time oaths in proof of claims by residents
COURTS AND PROCEDURE THEREIN. 227
§ 21.] Proof of Claim not to be Made Before Attorney— Evidence.
of the United States were required to be taken before the dis-
trict judges, the registers or commissioners o,f the Circuit Court ;
and only those officers could take the verification of the schedule
or inventory.
Proof of Claim Not to be Made Before the Attorney of the Claim-
ant.— Under the former act it was held that the proof of a claim
in bankruptcy should not be taken before the claimant's attorney
in that matter, because under that act a proof of a claim was
something more than a mere affidavit. It was a judicial pro-
ceeding, and it was expressly required that the proof should be
" satisfactory " to the officer taking it. (In re Nebe, Fed. Cas.
10,073; 11 N. B. R. 289.) Although under the present act proof
is little more than an affidavit, it should not be taken by one's own
attorney, it being a general rule in the United States, that an
affidavit should not be taken before one's own attorney even
though he be authorized ex officio to take it. But the fact that
the attorney for a party takes the oath of his client for the proof
of a debt in bankruptcy does not justify its dissolution. (In re
Kimball, 4 Am. B. R. 144; 100 Fed. 777.) In the case of In re
Kindt (3 Am. B. R. 443 ; 98 Fed. 403), it was held that the verifi-
cation of the petition of the bankrupt before one not then an at-
torney of record of such bankrupt but who subsequently became
such attorney was not invalid on that account
Sec. 21. Evidence. — a A court of bankruptcy may, upon ap-
plication of any officer, bankrupt, or creditor, by order require
any designated person, including the bankrupt, who is a compe-
tent witness under the laws of the State in which the proceedings
are pending, to appear in court or before a referee or the judge
of any State court, to be examined concerning the acts, conduct,
or property of a bankrupt whose estate is in process of adminis-
tration under this act.
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.
228 THE NATIONAL BANKRUPTCY LAW.
' To be Examined." [Ch. IV
c Notice of the taking of depositions shall be filed with the
referee in every case. When depositions are to be taken in oppo-
sition 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 evi-
dence with like force and effect as certified copies of the records
of district courts of the United States are now or may hereafter
be admitted as evidence.
e A certified copy of the order approving the bond of a trustee
shall constitute 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.
f A certified copy of an order confirming or setting aside a
composition, or granting or setting aside a discharge, not re-
voked, shall be evidence of the jurisdiction of the court, the
regularity of the proceedings, and of the fact that the order was
made.
g A certified copy of an order confirming a composition shall
constitute evidence of the revesting of the title of his property in
the bankrupt, and if recorded shall impart the same notice that a
deed from the trustee to the bankrupt if recorded would impart.
Analogous Provisions of Former Acts. —
As to depositions and the taking of evidence by commission : R. S. sections
5003, 5004, 5005 and 5006; act of 1867, sections 5, 7, and 38; act of 1841, sec-
tion 7 ; act of 1800, sections 14, 15. As to examination of third parties : R. S.
section 5087; act of 1867, section 26; act of 1800. sections 14, 15. As to cer-
tified copies of proceedings, being evidence: R. S. section 4992; act of 1867.
section 38. As to nature of evidence, of certified copy of order of discharge:
R. S. section 5119; act of 1867. section 34. As to purpose of recording certified
copy of bond: R. S. section 5054; act of 1867, section 14; act of 1800, sec-
tion 11.
" To be Examined." Section 21a.— The act of 1867 contained
two provisions somewhat analogous to paragraphs a and b of the
section under consideration. Sections 5,003 to 5,006, R. S. both
inclusive, provided that evidence or examination in any pro-
COURTS AND PROCEDURE THEREIN.
229
§ 21. J " To be Examined."
ceeding might be taken before the court or a register in bank-
ruptcy viva voce, or in writing before a commissioner of the
Circuit Court, or by affidavit, or on commission; and the court
might direct a reference to a register in bankruptcy or other
suitable person to take and certify such examination, and might
compel the attendance of witnesses and the production of books
and papers, and the giving of testimony in the same manner as
in suits in equity in the Circuit Court. The section under con-
sideration, in paragraphs b and c, manifestly permits the taking
of evidence before the officers named therein, in practically the
same manner. The other provision of the Act of 1867 was con-
tained in Revised Statutes, section 5,087, which provided that
the bankruptcy court might require the attendance of any person
as a witness to be examined in the same way in which the bank-
rupt might be examined pursuant to section 5086 of the Revised
Statutes, the latter being the provision corresponding to section 7
(9) of the present act. It is clear that paragraph a of the section
of the present act under consideration intends to provide a pro-
ceeding for such an examination of third parties, similar to the ex-
amination of the bankrupt. It expressly enacts that any person
who is a competent witness may be examined "concerning the
acts, conduct or property of the bankrupt." It does not say that
such person may be subpoenaed as a witness and be compelled to
give his testimony only where there is a trial of issues, but evi-
dently contemplates an examination independent of and perhaps
preliminary to any trial. (See In re Fixen, 2 Am. B. R. 822 ; 96
Fed. 784.) In the case of In re Howard (2 Am. B. R. 582 ; 95
Fed. 415), arising under the present act, the referee had made
an order upon the application of the trustee requiring a third
party to be examined before him concerning the acts, conduct and
property of the bankrupt. The witness appeared before the ref-
eree in obedience to a subpoena issued upon such order and by
counsel objected to being examind. The referee overruled the
objection. The court sustained the referee and quoted the fol-
lowing language from the referee's decision.
23o THE NATIONAL BANKRUPTCY LAW.
" To be Examined. " [Ch. IV.
" The examination of this witness is made upon the authority of sec. 21 of
the Bankruptcy Act. of July I, 1898. It has been decided by the Federal
courts in many cases, under a similar provision of .the Act of 1867, that all par-
ties who are competent witnesses are liable to undergo such an examination,
' though they may be parties to proceedings which the trustee in bankruptcy
has instituted or intends to institute for the purpose of setting aside liens pro-
cured by them, or preferential transfers made to them.' So it is held In re
Feinberg, 2 N. B. R. 425; Fed. Cas. No. 4716. It has been further held that
such parties will be obliged to answer any and all questions relating to the
acts, conduct, or property of the bankrupt, and their dealings with him, even
though their answers will give to the trustee evidence which he may use in
a subsequent civil action against the examined party. It has been so decided
by the Federal courts in the cases of In re Fay, 3 N. B. R. 660 ; Fed. Cas. No.
4708; In re Pioneer Paper Co. 7 N. B. R. 250; Fed Cas. No. 11 178; Garrison
v. Markley, 7 N. B. R. 246 ; Fed. Cas. No. 5256 ; and in many other cases, which
it is unnecessary for the court to cite. In the cases of In re Comstock, 13 N.
B. R. 193; Fed Cas. No. 3080, and In re Fredenburg, 1 N. B. R. 268; Fed.
Cas. No. 5075, the court decided that the person undergoing this examination
is a mere witness, and is not entitled to counsel. He is not a party to the pro-
ceedings, and has no rights at stake."
Ill a well-considered case in the Circuit Court of Appeals of
the 2nd Circuit, In re Horgan v. Slattery (3 Am. B. R. 253; 39
C. C. A. 118; 98 Fed. 414), it was held that a large latitude of
inquiry should be allowed in the examination of persons closely
connected with the bankrupt in business dealings for the purpose
of discovering the assets and unearthing frauds and upon any
reasonable surmise that they have the assets of the debtor. And
the mere fact that the witness is a creditor between whom and the
bankrupt's trustee a controversy is pending in a State court can-
not excuse him from testifying concerning the acts etc. of the
bankrupt on the ground that his answers may furnish evidence
against him in the civil suit or the federal court is not a proper
forum. {In re Cliffe, 2 Am. B. R. 317; 94 Fed. 354.) But the
question as to whether one is a competent witness is to be de-
termined with reference to the laws of the State in which the pro-
ceeding is pending, provided those laws are not repugnant to the
Constitution of the United States. Thus in the case of In re Jef-
ferson (3 Am. B. R. 174; 96 Fed. 826), it was held that where a
State statute declares that a wife is not a witness to confidential
COURTS AND PROCEDURE THEREIN. 231
§ 21.] " To be Examined."
communications between her and her husband, she cannot be
compelled in her husband's voluntary proceeding to reveal such
confidential matters. (And see In re Mayer, 3 Am. B. R. 222;
97 Fed. 328.) And a witness cannot be compelled to answer
any questions which would tend to criminate him. {In re Feld-
stein, 4 Am. B. R. 321. See Examinations of Bankrupt, sec-
tion 7 [9].)
Under the former act there were several decisions as to the ex-
tent of the privilege of a witness to refuse to answer questions,
upon the ground that his answers would disclose matters revealed
to him in professional confidence. While the courts protect a law-
yer in refusing to answer questions as to matters which he ascer-
tains in his capacity as counsel, and which are of a confidential na-
ture, they nevertheless will compel him to testify as to dealings
with the bankrupt as a purchaser and in any other than a strictly
professional capacity. Thus where an attorney took a conveyance
of land from the bankrupt and afterwards re-conveyed to the
wife of the bankrupt, and also, where he acted as agent in receiv-
ing and disbursing moneys of the bankrupt, he was compelled to
answer fully concerning all such matters. {In re Aspinwall,
Fed. Cas. 591; 10 N. B. R. 448; in re Bellis & Milligan, 3 N.
B. R. 199 ; s. c. 38 How. Pr. 79. ) In the first of the cases above
cited it was held that an attorney might be compelled to state
whether or not he had drawn a certain deed for the bankrupt.
Compare the following English decisions in which the extent
to which communications made by a bankrupt to his attorney are
privileged as confidential, was discussed and considered: in re
Phillips, 20 L. J. 16; Russell v. Jackson, 21 L. J. Chan. 146;
Turquand v. Knight, 2 Mees. & W. 98; Ex p. Lord, Buck, no;
Bramwell v. Lucas, 2 B. & C. 743. A witness on an examination
of this nature may be asked as to the name and residence of any
other person who can give the desired testimony with regard to
the bankrupt's property. {Ex p. Campbell, L. R. 5 Ch. App.
703.) See as to method of taking testimony before the referee,
G. O. 22 and Forms 29 and 30.
23 2 THE NATIONAL BANKRUPTCY LAW.
Subpoena Runs into Other Districts — Depositions. [Ch.IV,
Subpoena Euns into Other Districts. — U. S. Revised Statutes,
section 876, provides : " Subpoenas for witnesses who are re-
quired to attend a court of the United States, in any district, may
run into any other district; Provided, that in civil cases the wit-
nesses living out of the district in which the court is held do not
live at a grater distance than one hundred miles from the place of
holding the same." The above section applies to a subpoena issued
in a bankruptcy proceeding as well as in an ordinary civil case.
(In re Woodward, Fed. Cas. 18,000; 8 Ben. 112; s. c. 12 N. B.
R. 297.) Subpoenas form an exception to the general rule. Other
process of the district court does not run beyond the limits of
the judicial district.
Depositions. Section 21b, c. — What is referred to here are the
U. S. Revised Statutes, section 858, et seq. respecting the taking
of testimony by deposition. (See In re Fisk, 113 U. S. 713; 28
L. Ed. 1,117.)
Copies of Proceedings as Evidence. Section 2id-g. — It has been
held that the record of proceedings in bankruptcy is not one in-
tegral record, but that a duly certified copy of any portion thereof
may be introduced in evidence, (Michener v. Payson, Fed. Cas.
9.524; !3 N. B. R. 49; compare, however, Shomo v. Zeigler, 78
Penn. 357), but where one desires to introduce a portion of the
record, for instance, an order made during the proceedings, it is
necessary to introduce the whole record of all the proceedings
with reference to the particular order. The schedule and inven-
tory may be introduced in evidence separate from the record of
the rest of the proceedings. (Dupuy v. Harris, 6 B. Mon. 534.)
As against persons who were not parties to the proceedings, it
seems that a copy of the record is not admissible unless it is a
copy of the complete record, except in cases especially prescribed
in paragraphs e, f and g of this section. The schedule of debts
and assets filed in bankruptcy proceedings in which a defendant
and his partner were discharged individually and as partners,
was, however, held to be receivable in evidence against the de-
COURTS AND PROCEDURE THEREIN. 233
§ 22.] Certified Copy of Discharge — Reference of Cases after Adjudication.
fendant, although signed only by the partner. (Sheldon v.
Clews, 13 Abb. N. C. 40.) The schedule cannot be introduced
to prove anything therein stated unless it can be considered as
an admission by the party against whom it is offered. It may be
received as against a partner, in cases like the one just cited, be-
cause by taking a discharge in the proceedings in which it is
filed, the partner thereby makes the statements contained in it
his own. But a copy of the bankrupt's schedule admitting a
liability cannot be introduced in evidence against a joint obligor.
(Wilson v. Harper, 5 Rich. [N. S.] 294.) The introduction
of the petition and schedules in evidence for the purpose of
proving the bankruptcy does not make them evidence against the
party producing them, of the facts therein stated. (Pringle v.
Lever ich, 97 N. Y. 181.)
Certified Copy of Order Granting a Discharge. — The former act
required that the court should issue a written certificate of dis-
charge, and that this certificate should be conclusive evidence in
favor of the bankrupt of the fact, and regularity of the discharge.
Nothing, under the present act, is needed beyond the order of
discharge itself. The provision that a copy of the order shall be
evidence saves the trouble of proving the entire proceedings.
(Pennell v. Percival, 13 Penn. 197; Morse v. Gloyes, 11 Barb.
100.) The discharge cannot be impeached collaterally for any
error or irregularity. Every presumption exists that the pro-
ceeding was regular. Compare notes to sections 13 and 15.
(Morrison v. Woolson, 29 N. H. 11; Shawhan v. Wherritt, 7
How. 627; McNulty v. Frame, 1 Sandf. 128; Campbell v.
Perkins, 8 N. Y. 430; Lathrop v. Stuart, 5 McLean, 167; Rich-
ards v. Nixon, 20 Penn. 19.)
Sec. 22. Reference of Cases after Adjudication. — a After a
person has been adjudged a bankrupt the judge may cause the
trustee to proceed with the administration of the estate, or refer
it (1) generally to the referee or specially with only limited
authority to act in the premises or to consider and report upon
(30)
234 THE NATIONAL BANKRUPTCY LAW.
Jurisdiction of United States and State Courts. [Ch. IV.
specified issues; or (2) to any referee within the territorial juris-
diction of the court, if the convenience of parties in interest will
be served thereby, or for cause, or if the bankrupt does not do
business, reside, or have his domicile in the district.
b The judge may, at any time, for the convenience of parties
or for cause, transfer a case from one referee to another.
Analogous Provisions of Former Acts. —
As to one referee acting in the place of another : R. S. § 5007 ; act of 1867,
§ 4. As to powers, jurisdiction and duties of a referee, compare " Analogous
Provisions of Former Acts,"- given under the sections of this act, cross-refer-
enced in the note below.
Cross-Beferences. — As to the jurisdiction and powers and duties of a
referee see sections 34 to 43, both inclusive; also section 58 (c). As to the
power of the court to consider and confirm, modify or overrule or return with
instructions for further proceedings, all records and findings certified to them by
referees, see section 2 (10) ; and compare section 38 (a). As to a referee's
power to hear and pass upon contested matters, compare section 39 (5).
Sec. 23. Jurisdiction of United States and State Courts. — a
The United States circuit courts shall have jurisdiction of all
controversies at law and in equity, as distinguished from proceed-
ings in bankruptcy, between trustees as such and adverse claim-
ants concerning the property acquired or claimed by the trustees,
in the same manner and to the same extent only as though bank-
ruptcy proceedings had not been instituted and such contro-
versies had been between the bankrupts and such adverse claim-
ants.
b Suits by the trustee shall only be brought or prosecuted in
the courts where the bankrupt, whose estate is being adminis-
tered by such trustee, might have brought or prosecuted them if
proceedings in bankruptcy had not been instituted, unless by con-
sent of the proposed defendant.
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 of Former Acts. —
As to the jurisdiction of Circuit Courts : R. S. section 4979; act of 1867, sec-
tion 2; act of 1841, section 8; act of June 8th, 1872, ch. 340.
COURTS AND PROCEDURE THEREIN.
23S
§ 23.] Scope of Section — "Adverse Claimants."
Scope of Section. — The question of jurisdiction has already
been quite exhaustively discussed under chapter 2. It remains
merely to point out the specific application of the various provis-
ions of section 23, under the late decisions of the Supreme Court.
The phrase " all proceedings in bankruptcy " used in subdivision
" a " merely refers to bankruptcy proceedings strictly so-called
initiated by the petition and ending with the distribution of
assets among the creditors and the discharge or refusal of dis-
charge to the bankrupt. This is the only jurisdiction now con-
ferred upon the federal courts by the Bankruptcy Act proprio
vigore. Any other jurisdiction which they may have arises not
from the provisions of the Act but from other statutory pro-
visions. This jurisdiction however is exclusive. It includes every-
thing which is necessary to its exercise, as for instance all sum-
mary proceedings to recover the property of a bankrupt when the
bankruptcy court has once gained jurisdiction of it, measures for
the preservation of the property, proceedings for contempt arising
out of disobedience of its orders in the bankruptcy proceedings,
and generally those incidental powers which are covered by sec. 2.
The other jurisdiction over " adverse claimants " in suits brought
by a trustee refers to jurisdiction in plenary suits which the fed-
eral courts may gain by reason of the diverse citizenship of the
parties. The phrase " adverse claimants " has received a good
deal of attention. It may be briefly defined as covering all those
persons who have a color of title adverse to the trustee in bank-
ruptcy of such a nature that under the rules of equity they are
entitled to have that title adjudicated in a plenary suit and not
disposed of summarily. An illustration of this kind of adverse
title is contained in the case of In re Baudouine (3 Am. B. R.
651; 101 Fed. 574). In this case there was an attempt made by
the trustee to reach the surplus income of the bankrupt under a
testamentary trust created under the statutes of New York. The
District Court decided that such income could be reached sum-
marily. The Circuit Court of Appeals, on the other hand, held
that a testamentary trustee of such a trust had an interest ad-
verse to the trustee in bankruptcy and was entitled to be heard
236 THE NATIONAL BANKRUPTCY LAW.
Scope of Section — " Adverse Claimants." Ch.
in a plenary suit. In defending his trust duties the testamenta
trustee was necessarily hostile to the trustee in bankruptcy a:
was entitled to contest his title as full)'- as if he were the equital
owner of the fund. The court cites with approval as coverii
this question, Smith v. Mason (14 Wall. 419), and Marshal
Knox (16 Wall. 551). In Smith v. Mason a party claimed abs
lute title to a fund which was also claimed by the assignee in ban
ruptcy, and the court held that beyond all doubt the case was o:
falling within the jurisdiction of the circuit court under the A
of 1867, as being a case between adverse claimants. This ca
was followed in Marshall v. Knox (cited above), and a furth
definition of " adverse interest " was given. The court said
this case : " The adverse claim is not to the absolute property 1
the fund in dispute as was the case in Smith v. Mason, but relat
to a mere lien and to possession by way of pledge under the lie
In Smith v. Mason, it was held that the bankruptcy court cou
not by a mere rule make the adverse claimant a party to the banl
ruptcy proceedings and adjudge his rights in a summary wa
but that the assignee must litigate the claim in a plenary su
either at law or in equity." Further commenting on the diffe
ence between the case before them and the case of Smith ■
Mason, the court said :
" It may, with some plausibility, be said that as the property in th
case is conceded to be in the bankrupt, and the question has respect on
to the right of possession under the lien, the district court, which h
express jurisdiction of the ' ascertainment and liquidation of the liens, ai
other specific claims,' on the bankrupt's property, might assume control
the property itself. The claim, however, is to the right of the possessio
and that right may be just as absolute and just as essential to the intere
of the claimant as the right of property in the thing itself, and is, in fact,
species of property in the thing, just as much the subject of litigation as tl
thing itself. It is the opinion of the court, therefore, that the case is n
substantially different from that of Smith v. Mason."
In the case of Burbank v. Bigelow (92 U. S. 179), a pari
claimed a right to the proceeds of a judgment, and the assign*
denied the claim. The Supreme Court of the United States he!
COURTS AND PROCEDURE THEREIN. 237
r 23.] Scope of Section — ' ' Adverse Claimants. "
that this was a controversy over which the circuit court had ju-
risdiction under the Act of 1867. The language of the court in
substance was : " That this is a case of controversy between ad-
verse claimants does not seem to be at all in doubt. A right of
property is controverted, the complainant contending that the
funds of the judgment recovered by the bankrupt against a third
party belonged to the firm of which complainant's intestate was a
partner. If the bankrupt and his assignee deny this, it is a con-
troversy the determination of which is clearly embraced within
the jurisdiction conferred upon the circuit courts by the second
clause of section 2 of the original Bankrupt Act of 1867."
Under the present act see the case of In re Cohn (3 Am.
B. R. 421), where a daughter of a bankrupt carried on a
business claimed by the creditors to have been the business of the
bankrupt in her own name and kept the bank account as her own,
it was held that she was in the position of a third person not only
claiming title but in possession and the question of alleged fraud
between her and the bankrupt could not be inquired into in sum-
mary manner. (See also In re Russell, et al. 3 Am. B. R. 658;
41 C. C. A. — ; 101 Fed. 248.)
On the other hand as an illustration of the summary jurisdic-
tion which is incidental to bankruptcy courts, the Supreme Court
has decided in the case of White v. Schloerb, 4 Am. B. R. 178;
178 U. S. 542, that when at the date of adjudication in bank-
ruptcy the goods are in the actual possession of the bankrupts as
their property and the referee takes them into his possession
they are in the custody of the District Court and when so held
in the custody of the District Court they have been seized by a
writ of replevin by the State court the District Court may com-
pel their return by summary proceedings. This is one of many
cases holding that the court which first rightfully obtains juris-
diction over the res retains that jurisdiction to the end. ( Compare
In re Chambers, Calder & Co. 3 Am. B. R. 537 ; 98 Fed. 865 ;
Southern Loan Co. v. Benbow, 3 Am. B. R. 9; 96 Fed. 514;
Keegan v. King, 3 Am. B. R. 79; 96 Fed. 758.)
238 THE NATIONAL BANKRUPTCY LAW.
Jurisdiction of Circuit Court — Of State Courts in Other Matters. [Ch. !
Jurisdiction of Circuit Court. — It follows from what has be
said above that under the Act of 1898, unlike the Act of i8(
the Circuit Court has no original jurisdiction in bankrupt
What is here conferred in only such jurisdiction as such coui
would have had between the bankrupt and the adverse claimai
which jurisdiction is conferred by the Act of March 3, 188
amended August 13, 1888, contained in 25 U. S. Stat. 433
follows :
" The circuit courts of the United States shall have original cognizance, cc
current with the courts of the several States, of all suits of a civil nature,
common law or in equity, where the matter in dispute exceeds, exclusive
interest and costs, the sum or value of two thousand dollars, and arisi
under the constitution or laws of the United States, or treaties made,
which shall be made, under their authority or in which controversy t
United States are plaintiffs or petitioners, or in which there shall be a co
troversy between citizens of different States, in which the matter in dispt
exceeds), exclusive of interest and costs, the sum of value aforesaid."
Jurisdiction of State Courts in Other Matters. Section 23b. Tl
effect of this section as it now stands is best given by quotir
the head note in Bardes v. Bank, U. S. Supreme Court, May 2
1900 (4 Am. B. R. 163 ; 178 U. S. 524) :
" 1st. The provisions of the second clause of section 23 of the Bankru
Act of 1898 control and limit the jurisdiction of all courts, including t
several District Courts of the United States, over suits brought by truste
in bankruptcy to recover or collect debts due from third parties, or to s
aside transfers of property to third parties, alleged to be fraudulent
against creditors, including' payments in money or property to prefern
•creditors.
"2nd. The District Court of the United States can, by the proposi
defendant's consent, but not otherwise, entertain jurisdiction over suits broug
by trustees in bankruptcy to set aside fraudulent transfers of money 1
property, made by the bankrupt to third parties before the institution of tl
proceedings in bankruptcy."
Until the effect of this decision has been changed by an a
of Congress it will of course be absolutely controlling. It con
pels the trustee to go into the State court in all suits except whei
diverse citizenship of the parties allows him to go into the Circu
Court, and overrules the great majority of cases decided befoi
THE NATIONAL BANKRUPTCY LAW. 239
8 23,] Jurisdiction of State Courts in Other Matters.
it. Among others it overrules the following cases in the Circuit
Courts of Appeals, viz. Davis v. Bohle, 8th Circuit, 34 C. C. A,
37; 92 Fed. 325; 1 Am. B. R. 412; (where the question is im-
pliedly passed upon in holding that the District Court has juris-
diction of a suit or controversy between the creditors of a re-
spondent in an involuntary petition and his common law assignee,
as 'to which see, also, In re Gutwillig [2nd Circuit], 34 C. C. A.
377 ; 92 Fed. 337 ; 1 Am. B. R. 388, and Carriage Co. v. Stengel
[6th Circuit], 37 C. C. A. 210; 95 Fed. 637; 2 Am. B. R. 383;
in re Francis- Valentine Co. (9th Circuit), 36 C. C. A. 499; 94
Fed. 793; 2 Am. B. R. 522; in re Baudouine (2nd Circuit), 3
Am. B. R. 651; 101 Fed. 574; Wall v. Cox (4th Circuit), 101
Fed. 403 ; Hall v. Kincell and Perkins v. Markham ( San Gabriel
Co.) (9th Circuit), May, 1900, reported in 102 Fed. 310.)
The decisions of the various District Courts by a considerable
majority also sustain their own jurisdiction, and are hence over-
ruled by the Supreme Court in this respect. [See In re Brooks
(D. C. Vt), 91 Fed. 508; 2 Am. B. R. 531; in re Smith (D.
C. Ind.), 92 Fed. 135, 139; 1 Am. B. R. 266; Robinson v. White
(D. C), 97 Fed. 33; 3 Am. B. R. 88; Carter v. Hobbs (D. C),
92 Fed. 594; id. 94 Fed. 108; 2 Am. B. R. 224; Keegan v. King
(D. C. Ind.), 96 Fed. 758; 3 Am. B. R. 79; in re Pittelkow (D.
C. Wis.), 92 Fed. 901; 1 Am. B. R. 472; in re Kletchka (D. C.
N. Y.), 92 Fed. 901 ; 1 Am. B. R. 479; in re Baudouine (D. C.
N. Y.), 96 Fed. 536; 3 Am. B. R. 59; in re Kenney (D. C. N.
Y.), 95 Fed. 427; 2 Am. B. R. 494; in re Nathan (D. C. Nev.),
92 Fed. 590; in re Fellerath (D. C. Ohio), 95 Fed. 121 ; 2 Am.
B. R. 40; in re Booth (D. C. Ga.), 96 Fed. 943; 2 Am. B. R.
770; in re Kimball (D. C. Pa.), 97 Fed. 29; 3 Am. B. R. 161 ;
Trust Co. v. Benbow (D. C. N. C), 96 Fed. 514; 3 Am. B. R.
g;inre Fixen (D. C. Cal.), 96 Fed. 748; 2 Am. B. R. 822 ; in re
Newberry (D. C. Mich.), 97 Fed. 24; 3 Am. B. R. 158; Murray
v. Beale (D. C. Utah), 97 Fed. 567; 3 Am. B. R. 284; Lehman v.
Crosby (D. C. N. Y.), 99 Fed. 543; 3 Am. B. R. 662; Louisville
Trust Co. v. Marx (D. C. Ky.), 98 Fed. 456; 3 Am. B. R. 450;
in re Hammond (D. C. Mass.), 98 Fed. 845; 3 Am. B. R. 466.*
24o COURTS AND PROCEDURE THEREIN.
Jurisdiction of State Courts in Other Matters. [Ch. ]
Shutts v. Bank (D. C. Ind.), 98 Fed. 705 ; 3 Am. B. R. 492; in
Woodbury (D. C. No. Dak.), 98 Fed. 833; 3 Am. B. R. 45
Norcross v. Nathan (D. C. Nev.), 99 Fed. 414; 3 Am. B. :
613 ; Pepperdine v. Headley (D. C. Mo.), 98 Fed. 863 ; 3 Am.
R- 4S5-]
These cases either directly or impliedly held that the Distri
Court has jurisdiction to entertain such suits, though they difr
widely as to the grounds. Some, like In re Woodbury, hold tb
the limitation in section 23b has reference only to venue; othei
like Louisville Trust Co. v. Marx, that it is a limitation on t
jurisdiction of the Circuit Courts alone, while others, of whi
In re Baudouine is a type, confine the jurisdiction of the Distr:
Court to suits by the trustee to set aside fraudulent transfers
the bankrupt — suits which they say the bankrupt could not hii
self have brought. All this reasoning is now swept away
the very comprehensive opinion of Mr. Justice Gray, in Bardes
Bank (4 Am. B. R. 163; 178 U. S. 524).
On the other hand, early in the history of the Bankruptcy A
the Circuit Court of Appeals of the Fifth Circuit, in April, 18
{In re Abraham, 35 C. C. A. 592; 93 Fed. 767; 2 Am. B.
266), held that a trustee cannot by summary proceedings in 1
District Court recover from the bankrupt's general assigr
property covered by the assignment, but must proceed in a St;
court, unless the Circuit Court is open by reason of diverse ci
zenship. [Following In re Abraham, and, in some cases, dei
ing more broadly the jurisdiction of the District Court, are : In
Kelly (D. C. Tenn.), 91 Fed. 504; 1 Am. B. R. 306; in re R01
wood (D. C. Iowa), 91 Fed. 363; 1 Am. B. R. 272; in re Bu
rock Clothing Co. (D. C. Iowa), 92 Fed. 886; 1 Am. B. R. 4;
Hicks v. Knost [D. C. Ohio], 94 Fed. 625; 2 Am. B. R. 1;
Mitchell v. McClure (D. C. Pa.), 91 Fed. 621 ; 1 Am. B. R. <
Burnett v. Mercantile Co. (D. C. Ore.), 91 Fed. 365; 1 Am.
R. 229; in re Franks (D. C. Ala.), 95 Fed. 635; 2 Am. B.
632; Perkins v. McCauley (D. C. Cal.), 98 Fed. 287; 3 Am.
R. 445; Camp v. Zellars (C. C. A. 5th Circuit), reported in n
to Perkins v. McCauley, 3 Am. B. R. 445, and following In
COURTS AND PROCEDURE THEREIN. 241
§ 24.] Jurisdiction of Circuit Courts over Crimes — Appellate Courts.
Abraham (Bernheimer v. Bryan). J These cases must be assumed
to be affirmed by the Supreme Court, as indeed Hicks v. Knost
and Mitchell v. McClure are specifically (4 Am. B. R. 178; 178
U. S. 539, 541). In re Abraham, sub nom, Bryan v. Bern-
heimer, is still on the calendar of the Supreme Court unargued.
(As to gaining jurisdiction, by consent, see In re Connolly [D.
C. Pa. J, 3 Am. B. R. 842, and Hicks v. Knost, 4 Am. B. R. 178;
178U. S. 541.)
Jurisdiction of Circuit Court over Crimes. Section 23c. — The
concurrent jurisdiction of the Circuit Court given over the crimes
mentioned in the Act (see section 29) is in line with the general
provision of the federal statute 'that the Circuit Court has ex-
clusive criminal jurisdiction except where such jurisdiction is
specifically given to the District Court. (See U. S. R. S. section
629.)
Sec. 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 States 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 of Former Acts. —
As to appeals; R. S. section 4980; act of 1867, section 8. As to supervisory
jurisdiction of circuit courts of appeal ; R. S. section 4,986 ; act of 1867, section
(3i)
242 THE NATIONAL BANKRUPTCY LAW.
Appellate Jurisdiction of the Supreme Court —Writ of Error. [Ch.
2; act of June 8th, 1872, ch. 340; act of 1841, section 6; also R. S. secti
4,987 and 4,988; act of 1867, section 49; act of June 30th, 1870, ch. 177, s
tion 1.
Appellate Jurisdiction of the Supreme Court in Matters of Bai
ruptcy — Writ of Error. — The appellate jurisdiction of the Suprei
Court with reference to a final decision of the Court of Appe
allowing or rejecting a claim; where controversies are certifi
to the Supreme Court from other federal courts, and where a :
view is had by virtue of a writ of certiorari, are best treated
under section 25b, c and d, where such methods of review 1
specifically referred to. The appellate jurisdiction referred to
the foregoing section, to wit : " appellate jurisdiction of conti
versies arising in bankruptcy proceedings " refers to the broad
jurisdiction which is analogous to that exercised in other cas<
The first and most important branch of appellate jurisdiction
this respect arises under writs of error to the highest courts
the States. The right of the Supreme Court to review the jud
ment of the highest court of a State by writ of error is set foi
in section 709 of the U. S. R. S. which is as follows :
" A final judgment or decree in any suit in the highest court of a St:
in which a decision in the suit could be had, where is drawn in questi
the validity of a treaty or statute of, or an authority exercised under, 1
United States, and the decision is against the validity, or where is drawn
question the validity, of a statute of, or an authority exercised under any St
on the ground of their being repugnant to the Constitution, treaties, or la
of the United States, and the decision is in favor of their validity, or whi
any title, right, privilege, or immunity is claimed under the Constitution,
any treaty or statute of, or commission held or authority exercised under, 1
United States and the decision is against the title, right, privilege, or immuni
specially set apart or claimed by either party, under such Constitution, trea
statute, commission or authority— may be re-examined and reversed or affinr
in the Supreme Court upon a writ of error. The writ shall have the sa
effect as if the judgment or decree complained of had been rendered
passed in a court of the United States. The Supreme Court may revei
modify, or affirm the judgment or decree of such State Court, and may, at th
discretion, award execution or remand the same to the court from which
was removed by the writ."
It will be seen upon study of this section that a review of a c
cision of a State court may be had with respect to bankruptc
COURTS AND PROCEDURE THEREIN. 243
§ 24.] General Appellate Jurisdiction of Circuit Court of Appeals.
First, where there had been a decision against the validity of any
portion of the Bankruptcy Act; second, where a decision had
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 Bankruptcy Statute has been denied by a State court. Cases
reviewing the decisions of State courts under the third classifica-
tion are quite numerous, particularly where the effect of a dis-
charge of a bankrupt has been brought in question. Such are
Forsyth v. Vehmeyer (3 Am. B. R. 807; 177 U. S. 177) ; Henne-
quin v. Clews (in U. S. 677) ; Strang v. Bradner (114 U. S.
555). It must be remembered in such cases that the federal ques-
tion must be raised in the court below. (See Columbia Water-
power Co. v. Street Railway Co. 172 U. S. 475.) For the prac-
tice on a writ of error see Foster's Federal Practice.
While the power of the Supreme Court to review a final de-
cision of a lower federal court conferred by the Act of March,
1 89 1, commonly called the Evarts Act, is probably intended to
be covered by section 25d, it is to be noted at this point that sec-
tion 24a gives the Supreme Court appellate jurisdiction in bank-
ruptcy proceedings " from the courts of bankruptcy " from which
they have appellate jurisdiction in other cases.
General Appellate Jurisdiction of Circuit Court of Appeals. — Sub-
division " a " of this section gives to the Circuit Courts of
Appeals jurisdiction of controversies arising in bankruptcy pro-
ceedings from the courts of bankruptcy from which they have
appellate jurisdiction in other cases. The appellate jurisdiction
referred to here arises from section 6 of the Act of March, 1891,
20 U. S. Stat, 828, by which it is provided that the Circuit Courts
pf Appeals shall exercise appellate jurisdiction to review by ap-
peal or by writ of error final decisions in the District Court and
the existing Circuit Courts in all cases other than those provided
for in section 5 of the same act, viz: (1) where the jurisdiction
of the court is in i.ssue; (2) from final judgments in a prize case;
(3) in cases of conviction of a capital crime; (4) in cases which
244 THE NATIONAL BANKRUPTCY LAW.
Revisory Powers of the Circuit Court ; History. [Ch.
involve the construction or application of the Constitution; |
in cases where the constitutionality of a law of the United Stc
or treaty is drawn in question; (6) in any case in which the c
stitution or law of a State is claimed to be in contravention
the federal constitution, all of which are cases in which an app
may be certified directly to the Supreme Court. This gem
jurisdiction on appeal would include a writ of error to the Circ
or District Court on a judgment rendered by such court uj.
" a controversy " arising out of bankruptcy but will be seldom ;
plied on account of the specific provision contained in section ;
and 25a respecting appellate jurisdiction in strict bankruptcy p
ceedings. It may, however, be applicable in the case where
reason of diverse citizenship an action is brought by or agai
a trustee in the Circuit Court, or is brought by consent in
District Court.
Revisory Powers of the Circuit Court; History. Section 24b
The former Bankruptcy Acts of 1841 and 1867, provided that
Circuit Courts should have certain revisory powers over the p
ceedings of the courts of bankruptcy. Under the Act of i£
that revisory power could be exercised whenever the court
bankruptcy itself cared to adjourn any point or objection into
Circuit Court to be there heard and determined. (In re Chris
3 How. 292; Clark v. Binninger, Fed. Cas. 2,815; 7 Blatch. i<
s. c. 3N. B. R. 487.)
The Act of 1867, by section 2 (R. S. section 4,986), gave
the Circuit Court for each district " general superintendence
all cases and questions arising in the District Court for such c
trict when sitting as a court of bankruptcy," and further p
vided that " except when special provision was otherwise ma
such circuit courts might, upon bill, petition or other proper p
cess presented by any party aggrieved, hear and determine 1
case as in a court of equity." During the pendency of the legis
tion in Congress which resulted in the present bankruptcy h
provisions giving Circuit Courts of Appeals this revisory pov
were incorporated and adopted, only to be stricken out, and tr.
COURTS AND PROCEDURE THEREIN. 245
§ 24.] Revisory Powers of the Circuit Court; History.
to be re-incorporated in the law as finally adopted. The objec-
tion to giving these courts this power was that it would tend to
delay proceedings in bankruptcy and to increase expense.
The revisory power given to the Circuit Court of Appeals
under this section must be carefully distinguished from the ap-
peal which is authorized by the Act of 1891 and section 25. In
case of appeals in equity the facts as well as the law are before
the court for review. But under this section all that is contem-
plated is a summary review of any erroneous holding upon a ques-
tion of law and it does not in any sense contemplate a review of
the facts. (See In re Rouse, Hazard & Co. 1 Am. B. R. 234;
33 C. C. A. 356; 91 Fed. 96; in re Purvine, 2 Am. B. R. 787; 37
C. C. A. 446; 96 Fed. 192; in re Richard, 3 Am. B. R. 145; 37
C. C. A. 634; 96 Fed. 935; Courier Journal etc. Printing Co. v.
Brewing Co. [C. C. A.] 4 Am. B. R. 183; 101 Fed. 699; in re
Abraham, 2 Am. B. R. 266; 35 C. C. A. 592 ; 93 Fed. 767.) The
petition under section 24b should state specifically the question of
law which was involved and ruled upon by the court below, and
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. {In re Richards, supra. ) No official form of
petition has been prescribed. Section 25a on the other hand con-
templates an appeal in equity on the three subjects therein stated,
to wit: (1) an adjudication on the question of bankruptcy; (2)
on the question of discharge; (3) on the debt or claim of $500
and upwards. It has been held that it was the intention of
Congress in prescribing the method in which a judgment adjudi-
cating a person a bankrupt may be reviewed, to make it im-
possible to review such a judgment on an original petition in the
mode prescribed in section 24b. (In re Good, 3 Am. B. R. 605 ;
39 C. C. A. 581; 99 Fed. 389.) Such supervisory jurisdiction
extends only over strict bankruptcy proceedings. (In re Jacobs,
3 Am. B. R. 671 ; 39 C. C. A. 647; 99 Fed. 539.) There seems
to be no time specified within which such petition can be reviewed.
Neither the statute nor the rules appear to fix the time within
which such petition should be taken. • G. O. 36 refers to the al-
246 THE NATIONAL BANKRUPTCY LAW.
Appeals and Writs of Error. [Ch.
lowance of appeals. But in this connection the following st
ment of Mr. Justice Strong in Bank v. Cooper (20 Wall. 171)
construing a similar provision of the Act of 1867, is very
structive :
" It is true their bill was not filed in the Circuit Court ti
about four months and a half after the order complained of •
made. But the Act of Congress prescribes no time within wl
the application for a review must be presented. An appeal is
quired to be taken within ten days. Not so with a petition or
for a review. Undoubtedly the application should be made wil
a reasonable time, in order that the proceedings to settle the ba
rupt's estate may not be delayed, but neither the act of Cong
nor any rule of this court determines what that time is.
present, therefore, it must be left to depend upon the circi
stances of each case. Perhaps, generally, it should be fixed
analogy to the period designated within which appeals must
taken. (Littlefield v. Del. & Hud. Can. Co. 4 N. B. R. 77; I
Cas. 8,400.)"
In the case of In re Worcester County (4 Am. B. R. 496;
Fed. 808), it was held that as there is no statutory limitation
ing the time for review of matters arising on the face of
record, a petition for review is limited by analogy to the
months allowed by statute for taking appeals generally to the (
cuit Court of Appeals. But this seems to be an erroneous de
ion because the time for taking the appeal in bankruptcy is 1
ited by section 25 to ten days. (See In re Good, supra.)
Sec. 25. Appeals and Writs of Error.— a That appeals, a:
equity cases, may be taken in bankruptcy proceedings from
courts of bankruptcy to the circuit court of appeals of
United States, and to the supreme court of the Territories;
the following cases, to wit, ( 1 ) from a judgment adjudging
refusing to adjudge the defendant a bankrupt; (2) from a ju
ment granting or denying a discharge; and (3) from a judgrr
allowing or rejecting a debt or claim of five hundred dollars
over. Such appeal shall be taken within ten days after the ju
COURTS AND PROCEDURE THEREIN. 247
§ 25.] Appeals to Court of Appeals.
ment appealed from has been rendered, and may be heard and
determined by the appellate court in term or vacation, as the case
may be.
b From any final decision of a court of appeals, allowing or re-
jecting 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 opinon 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 of Former Acts. —
As to appeals to the circuit courts : R. S., sections 4980, 4981, 4982, 4983
and 4984; act of 1867, sections 8 and 24. As to appeals to the Supreme
Court from the circuit courts of appeal : R. S., section 4985 ; act of 1867,
section 24; also R. S., section 4989; act of 1867, section 9.
Appeals to Court of Appeals. Section 25a. — As to general power
of appeal from the District Court to the Circuit Court of Appeals
see what has been said under the last section. As there pointed
out the appeal contemplated within section 25 is an appeal in
equity which brings up for consideration in the appellate court
both questions of fact and of law. It seems to be exclusive so
far as the subjects mentioned in subdivision " a " are concerned
of any other appellate jurisdiction in the Circuit Court of Ap-
peals. (See In re Good, 3 Am. B. R. 605 ; 39 C. C. A. 581 ; 99
248 THE NATIONAL BANKRUPTCY LAW.
Appeals to Court of Appeals. [Ch. I"
Fed. 389.) A recent decision of the Court of Appeals of tr.
6th circuit [Courier Journal, etc. Printing Co. v. Schaefer-Mey<
[(C. C. A.), 4 Am. B. R. 183; 101 Fed. 699], in the opinio
Lurton, C. J., gives a very complete statement of the jurisdictio
of the Court of Appeals under this section.
Two modes of reviewing the decisions and orders of the District Cou
in bankrupt proceedings are provided by the Bankrupt Act. The first
that found in section 24b of the act, which provides that :
" The several Circuit Courts of Appeal shall have jurisdiction in equitj
either interlocutory or final, to superintend and revise, in matter of law, tr
proceedings of the several inferior courts of bankruptcy within their jurii
diction. Such power shall be exercised on due notice and petition by any part
aggrieved."
Section 25a of the same act provides:
"That appeals, as in equity cases, may be taken in bankruptcy proceeding
from the courts of bankruptcy to the Circuit Courts of Appeals of tfc
United States, and to the Supreme Court of the Territories, in the followin
cases, to wit: (1) From a judgment adjudging or refusing to adjudge th
defendant a bankrupt; (2) from a judgment granting or denying a di;
charge; and (3) from a judgment allowing or rejecting a debt or claim of fiv
hundred dollars or over."
The superintending and revising authority granted by the twenty-fourt
section was evidently intended to provide a summary way for reviewing th
orders and decisions of the bankrupt courts upon questions of law, and doe
not contemplate any review of the facts. Under section 25, a review of bot
questions of fact and law is contemplated. Under section 24, the jurisdictio
is not exercised under an appeal, but upon an original petition filed in thi
court by any person aggrieved by the decision or order complained o
This differentiation of the modes of redress provided by the two sections seen
altogether conformable to the language employed, and is the interpretatio
announced by the Circuit Court of Appeals for the Seventh Circuit In R
Rouse, Hazard & Co. (iAm. B. R. 234, 63 U. S. App. 570, 33 C. C. A. 351
91 Fed. 96, and In Re Richards (3 Am. B. R. 145), 37 C. C. A. 634, 96 Fed. 93
The same interpretation is announced in the Fifth Circuit Court of Appeal
In re Abraham (2 Am. B. R. 266), 35 C. C. A. 592, 93 Fed. 767, and In 1
Purvine (2 Am. B. R. 787) , 37 C. C. A. 446, 96 Fed. 192. It was also the vie
taken by this court in Cunningham v. Bank (decided at this term) (4 Am. 1
R. 192), 101 Fed. 977. If the petitioner had desired a review of the questic
of the allowance of his claim upon both law and fact, he should have appealei
In Cunningham v. Bank, cited above, we held that the question of the ran
or lien of a claim was an incident to the allowance or rejection of the del
for which a lien was allowed or denied, and might therefore be review*
under an appeal from an order allowing or rejecting the debt, and thi
under such an appeal questions of both law and fact might be review©
Nevertheless an order allowing or denying a lien claimed may be reviews
COURTS AND PROCEDURE THEREIN.
249
§ 25.] Appeals to Court of Appeals.
upon petition, as to any matter of law. In re Rouse, Hazard & Co. (1 Am. B.
R. 234,33 C. C. A. 356, 91 Fed. 96). In re Richards (3 Am. B. R. 145 37 C.
C. A. 634, 96 Fed. 935.) No rule or order has been made by the Supreme
Court regulating the practice under the twenty-fourth section, and none
has been prescribed by this court. In re Richards, cited above, the Court of
Appeals for the Seventh Circuit, speaking of the mode in which the jurisdiction
of the court might be invoked under that section, said :
"In the case of an appeal, the facts as well as the law are before this court
for review. In the case of original petition, this court has authority to
review merely a matter of law arising in the course of the proceeding below.
The latter is intended as a summary mode of reviewing any supposed errone-
ous holding upon a question of law, and does not contemplate a review of the
facts. A similar conclusion was reached by the Court of Appeals of the Fifth
Circuit In re Purvine (2 Am. B. R. 787, 37 C. C. A. 446, 96 Fed. 192.) The
petition in such case should state specifically the question of law which was
involved and was ruled upon by the court below, and 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. Such question of law so
presented is the question, and the only question, that can be properly ruled
upon by this court upon an original petition."
This meets with our approval, and properly indicates the character of
question which may be thus reviewed, and a proper mode of presenting it.
The facts as they appear from the order sought to be reviewed, as stated in
the opinion of the court, or in the summary of evidence certified by the
referee, where it appears that the order of the referee was reviewed by the
district judge only upon such summary certified to him, must be treated as
settling the facts upon which the "matter of law" arises which is sought to
be reviewed.
In a recent case in the Circuit Court of Appeals for the 1st Cir-
cuit, In re Worcester County; s. c. Derby v. Worcester County
(4 Am. B. R. 496; 102 Fed. 808), it was held that if one doubtful
whether his remedy is under section 24 or section 25 undertakes to
avail himself of both, one does not necessarily neutralize the other,
because in contemplation of law no substantial injury is thereby
done to the party appealed against.
It has been recently held by the Circuit Court of Appeals of the
8th circuit in Chatfield v. O'Dwyer (4 Am. B. R. 313; 101 Fed.
797), that an appeal from the allowance of a claim by the District
Court can be taken by the trustee alone as the representative of
all the creditors but that where the trustee upon the request of the
creditor has declined to appeal the District Court has power either
to direct an appeal by the trustee or make an order permitting the
(32)
25o THE NATIONAL BANKRUPTCY LAW.
Time for Taking an Appeal. [Ch.
creditor to appeal in the name of the trustee. The case folio-
the decisions under the Act of 1867 holding that only the assign
had the right to appeal from the allowance of a claim. On t
other hand the Court of Appeals of the 5th circuit, In re Rod
(4 Am. B. R. 369; 101 Fed. 956), has held that any party injur
or affected by the decree or judgment may appeal — a rule whi
is applied to a creditor dissatisfied with the allowance of anothei
claim. The. first case seems to have the better authority. S
whait is said as to actions to set aside preferences under section 6
Time for Taking an Appeal. — The time for taking the appe;
in accordance with what is probably a universal rule of practi
cannot be enlarged when it is statutory. (Wood v. Bailey, :
Wall. 640.)
Where one omitted to take an appeal within the statutory tin
and the omission resulted from a mistake in the choice of rem
dies, the United States Supreme Court held that the Distri
Court might grant a review of the decree so as to enable the par
to take an appeal in time. ( Stickney v. Wilt, 1 1 N. B. R. 97 ;
c. 23 Wall. 150.)
The practice on the appeal is very simple. It is the same
in all equity cases. A short petition for appeal accompanied 1
an assignment of errors and a bond to cover costs must be fil
with the clerk and the appeal allowed either by the District Jud:
or a Judge of the Appellate Court. This allowance is usual
indorsed upon the petition or it may be inferred from the acce
tance of the bond and a citation to the appellees in their isst
As to when appeal is taken the following opinion of Caldwe
C. J., in Norcross v. Nave (C. C. A, 4 Am. B. R. 317; 101 Fe
796), is instructive.
" On the 20th day of April, 1899. John R. Norcross, the appellant, v
adjudged a bankrupt by the District Court of the United States for 1
Western District of Missouri, St. Joseph Division. On the 29th of April, 18
he prayed, and was allowed by the district judge, an appeal to this court fr<
the decree adjudging him a bankrupt; but the prayer for the appeal, and
allowance, and the citation and service thereon were not filed in the Disti
Court until the 2nd day of May, 1899. Section 25a of the Bankruptcy A
COURTS AND PROCEDURE THEREIN. 251
§ 25.] Appeals to Supreme Court.
which allows an appeal from the court of bankruptcy to the Circuit Court
of Appeals from a judgment adjudging the defendant a bankrupt, provides
that " such appeal shall be taken within ten days after the judgment appealed
from has been rendered." In re Good (3 Am. B. R. 60s), 39 C. C. A. 581, 99
Fed. 389. Under the decisions of the Supreme Court of the United States
an appeal is not taken within the meaning of the section quoted until the
petition and allowance of appeal (where there is such a petition and allowance)
and the appeal bond and the citation are presented to and filed in the court
which made the decree appealed from. In this case these papers, save the bond,
were not filed in the District Court until the 2nd day of May, 1899, more
then ten days after the judgment was entered adjudging the appellant a bank-
rupt. From the indorsements on the bond it sufficiently appears that it was
filed within the ten days, but that is only one step towards perfecting the
appeal. The presumption that might arise from the filing and approval of the
bond (Brandies v. Cochrane, 105 U. S. 262, 26 L. Ed. 989) does not obtain
when the record affirmatively discloses that there was a prayer for the appeal,
and its allowance, and a citation, none of which were filed in the court until
after the expiration of the ten days allowed to perfect the appeal. The case
of Credit Co. v. Arkansas Cent. Ry. Co. 128 U. S. 258, 9 Sup. Ct. 107, 32 L. Ed.
448, is directly in point, and concludes the question; and to the same effect
are Fowler v. Hamill, 139 U. S. 549, " Sup. Ct. 663, 35 L. Ed. 266; Farrar v.
Churchill, 135 U. S. 609, 10 Sup. Ct. 771, 34 L- Ed. 246. The appeal is dis-
missed."
Where there has been an application for a rehearing and an
order entered upon such application the time for appeal runs from
the entry of the last mentioned order. (See In re Worcester
County, 4 Am. B. R. 496; 102 Fed. 808.)
Appeals to Supreme Court. Section 25b (1). — The use of the
words " on appeal " in this statute is misleading because there is
no such thing as an appeal technically speaking from the highest
court of the State to the United States Supreme Court. A final
judgment is reviewed upon a writ of error. As to when a writ
of error will lie see what is said on this subject under section 24.
Sec. 25b (2) d. The provision under subdivision "b" is
undoubtedly intended to be supplementary to the the general right
of appeal to the Supreme Court upon certification provided for
by section 5 of the act of March, 1891, commonly known as the
Evarts Act. That section is as follows :
" Appeals or writs of error may be taken from the District Courts or from
the existing Circuit Courts direct to the Supreme Court in the following cases:
252 THE NATIONAL BANKRUPTCY LAW.
Appeals to Supreme Court — Review on Certiorari. [Ch. IV.
(i) In any case in which the jurisdiction of the court is in issue; in such
cases the question of jurisdiction alone shall be certified to the Supreme Court
from the court below for decision. (2) From the final sentences and decrees
in prize causes. (3) In cases of conviction of a capital crime. (4) In any
case that involves the construction or application of the Constitution of the
United States. (5) In any case in which the constitutionality of any law of
the United States, or the validity or construction of any treaty made under
its authority, is drawn in question. (6) In any case in which the constitution
or law of a State is claimed to be in contravention of the Constitution of the
United States. Nothing in this act shall affect the jurisdiction of the Supreme
Court in cases appealed from the highest court of a State, nor the con-
struction of the statute providing for review of such cases."
Recent cases which have been decided by the Supreme Court
on the question of jurisdiction have been brought up under this
section of the Evarts Act. When the case of Bardes v. Bank
first reached the United States Supreme Court on direct certifi-
cation from the District Court, it was rejected because no final
judgment had at that time been made in the District Court. (See
Bardes v. Hawarden Bank, 3 Am. B. R. 680; 175 U. S. 526.) In
that case it was held that under section 25d a certificate present-
ing the question of the jurisdiction of the District Court is subject
to the provisions of the 5th section of the Judiciary Act of 1891
in which the appeal upon the question of jurisdiction can only
be taken directly to the Supreme Court after final judgment.
It will be seen from an inspection of section 5 of the Act of
189 1 that in addition to the question of jurisdiction the Supreme
Court may review in bankruptcy proceedings on certificate the
cases referred to in subdivisions 4, 5, and 6 above.
Review on Certiorari. Section 25d.— What is referred to in the
grant of power to review by certiorari is the general jurisdiction
conferred by section 6 of the act of March, 1891 (26 Stat, at L.
826), where it is provided that " in any such case as is hereinbe-
fore made final in the Circuit Court of Appeals "(such cases being
other than those mentioned in section 5) "it shall be competent
for the Supreme Court to require, by certiorari or otherwise, any
such case to be certified to the Supreme Court for its review and
determination, with the same power and authority in the case as
COURTS AND PROCEDURE THEREIN.
«S3
§ 26.] Appeal to Supreme Court of Territory — Arbitration of Controversies.
if it had been carried by appeal or writ of error to the Supreme
Court." The writ of certiorari is a high prerogative writ and
will seldom be used. (See Forsyth v. Hammond, 166 U. S. 506.)
The following G. p. 36 is to be noted in connection with what
has been said on the subject of appeals.
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 bank-
ruptcy whatever, shall be taken within thirty days after the judgment or decree,
and shall be allowed by a judge of the court appealed from, or by a justice
of the Supreme Court of the United States.
3. In every case in which either party is entitled by the act to take an
appeal to the Supreme Court of the United States, the court from which
the appeal lies shall, at or before the time of entering its judgment or decree,
make and file a finding of the facts, amd its conclusions of law thereon,
stated separately; and the record transmitted to the Supreme Court of the
United States on such an appeal shall consist only of the pleadings, the
judgment or decree, the finding of facts, and the conclusions of law.
Appeal to Supreme Court of Territory. — It has been held by the
Oklahoma Supreme Court that an appeal does not lie to the
Supreme Court of a territory under section 25 from a judgment
allowing or rejecting a claim of less that $500, and that section
24b has no application to territorial courts. (In re Stumpff,
[Okl. Sup. Ct.] 4 Am. B. R. 267.)
No Appeal or Eight of Revision from Refusal to Confirm a Com-
position.— See In re Adler (103 Fed. 444; 4 Am. B. R. ),
cited and commented on under section 12 ante, sub nom. Final-
ity of Refusal to Confirm.
Sec. 26. Arbitration of Controversies. — a The trustee may,
pursuant to the direction of the court, submit to arbitration any
controversy arising in the settlement of the estate.
2S4 THE NATIONAL BANKRUPTCY LAW.
Arbitration of Controversies— Compromises. [Ch. IV.
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 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 court and shall have
like force and effect as the verdict of a jury.
Analogous Provisions of Former Acts,—
R. S., section 5061 ; act of 1867, section 14; act of 1841, section 11 ; act of 1800,
section 43.
The provisions of section 26, to the effect that the findings of
the arbitrator shall have the force and effect of the verdict of a
jury, make such findings reviewable by the court to the same ex-
tent that a verdiqt would be. (See In re McLam, 3 Am. B. R.
245; 97 Fed. 922.) The arbitrators must be chosen in strict
accordance with the provisions of the statute. Id. See also
G. O. 33 which follows:
XXXIII. ARBITRATION.
Whenever a trustee shall make application to the court for authority to
submit a controversy arising in the settlement of a demand against a bank-
rupt'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.
Compare section 58 post on notice to creditors of proposed
compromise.
Sec. 27. Compromises — a The trustee may, with the approval
of the court, compromise any controversy arising in the admin-
istration of the estate upon such terms as he may deem for the
best interests of the estate.
Analogous Provisions of Former Acts. —
R. S. section 5061 ; act of 1867, section 14 ; act of 1800, section 43.
COURTS AND PROCEDURE THEREIN. zS5
§§ 28, 29.] Approval of Court — Designation of Newspapers — Offenses.
Approval of the Court Necessary in Each Case. — Under the analo-
gous provisions of the former act, it was held that this section did
not authorize the court to make an order permitting the assignee,
with the approval of a committee of creditors duly appointed, to
compromise any and all debts that to him seemed best. Each
case should be brought before the court by the trustee and the
special facts which make it proper to compromise, should be set
forth. (In re Dibblee, Fed. Cas. 3,885; 3 Ben. 354.)
And this rule has been practically adopted by the Supreme
Court in G. O. 33 quoted under the preceding section (26).
Sec. 28. Designation of Newspapers. — a Courts of bankruptcy
shall by order designate a newspaper published within their re-
spective territorial districts, and in the county in which the bank-
rupt 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 par-
ties in interest, designate some additional newspaper in which
notices and orders in such case shall be published.
Analogous Provisions of Former Acts. —
As to publication of notices: act of 1867, section 11, amended by R. S.
section 5019; act of 1841, section 7.
Cross-reference — As to publication of notice to creditors, of the first
meeting, see section 58 (f).
Sec. 29. Offenses. — a A person shall be punished, by impris-
onment 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.
b A person shall be punished, 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
256 THE NATIONAL BANKRUPTCY LAW.
Cross-references — Offenses. [Ch. I\
after his discharge, from his trustee any of the property belong
ing to his estate in bankruptcy; or (2) made a false oath o
account in, or in relation to, any proceeding in bankruptcy; (3'
presented under oath any false claim for proof against the estat
of a bankrupt, or used any such claim in composition personall;
or by agent, proxy, or attorney, or as agent, proxy, or attorney
or (4) received any material amount of property from a bankrup
after the filing of the petition, with intent to defeat this act; oi
(5) extorted or attempted to extort any money or property fron
any person as a consideration for acting or forbearing to act ir
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 thereupor
become vacant, upon conviction of the offense of having know-
ingly ( 1 ) acted as a referee in a case in which he is directly 01
indirectly interested; or (2) purchased, while a referee, directlj
or indirectly, any property of the estate in bankruptcy of which,
he is referee; or (3) refused, while a referee or trustee, to permil
a reasonable opportunity for the inspection of the accounts re-
lating to the affairs of, and the papers and records of, estates in
his charge by parties in interest when directed by the court so tc
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 th«
offense.
Analogous Provisions of Former Acts. —
As to offenses of the bankrupt: R S. section 5132; act of 1867, section 44,
As to offenses of officers of the court: R. S. section 5012; act of 1867, section 45.
Cross-references. — The word " document " is defined in section
1 (13). As to what courts have jurisdiction to try offenses,
compare sections 2 (4) and 23c. " Concealed " is defined in sec-
tion 1 (22). As to the effect of the commission of an offense
upon an application for a discharge, see section 14b (1).
Offenses.— The present act makes not only the bankrupt and
the officers of the court punishable for certain offenses, but also
makes criminal various acts of third parties, in this latter respect
COURTS AND PROCEDURE THEREIN.
257
§ 29.] Conspirators — Defendant May be a Witness.
differing from the Act of 1867. In all of the offenses mentioned
in paragraph b, essential elements, which must be stated in the
indictment and found upon the trial, are that the act is done
knowingly and fraudulently. Inasmuch as the schedules re-
quired by section 7 (8) must be verified, a wilful and fraudulent
omission of a material asset or a material debt, would seem to be
an offense punishable by imprisonment. (Compare U. S. v.
Nichols, 4 McLean, 23.) A bankrupt who submits the facts in
regard to his property fairly to the advice of his counsel, and who,
acting under the advice thus given, withholds certain items from
his schedule, is not guilty of perjury, the fraudulent intent being
wanting. (U. S. v. Conner, 3 McLean, 573.) But if he makes
false statements in regard to it, in answer to interrogatories pro-
posed to him in his examination, it is perjury. (U. S. v. Dickey,
1 Morris, 412.) False swearing to a fact, to the best of the opin-
ion of the witness, which the witness, though without any reason-
able cause, believes to be true, is not perjury. (Commonwealth
v. Brady, 5 Gray [Mass. J 78.) But perjury cannot be predi-
cated of a witness where the false testimony was on a prior pro-
ceeding and incorporated by consent. (In re Goldsmith, 4 Am.
B. R. 234; 101 Fed. 570.)
Conspirators. — U. S. Revised Statutes, section 5,440, provide:
" If two or more persons conspire either to commit any offense
against the United States, or to defraud the United States in any
manner or for any purpose, and one or more of such parties do any
act to effect the object of the conspiracy, aU the parties to such
conspiracy shall be liable to a penalty of not more than ten thou-
sand dollars, or to imprisonment of not more than two years, or to
both fine and imprisonment in the discretion of the court."
Under this section it was held that a person who conspired with
another to commit an offense against the Bankruptcy Act of
1867 was liable to prosecution. (U. S. v. Bayer, Fed. Cas.
14,547; 4 DiH. 407-)
Defendant May Be a Witness. — The Act of March 16, 1878,
chapter 37 (20 Stat. L. 30), provides that
(33)
258 THE NATIONAL BANKRUPTCY LAW.
Proceeding by Indictment — Inspection of Accounts — Rules, etc. [Ch. IV.
" In the trial of all indictments, information, complaints, and other proceed-
ings against persons charged with the commission of crimes, offenses, and
misdemeanors, in the United States courts, Territorial courts, and courts-
martial, and courts of inquiry, in any State or Territory, including the Dis-
trict of Columbia, the person so charged shall, at his own request but not
otherwise, be a competent witness. And his failure to make such request
shall not create any presumption against him."
This statute must be considered as overruling various decisions
to the contrary rendered before its enactment.
Proceeding by Indictment. — Under the former act which made
the wilful and fraudulent omission of assets from the schedule
a misdemeanor, it was held that such an offense was not an in-
famous crime, and that a proceeding against the offender might be
by information and not indictment. (U. S. v. Block, Fed. Cas.
14,609; 15 N. B. R. 325.)
But as to all offenses referred to in subdivisions " a " and " b "
it must be assumed since the decisions of In re Wilson (114 U. S.
422) and Mackin v. U. S. (117 U. S. 348) that all offenses which
are punishable by imprisonment for more than one year must be
presented by indictment.
Inspection of Accounts. — As to what is a reasonable opportunity
of inspecting accounts, compare In re Brewer; Ex p. Runel (1
DeGex, M. & G. 491.)
Sec. 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.
Analogous Provisions of Former Acts.-
Act of 1867, section 10.
The General Orders of the Supreme Court are obligatory and
binding on courts of bankruptcy. They confer rights as well as
COURTS AND PROCEDURE THEREIN. 259
g 31.] Computation of Time — Time by Months and Years.
prescribe rules of practice and must be followed. (In re Scott,
3 Am. B. R. 625; 99 Fed. 404.) But the forms and orders in-
dicate only the substance and are not necessarily exclusive as to
cases not falling strictly within their terms. (See In re Paige,
3 Am. B. R. 679; 99 Fed. 538. See also In re Soper, 1 Am. B.
R. 193.)
Sec. 31. Computation of Time. — a Whenever time is enu-
merated by days in this act, or in any proceeding in bankruptcy,
the number of days shall be computed by excluding the first and
including the last, unless the last fall on a Sunday or holiday,
in which event the day last included shall be the next day there-
after which is not a Sunday or a legal holiday.
Analogous Provisions of Former Acts. —
R. S. section 5013 ; act of 1867, section 48.
Time by Months and Tears. — Although the statute expressly
provides only for a method of computing time when the enumera-
tion is by days, it was held under the former act which was sub-
stantially similar in its provisions, that a fair construction of it re-
quired that the same rule should be applied when the time was
enumerated by months or years. Under that statute, which per-
mitted one to apply for a discharge within a year from the ad-
judication, it was held that where one had been adjudicated
bankrupt on the 26th of November of a certain year, and the 26th
of November of the following year came upon Thanksgiving
Day, it being a legal holiday, the application could be filed on
the 27th of November. (In re J. B. Lang, Fed. Cas. 8,056 ; 2
N. B. R. 480. ) To same effect : Cooley v . Cook ( 125 Mass. 406) .
But the general rule of law is that when a thing must be done
within a certain number of months or years, if the last day falls
on Sunday or a holiday, it cannot be done on the next day.
(Compare Amer. and Eng. Ency. of Law [1st ed.], title, Time.)
In another case in bankruptcy it was held that an attachment
260 THE NATIONAL BANKRUPTCY LAW.
Time by Months and Years — Transfer of Cases. [Ch. IV.
made on the 8th of March, at seven o'clock in the afternoon was
voidable, if the petition in bankruptcy was filed on the 8th of July
at two o'clock in the afternoon, the court in that case not apply-
ing the rule which requires that the last day should be included,
but holding that the general common-law rule that fractions of a
day are not to be considered did not apply, and that in ascertain-
ing whether or not a petition in bankruptcy had been filed within
four months from the time of securing such an attachment, hours
and minutes might be counted to see whether the time had
expired. (Westbrook Mfg. Co. v. Grant, 60 Me. 88.) In a
similar case it was held that the day on which the petition was
filed must be excluded. (Dutcher v. Wright, 16 Albany Law
Journal, 100; s. c. 94 U. S. 553.) When Sunday or a holiday
is one of the intervening days, it is to be counted. {In re York v.
Hoover, Fed. Cas. 18,139; 4 N. B. R. 479.) The filing of a
petition which will establish the date from which is to be de-
termined the validity of liens and preferential transfers, which
are in some cases voidable under this act, must be the filing of a
petition which alleges the necessary jurisdictional facts. If no
adjudication can be made on it, it will not mark the date from
which time is to be measured. {In re Rogers, Fed. Cas. 12,003 >
10 N. B. R. 444.) A petition is filed at the time when presented
to the clerk for action by the court, not at the time when the clerk
presents it to the judge to obtain a subpoena or a show cause
order thereon.
Cross-reference.— Compare notes to section 60, paragraph on When Do
the Four Months Expire.
Sec. 32. Transfer of Cases.— a In the event petitions are filed
against the same person, or against different members of a part-
nership, in different courts of bankruptcy each of which has 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
convenience of parties in interest.
COURTS AND PROCEDURE THEREIN. 261
§ 32.] Transfer of Cases — Where May the Petition be Filed.
Analogous Provisions of Former Acts. —
As to transfers in cases of two petitions being filed against one partnership :
Rule XVI. of Orders in Bankruptcy, under the act of 1867.
And see following G. O. 6 as to effect of filing petitions in
different districts.
VI. PETITIONS IH DIFFERENT DISTRICTS.
In case two or more petitions shall be filed against the same individual
in different districts, the first hearing shall be had in the district in which
the debtor has his domicil, and the petition may be amended by inserting
an allegation of an act of bankruptcy committed at an earlier date than that
first alleged, if such earlier act is charged in either of the other petitions ; and
in case of two or more petitions against the same partnership in different courts,
each having jurisdiction over the case, the petition first filed shall be first heard,
and may be amended by the insertion of an allegation of an earlier act of bank-
ruptcy than that first alleged, if such earlier act is charged in either of the other
petitions; and, in either case, the proceedings upon the other petitions may be
stayed until an adjudication is made upon the petition first heard ; and the court
which makes the first adjudication of bankruptcy shall retain jurisdiction over
all proceedings therein until the same shall be closed. In case two or more pe-
titions shall be filed in different districts by different members of the same part-
nership for an adjudication of the bankruptcy of said partnership, the court in
which the petition is first filed, having jurisdiction, shall take and retain juris-
diction 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 satis-
fied that it is for the greatest convenience of parties, in interest that another of
said courts should proceed with the cases, order them to be transferred to
that court.
(And see In re Waxelbaum, 3 Am. B. R. 392 ; 101 Fed. 228.)
Where May the Petition be Filed. — The petition may be filed at
the option of the petitioner in any one of three districts, viz.,
the district in which the bankrupt for the greater portion of the
six months previous to the filing of the petition has resided, or
has his domicil or has had his principal place of business. In
the case of non-resident aliens having no principal place of busi-
ness in the United States, or in the case of persons who have
been adjudged bankrupt by courts of competent jurisdiction
without the United States, it may be in any district in which they
have property. (Section 2 [1].) Jurisdiction over one partner
262 THE NATIONAL BANKRUPTCY LAW.
Where May the Petition be Filed. . [Ch. IV
gives the court a right to adjudge all the members of the firn
bankrupts (section 5c) ; but does not give it jurisdiction to ad-
judge each member of the firm individually a bankrupt, unless ii
has jurisdiction over him personally.
CHAPTER V.
OFFICERS, THEIR DUTIES AND COMPENSATION'.
Sec. 33. Creation of Two Officers.— a The offices of referee and
trustee are hereby created.
Analogous Provisions of Former Acts. —
Compare " Analogous Provisions of Former Acts " given under sections 34
to 49, both inclusive.
Under the Former Act. — Duties corresponding to those by this
statute imposed upon the referee and the trustee, were under the
former act imposed upon officers known respectively as register,
and assignee.
Sec. 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 are needed, may constitute at least one district.
Analogous Provisions of Former Acts. —
As to appointment: R. S. section 4993; act of 1867, section 3; act of 1841,
section 5 ; act of 1800, section 2. As to removal : R. S. section 4997 ; act of
1867, section 5.
Appointment. — The law clearly intends that there shall be at
least one referee for each county, more if necessary. The fixing of
263
264 THE NATIONAL BANKRUPTCY LAW.
Qualifications of Referees — Degree of Relationship. [Ch. V.
definite limits for the districts of referees seems to be necessary;
otherwise serious jurisdictional questions may arise, inasmuch
as the act provides that the referee must reside or have an office
in the territorial district for which appointed. (Section 35.)
Further, numerous provisions of the statute provide that various
matters may be referred to " the " referee.
Sec. 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) residents of, or have
their offices in, the territorial districts for which they are to be
appointed.
Analogous Provisions of Former Acts. —
As to qualifications : R. S. sections 4994 and 4995 ; act of 1867, section 3.
Degree of Relationship. — "Affinity" means relationship by
marriage, viz: the tie between the respective kindred of a mar-
ried couple. " Consanguinity " is the connection or relation of
persons to a common ancestor, viz: blood relationship. (See
Anderson's Law Dictionary.)
In determining degrees of relationship the rule of the common
law, as well as the civil law, is to count up from either of the per-
sons related to the common ancestor, and then down to the other
person related, reckoning a degree to each person ascending and
descending. (Redfield's Surrogate's Practice, 5th ed. p. 669.)
In computing, the common ancestor is counted but once, and one
of the persons related is excluded and the other included.
OFFICERS, THEIR DUTIES AND COMPENSATION. 265
§§ 36. 37. 38.] Oaths of Office of Referees — Number of — Jurisdiction of.
Sec. 36. Oaths of Office of Referees.— a Referees shall take the
same oath of office as that prescribed for judges of United States
courts.
Analogous Provisions of Former Acts. —
R. S. section 4995; act of 1867, section 3.
Oath of Office.— U. S. Revised Statutes, section 712, provides: "The
justices of the Supreme Court, the circuit judges, and the district judges, here-
after appointed, shall take the following oath before they proceed to perform
the duties of their respective offices : ' I , do solemnly swear (or
affirm) 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 dis-
charge and perform all the duties incumbent on me as , according to
the best of my abilities and understanding, agreeably to the Constitution and
laws of the United States, so help me God.' "
Sec. 37. Number of Referees. — a Such number of referees shall
be appointed as may be necessary to assist in expeditiously tran-
sacting the bankruptcy business pending in the various courts of
bankruptcy.
Analogous Provisions of Former Acts. —
R. S. section 4993; act of 1867, section 3.
Sec. 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 ad-
ministering of oaths to and the examination of persons as wit-
nesses and for requiring the production of documents in pro-
ceedings 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
(34)
266 THE NATIONAL BANKRUPTCY LAW.
Jurisdiction of Referee. [Ch. V.
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 compositions or discharges, as are by this act con-
ferred 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 applica-
tion of the trustee during the examination of the bankrupts, or
other proceedings, authorize the employment of stenographers at
the expense of the estates at a compensation not to exceed ten
cents per folio for reporting and transcribing the proceedings.
Analogous Provisions of Former Acts. —
R. S. section 4998; act of 1867, section 4; also R. S. sections 5009 and 5010;
act of 1867, sections 4 and 6.
Together with this section should be considered G. O. 12,
which is as follows :
XII. DUTIES OF REFEREE..
1. The order referring a case to a referee shall name a day upon which
the bankrupt shall attend before the referee; and from that day the bank-
rupt shall be subject to the orders of the court in all matters relating to
his bankruptcy, and may receive from the referee a protection against arrest,
to continue until the final adjudication on his application for a discharge,
unless suspended or vacated by order of the court. A copy of the order shall
forthwith be sent by mail to the referee, or be delivered to him personally
by the clerk or other officer of the court. And thereafter all the pro-
ceedings, except such as are required by the act or by these general orders
to be had before the judge, shall be had before the referee.
2. The time when and the place where the referees shall act upon the
matters arising under the several cases referred to them shall be fixed by
special order of the judge, or by the referee ; and at such times and places the
referees may perform the duties which they are empowered by the act to
perform.
3. Applications for a discharge, or for the approval of a composition, or
for an injunction to stay proceedings of a court 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.
Jurisdiction of Referee.— After adjudication the judge may
refer the case either generally to the referee or specifically with
OFFICERS, THEIR DUTIES AND COMPENSATION. 267
§ 38.] Jurisdiction of Referee.
only limited authority in the premises. (See section 22.) The
adjudication must be by the judge unless he is absent from the
district or division, in which contingency the clerk sends the case
to a referee. The object of the bankruptcy statute is as far as
possible to establish local courts which will deal promptly and
easily with the matters that come before them. So that it fol-
lows that the referee's powers in general, subject to review by
the judge, and after reference of the case to him by order of the
judge, cover nearly all the powers which are conferred by statute
upon bankruptcy courts.
Although in general the territorial jurisdiction of referees
under the present act is less extensive than that of registers under
the former act, as to subject-matter their jurisdiction greatly ex-
ceeds that of the former register, for a referee may, generally
speaking, hear and determine contested matters, while the reg-
isters, when issues of fact or of law arose before them, were com-
pelled to certify them to the court for determination. In con-
sidering the authority, jurisdiction, powers and duties of a ref-
eree it must be borne in mind that wherever in the bankruptcy
act the word " court " is used, the word means the court of bank-
ruptcy in which the proceedings are pending, and may include
the referee. (Section 1 [7].) And it is the duty of the court
to consider, and to confirm, or modify or overrule, or return with
instructions for further proceedings, any records or findings cer-
tified to it by the referee. (Section 2 [10].) The only petitions
in bankruptcy which can be determined by a referee are volun-
tary petitions and involuntary petitions in cases in which no other
pleadings have been filed by the bankrupt or by his creditors.
(Section i8f and g.) In no case can he pass upon a peti-
tion to adjudge one bankrupt unless the judge is absent from the
district at the time the matter is referred. As to referee's juris-
diction to take the examination of witnesses, compare section
4ia, b, and c. As to the taking of possession of the bank-
rupt's property, compare section 69. The powers and duties of
a referee may be restricted by rules or orders of the courts of
bankruptcy prescribed for the district. Except for- these restric-
268 THE NATIONAL BANKRUPTCY LAW.
Application for Discharge — Review by Judge — Duties of Referees. [Ch. V.
tions upon his jurisdiction, and the statutory restrictions set
forth in this section he may, in general, perform all the duties
conferred on courts of bankruptcy. His authority to pass upon
issues of fact arising in the proceedings is clear. (Section 39a
[5]-)
Jurisdiction Upon Application for Discharge. — Although, as has
been seen, the referee may not finally determine the question of
discharge or non-discharge, by G. O. 12 he may report upon any
issue arising thereon which is referred to him. His duties in this
respect have been lately passed upon by the District Court of
Iowa, In re Kaiser, 3 Am. B. R. 767 ; 99 Fed. 689. In that case,
upon a contested application for discharge, it was held :
(1) That authority of referee extends beyond taking, ruling
upon, and reporting evidence, and includes making findings and
recommendations thereon. (2) Specifications of opposition to
discharge intended to show that bankrupt has been guilty of
criminal concealment, must aver scienter and all essential facts
necessary to establish the commission of the offense. (3) Such
specification is prerequisite to the introduction of any evidence,
and defines the issues to which the inquiry should be confined,
and (4) may not be amended by the referee, but may be amended
by the court.
Review by the Judge. — The review of the referee's decision is
provided for in G. O. 27, which is as follows:
XXVII. REVIEW BY JUDGE.
When a bankrupt, creditor, trustee, or other person shall desire a review
by the judge of any order made by the referee, he shall file with the referee,
his petition therefor, setting out the error complained of; and the referee shall
forthwith certify to the judge the question presented, a summary of the evi-
dence relating thereto, and the finding and order of the referee thereon.
Sec. 39. Duties of Referees — a Referees shall ( 1 ) declare divi-
dends and prepare and deliver to trustees dividend sheets show-
ing the dividends declared and to whom payable; (2) examine
all schedules of property and lists of creditors filed by bankrupts
OFFICERS, THEIR DUTIES AND COMPENSATION. 269
§ 39.] Duties of Referees.
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 bank-
rupts, or cause the same to be done, when the bankrupts fail, re-
fuse, 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 application of any party in in-
terest, 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.
b Referees shall not ( 1 ) act in cases in which they are directly
or indirectly interested; (2) practice as attorneys and counsellors
at law in any bankruptcy proceedings; or (3) purchase, directly
or indirectly, any property of an estate in bankruptcy.
Analogous Provisions of Former Acts. —
R. S. sections 4998, 5000 and 5001 ; act of 1867, sections 4 and 5.
Duties of Referees. Section 39 (a). — The duties referred to
in this section are mainly administrative. As to other duties of
referees see G. O. 12 quoted under the preceding section.
(1) As to the time when the dividend shall be declared see
section 65b; as to the form of a dividend sheet, see form No. 40.
(2) The examination of the schedules it would seem should
be made by the referee personally.
27o THE NATIONAL BANKRUPTCY LAW.
Duties of Referees. [Ch. V.
This section not only authorizes but requires a referee to order
an amendment of schedules when the same are defective, whether
or not the bankrupt or any creditor makes application for an
amendment. Although the bankrupt is required to file these
schedules with his petition, the schedules are not a part of the
petition, and the fact that they are defective is no reason for post-
poning an adjudication of bankruptcy. (In re Patterson, Fed.
Cas. 10,815; 1 Ben. 517; s. c. 1 N. B. R. 125.) Compare sec-
tion 7 (8). Although the referee is required to prepare and
file the schedules, in case a bankrupt does not do so, this provision
does not compel him to act until all proceedings have been taken
to compel the bankrupt to file them. If the latter neglects to file
them within the time mentioned in section 7 (8), the court may
direct them to be filed, and may punish the bankrupt for contempt
if he thereafter fails to obey the order. It is the referee's duty
to prepare them only where the order above mentioned cannot
be enforced.
(3) As to the furnishing of information concerning the estate
compare section 29c (3) ; also section 4.
(4) As to giving ten days' notice to creditors compare section
58c.
(5) As to making up records and the transmission of the
same compare sections 42, 2 (10), and 51a (3).
(6) As to preparation of schedules see what is said under (2).
(7, 8) See what is said under (5) ante.
(9) As to the employment of a stenographer compare sec-
tion 38a (5). It would seem that a stenographer or other
assistant should not be employed except at the request of the
trustee or upon the order of the judge In re Carolina Cooperage
Co. (3 Am. B. R. 154; 96 Fed. 950), and see G. O. 35 (2).
Besides transmitting the records the referee should file all
claims against the estate. See G. O. 24, which is as follows :
XXIV. TRANSMISSION OF PROVED CLAIMS TO CLERK.
The referee shall forthwith transmit to the clerk a list of the claims proved
against an estate, with the names and addresses of the proving creditors.
OFFICERS, THEIR DUTIES AND COMPENSATION. 271
§ 39.] Duties of Referees — Care of Property —Restrictions.
The method of taking testimony by the referee is set forth in
G. O. 22, which follows :
XXII. TAKING OF TESTIMONY.
The examination of witnesses before the referee may be conducted by the
party in person or by his counsel or attorney, and the witnesses shall be subject
to examination and cross-examination, which shall be had in conformity with
the mode now adopted in courts of law. A deposition taken upon an exami-
nation before a referee shall be taken down in writing by him, or under his
direction, in the form of narrative, unless he determines that the examination
shall be by question and answer. When completed it shall be read over to the
witness and signed by him in the presence of the referee. The referee shall
note upon the deposition any question objected to, with his decision thereon;
and the court shall have power to deal with the costs of incompetent, imma-
terial, or irrelevant depositions, or parts of them, as may be just.
As to orders made by the referee see G. O. 23, as follows :
XXIII. ORDERS OE REFEREE.
In all orders made by a referee, it shall be recited, according as the fact
may be, that notice was given and the manner thereof; or that the order was
made by consent; or that no adverse interest was represented at the hearing;
or that the order was made after hearing adverse interests.
Care of Property. — The present statute contains no provision
authorizing or requiring a referee to accept the surrender of the
property of a bankrupt after adjudication, a power conferred
upon the register under the old practice. It seems to be con-
templated now that the bankrupt is to retain the custody and con-
trol of the property until the trustee takes possession. The court
of bankruptcy may, if it is absolutely necessary, appoint a re-
ceiver or marshal to take charge of it until the trustee is quali-
fied. (Section 2 [3].) Whatever duties the referee may now
have concerning it, would seem to be judicial in their character.
Restrictions. Section 39 (6) — The provisions of the statute
forbidding the referee from acting in any case in which he is
directly or indirectly interested, and from practicing as attorney
and counsellor at law in any bankruptcy proceeding whatever,
restrict him in this respect more than the former act restricted
272 THE NATIONAL BANKRUPTCY LAW.
Notice to Trustee of His Appointment — Compensation of Referees. [Ch. A
the register. A violation of either of the matters mentioned ii
b (i) or (3), is an offense under section 29.
But the mere fact that the referee is a debtor of the allegei
bankrupt does not disqualify him to act as referee in proceeding
against his creditor. (Bray v. Cobb, 1 Am. B. R. 153; 91 Fed
102.)
Notice to Trustee of His Appointment. — It is the referee's dut;
to notify the trustee of his appointment. See G. O. 16, which i
as follows:
XVI. NOTICE TO TRUSTEE OF HIS APPOINTMENT.
It shall be the duty of the referee, immediately upon the appointment ani
approval of the trustee, to notify him in person or by mail of his appoint
ment; and the notice shall require the trustee forthwith to notify the refere
of his acceptance or rejection of the trust, and shall contain a statemen
of the penal sum of the trustee's bond.
Expenses of Referee. — The referee must keep an accurate ac
count of his expenses. This subject is covered by G. O. 26
which is as follows :
XXVI. ACCOUNTS OF REFEREE.
Every referee shall keep an accurate account of his traveling and incidents
expenses, and of those of any clerk or any officer attending him in the pei
formance of his duties in any case which may be referred to him; and shal
make return of the same under oath to the judge, with proper vouchers whe:
vouchers can be procured, on the first Tuesday in each month.
Sec. 40. Compensation of Referees. — a Referees shall receive a
full compensation for their services, payable after they are ren
dered, a fee of ten dollars deposited with the clerk at the time th
petition is filed in each case, except when a fee is not requirei
from a voluntary bankrupt, and from estates which have beei
administered before them one per centum commissions on sum
to be paid as dividends and commissions, or one-half of one pe
centum on the amount to be paid to creditors upon the confirma
tion of a composition.
b Whenever a case is transferred from one referee to anothe
the judge shall determine the proportion in which the fee am
commissions therefor shall be divided between the referees.
OFFICERS, THEIR DUTIES AND COMPENSATION. 273
§ 40.] On Dividends and Commissions.
c In the event of the reference of a case being revoked before
it is concluded, and when the case is specially referred, the judge
shall determine what part of the fee and commissions shall be paid
to the referee.
Analogous Provisions of Former Acts. —
R. S. sections 5008 and 5125 ; act of 1867, sections 4 and 5.
On Dividends and Commissions. — The basis of commissions is
not receipts and disbursements, but the sum left for distribution
as dividends and as commissions. The commissions and the fee
are not payable to the referee until the estate is closed; that is,
not until he has sent all the records to the clerk. (Compare sec-
tions 5 1 [4] and 39 [7] . ) The purpose of these provisions, ac-
cording to the report of the judiciary committee of the House, is
to induce officers to expedite the administration of estates in their
charge and to keep down expenses. As to cases in which a vol-
untary bankrupt is excused from paying a fee, compare section
5i [2].
The term dividend has been judicially defined under the present
act as a parcel of the funds arising from the assets of the estate,
rightfully allotted to a creditor entitled to share in the fund,
whether in the same proportion with other creditors, or in differ-
ent proportion. {In re Barber, 3 Am. B. R. 306; 97 Fed. 547.)
In that case it was held that where a secured creditor does not
invoke the aid of the Court of Bankruptcy to enable him to turn
his securities into cash, then, although the court in the exercise of
its equitable power for the benefit of the unsecured creditors, may
order the incumbered property sold free and discharged of the
incumbrance, assuming the conservation of the equitable rights
of the secured creditor in the disposition of the proceeds of the
sale, it seems that the moneys coming to the secured creditor
under such circumstances come into the case incidentally and are
not to be regarded as any dividend, and should not be charged
with any commissions. But where the secured creditors in their
own interests invoke the aid of the Court of Bankruptcy to make
(35)
274 TELE NATIONAL BANKRUPTCY LAW.
On Dividends and Commissions. [Ch. V.
such a sale, and realize thereby upon their security more than they
could have expected through foreclosure, and without the expense
and delay of that remedy, thereby preserving their own equities
and at the same time realizing the claims of the unsecured
creditors, the amount paid to them must be properly considered
as a dividend, and hence is properly chargeable with commissions,
and this is so even though the secured creditors stipulate that the
whole of the fund realized should be paid to an agency of their
own selection for division and apportionment among them.
In this case (distinguishing In re Slevin, 4 Dill. 131 ; Fed. Cas.
Ho. 12,942) Judge Lochren says:
" The case of In re Slevin, 4 Dill. 131, Fed. Cas. No. 12,942, has no bearing.
There the sale was made by the trustee named in the mortgage, and the as-
signee in bankruptcy, who would have been entitled to receive only any surplus
after the payment of the mortgage debt, joined in the deed. But there was no
surplus, no money whatever to be administered by the Court of Bankruptcy,
and he was properly held entitled to no commission. Here the entire fund was
Obtained through the action of the Court of Bankruptcy, whose officers alone
made the sale and administered the fund; paying the avails of the security
directly to the bondholders, and entirely disregarding the trustee named in the
mortgage. The mortgage was functionless in the proceeding, except as it
showed the extent of the rights and equities of the bondholders which were
entitled to the protection of the court. The payments to the bondholders were
of their dividends or allotments of the fund produced in the Court of Bank-
ruptcy through the execution of its orders by its officers upon the motion or
request of the secured creditors, and the referee and trustee are entitled to
commissions on such dividends. Such sale, when agreed to by all the parties,
was doubtless within the equity powers of the Court of Bankruptcy. Ex parte
Christy, 3 How. 292, 315. It enabled the mortgagees or bondholders to realize
with greater speed the avails of the security than could have been done by
foreclosure under the terms of the mortgage, and of the law under which the
creditors might have acted. But there is nothing in the law which excludes
the referee from commissions upon dividends to any class of creditors from a
fund obtained through the action of the court alone, and the services of its of-
ficers, when such action and services have been invoked by such creditors."
On the other hand a referee recently held (In re Gardner, 4
Am. B. R. 420), that this portion of the statute relating to com-
missions on dividends, etc., is unconstitutional on the ground that
the judiciary article of the Constitution of the United States
is impliedly subject to the general common law rule that
OFFICERS, THEIR DUTIES AND COMPENSATION. 275
§ 40.] On Dividends and Commissions.
no one shall be a judge in a matter in which he is inter-
ested, and that the referee is interested within the meaning
of that maxim, when he passes upon the question of divi-
dends, and therefore such a matter if passed upon at all must be
passed upon by the judge. It is probable that the referee has
taken too narrow a view of the subject. In the first place, his
statement of the common law rule being incorporated by implica-
tion in the Constitution of the United States is open to question ;
and secondly he has undoubtedly given the rule a too narrow in-
terpretation. The " interest " which will disqualify a judicial
officer means an interest in the cause of action itself, something
more than such interest as may result incidentally by reason of
fees, etc. So held in New York where a judge passed upon the
constitutionality of a statute which increased his compensation
when acting in a certain capacity as well as the compensation of
other judges. (People ex rel. Morris v. Edmonds, 15 Barb. 529.)
It is probable that the decision of In re Gardner will not be fol-
lowed. But commssion cannot be collected upon claims en-
titled to priority. {In re Fielding, 3 Am. B. R. 135; 96 Fed.
800.)
It has been held in the case of Fellows v. Freudenthal, C. C. A.
7th C. (4 Am. B. R. 490; 102 Fed. 731), that where issues aris-
ing upon an application for discharge are sent to a referee to as-
certain and report upon, the reference is made to him in the capa-
city of special master in chancery and not as referee in bankruptcy,
and the duty is independent of the latter office and in no sense in-
compatible. A reasonable allowance may therefore be taxed for
the referee's compensation outside and apart from the provisions
of section 40. It must be remembered, however, in this connec-
tion that the reference of specified issues arising in the adminis-
tration of the estate is within the direct contemplation of the
Bankruptcy Law. (Section 22 ante.)
On the subject of the compensation of the referee it is im-
portant to keep in mind G. O. 35, as follows :
2. The compensation of referees, prescribed by the act, shall be in full com-
pensation for all services performed by them under the act, or under these
276 THE NATIONAL BANKRUPTCY LAW.
On Dividends and Commissions — Contempts before Referees. [C
general orders ; but shall not include expenses necessarily incurred by the
publishing or mailing notices, in traveling, or in perpetuating testimony
other expenses necessarily incurred in the performance of their duties u;
the act and allowed by special order of the judge.
4. In any case in which the fees of the clerk, referee and trustee are
required by the act to be paid by a debtor before filing his petition to be
judged a bankrupt, the judge, at any time during the pendency of' the
ceedings in bankruptcy, may order those fees to be paid out of the estate
may, after notice to the bankrupt, and satisfactory proof that he then
or can obtain the money with which to pay those fees, order him to pay t
within a time specified, and, if he fails to do so, may order his petition t<
dismissed.
On the subject of accounts of the referee see G. O. 26, quo
under preceding section.
G. O. 10 gives the referee with other officers the right to
quire from the bankrupt or other person in whose behalf expen
are to be incurred indemnity for such expenses.
Sec. 41. Contempts before Referees.— a A person shall not,
proceedings before a referee, (1) disobey or resist any law
order, process or writ; (2) misbehave during a hearing or
near the place thereof as to obstruct the same; (3) neglect
produce, after having been ordered to do so, any pertinent doi
ment; or (4) refuse to appear after having been subpoenaed,
upon appearing, refuse to take the oath as a witness, or, after h;
ing taken the oath, refuse to be examined according to law. P
vided, Tha+ no person shall be required to attend as a witn
before a referee at a place outside of the State of his resideti
and more than one hundred miles from such place of resideti
and only in case his lawful mileage and fee for one day's attei
ance shall be first paid or tendered to him.
b The referee shall certify the facts to the judge, if any pen
shall do any of the things forbidden in this section. The juc
shall thereupon, in a summary manner, hear the evidence as
the acts complained of, and, if it is such as to warrant him in
doing, punish such person in the same manner and to the sa:
extent as for a contempt committed before the court of bai
ruptcy, or commit such person upon the same conditions as if 1
OFFICERS, THEIR DUTIES AND COMPENSATION. 377
§ 41.] Disobedience to Subpoena — Contempt Proceedings — Witness Fees.
doing of the forbidden act had occurred with reference to the
process of, or in the presence of the court.
Analogous Provisions of Former Acts. —
R. S. sections 5002, 5005 and 5006 ; act of 1867, sections 5 and 7 ; act of 1800,
sections 14 and IS; also R. S. section 4999; act of 1867, section 4.
Disobedience to Supoena. — To justify a person who is properly
subpoenaed and to whom has been paid the required mileage and
fees, in refusing to attend, it would seem from this section that he
must show that he not only lives outside of the State, but more
than one hundred miles from the place where he is required to
attend. (Compare, however, U. S. R. S., section 876.) The
fact that he lives in a different judicial district will not excuse
him. A referee's subpoena reaches beyond the limits of the judi-
cial district. In this respect it differs from other process. The
referee to whom a case is referred has all the powers of the court
which appoints him for the purpose of summoning and examining
witnesses, except the power of commitment. (In re W. S. Wood-
ward, 10 Pac. L. R. 214; s. c. 8 Ben. 112; Fed. Cas. 18,000;
s. c. 12 N. B. R. 297.)
Contempt Proceedings. — Although a register (like a referee)
could not punish for contempt, yet in the case of Speyer (Fed.
Cas. 13,239; 6 N. B. R. 255), arising under the act of 1867,
where a party moved the court before the judge for an order to
punish a bankrupt for contempt for disobeying an order of the
register, the court referred the matter back to the register to take
such testimony as the bankrupt might offer in order to purge him-
self of the contempt. And this seems to be the practice under the
present statute, In re McCormick, 3 Am. B. R. 340 ; 97 Fed. 566.
Witness Fees.— U. S. Revised Statutes, section 848, provides :
" For each day's attendance in court, or before any officer pur-
suant to law, one dollar and fifty cents, and five cents a mile for
going from his place of residence to the place of trial or hearing,
and five cents a mile for returning. When a witness is subpce-
278 THE NATIONAL BANKRUPTCY LAW.
Witness Fees — Records of Referees — Referee's Absence. [Ch. V.
naed in more than one cause between the same parties, at the same
court, only one travel fee and one per diem compensation shall be
allowed for attendance. Both shall be taxed in the case first dis-
posed of, after which the per diem attendance fee alone shall be
taxed in the other cases in the order in which they are disposed
of. When a witness is detained in prison for want of security
for his appearance, he shall be entitled, in addition to his sub-
sistence, to a compensation of one dollar a day." U. S. Revised
Statutes, section 849, provide : " No officer of the United States
courts, in any State or Territory, or in the District of Columbia,
shall be entitled to witness fees for attending before any court
or commissioner where he is officiating."
As to practice in punishing for contempt by the district judge,
see Chapter II, ante, sub nom. Contempts.
Sec. 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.
b A record of the proceedings in each case shall be kept in a
separate book or books, and shall, together with the papers on
file, constitute the records of the case.
c The book or books containing a record of the proceedings
shall, when the case is concluded before the referee, be certified
to by him, and, together with such papers as are on file before
him, be transmitted to the court of bankruptcy and shall there
remain as a part of the records of the court.
Analogous Provisions of Former Acts. —
R. S. section 5000; act of 1867, section 4.
Records as Evidence.— As to a certified copy of any of the records being
admissible in evidence, compare section 2ld.
Sec. 43. Referee's Absence or Disability. — a Whenever the office
of a referee is vacant, or its occupant is absent or disqualified to
OFFICERS, THEIR DUTIES AND COMPENSATION. 279
§ 44.] Appointment of Trustees — The Right of Appointment.
act, the judge may act, or may appoint another referee, or another
referee holding an appointment under the same court may, by
order of the judge, temporarily fill the vacancy.
Analogous Provisions of Former Acts. —
R. S. section 5007 ; act of 1867, section 4.
Transfer of Cases for Cause. — As to the power of the judge to transfer a
case from one referee to another for convenience of parties or for cause, see
section 22 b and G. O. 6.
Sec. 44. Appointment of Trustees. — a The creditors of a bank-
rupt estate shall, at their first meeting after the adjudication or
after a vacancy has occurred in the office of trustee, or after an
estate has been reopened, or after a composition has been set aside
or a 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 pro-
vided, the court shall do so.
Analogous Provisions of Former Acts. —
R. S. section 5034; act of 1867, section 13. As to appointment of an assignee
to fill a vacancy : R. S. section 5041 ; act of 1867, section 18.
The Eight of Appointment. — This section gives to creditors in
the first instance an absolute right to appoint a trustee.
The matter has recently been very thoroughly discussed in an
opinion by Judge Brown of the Southern District of New York
in re Lewensohn, 3 Am. B. R. 299 ; 98 Fed. 576. The doctrine
laid down in that case is that the referee should not disapprove of
the choice of the trustee by the creditors, nor should he interfere
with or obstruct such choice except upon clear proof of incom-
petence for duty or non-residence. The opinion states the facts
as here presented. So far as it bears upon the question of choice
of the trustee it will be found to be a complete discussion of that
subject.
a8o THE NATIONAL BANKRUPTCY LAW.
The Right of Appointment. [Ch, V.
" Opinion of Brown, Judge : At the first meeting of creditors in the above
proceeding, on December 5th, all who had proved their claims, being thirty-
eight in number and representing debts to the amount of about $150,000, voted
for Francis M. Bacon, Jr., of this city, as trustee. His firm of Bacon & Co.
was one of the four largest creditors, having a claim of $11,450. On December
12th, to which day the meeting was adjourned, objections were for the first
time made on behalf of the bankrupt, and the referee was asked to disapprove
of the trustee elected on the ground that he was not competent, impartial and
unbiased. The matter was taken under consideration by the referee, and the
meeting adjourned without day. On the next day the referee disapproved of
the trustee elected, on the ground above stated, and appointed another trustee.
A motion is now made to set aside this appointment. The subject has been
argued at length, both as respects the right of the referee to appoint a trustee
upon such a disapproval, as well as upon the sufficiency of the objections raised
against the confirmation of the trustee chosen by the creditors. Substantially
the same question has been presented to me as to the referee's power to ap-
point when an elected trustee declines to serve or fails to qualify. The same
considerations apply to all these cases, and I shall treat them as one.
1. Section 44 of the Bankrupt Act provides that the creditors shall appoint
one or more trustees ' at their first meeting after the adjudication or after a
vacancy has occurred in the office of trustee * * * or if there is a
■vacancy: in the office of trustee,' and that if the creditors do not appoint the
court shall do so.
Whatever may be the reserved or implied power of courts of bankruptcy
under the last paragraph of section 2 to appoint a trustee when necessary,
resort to such an implied power cannot ordinarily be had in cases where the
statute itself designates a different mode of appointment ; and in doubtful cases
the general intent of the law, as gathered from its express provisions, should
be observed so far as possible.
If, upon the referee's disapproval of an elected trustee, or upon the trustee's
refusal to accept, Qr failure to qualify, ' there is a vacancy in the office of trus-
tee,' the case falls within one of the clauses of section 44 above cited, and a
further election by creditors must be had where, as in this case, such an elec-
tion is practicable ; and, in my opinion, these cases do fall within both the letter
and the spirit of section 44 (see Collier on Bankruptcy, 246; Loveland, Bankr.
204, sec. 270, sec. 142).
In the case of In re Smith, I N. B. R. 243, 247; 2 Ben. 113, 22 Fed. Cas. 261,
Blatchford, J. says of the Act of 1867:
' The policy of the Bankrupt Act, as clearly shown in its provisions, is to
give to the creditors of the bankrupt the free, deliberate, unbiased choice in
the first instance of the person who is to take the assets and manage them.
The importance of this policy has been uniformly recognized by this court. It
Is especially incumbent upon registers in no manner to interfere with or in-
fluence, either directly or indirectly, the choice of an assignee by creditors.'
This general intent is still more strongly manifested by the Act of 1898,
since the latter act has largely curtailed the former power of the court to
OFFICERS, THEIR DUTIES AND COMPENSATION. 281
§ 44.] The Right of Appointment.
appoint, and correspondingly extended the right of creditors. Section 13 of the
Act of 1867 (sec. 5034, Rev. St.) provides for an election by creditors at the
first meeting only, and authorizes the court to fill all vacancies; at the same
time it expressly treats a failure to qualify as a case of ' vacancy.' The Act of
1898, however, provides for an election by creditors, not only at their first meet-
ing, but in five other contingencies, viz. : ( 1 ) After a vacancy has occurred
in the office of trustee; (2) after an estate has been re-opened; (3) after a
composition has been set aside (4) or a discharge revoked, or (5) 'if there
is a vacancy in the office of trustee.' These clauses seem designed to cover all
situations.
The authority of the court to fill vacancies, given by the Act of 1867, is
wholly omitted ; no such authority is anywhere to be found in the Act of 1898 ;
while section 2, paragraph 17, in defining the jurisdiction of the court in this
regard, authorizes it to appoint trustees only
' Pursuant to the recommendation of creditors, or when they neglect to
recommend the appointment of trustees . . . and upon complaints of
creditors, remove trustees for cause upon hearings and after notices to
them.'
From what the act provides, as well as from what it omits, therefore, the
necessary inference is that it designs to give creditors in all cases an oppor-
tunity to choose the trustee, and to authorize the court to appoint only where
they neglect or fail to do so. This was one of the merits of the act that was
urged upon its passage (Collier, Bankr. 33). The general orders are framed
on this view: No. 14 forbidding any official trustee, or trustee for any class
of cases, and No. 25 authorizing a meeting of creditors to be called whenever
there is a ' vacancy in the office of trustee.' The particular language of the
two clauses of section 44 as respects ' vacancies ' shows the same intent. The
first clause, ' after a vacancy has occurred' imports that the office was previous-
ly filled ; but, the revisers apparently not being satisfied with this limitation, the
second clause was added in order to secure an opportunity of choice to
creditors in every case ' where there is a vacancy,' i. e. where the office, from
whatever cause, is unfilled. For the word ' vacancy ' alone does not import
that the office has been previously filled. Bouvier's Law Dictionary defines
the word as ' place which is empty. The term is principally applied to cases
where the office is not filled.' In the Century Dictionary it is defined: ' (d)
An unoccupied or unfilled post, position or office.'
So long as the office is unfilled, therefore, ' there is a vacancy,' whether
previously filled or not, and this second clause, as respects vacancies, therefore,
applies. If this clause were not broader than the first, it would be mere sur-
plusage. The two clauses indicate the composite origin of the text; and the
latter in effect supersedes the former. That the word vacancy is used in the
broad sense above stated is further shown, not only by the Act of 1867 (sec.
5034), which provides that if the assignee chosen fails to accept the trust the
judge or register may fill the vacancy (that is, a ' vacancy,' though the office
had not been previously filled), but section 50 of the present act, after requiring
a bond from the trustee before entering upon the performance of his official
(36)
THE NATIONAL BANKRUPTCY LAW.
Number to be Chosen — Cross-references. [Ch. V.
duties (subd. b), provides (subd. k) that 'If any trustee fail to give bond he
shall be deemed to have declined his appointment, and such failure shall create
a vacancy in his office.'
' There is a vacancy,' therefore, within the second clause of section 44 re-
lating to vacancies whenever the trustee chosen refuses to accept or fails to
qualify or is disapproved by the court, whether the office has been previously
filled or not ; and in such cases the court cannot appoint until after opportunity
is afforded creditors for a new election, where that is practicable.
In order to prevent the delay incident to the call of a new meeting of
creditors, under General Order 25, it is advisable that the consent of the pro-
posed trustee should be obtained if practicable before his election; and if
objections to a trustee elected are reserved by the referee, the meeting should
be adjourned to a future day, when a new election can be had, in case the
previous choice is disapproved."
It is very clear that where the creditors fail to select, the referee
as well as the judge may appoint a trustee inasmuch as the word
" court " in the Bankruptcy Act includes the referee as well as
the judge. (Section 1 [7].) (See In re Kuffler, 3 Am. B. R.
162; 97 Fed. 187; in re Brooke, 4 Am. B. R. 50; 100 Fed.
432.) G. O. 13 provides that the appointment of a trustee shall
be subject to be approved or disapproved by the referee or judge
but that he shall be removable by the judge alone.
Number to be Chosen. — The act authorizes creditors to choose
one or three trustees. There is no authority given them to choose
two or more than three. The act evidently contemplates that
such a number shall be chosen as will prevent any possible dead-
lock. If three are chosen, the assent of at least two of them is
necessary to the validity of any act concerning the administra-
tion of the estate. (Section 47b.) Whether when one of
three trustees has died, it may be said that a vacancy has occurred
which should be filled, quaere. Section 46 authorizes the survivor
to continue the prosecution or defense of any pending action and
would seem to imply that the vacancy need not be filled.
Cross-references. — As to time and manner of election, as to all
proceedings at the first meeting of creditors, as to the number nec-
essary to constitute a quorum and as to adjournments of the meet-
ing, compare section 55. As to voters and their qualifications,
OFFICERS, THEIR DUTIES AND COMPENSATION. 283
§ 45'] Qualifications of Trustees — Who May be Trustee.
as to the mode of voting and the right of creditors to appear by
proxy or by agents or attorneys in fact, compare section 56.
In connection with the appointment of the trustee, G. O. 14
and G. O. 15 should be read. They are as follows :
XIV. NO OFFICIAL OB GENEBAL TBTJSTEE.
No official trustee shall be appointed by the court, nor any general trustee to
act in classes of cases.
XV. TBTJSTEE 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 ap-
pointed as aforesaid, the court may order that no meeting of the creditors other
than the first meeting shall be called.
Sec. 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 Provisions of Former Acts. —
R. S. section 5035 ; act of 1867, section 18.
Who May Be Trustee.— The present act, in making one eligible
to election as trustee, even though he does not reside within the
judicial district in which he is appointed, provided he has an office
therein, differs from the former law. There are no express stat-
utory restrictions as to who may be trustee, other than those
herein given. Any person of sufficient capacity and residing in
or having an office in the judicial district may be chosen. A
creditor may be appointed, but when he has received a preference
which is or might be voidable, he should not be chosen as his
284 THE NATIONAL BANKRUPTCY LAW.
Who May be Trustee. [Ch. V.
duties as trustee are incompatible with his interests as preferred
creditor. And the director of a corporation which has received
a preference should not be chosen. (In re Powell, Fed. Cas.
11,354; 2 N. B. R. 45.) An attorney for a creditor may be
■chosen. (In re Barrett, Fed. Cas. 1,043; 2 N- B- R- 533-) An
attorney of the bankrupt may be chosen, but in that case he cannot
be permitted to continue to act as attorney for the bankrupt ; his
duties in the two positions might become inconsistent. (In re
Clairmont, 1 Lowell, 230; s. c. Fed. Cas. 2,781; 1 N. B. R.
276.)
In the case of In re Lewensohn (3 Am. B. R. 299; 98 Fed.
576), the charges under which the trustee selected by the creditors
was sought to be removed, was that he had a hostile animus
against the bankrupt and had caused him to be dogged by private
detectives. In holding that the trustee should not be removed for
this reason Judge Brown says :
"If it is theoretically possible that such a state of hostility might exist be-
tween the bankrupt and the person elected as to make him an improper person
to act as trustee (In re McGlynn, 2 Low. 127, 16 Fed. Cas. 122), it should be
at least clear that this bias was not through the bankrupt's own fault. Under
the statute (sec. 45), incompetency for the performance of their duties, and
non-residence, are the only grounds of disapproval, and with these mere bias
or hostility to the bankrupt, except in extreme cases, can have little to do. The
choice of creditors ought not to be interfered with on slight grounds (Robin-
son on Bankruptcy, 395; Collier on Bankruptcy, 247). In the case of In re
Funkenstein, 9 Fed. Cas. 1004, Hoffman, Justice, says : ' Until the court has
before it clear and positive evidence that the parties nominated are commer-
cially dishonest or disreputable in the commercial community, it seems to me
it would be my duty to recommend their approval.' In the case of In re
Barrett, 2 N. B. R. 533, 2 Fed. Cas. 909, Jackson, J. observes : ' What, then,
is cause sufficient to justify the judge in withholding his assent? Manifestly,
it must be for want of capacity or integrity in the party selected.' To the
same effect are In re Grant. 2 N. B. R. 106, 10 Fed. Cas. 973 ; In re Clairmont,
1 N. B. R. 276, S Fed. Cas. 810.
The cases cited as to the desirableness of amicable relations (McPherson v.
Cox, 96 U. S. 404; May v. May, 167 id. 310) refer to the relations between the
trustee and his beneficiaries. In bankruptcy, however, the beneficiaries are not
the bankrupt, but the creditors. For that reason the law gives to them alone
the choice of truytee. The bankrupt has no part in it, because, presumably,
he has no interest in it. and it is scarcely consistent with that situation that
the bankrupt, who has no voice in the election, and whose business dealings
OFFICERS, THEIR DUTIES AND COMPENSATION. 285
§ 46.] Death or Removal of Trustees — Death of One of Three Trustees.
may have been most reprehensible, should be allowed to defeat the creditors'
unanimous choice on the ground that the trustee elected was unfriendly to
himself — an objection which would naturally be strongest when the bankrupt's
own demerits were greatest.
The trustee's duties are administrative, not judicial. It is not his special
duty ' to hold an even hand or an unbiased mind ' towards the bankrupt, but
to make the most possible out of the assets, and in the performance of this
duty mere bias or unfriendliness toward the bankrupt must be rarely, if ever,
material. Considering the number and frequency of fraudulent bankruptcies
in the past, a zealous watch and scrutiny of an insolvent's transactions cannot
be looked upon as a demerit, or as indicative of a lack of ' competency ' in a
trustee. And unfounded suspicions and prejudices even may be met by the
honest merchant without fear."
Sec. 46. Death, or Removal of Trustees. — a The death or re-
moval 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 commenced or was being defended by such joint trustee
alone or by such successor.
Analogous Provisions of Former Acts. —
R. S., section 5042; act of 1867, section 18. As to removal of the assignee
by the court: R. S., section 5036; act of 1867, section 13; also R. S., section
5039; act of 1867, section 18. As to removal of assignee by vote of the
creditors in meeting assembled; R. S., section 5039; act of 1867, section 18.
Death of One of Three Trustees.— Compare section 44 and sec-
tion 47b as to whether the death or removal of one of three
trustees creates a vacancy which must be filled.
Removal of Trustees. — The power to remove a trustee is given
by section 2 (17), which provides that the courts may, "upon
complaints of creditors, remove trustees for cause, upon hearings
and after notices to them." The matter is left to the discretion
of the judge ; his action cannot be reviewed and reversed by the
Circuit Court. (In re Adler Brothers, Fed. Cas. 82 ; 2 Woods,
571; compare in r<? Perkins, 5 Biss. 254; s. c. Fed. Cas. 10,982;
286 THE NATIONAL BANKRUPTCY LAW.
Resignation — Removal by Vote of Creditors — Duties of Trustees. [Ch. V.
8 N. B. R. 56.) • So in England it has been held that the exercise
of this discretion will not be interfered with upon appeal, unless
it is perfectly clear that there has been an abuse of discretion (Ex
p. Bates, 21 L. J. Bank, 20; 16 Jurist, 459) ; but the discretion
is a judicial discretion, to be exercised only when there is suffi-
cient cause. (In re Mallory, Fed. Cas. 8,990; 4 N. B. R. 153.)
It must be shown that the removal is expedient or necessary. The
statute does not say that a bankrupt may ask for the removal of
his trustee. There is little possibility of there being any surplus
in such proceedings, and he can have little interest in the matter;
yet in England his petition for the removal of the assignee will be
entertained (Ex p. Baker, 2 Mont. D. &. D. 60) ; and there would
seem to be no reason under our statute why he should not have a
similar right. Indeed this right seems to be recognized in the
case of In re Lewensohn. For a discussion as to what reasons
will warrant the removal of a trustee see that case as quoted at
length under sections 44 and 45.
Resignation. — This statute nowhere gives the trustee the right
to resign. After he once accepts the office, he cannot do so with-
out the consent of the court; if he is permitted to resign as a
favor to himself, he must pay the costs of the proceedings, but
where he is removed by the court for the benefit of the estate with-
out any fault or dereliction of his own, he is entitled to have all
his costs and all the expenses which he may have incurred, paid
to him out of the estate. (Ex p. Watts, 1 Deac. & Chitt. 22;
Ex p. James, 1 Deac. & Chitt. 372.)
Removal by Vote of Creditors.— The present statute does not give
to creditors the right by vote to remove a trustee with the ap-
proval of the court ; in this respect the statute differs from the
former act.
Sec. 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
OFFICERS, THEIR DUTIES AND COMPENSATION. 287
§ 47.] Duties of Trustees.
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 ; (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 de-
posited; (5) furnish such information concerning the estates of
which they are trustees and their administration as may be re-
quested by parties in interest; (6) keep regular accounts showing
all amounts received and from what sources and all amounts ex-
pended 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 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 there-
after, 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 ap-
pointment.
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.
Analogous Provisions of Former Acts. —
As to setting apart bankrupt's exemptions : Rule XIX. of Orders in Bank-
ruptcy under the act of 1867. As to deposits of money : R. S. section 5059 ;
act of 1867, section 17; act of 1841, section 9; act of 1800, section 54. As to
submission of accounts to court, preparatory to the final dividends : R. S. sec-
tion 5096 ; act of 1867, section 28. As to the other duties of trustees, compare
" Analogous Provisions of Former Acts," given under the other sections of this
act relating to such duties. As to assignee's duty to account for all interest :
R. S. section 5062 B.
In addition to this section compare G. O. 17, which is as fol-
lows:
XVII. DUTIES OF TRUSTEE.
The trustee shall, immediately upon entering upon his duties, prepare a com-
plete inventory of all the property of the bankrupt that comes into his posses-
288 THE NATIONAL BANKRUPTCY LAW.
Interest — Collection of Assets. [Ch. V.
sion. The trustee shall make report to the court, within twenty days after re-
ceiving 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 esti-
mated value of each article, and any creditor may take exceptions to the de-
termination of the trustee within twenty days after the filing of the report.
The referee may require the exceptions to be argued before him, and shall
certify them to the court for final 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 bank-
ruptcy, within five days after the same shall be due, it shall be the duty of the
referee to make an order requiring the trustee to show cause before the judge,
at a time specified in the order, why he should not be removed from office.
The referee shall cause a copy of the order to be served upon the trustee at
least seven days before the time fixed for the hearing, and proof of the service
thereof to be delivered to the clerk. All accounts of trustees shall be referred
as of course to the referee for audit, unless otherwise specially ordered by the
court.
Interest. Section 47a (1) — The requirement that the trustee
shall keep account of and pay over all interest received by him;
doubtless has reference to temporary investments of funds in his
hands made pursuant to the order of the court. Although the
present act contains no express provision authorizing, in any case,
such temporary investment, but does, on the other hand, require
that the trustee shall deposit the money in one of the designated
depositories, yet, whenever by reason of litigation or other cause,
the distribution of the estate will be delayed, it is the duty of the
trustee to bring the matter before the attention of the court and
procure an order authorizing him to temporarily invest or at least
to deposit upon interest. Such was the express provision of the
former statute. Failure of the trustee to deposit with reasonable
promptness will be a cause for removal and will further subject
him to the payment of such interest as would have been secured.
Like all trustees, if he uses the money in his own business, he
will be liable for interest at the legal rate ; or in excess of that,
if he has made a greater profit from it.
Collection of Assets. Section 47a (2) .—All the property of the
bankrupt which is of an assignable nature (except exempt prop-
erty) vests, by virtue of the adjudication, in the trustee; this
OFFICERS, THEIR DUTIES AND COMPENSATION. 289
§ 47.] Collection of Assets.
includes all rights of action other than those which die with the
person, such as claims for damages in tort for purely personal
injuries. Whenever a cause of action would pass to an executor
it passes to the trustee. Thus he may sue and recover for tres-
pass to the property of the bankrupt, even though the offense oc-
curred before the adjudication (Seiling v. Gunderman, 35 Tex.
345) ; or for the negligence of any person affecting the property
rights of the bankrupt, as where the negligence consisted in the
failure of a sheriff to return an execution within the statutory
time, and notwithstanding the execution was issued in the name
of the bankrupt and not of the trustee. (Gary v. Bates, 12 Ala.
544- )
Further, the trustee acquires certain rights which the bankrupt
does not have. Thus, as the representative of creditors, he may
sue to set aside transfers and conveyances and incumbrances made
in fraud of creditors, except as to purchasers in good faith and for
a present fair consideration; and by section 67 (e) (q. v.) all
property so conveyed by the bankrupt in fraud of his creditors
becomes, by virtue of the adjudication, a part of the assets of the
bankrupt and passes to the trustee, whose duty it is to recover
and reclaim the same by legal proceedings if necessary for the
benefit of the creditors. So all levies, judgments, or other liens
obtained in violation of the Bankruptcy Act as specified in section
67 (f), are invalidated by an adjudication in bankruptcy and the
property affected by them passes to the trustee free and clear from
the liens. Subject to the exceptions, just mentioned, in which the
trustee as the representative of creditors has rights of property in
addition to those of the bankrupt, he acquires no better title than
that person had at the time of the adjudication. If he acquires
title pendente lite,, the trustee stands in the same position as any
other purchaser pendente lite. He is affected by the judgment
which may be recovered, whether or not notice is given to him.
(Eyster v. Gaff, 91 U. S. 521.) The trustee, except in the cases
of the fraudulent transfers above mentioned, will be estopped, if
the bankrupt would be estopped. {In re Rockford, R. I & St
(37)
'290
THE NATIONAL BANKRUPTCY LAW.
Legal Remedies — When Should He Sue. [Ch. V.
L. R. Co. Fed. Cas. 11,978; 1 Low, 345.) Compare section 70
as to the property, title to which is vested in the trustee and for
further discussion of this subject. The trustee must use due dili-
gence in collecting and disposing of the property of the bankrupt
and in distributing its proceeds among the creditors. If he is
guilty of gross negligence of duty he may be removed (In re
Morse, Fed. Cas. 9,852; 7 N. B. R. 56), and he will be personally
chargeable with any loss which the estate suffers by his negli-
gence.
legal Remedies. — If the trustee cannot collect the assets by de-
mand he may institute legal proceedings therefor or may avail
himself of any remedy given him by the statute. Thus, he may,
with the approval of the court, compromise (section 27) or sub-
mit to arbitration (section 26). He may institute new suits when
necessary, and may continue the prosecution or defense of pend-
ing actions. (Compare section 11.)
When Should He Sue.— The trustee should neither institute an
original suit nor continue a pending one unless in his judgment
it is for the interests of the estate, or unless he has been ordered
by the court so to do. He is in the first instance the judge of the
wisdom of pursuing remedies in this manner. If the cause of
action be one not worth the expense of litigation, it is his duty to
abandon it. (Mutual Bldg. Fund v. Boussieux, 4 Hughes, 387;
Traders' Bank v. Campbell, 14 Wall. 87.) The trustee need not
sue if he has not money on hand sufficient to meet all the expenses
of the suit. (Reade v. Waterhouse, 52 N. Y. 587; s. c. 10 N.
B. R. 277; s. c. 12 Abb. Pr. [N. S.J 255.) He is never obliged
to sue unless the property to be recovered would be assets of the
estate. Thus, it has been held it is not his duty to institute a suit
upon the individual liability of the stockholders of the bankrupt
corporation of which he is the trustee. The liability of the stock-
holders is to the creditors, not to the bank. (Dutcher v. Bank,
Fed. Cas. 4,203; 12 Blatch. 435; s. c. 11 N. B. R. 457; distin-
guishing Sawyer v. Hoag, 9 N. B. R. 145; s. c. 17 Wall. 610;
s. c. below, Fed. Cas. 12,400; 3 Biss. 293.)
OFFICERS, THEIR DUTIES AND COMPENSATION. 291
§ 47.] Reduction to Money: Sales — Depositories — Furnish Information.
For further discussion as to how the trustee should sue, what
suits should be brought and where, see seotion 70 and section 6je
and f post.
Reduction to Money: Sales. — As to power to sell, what title
passes, sales of incumbered property, who may purchase, etc., see
section 70 post and G. O. 18.
Depositories. Section 47a (3), etc. — Compare section 61, as to
the duty of the court to designate. Compare notes to subdivision
( 1 ) , supra, as to interest.
As to trustee's accounting, see G. O. 17, also quoted under this
section, ante.
Duty to Furnish Information. Section 47a (5) — In re Perkins,
Fed. Cas. 10,982; 8 N. B. R. 56; s. c. 5 Biss. 254, it was said
by the U. S. Circuit Court for the Northern District of Illinois :
" It is the duty of an assignee to disclose to the creditors, upon inquiry, and
where it appears they are ignorant thereof, the main facts known to him relat-
ing to the condition and assets of the bankrupt estate. Where he knows
there is a large sum of money on deposit in a bank, belonging to the estate,
against which the bank claimed and were purchasing set-offs, it is his im-
perative duty to state these facts to creditors inquiring concerning the value
of their claims. It is not sufficient excuse that he could not give definite esti-
mates as to what the estate would pay, or that he says he did not intend to
mislead any one. He is presumed to intend the necessary consequences of
his own acts, and the suppression of the existence of this large deposit must
mislead creditors and affect their action. Nor is it a sufficient answer or
excuse that the books of the bankrupt could be examined by the creditors.
The assignee should also make, in season, the reports prescribed by the rules
in bankruptcy. When an assignee has failed in properly informing creditors
in regard to their rights and the value of the assets, and the information has
been suppressed in the interest of one class of creditors, it is the duty of the
court to remove him. On a revisory petition to the Circuit Court, the proper
practice is to direct the District Court to remove the assignee and to appoint
some other competent person in his place."
As to failure to permit an opportunity to inspect accounts being
an offense, compare section 29 (c).
Dividends. Section 47a (9)— Compare sections 64, 65 and 66.
292 THE NATIONAL BANKRUPTCY LAW.
Exemptions — Concurrence of Two Trustees — Compensation. [Ch. V
Exemptions. Section 47a (11) — As to the bankrupt's duty to
make claim therefor in his schedule, compare section 7 (8). As
to the effect of failure by the trustee to designate and set apart the
exemptions, compare section 6, paragraph on Trustee's Rights
in Exempt Property.
Concurrence of Two Trustees. Section 47b. — The requirement
that at least two of the trustees must concur to make any act
valid, is but one of the many facts which imply that where one or
more of the trustees die, a vacancy will be considered as occur-
ring, which will make it the duty of the creditors to elect a suc-
cessor. Compare commentaries on sections 44 and 46.
Sec. 48. Compensation of Trustees. — a Trustees shall receive
as full compensation for their services, payable after they are ren-
dered, 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 from estates which they have
administered, such commissions on sums to be paid as dividends
and commissions as may be allowed by the courts, not to exceed
three per centum on the first five thousand dollars or less, two
per centum on the second five thousand dollars or part thereof,
and one per centum on such sums in excess of ten thousand
dollars.
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.
Analogous Provisions of Former Acts.
R. S. section 5099; act of 1867, section 28; act of 1800, section 29; also R S
section 5127; act of 1867, section 47; also R. S. section 5127A; also R. S sec-
tion 5 124; act of 1867, section 47, amended by act of July 27th, 1868, ch. 258,
section 2 ; act of 1800, section 47.
OFFICERS, THEIR DUTIES AND COMPENSATION. 293
§ 48.] After Services are Rendered.
After Services Are Hendered. — As in the case of referees, the law
provides that the trustees shall receive no compensation until
their services are rendered, and that then the amount paid them
as commissions shall be upon the sums paid out as dividends and
commissions, not upon the amount of their receipts and disburse-
ments. As to cases in which a voluntary bankrupt is excused
from paying a fee, compare section 51 a (2).
Compare G. O. 35 (3, 4,) as follows:
3. The compensation allowed to trustees by the act shall be in full compen-
sation for the services performed by them ; but shall not include expenses neces-
sarily incurred in the performance of their duties and allowed upon the settle-
ment of their accounts.
4. In any case in which the fees of the clerk, referee and trustee are not re-
quired 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 proceedings 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.
An interesting case (In re Plummer, 3 Am. B. R. 320) Referee
Hotchkiss of New York held that where a trustee does more thari
merely collect the assets, and disburse the money so collected,
and in addition to the services required of him by law, performs
extra services for the beneficiaries of the trust, particularly where
he is directed so to do by the creditors themselves, he should be
allowed a reasonable extra compensation, in analogy to the case
of a railway receiver.
In that case, at the request of the creditors, a trustee continued
running a manufacturing plant, buying new material, and ma-
king necessary repairs to machinery, and giving his personal at-
tention to the business with a profit to the creditors. But the
referee also held that the better practice requires the trustee under
such circumstances, in his notice of final meeting, to notify credit-
ors of his intention to present such a bill, but where three-fourths
of the creditors were represented at the meeting, and all asked
that the bill should be allowed, it was held that such claim should
294 THE NATIONAL BANKRUPTCY LAW.
Accounts and Papers of Trustees — Bonds of Referees and Trustees. [Ch. V.
be ordered and allowed and included in the expenses of the ad-
ministration of the estate.
It has also been held under the present Act that where a trus-
tee, himself an attorney-at-law, rendered professional services
necessary to the proper administration of the trust, he was entitled
to such reasonable compensation as he would have been obliged
to pay had he employed other competent counsel. {In re Mitchell,
i Am. B. R. 687 ; referee's opinion. ) There was a decision to the
same effect under the Bankruptcy Law of 1867. {In re Welge,
1 Fed. 216.) But see, contra, In re Meldaur (17 Fed. Cas.
958.) It seems that the opinion of the learned referee in the
Plummer case is based on principles of abstract equity. It is a
little doubtful, however, in the light of section 48a of the Bank-
ruptcy Law, providing that the filing fee and the commissions
shall be the only compensation of trustee, whether it will be sus-
tained.
Sec. 49. Accounts and Papers of Trustees. — a The accounts and
papers of trustees shall be open to the inspection of officers and
all parties in interest.
Analogous Provisions of Former Acts. —
R. S. section 5062B.
Reasonable Opportunity for Inspection.— Compare notes to section 29c
(3) . as to failure to permit a reasonable inspection of accounts being an offense
punishable by imprisonment, and Form 40 showing what such account should
be. See G. O. 17.
Sec. 50. Bonds of Referees and Trustees. — a Referees, before
assuming the duties qf their offices, and within such time as the
district courts of the United States having jurisdiction shall pre-
scribe, 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 performance
of their official duties.
OFFICERS, THEIR DUTIES AND COMPENSATION. 295
§ 50.] Bonds of Referees and Trustees.
b Trustees, before entering upon the performance of their offi-
cial duties, and within ten days after their appointment, or within
such further time, not to exceed five days, as the court may per-
mit, shall respectively qualify by entering into bond to the United
States, with such sureties as shall be approved by the courts, con-
ditioned for the faithful performance of their official duties.
c The creditors of a bankrupt estate, 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 compo-
sition 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. If the creditors do not fix the amount of the bond of the
trustee as herein provided the court shall do so.
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.
h 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.
t 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. '
;' Joint trustees may give joint or several bonds.
k If any referee or trustee shall fail to give bond, as herein pro-
vided and within the time limited, he shall be deemed to have
declined his appointment, and such failure shall create a vacancy
in his office. J
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.
396 THE NATIONAL BANKRUPTCY LAW.
Bonds Under the Acts of 1867 and 1898 — Duties of Clerks. [Ch. V.
Analogous Provisions of Former Acts. —
• As to the right of a creditor to demand that the assignee give a bond : R.
S. section 5036; act of 1867, section 13; act of 1841, section 9. As to duty of
the register to give a bond : R. S. section 4995 ; act of 1867, section 3.
Bonds Under the Acts of 1867 and 1898.— Under the Act of
1867, registers were always required to give bonds, but assignees
were not obliged to do so, unless the court on motion of a creditor
expressly ordered it.
For form of bond of referees under present law see Form No.
17; for bond of trustees see Form No. 25; and for order approv-
ing bond of trustees see Form No. 26.
Sec. 51. Duties of Clerks. — a Clerks shall respectively (1) ac-
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
affidavit stating that the petitioner is without, and cannot ob-
tain, 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 col-
lected for him at the time of filing the petition.
Analogous Provisions of Former Acts. —
As to duty to account for moneys received : Rule XXVIII of General Or-
ders in Bankruptcy, under the act of 1867. As to general duties of the clerk:
Rule I of Orders in Bankruptcy, under the act of 1867.
In addition to the .duties of the clerks set forth in this section
see G. O. 1, 2 and 3, as follows:
OFFICERS, THEIR DUTIES AND COMPENSATION. 297
§ 52.] Close of the Case — Compensation of Clerks and Marshals.
I. DOCKET.
The clerk shall keep a docket, in which the cases shall be entered and num-
bered in the order in which they are commenced. It shall contain a memo-
randum of the filing of the petition and of the action of the court thereon, of the
reference of the case to the referee, and of the transmission by him to the
clerk of his certified record of the proceedings, with the dates thereof, and a
memorandum of all proceedings in the case except those duly entered on the
referee's certified record aforesaid. The docket shall be arranged in a man-
ner convenient for reference, and shall at all times be open to public inspection.
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.
III. PROCESS.
All process, summons 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 application, be furnished to the referees.
Close of the Case. — It would seem that a case is not closed so as
to justify the clerk in paying the referee his fees until the
latter has transmitted to the clerk all the records required to be
kept by him. (Compare section 39a [7].)
Sec. 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 re-
quired 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 similar services in other cases in accordance with laws
now in force, or such as may be hereafter enacted, fixing the
compensation of marshals.
Analogous Provisions of Former Acts.—
R. S. sections 5124, 5125, 5127, 5127A, 5127B; act of 1867, sections 5 and 47;
act of 1841, section 13; act of 1800, sections 46, 47; act of July 27th, 1868, ch.
(38)
298 THE NATIONAL BANKRUPTCY LAW.
Compensation of Clerks and Marshals — Payment in Advance. [Ch. V.
258, section 2. As to deposit of guarantee of amount of fees: R. S. sec-
tion 5124.
Compare also G. O. 35, partially quoted heretofore, which in
full is as follows :
XXXV. COMPENSATION OF CLERKS, REFEREES AND TRUSTEES.
1. The fees allowed by the act to clerks shall be in full compensation for all
services performed by them in regard to filing petitions or other papers re-
quired 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 ; 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 com-
pensation for all services performed by them under the act, or under these
General Orders; but shall not include expenses necessarily incurred by them
in publishing or mailing notices, in traveling, or in perpetuating testimony, or
other expenses necessarily 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 com-
pensation 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 trustee are not re-
quired by the act to be paid by a debtor before filing his petition to be ad-
judged a bankrupt, the judge, at any time during the pendency of the pro-
ceedings 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.
See as to right to require indemnity G. O. 10. And as to
accounts of marshals, see G. O. 19.
The statutory marshals' fees will be found in U. S. R. S. sec.
829.
But the marshal's compensation in the care of property is,
like the receiver's, in the discretion of the court. See under sec-
tion 2 " Power to Take Charge of Property," and cases
cited.
Payment in Advance.— The marshal has a right to demand in
advance the payment of his fees for the service of process. (Ray
OFFICERS, THEIR DUTIES AND COMPENSATION. 299
§§ 53.54-] Duties of Attorney-General — Statistics.
v. Knowlton, 11 Biss. C. C. 360; Duy v. Knowlton, 14 Fed.
107.)
Sec. 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 voluntary 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.
No Analogous Provisions in Former Acts.
• Sec. 54. Statistics of Bankruptcy Proceedings. — a Officers shall
furnish 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 possession, to the attorney-general, for sta-
tistical purposes, within ten days after being requested by him to
do so.
No Analogous Provisions in Former Acts. j
CHAPTER VI.
CREDITORS
Sec. 55. Meetings of Creditors. — a The court shall cause the
first meeting 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, 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 held within such time, the court shall fix the
date, as soon as may be thereafter, when it shall be held.
b 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 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
secured 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.
300
CREDITORS. 301
§ 55.] Order and Notice.
Analogous Provisions of Former Acts. —
As to notice to creditors of the time and place of first meeting : R. S. section
5019; act of 1867, section 11; act of 1841, section 7; also R. S. section 5032;
act of 1800, section 6. As to presiding officer : R. S. section 5033 ; act of 1867,
section 12. As to choice of trustee at first meeting: compare Analogous Pro-
visions of Former Acts, given under section 44 of this act. As to the second
meeting specially provided for by the act of 1867, and the purpose thereof, and
the proceedings thereat: R. S. section 5092; act of 1867, section 26; act of
1800, section 29. As to the third meeting specially provided for by the act of
1867: R. S. section 5093; act of 1867, section 28; act of 1800, section 30. As
to the other meetings, and notice thereof: R. S. section 5094; act of 1867,
section 17.
Order and Notice. — The usual practice is that after adjudica-
tion the matter is generally referred to the referee to take further
proceedings therein, which includes everything which is not
specifically reserved for the Judge by the provisions of this Act.
(See section 38 ante on powers of referee.) The referee then
sends a notice of the first meeting to creditors. (See Form No.
18 and sections 58a (3) and 58b and c.) The proceedings at the
first meeting will be to prove debts and to elect a trustee. (See
section 44.) A recent opinion of District Judge Purnell, in re
Eagles and Crisp (3 Am. B. R. 733; 99 Fed. 695), contains a
valuable outline of the practice at the first meetings and is quoted
as follows :
" It would not be inappropriate for referees to follow the familiar practice of
' explaining the object of the meeting ' to creditors and attorneys not familiar
with the practice in the courts of bankruptcy. * * * The meeting is for
business, and must be held in strict accordance with the notice, at the time
and place specified, not at some other time, sooner or later, or another place,
though near by. Adjournments may be had if the business requires it, but
all adjournments are the same meeting, in contemplation of law. If no
creditor appears, the meeting is as effectual as if they were present or repre-
sented. The court, judge, or referee is not authorized or required to wait for
or ' count a quorum.' If, in such case, the schedules disclose no assets, the
court may order that no trustee be appointed. Rule 15.
The referee should be punctually present at the time and place specified in the
notice. He or the judge presides, and his duties are judicial. He does not
otherwise participate. The bankrupt is required and should be actually present
at the first meeting. It is a creditors' meeting, and they (the referee and the
bankrupt) are there to assist the creditors — the first as an officer of the law,
and the other to aid him in so doing. Thus aided, the referee should, in most
302 THE NATIONAL BANKRUPTCY LAW.
Order and Notice. [Ch. VI.
cases, be able to pass upon all claims which have been or may be presented at
the meeting. Bankr. Act, sec. 55c. Having thus passed upon the claims pre-
sented, a creditor to participate in and vote at such meeting must own an un-
secured claim, provable in bankruptcy, and must not only have proved such
claim, but had it allowed. Id. sees. 56a, 56b, in re Hill, Fed. Cas. 6,481, 1
N. B. R. 16 ; in re Altenheim, Fed. Cas. 268, 1 N. B. R. 85. Secured creditors
cannot vote at such meetings, unless their claims exceed the amount of the
security held by them, and then only for such excess as shall be allowed by
the court. Bankr. Act, sec. 56b. An attorney, agent or proxy can represent
and vote for such creditors, but, before being permitted to do so, should be
required to produce and file written authority from the creditor, which should
be filed by the referee as a part of his record. In re Sugenheimer (D. C.)
(1 Am. B. R. 425), 91 Fed. 744. Creditors holding claims which are secured
or have priority are not, in respect to such claims, entitled to vote. To do
so, such security or priority must be surrendered. In re Saunders, Fed. Cas.
No. 12,371, 13 N. B. R. 164; Bankr. Act, sec. 57 g; in re Conhaim (D. C.) (3
Am. B. R. 249), 97 Fed. 924. This provision illustrates the homely maxim of
Heywood, hoary with the age of over four centuries, that one cannot eat his
cake and have his cake too. The creditor must decide. He can make a sur-
render, thus becoming an unsecured creditor, and participate with other
creditors in the management of the estate, or he can stand on his security or
priority. He cannot do both. He cannot run with the hare and hold with the
hounds, as boys who run rabbits would express it, quoting a sixteenth century
authority.
Assisted as indicated by the schedules, the bankrupt, and others interested,
creditors present, it would seem the court could pass on all or most of the
claims without difficulty or delay. If a particular claim is objected to, the
question should be heard as soon as feasible, and, if the court (judge or
referee) is not satisfied with the weight of evidence, the hearing may be post-
poned and heard at some subsequent time. The Act of 1867 provided ex-
pressly for such postponement, and the Act of 1898 does not prohibit, but, by
lodging a large discretion in the court, warrants and contemplates it. On a
decision, the allowance or rejection of a claim of $500 or over, both may be
reviewed by the Court of Appeals. Bankr. Act, sec. 25, subd. 3. The effect
of allowing or postponing the hearing on a particular claim affects only the
creditor's right to vote at the first meeting of creditors. If made to appear
the result would be changed by such vote or votes, the judge or referee may
set aside the result, and order a new vote to be taken. When it appears the
right to vote would not affect the business of the estate, the proceedings would
not be disturbed to allow a creditor to exercise the right to vote when it would
be barren of results. A creditor who has received a preference must sur-
render such preference before he can participate in a meeting of creditors. By
the adjudication, the estate of the bankrupt is in the custody of the court.
If the preference is by the assignment of securities, the creditor cannot realize
on such securities, or release the debtor of the bankrupt, except through the
Bankrupt Court. See In re Cobb (D. C.) (3 Am. B. R. 129), 96 Fed. 821,
and authorities cited. Such creditor should prove and file his claim, and his
CREDITORS. 303
§ 56.] Meetings of Creditors, Voters at
preference, if valid, will be protected by the court, but he cannot participate
in meetings as an unsecured creditor. In a proceeding like the one at bar, the
creditors of the partnership elect the trustee, but an individual creditor of one
of the partners cannot vote for a trustee of the partnership. Bankr. Act,
sec. sb."
The foregoing extract gives a very excellent resumi of the
practice. It should be kept in mind that the creditors select the
trustee. (Section 44.) See for further discussion of this sub-
ject section 57 on proof of claims.
Subsequent special meetings of creditors for any cause what-
ever are expressly provided for in G. O. 25, which is as follows :
XXV. SPECIAL MEETING OP 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, specify-
ing in the notice the purpose for which it is called.
And G. O. 4 is as follows :
IV. CONDUCT OP PROCEEDINGS.
Proceedings in bankruptcy may be conducted by the bankrupt person in his
own behalf, or by a petitioning or opposing creditor; but a creditor will only
be allowed to manage before the court his individual interest. Every party
may appear and conduct the proceedings by attorney, who shall be an attorney
or counsellor authorized to practice in the circuit or district court. The name
of the attorney or counsellor, with his place of business, shall be entered upon
the docket, with the date of the entry. All papers or proceedings offered by an
attorney to be filed shall be indorsed as above required, and orders granted
on motion shall contain the name of the party or attorney making the motion.
Notices and orders which are not, by the act or by these general orders, re-
quired to be served on the party personally may be served upon his attorney.
Sec. 56. Voters at Meetings of Creditors. — a Creditors shall
pass upon matters submitted to them at their meetings by a ma-
jority vote in number and amount of claims of all creditors whose
claims have been allowed and are present, except as herein other-
wise provided.
b Creditors holding claims which are secured or have priority
shall not, in respect to such claims, be entitled to vote at creditors'
304 THE NATIONAL BANKRUPTCY LAW.
Voters at Meetings of Creditors — Vote Required. [Ch. VI.
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.
Analogous Provisions of Former Acts. —
As to voters in general : R. S. section 5034 ; act of 1867, section 13. As to
preferred creditors being deprived of a vote under the act of 1867 : R. S. sec-
tion 5035 ; act of 1867, section 18.
See quotations from the case of Eagles and Crisp under the
preceding section as to the method of voting.
Vote Required. — Only persons whose claims have been allowed
and who are present may vote ; mere proqf of claims is not suffi-
cient, as under the former act. The vote required under this act
is the majority in number and amount of all whose claims have
been allowed and who are present. Under the former act a ma-
jority of all who had proved their claims, whether present or
not, was required. Secured creditors may now vote even at the
first meeting; in this respect also, the present law differs from
the former law. As to the manner of determining the excess of
their claims over the value of their securities, compare section
57 (0-
By section 1, subdivision 9, it is declared that the term " cred-
itor " shall include not only the owner of the demand himself,
but " his duly authorized agent, attorney or proxy." Any per-
son, therefore, who assumes to represent a creditor in the func-
tions referred to in section 56a must be a " duly authorized
agent, attorney or proxy " of the creditor.
By General Order 21, subdivision 5, it is provided what such
due authorization shall consist of, as follows :
" The execution of any letter of attorney to represent a creditor .
may be proved or acknowledged before a referee or a United States com-
missioner 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 cor-
poration on whose behalf he acts, etc."
CREDITORS. 305
§ 57.] Proof and Allowance of Claims.
A letter of attorney executed on behalf of a partnership must
contain the oath of the partner executing it that he is a member of
the partnership even though on the same day he has made such
oath in a deposition to prove the partnership claim against the
bankrupt's estate. (In re Finlay, 3 Am. B. R. 738.)
Sec. 57. Proof and Allowance of Claims. — a Proof of claims
shall consist 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 owing from the bankrupt to
the creditor.
b Whenever a claim is founded upon an instrument of writing,
such instrument, unless lost or destroyed, shall be filed with the
proof of claim. If such instrument is lost or destroyed, a state-
ment of such fact and of the circumstances of such loss or destruc-
tion 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 claimants 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 con-
sideration be continued for cause by the court upon its own
motion.
e Claims of secured creditors and those who have priority may
be allowed to enable such creditors to participate in the proceed-
ings at creditors' meetings held prior to the determination of the
value of their securities 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 convenience of the court and the best interests of the
estates and the claimant will permit.
g The claims of creditors who have received preferences shall
not be allowed unless such creditors shall surrender their pref-
erences. p C1
(39)
306 THE NATIONAL BANKRUPTCY LAW.
Proof and Allowance of Claims. [Ch. VI,
h The value of securities held by secured creditors shall be
determined by converting the same into money according to the
terms of the agreement 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 dis-
trict, 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 proceeding 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.
/ 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 bank-
ruptcy 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 subse-
quent 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.
CREDITORS.
3°7
§ 57-] Proof and Allowance of Claims.
Analogous Provisions of Former Acts. —
As to manner of proof : R. S. section 5077 ; act of 1867, section 22 ; act of
1841, sections 5 and 7. As to who may make proof: R. S. section 5078; act
of 1867, section 22; act of 1841, section 5. As to who may take proof: R. S.
section 5079 ; act of 1867, section 22 ; amended by act of July 27, 1868 ; ch. 258,
section 3 ; act of 1841, section 5- As to assignee's right to inspect proof : R.
S. section 5080 ; act of 1867, section 22. As to examination and allowance of
claims : R. S. section 5081 ; act of 1867, section 22 ; act of 1841, sections 5
and 7; act of 1800, sections 16, 37, 39. As to proof of instruments in writing:
R. S. section 5082; act of 1867, section 24. As to postponing allowance of
claims to which objection is made : R. S. section 5083 ; act of 1867, section 23.
As to proof by preferred creditors : R. S. section 5084 ; act of 1867, section 23.
As to making a list of allowed claims: R. S. section 5085; act of 1867, sec-
tion 23.
With section 57 must be read G. O. 21 which is as follows:
XXI. PBOOP OF DEBTS.
1. Depositions to prove claims against a bankrupt's estate shall be correctly
entitled in the court and in the cause. When made to prove a debt due to a
partnership, it must appear on oath that the deponent is a member of the
partnership ; when made by an agent, the reason the deposition is not made by
the claimant in person must be stated; and when made to prove a debt due to
a corporation, the deposition shall be made by the treasurer, or, if the corpo-
ration 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 became or will become due; and if it consists of items
maturing at different dates the average due date shall be stated, in default of
which it shall not be necessary to compute interest upon it. All such depo-
sitions shall contain an averment that no note has been received for such ac-
count, 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 designation shall be made by such creditor, all notices shall be
so addressed; 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 supported by a
deposition of the owner at the time of the commencement of proceedings, set-
ting forth the true consideration of the debt, and that it is entirely unsecured,
or if secured, the security, as is required in proving secured claims. Upon the
filing of satisfactory proof of the assignment of a claim proved and entered on
the referee's docket, the referee shall immediately give notice by mail to the
original claimant of the filing of such proof of assignment; and, if no objection
3o8 THE NATIONAL BANKRUPTCY LAW.
Proof and Allowance of Claims. [Ch. VI.
be entered within ten days, or within further time allowed by the referee, he
shall make an order subrogating the assignee to the original claimant. If ob-
jection be made, he shall proceed to hear and determine the matter.
4. The claims of persons contingently liable for the bankrupt may be proved
in the name of the creditor when known by the party contingently liable.
When the name of the creditor is unknown, such claim may be proved in the
name of the party contingently liable ; but no dividend shall be paid upon such
claim, except upon satisfactory proof that it will diminish pro tanto the origi-
nal debt.
5. The execution of any letter of attorney to represent a creditor, or of an
assignment of claim after proof, may be proved or acknowledged before a
referee, or a United States commissioner, or a notary public. When executed
on behalf of a partnership or of a corporation, the person executing the in-
strument 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 acknowl-
edgment, his identity shall be established by satisfactory proof.
6. When the trustee or any creditor shall desire the re-examination of any
claim filed against the bankrupt's estate, he may apply by petition to the referee
to whom the case is referred for an order for such re-examination, and there-
upon 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 creditor, and of
any witnesses 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.
The following quotation from the opinion of Judge Thomas,
'In re Sumner (4 Am. B. R. 123; 101 Fed. 224) is also valuable
in this connection.
" The first question to be decided relates to the method that should be em-
ployed by a creditor for the purpose of presenting his claim to the referee for
allowance, and to the evidence that should be furnished by him for that
purpose.
Section 57a of the act provides :
' Proof of claims shall consist 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
owing from the bankrupt to the creditor.'
Section 57b provides :
' Whenever a claim is founded upon an instrument of writing, such instru-
ment, unless lost or destroyed, shall be filed with the proof of claim. If such
CREDITORS. 309
§ 57.] Proof and Allowance of Claims.
instrument is lost or destroyed, a statement of such fact and of the circum-
stances 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.'
This section provides both the method of presenting the claim and the evi-
dence necessary, in the first instance, to sustain it. The ' statement under
oath,' if it contain the matter pointed out, is at once the claimant's pleading
and his evidence, and makes for him a prima facie case.
Section 57d provides :
' 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.'
The meaning of this subdivision is that, if objection be interposed, or the
court be not satisfied with the prima facie case thus made, the claim shall not
be accepted as proven, until disposition shall have been made of such objection,
or, if the court continue the consideration, until the court shall be convinced
of its validity.
Just here arises the second inquiry : If objection be made to the claim, must
the claimant present evidence in addition to the statement provided for in sec-
tions 57a and 57b. or has he made such a prima facie case as to place the
burden upon the objector of furnishing evidence that shall overcome the evi-
dence conveyed to the court by the statement? It is apparent that, if the
statement makes a prima facie case, the claimant may rest and await the intro-
duction of evidence that shall be opposed to the sufficient evidence presented by
the claimant.
Section 571 provides :
'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 claimants
will permit.'
It is apparent from subdivision ' f ' that the statute contemplates that, after
the claimant has presented his claim in the prescribed manner, objection
may be made and that thereafter the question of the objection shall be taken
up and decided. This does not mean that the burden of proof is upon the
objector to disprove the claim, but that he shall produce evidence whose
probative force shall be equal to, or greater than, the evidence offered in the
first instance by the claimant. The burden of proof is always upon the claim-
ant, but the statute points out how he may meet it for the purpose of making a
prima facie case ; and further provides that a creditor, or other person entitled,
may, by interposing objection, so relate himself to the record as to be able to
3io THE NATIONAL BANKRUPTCY LAW.
Proof and Allowance of Claims. [Ch. VI.
give evidence in opposition to the claim. Therefore, if the creditor shall have
complied with section 57a, by filing with the referee a statement under oath, he
shall be entitled to have his claim accepted, unless from some circumstance
the referee demands further evidence from him, or unless an objection is inter-
posed, and such objection is followed by evidence offered by the objector,
which shall overthrow the presumptive case made by the claimant. It is proper
to inquire, in this connection, whether the objector is entitled to examine the
claimant. It is considered that an opportunity should be given to examine the
claimant and other witnesses, if the attendance of the same can be procured
seasonably and without embarrassing delay, and it may be that in suitable
cases the referee should suspend a determination of the matter until evidence
can be taken by deposition. But a suspension of the proceedings for the pur-
pose of obtaining the evidence of witnesses not within the jurisdiction of the
court should only be exercised where the referee is convinced that there is not
only formal objection to the claim interposed in good faith, but also that there
is substantial reason for believing that such evidence is necessary for the just
administration of the estate. The proceeding before the referee at the first
meeting of creditors, looking to the election of a trustee, is intended to be
summary, the expeditious administration of the estate is of importance, and
no considerable delay should be permitted for the purpose of obtaining evi-
dence respecting claims, unless the court is satisfied that such evidence is of
substantial value and necessary to just determination. Experience in this
district under the present act illustrates that the provision of the statute com-
mitting the selection of the trustee to the creditors permits embarrassments
which seriously tend to delay the speedy and proper distribution of the estate.
It usually happens that, where there are assets, coteries of creditors are formed
for the purpose of controlling the election of a trustee, either in the interest
of particular creditors, or for the purpose of carrying to some particular law-
yer the emoluments arising from the conduct of the business. As a result, the
court has been compelled to appoint a receiver in almost every important pro-
ceeding pending the contest over the election of the trustee. Such receiver
usually performs a considerable part of the duties that belong to the trustee,
and the expense of the administration is largely increased. It is not within
the power of the court to withdraw from the creditors their due right to select
the trustee, but every effort should be made to put an end to the undue con-
tention, and the consequent delay that accompanies the attempted exercise of
that right."
The official forms are quite full respecting the proof of dif-
ferent kinds of debts and these forms should be followed as closely
as possible. For proof of unsecured debts see Form No. 3 1 ; of
secured debts, Form No. 32 ; of debt due corporation, Form No.
33; of debt clue partnership, Form No. 34; proof by agent or by
attorney, Form No. 35; proof of secured debt by agent, Form
No. 36; affidavit of lost bill or note, Form No. 37. For an
CREDITORS. 311
§ 57-] Questioning Validity of Judgments Presented for Allowance.
order reducing claim, see Form No. 38; an order expunging
claim, Form No. 39.
As to debts which may be proved see section 63.
It is to be noted that it is not essential that proofs shall be
made at or before the first meeting. They may be made at any
time within a year after the adjudication and it is not necessary
that they should be filed in the first instance with the referee. (See
subdivisions c and n of this section and in re Rider, 3 Am. B.
R. 178; 96 Fed. 808.)
Questioning the Validity of Judgments Presented for Allowance.
— The question as to how far a creditor may attack the validity
of a judgment rendered against a bankrupt in behalf of another
creditor prior to the proceedings, and which the judgment credit-
or attempts to prove, has been rendered somewhat confusing
on account of the failure of some courts to recognize the true
rule governing the conclusiveness of judgments. As a general
rule a creditor is in a sense privy to his debtor and so is concluded
by a judgment or decree obtained by a third person in a court
of competent jurisdiction against the debtor without fraud or
collusion to the extent that such judgment establishes (1) the
relation of creditor and debtor and (2) the amount of the in-
debtedness recovered thereby. The leading case in this country
is Candee v. Lord et al. 2 N. Y. 269.
That was a case where a bill had been filed in chancery based
upon an unsatisfied judgment obtained by complainant against
Russel Lord. The bill charged that the defendants, Henry Lord
and William Champfin, had, by fraudulent judgments, sold the
debtor Russel Lord's property, and received the proceeds, and
prayed that they should account therefor to the creditors of
Russel Lord. Defendants Henry Lord and Champlin answered
and sought to assail complainant Candee's judgment on the
ground that it had been obtained upon a forged endorsement.
On an appeal from the chancellor's decision awarding a jury trial
upon the issues of forgery (among other things), the Court of Ap-
peals held that in the absence of allegations or proof of fraud or
3i2 THE NATIONAL BANKRUPTCY LAW.
Questioning Validity of Judgments Presented for Allowance. [Ch. VI.
collusion between the parties in the procuring of the Candee
judgment, the defendants were bound and could not relitigate the
question of forgery in the creditor's action. In several subse-
quent cases of the same general character, it was hedd that the
defendants could not, in the absence of fraud or collusion, im-
peach the consideration of the judgment upon which the action
was founded, or be permitted to show that the contract upon
which it was rendered had, in fact, no existence or was not en-
forcible. (Burgess v. Simonson, 45 N. Y. 225; Carpenter v.
Osborn, 102 id. 552; Decker v. Decker, 108 id. 128.) And a
former judgment (or decree) establishing rights and relations be-
tween the parties thereto, while never admissible to defeat or divest
any right existing in a person not a party or privy thereto, is ad-
missible against such person for the purpose of proving that the
plaintiff in the former judgment sustained to the defendant the
relation established thereby and was clothed with whatever right
the defendant had which was awarded to plaintiff thereby, saving
always the right of the third person to impeach the former judg-
ment for fraud or collusion. (R'y Equipment Co. v. Blair, 145
N. Y. 607; see, also, Barr v. Gratz, 4 Wheat. 213; Bigelow on
Est. 149 et seq.)
But the courts have refused to extend this doctrine beyond
personal judgments. Thus, in Hassall v. Wilcox, 130 U. S. 493,
the question was as to the priority of liens. One party relied upon
the judgment of a State court adjudging him such priority over
all other claims, in an action to which the holder of a mortgage
prior in time was not a party. Held, as against such mortgagee
and bondholders, the judgment of the State court was not bind-
ing.
In Brooks v. Wilson, 125 N. Y. 256, it is held that a judgment
between parties to a conveyance or mortgage which affirms the
validity of a deed or mortgage, whether obtained by default or
upon litigation, would, especially where the exact issue, whether
or not it was a fraud upon creditors, was not presented by the
pleadings and decided, does not preclude a creditor not a party
CREDITORS. 313
§ 57.] Questioning Validity of Judgments Presented for Allowance.
to the action from subsequently assailing the original transaction
as a fraud upon his rights as a creditor.
It consequently follows from what has been said that where
a creditor offers a claim based upon a personal judgment in a
State court other creditors whose dividends would be reduced
were such claims allowed and who are not parties to the judgment
are not precluded from showing in bankruptcy proceedings that
the judgment was obtained by fraud or collusion. In England
the principle seems to be somewhat broader and allows the bank-
ruptcy court to go behind a judgment for other causes than
alleged fraud or collusion. And the English rule seems to have
been followed under the Act of 1867 in the case of ex parte
O'Neil, In re Fowler (Fed. Cas. No. 10,527; 1 N. B. R. 677; 1
Low. 161), in which it was held that creditors interested in con-
testing a judgment might show that the judgment was void or
voidable for fraud or irregularity because they had no right to
have it reviewed directly. It seems doubtful however as to
whether the American doctrine can be held to go as far as this.
Indeed in many cases decided under the old Act it was held that
a judgment in personam recovered in a State court could not be
assailed in bankruptcy, but resort must be had in the State court
to test its validity. (See Campbell's case, Fed. Cas. No. 2,349; 1
N. B. R. 165; McKinsey v. Harding, Fed. Cas. No. 8,866; 4
N. B. R. 38. ) But 'this view goes too far the other way. The true
rule would seem to be that any person who is injuriously effected
by a judgment to which he is not a party may attack it in the
bankruptcy court for fraud or collusion, but as to other matters
it is conclusive. See thoughtful opinion on this subject by Ref-
eree Hotchkiss, In re Phelps (3 Am. B. R. 434).
In what is said above as to the conclusiveness of judgments
it is always implied that a judgment must be regular on its face
and the court which rendered it must have had jurisdiction of the
subject-matter. It is never too late to raise the question of juris-
diction of the subject-matter ; but this is met by another rule that
if the court where the judgment was rendered be of general juris-
(40)
3i4 THE NATIONAL BANKRUPTCY LAW.
Secured and Preferential Creditors. [Ch. VI.
diction, or, as some cases say, of record, the jurisdiction need
not affirmatively appear. (See in re Columbia Real Estate Co.
101 Fed. 965; 4 Am. B. R. 411.) It is conclusively presumed
and the recitals of the judgment of a domestic court of general
jurisdiction may not, as a rule, be contradicted by extrinsic evi-
dence in a collateral proceeding. See cases above cited. The
court of bankruptcy while a court of limited jurisdiction as to
subject-matter does not need to recite the facts of jurisdiction
in order to bring it within this rule. See Columbia Real Estate
Co. supra.
Secured and Preferential Creditors. Section 57c, g, h. — The
method of presenting and proving claims has been sufficiently con-
sidered in the preceding paragraph and it remains to consider the
right of secured and preferential creditors.
Section 1 (23) declares that the term "secured creditors"
shall include a creditor who has security for his debts 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 person secondarily liable for the bankrupt has such se-
curity 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 thereupon, and there-
after institute proceedings to enforce his claim upon the security
for the balance. ( See in re Headley, 3 Am. B. R. 272 ; 97 Fed.
765.) And this rule applies even where the security that 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. (Ex p. Graves, 2 Jur.
N. S. 651 ; Ex p. Peacock, 2 G. & J. 67; in re Howard, Cole &
Co. 4 N. B. R. 571 ; Fed. Cas. 6,750; in re Coe et al. 1 Am. B. R.
275.) Under the Act of 1867 there was no method by which the
secured creditor could prove his claim in time to take part in the
proceedings at the first meeting.
The provisions of paragraph e were especially intended to save
CREDITORS. 31 «
§ 57.] Secured and Preferential Creditors.
to that class of creditors the right of participating in the election
of a trustee and other business, to the extent of the sums only as
seem to be owing over and above the value of their securities.
But after their claims have been allowed by the courts at such
sums that seem to be owing over and above the value of the
securities they must still procure an exact determination of the
security in a manner prescribed in paragraph h in order that
their claims may be allowed, so as to entitle them to dividends.
If they elect to rely upon their securities they are not parties to
the bankruptcy proceedings at all. There is nothing compelling
them to make proof and they may enforce their liens if otherwise
valid, subject to the power of stay set forth in section 11 (q. v.).
If a creditor, in proving his debt, fails to make mention of his
security, he will, as a general rule, be deemed to have elected to
prove it as unsecured and to have surrendered his security. (In
re Bloss, Fed. Cas. 1,562; 4 N. B. R. 147; Heard v. Jones, 15
N. B. R. 402 ; Ex p. Solomon, 1 G. & J. 25 ; Stewart v. Isidor,
1 N. B. R. 485; Hatch v. Seely, 13 N. B. R. 380; Ex p. Downs,
1 Rose, 96; in re Brand, Fed. Cas. 1,809; 3 N. B. R. 324; in re
Granger, Fed. Cas. 5,684; 8 N. B. R. 30; Ex p. Hornby, Buch.
351.) But 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 fact. (Cook v. Farrington, 104 Mass. 212.)
Where the security is the property of the bankrupt held by an
indorser, 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 indorser. (Merchants' Bank v. Com-
stock, 55 N. Y. 24.) Where, from ignorance or inadvertence,
a claim has been proved.-as unsecured, the court, in the exercise
of its discretion, may permit the creditor to have his proof ex-
punged 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 asking it and excusing his mis-
take, if neither the bankrupt nor any other party will be injured ;
316 THE NATIONAL BANKRUPTCY LAW.
Secured and Preferential Creditors. [Ch. VI.
that is, if their rights after the granting 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 proving the claim as unse-
cured. {In re Hubbard, Fed. Cas. 6,813; 1 Low. 190; s. c. 1
N. B. R. 679.) The court may impose terms and conditions
in granting an order permitting an amendment of proof. {In re
Parkes, Fed. Cas. 10,754; 10 N. B. R. 82; compare also in re
Jaycox & Green, 8 N. B. R. 241 ; in re Clark & Bininger, Fed.
Cas. 2,815; 5 N. B. R. 255; Greigson v. Girard, 4 T. & C. [N.
Y.] 419; Ex p. Davenport, M. D. & D. 313; in re McConnell, 9
N. B. R. 387; Fed. Cas. 8,712; in re Friedman, 1 Am. B. R.
5i°.)
The preference referred to in subdivision g of the foregoing
section is the preference defined in section 60a as follows :
" A person shall be deemed to have given a preference if, being insolvent,
he has procured or suffered a judgment to be entered against himself in favor
of any person, or made a transfer of any of his property, and the effect of
the enforcement of such judgment or transfer 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."
Section 60b is as follows :
" If a bankrupt shall have given a preference within four months before
the filing of a petition, or after the filing of the petition and before the ad-
judication, and the person receiving it or to be benefited thereby, or his agent
acting therein, shall have had reasonable cause to believe that it was intended
thereby to give a preference, it shall be voidable by the trustee, and he may
recover the property or its value from such person."
It will be seen that there may be a distinction between the
character of a preference which will act as a bar to the proof of
creditors unless the preference is surrendered and a preference
such as would authorize the trustee to recover the same back
from the person receiving it. Under section 57g knowledge by a
creditor that he is receiving a preference is not necessary to pre-
vent the proof of the claim, though under section 60b no action
will lie by the trustee for the recovery of such preference against
the creditor unless the person receiving it, etc., had reasonable
cause to believe that it was intended as such a preference. It has
CREDITORS.
3i7
§ 57.] Secured and Preferential Creditors.
been held that "preference" includes a payment of money and
that hence where a bankrupt within four months of bankruptcy,
and while insolvent, makes a payment on account to a creditor
who is entirely innocent of the insolvency or of the intent to
prefer, the creditor will still be put to his election as to whether
he shall retain the payment and take no further dividend or
whether he shall surrender it and take his dividend with the other
unsecured and unpreferred creditors. This is the doctrine which
is laid down by the Circuit Court of Appeals for the 7th and 9th
Circuits. (See Electric Co. v. Worden, 3 Am. B. R. 634; 39
C. C. A. 582 ; 99 Fed. 400; in re Fixen & Co. (C. C. A. ) 4 Am.
B. R. 10; 102 Fed. 295; see also District Court decisions in re
Conhaim, 3 Am. B. R. 249; 97 Fed. 923; Strobel & Wilkin Co.
v. Knost, 3 Am. B. R. 631 ; 99 Fed. 409; in re Sloan, 4 Am. B.
R. 356 ; 102 Fed. 116.) But it is very clear that the payment to be
a preference within the meaning of section $jg must have been
made while the debtor was insolvent. {In re Alexander, 4 Am.
B. R. 376; 102 Fed. 464.)
And the doctrine has been further distinguished, and the rule
laid down that a payment is not a preference unless the creditor
has knowledge of the intent to prefer. ( See in re Piper, 2 N. B.
N. 7; in re Smoke, D. C. N. Y. Aug. 1900, 4 Am. B. R. 434;
and see also Blaky v. Bank, 2 Am. B. R. 459; 95 Fed. 267.)
The decision of the district judge in the Smoke case, supra, does
not go quite so far as to hold the above qualification. What that
case actually holds is that a payment made on account in the regu-
lar course of business by the debtor who does not know or believe
himself at the time insolvent, and who intends no preference by
such payment, does not constitute a preference. But the referee's
opinion is much broader in its scope. (See report of the case in
the American Bankruptcy Reports as above cited. )
The question as to such payment on account being a preference
cannot be considered to be settled. At the time of the present
writing (Sept. 1900) there is pending in the Supreme Court oi
the United States an appeal from a judgment of the Circuit Courl
of Appeals for the 7th Circuit in the case of Carson, Pirie, Scoti
3i8 THE NATIONAL BANKRUPTCY LAW.
Secured and Preferential Creditors — Two Preferences. [Ch. VI.
&Co. Appellants, v. Chicago Title and Trust Co. Trustee in bank-
ruptcy of Frank Brothers, Appellee, which the writer is informed
is likely to be argued in the October term, 1900, and in which
the Court of Appeals has followed its prior decision in the case
of Electric Co. v. Worden and the question is squarely presented
for decision in the court of last review. Most of the cases which
hold that the innocent creditor is put to his election in the event of
payment having been made on account seem to confine the rule
to a payment made within four months of bankruptcy, but if their
reasoning is correct a payment made prior to the four months,
if made while the debtor is insolvent with intent to prefer, should
come as well within the meaning of 60a and 57g. And so it has
recently been held in the District of Massachusetts. {In re Jones,
4 Am. B. R. 563; 103 Fed. .) At the present time, how-
ever, it is unwise to attempt to anticipate the decision of
the Supreme Court', but it seems as if the word " preference "
in 60a should be confined to the meaning given in the other sub-
divisions of the same section. The rule making the payment on
account by the bankrupt, while insolvent, to the innocent creditor
a preference cannot fail to have an unsettling effect upon com-
mercial relations, and even in the face of the weight of authority
it is to be hoped that the courts will yet see their way clear to
exempting the innocent creditor from the effects of the decision
of Electric Co. v. Worden and cases following it.
Two Preferences. — Under the old law it was held if a creditor
had two or more separate debts and received a fraudulent pref-
erence as to some one or more of them, but not as to all of them,
he could, without surrendering the preference, prove as to those
upon which no preference had been received; and also that he
might surrender his preference as to certain claims and receive
dividends upon them, though retaining it as to others. {In re
Richter, 1 Dill. 544; s. c. 4 N. B. R. 221 ; compare in re Jordan,
9 N. B. R. 416.) The express terms of that act, required that
construction.
But under the present act it has been held that a cred-
CREDITORS. 319
§ 57.] Two Preferences — What is a Surrender.
itor cannot prove any claim against the bankrupt until he has
surrendered any preference which he may have obtained. (In re
Knost, 2 Am. B. R. 471 ; affirmed in 3 Am. B. R. 631 ; 99 Fed.
409; Electric Co. v. Worden, 3 Am. B. R. 634; 39 C. C. A. 582 ;
99 Fed. 400; In re Conhaim, 3 Am. B. R. 249; 97 Fed. 924;
In re Rogers Milling Co. 4 Am. B. R. 540; 102 Fed. 687.)
What is a Surrender. — The question, what constitutes a sur-
render, has received much discussion. It is admitted by all that
if the assignee is compelled to bring an action to invalidate a
transfer, and if he recovers and enters up judgment, no subse-
quent payment of that judgment by the preferred creditor and
no subsequent compliance by him with its terms can be considered
a surrender. By his judgment the trustee has " recovered " the
property. In legal effect, the transferee no longer has anything
to surrender. (In re Tonkin, 4 N. B. R. 52; Fed. Cas. 14,094;
in re Richter, 4 N. B. R. 221 ; s. c. 1 Dill. 544; Fed. Cas. 11,803.)
But how far the proceedings instituted to recover may proceed,
and the right still be left in the transferee to surrender, is a
point upon which the x authorities are greatly at variance. Thus,
In re J. Lee (Fed. Cas. 8,179; 14 N. B. R. 89), Judge Wallace of
the Northern District of New York said : " I have repeatedly held
that a voluntary surrender (by a preferred creditor) is a prere-
quisite to the right to prove, and that it is too late for the cred-
itor to avail himself of the privilege after he has elected to con-
test the assignee's title to the money or property preferentially
received." Judge Blatchford of the Southern District of New
York, however, held, in many cases, views somewhat different
from those of Judge Wallace. In re J. Riordan (Fed. Cas. 1 1,852 ;
14 N. B. R. 332), was a case which came before him, in which the
preferred creditor surrendered his preferences pending the
action. The court said :
" That surrender was accepted, and the assignee discontinued the suit volun-
tarily, and thereby is estopped from alleging that there was no surrender.
The assignee might have refused to accept the surrender or to discontinue
the suit, except on condition that he should have the same benefit of object-
320 THE NATIONAL BANKRUPTCY LAW.
What is a Surrender. [Ch. VI.
ing to the proof of debts as if the money had been obtained as a result of re-
covery. But he imposed no such condition. If he had imposed it, and it had
been refused, he might have gone on with the suit, in order, in case of his
recovering it, to exclude the proof of the debt. Having waived a recovery,
he thereby waived the right to exclude the proof cf debt."
On the other hand, numerous decisions laid down the rule that
a preferred creditor might surrender his preference at any time
before the actual entry of judgment against him. (Compare the
following cases cited in the brief by attorneys for preferred
creditors : In re J. Riorden, supra; in re H. B. Montgomery, Fed.
Cas. 9,727; 3 Ben. 565; s. c. 3 N. B. R. 137, 429; in re Kipp, 4
N. B. R. 593 ; in re Tonkin, supra; in re C. A. Davidson, Fed.
Cas. 3,599; 3 N. B. R. 418; in re Scott & McCarty, 4 N. B. R.
414; Fed. Cas. 12,518; compare also in re Richter, supra; in re
Cramer, 13 N. B. R. 225; Fed. Cas. 3,345; in re Simeon Leland,
Fed. Cas. 8,230; 9 N. B. R. 209.) In the case of Burr v. Hop-
kins (Fed. Cas. 2,192; 12 N. B. R. 211), a preferred creditor sur-
rendered his preference after an opinion had been given by the
court and after findings of fact had been made, but before the
actual entry of judgment. It was held by the United States Cir-
cuit Court for the Eastern District of Wisconsin, that this was a
surrender authorizing the one making it to prove his claim. The
extent to which courts have admitted the right of a preferred
creditor to surrender may be seen by a consideration of the de-
cisions in Zahm v. Fry (Fed. Cas. 18,198; 9 N. B. R. 546), and
Hood v. Karper (Fed. Cas. 6,664; 5 N. B. R. 358), in which cases
it was held that where there was no actual fraud on the part of
the preferred creditor, he should in equity have an opportunity
of considering whether he would surrender his preference and
pay the costs and expenses of the suit, and that the court might
properly suspend the entry of the decree to give him an oppor-
tunity to do so. The surrender must be to the trustee, not to
the bankrupt. (In re Currier, Fed. Cas. 3,492 ; 13 N. B. R. 68.)
It is not necessary to surrender a preference except in order to
enable one to prove his claim against the party who made the
preferential transfer. Thus, if a creditor has received a pref-
CREDITORS. 321
§ 57.] What is a Surrender — Subrogation.
erence from a firm composed of two persons, but has an individ-
ual claim against one of them, he may prove the latter without
surrendering his preference. (In re Comstock & Co. Fed. Cas.
3,079; 12 N. B. R. no.)
The question does not seem to have been passed upon under the
present act.
Subrogation. Section 571. — The right of a surety of a debtor to
prove the claim of a creditor when the latter neglects to do so,
and to be subrogated to the rights of the creditor, if he discharges
the indebtedness in whole or in part, is an equitable right. It
exists only when the principal creditor could prove. If he, by ac-
cepting a preference and refusing to surrender it, cannot prove
the claim, the sureties cannot prove it.
The relief is the same as the surety would have if the creditor
should prove his claim. The creditor has no right to anything
more than payment while the surety who has borne the burden
is entitled to the benefit. These rights arise not from the original
contract of suretyship but from the equities of the subsequent
transactions. (In re Bingham, 2 Am. B. R. 223; 94 Fed. 796.)
But it has clearly been held under the present act that a creditor
of a bankrupt is entitled to prove his full claims against the bank-
rupt's estate in preference to a surety who has paid part of such
indebtedness. This question was squarely presented in the case
of In re Heyman (D. C. N. Y., 2 Am. B. R. 651 ; 95 Fed. 800),
where the question for decision was whether the surety may dis-
charge part of the debt due from the bankrupt and be at once
subrogated pro tanto to the rights of a creditor and prove his
claim against the estate. In dealing with the question Judge
Thomas said:
Sec. 57, subd. 1, provides :
' 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.'
Rev. St. sec. 5070 (Bankruptcy Act, sec. 19) provides as fol-
lows:
(41)
322
THE NATIONAL BANKRUPTCY LAW.
Subrogation. [Ch. VI.
' Any person liable as bail, surety, guarantor, or otherwise for the bank-
rupt, 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 the creditor has 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 such debt,
but is still liable for the same or any part thereof, may, if the creditor fails or
omits to prove such debt, prove the same either in the name of the creditor
or otherwise, as may be provided by the general orders, and subject to such
regulations and limitations as may be established by such general orders.'
Sec. 57 of the Act of 1898 states that the surety may prove the claim in the
name of the creditor in case the latter does not make such proof, and enables
the surety, in case he discharge the debt in whole or in part, to be subrogated
to the rights of the creditor. The construction would be permissible that the
surety is subrogated to the rights of the creditor to the extent to which he has
paid the debt, but, if he has paid nothing, he must await the action of the
creditor; and, in default of such action, the surety may act for the creditor in
the matter of proving the claim. The construction placed upon sec. 19 of the
Act of 1867 leads to a contrary conclusion. That section states in terms that
the surety who has discharged the debt in whole or in part shall be entitled
to prove the debt, or, if the creditor has proved it, to stand in his place. That
section further states, that, if the surety has not paid the whole of the debt,
but is still liable for the same, or any part thereof, he may, if the creditor omits
to prove the debt, prove the same, either in the name of the creditor or other-
wise, as may be provided, etc. These two sentences of sec. 5070, Rev. St. on
certain state of facts might not entirely accord, but it is considered that the
section is the full equivalent, and no more than an equivalent, of subd. 1 of
sec. 37 of the Act of 1898. In such case it seems suitable to follow the interpre-
tation placed upon sec. 5070, Rev. St. From the decisions relating to the
former act, it appears that the creditor is entitled to prove his full claim in
preference to a surety, who has discharged a part of his indebtedness. The
authorities tending to establish this holding are : In re Ellerhorst, 5 N. B. R.
144; Fed. Cas. 4381; in re Hollister, 3 Fed. 452; Stewart v. Armstrong, 56
Fed. 171 ; in re Souther, 2 Low. 322, Fed. Cas, 13184; 9 N. B. R. 502; Bank v.
Pierce, 137 N. Y. 444; 33 N. E. 557. See Downing v. Bank, 11 N. B. R. 372;
Fed Cas. 4046..
But irrespective of the provisions of any particular statute a
surety paying the debt of his principal after bankruptcy may set
off the amount so paid against his debt to the bankrupt. See re-
cent case of In re Dillon (4 Am. B. R. 63; 100 Fed. 931), in
which it was held that where upon the dissolution of a firm one
partner agrees with his retiring co-partners to become responsible
for the payment of all firm debts and liabilities, the retiring part-
ners become in equity sureties for the remaining partner, and
CREDITORS. 3*3
§ 57-] Debts to the United States — Reconsideration.
this relationship is recognized in bankruptcy. Hence where the
retiring partner is compelled to pay a debt of a firm in whole or
in part he becomes subrogated to the claim of the creditor, pro
tanto. Where the original creditor has not proved his claim the
surety seeking to prove it must be required to prove it in the cred-
itor's name. As to whether, when the surety is unable to prove
the creditor's claim which he has paid, on account of its being
a preference, the surety may set it off against his debt due to the
principal, quaere.
On the same general subject see G. O. 21 (4).
Debts to the "United States. Section 57 j. — Compare commentary
under section 17 on this subject. As to the rights of the United
States to a priority of payment, compare section 64.
Reconsideration. Section 57k. — The right given by this para-
graph and also by G. O. 21 (6) quoted ante under this section to
reconsider claims which have been allowed, and to reallow or re-
ject them, is merely declaratory of the law. It is a matter within
the discretion of the court, and the only limitation is that provided
for in the statute itself, namely, that claims shall not be reconsid-
ered after the estate has been closed. Up to that time the court has
ample power to investigate a claim and to make any corrections
which equity or justice demands. It may reduce the amount if
it is too large, or may increase it, if by mistake it was proven for
too small a sum, but the court will reconsider under this section
only claims against the bankrupt that were in existence when
the petition was filed and not claims for expenses of administra-
tion, such as a receiver's account. Such expenses should be
promptly objected to and an exception filed when the question
is raised before the referee. (In re Reliance Co. 4 Am. B. R.
49; 100 Fed. 619.) In a proceeding to reconsider, the burden
of proof rests upon the petitioner. The original allowance estab-
lishes a prima facie case. It has been held that the bankruptcy
court may expunge or dismiss a claim on account of matters oc-
curring after the proof is made. (In re J.' C. Loring, Fed. Cas.
8,512; 1 Holmes, 483.)
324 THE NATIONAL BANKRUPTCY LAW.
Effect of Proving a Claim — Allowance, etc. — Notice to Creditors. [Ch. VI.
Effect of Proving a Claim Upon a Continuance of Other Proceed-
ings to Enforce It. Section 57I. — (Compare section 11, paragraph
on Effect of Proof on Rights of Action.)
Appeals from the Allowance or Disallowance of Claims. — Com-
pare section 25 a (3), and section 25 b.
Sec. 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 hearing upon applications for the confirmation of compo-
sitions or the discharge of bankrupts; (3) all meetings of credit-
ors; (4) all proposed sales of property; (5) the declaration and
time of payment of dividends; (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, and (8) the proposed dismissal of the pro-
ceedings.
b 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.
Analogous Provisions of Former Acts. —
As to notices of first meeting: R. S. section 5019; act of 1867, section 11.
As to notice of filing of trustee's account : R. S. 5096 ; act of 1867, section 28.
As to notice of dividends: R. S. section 5102; act of 1867, section 27; act of
1841. section 0; act of 1800, section 29. As to notice of application for dis-
charge: R. S. section 5109; act of 1867. section 29; act of 1841, section 4. As
to notice of application for confirmation of composition : R. S. section 5103A.
As to notice of meetings in general: R. S. section 5094; act of 1867, sec-
tion 17.
The statute is so clear in its statement as to need very little
commentary. A few matters, however, should be taken into ac-
CREDITORS. 32
§ 58.] Notice to Creditors.
count in connection with the section. Thus by G. O. 4 it is pro
vided that notices and orders not required by the Act or by th
General Orders to be served on the party personally may be servei
on his attorney. And by G. O. 21 (2) it is provided that an;
creditor may file with the referee a request that all notices t<
which he may be entitled shall be addressed to him at such plac
as he shall designate and until some other designation shall b
made all notices shall be so addressed. As to notice of re-exam
ination of claim see G. O. 21 (6). The notice of hearing on th
bankrupt's petition for discharge is given by the clerk upon Fora
No. 57 ; other notices are given by the referee.
As notice by mail of all examinations of the bankrupt is re
quired by this section it is important that where such examina
tion is to take place upon his application for discharge, the notic
of such application for discharge should contain a notice of th
examination of the debtor to avoid the necessity of further notice
(In re Price, 1 Am. B. R. 419; 91 Fed. 635.) But the coui
may, by section 7 (9), order an examination at any time durini
the pendency of proceedings upon ten days' notice. Id. Th
language of subdivision 4 respecting notice of proposed sales 0
property should be read in connection with section 70b. In thi
connection attention should be called to G. O. 18, subdivision 1
which provides as follows :
Upon petition by a bankrupt, creditor, receiver or trustee, setting forth tha
a part or the whole of the bankrupt's estate is perishable, the nature and loca
tion of such perishable estate, and that there will be loss if the same is not sol
immediately, the court, if satisfied of the facts stated and that the sale i
required in the interest of the estate, may order the same to be sold, with 0
without notice to the creditors, and the proceeds to be deposited in court.
The provision in regard to the notice of declaration and tim
of payment of dividend is exemplified in Form No. 41, by whicl
it wild appear that notice is given by the trustee after the list
of claims and dividends has been delivered to him by the referei
and addressed to each creditor stating that such creditor ma1
receive a warrant for the dividend due to him on the day named"
that if he cannot personally attend the warrant will be delivera
326 THE NATIONAL BANKRUPTCY LAW.
Notice to Creditors — Necessity of Notice to Give Jurisdiction. [Ch. VI.
to his order upon his filling up and signing a form which is at-
tached to the notice. The provision in regard to the notice to
creditors of the first meeting implies that such notice shall be
published as well as served. (Form No. 1 8.) Notice of the filing
of the final accounts of the trustee, and the time and the place
where they will be examined, is clearly a notice to be given after
the filing of the account. Compare sec. 47 (8) ; also R. S. sec. 5,096.
Notice of the proposed compromise of the controversy must be
notice of the application of the trustee for an order from the court
permitting such compromise. Compare section 27. As to notice
of the proposed dismissal of the proceedings, compare section
59 (#)• As to the newspaper in which notice of the first meeting
shall be published, compare section 28.
Except so far as additional notice may be required by the
General Orders or by the practice of a particular district, or by
the Rules of Equity, this section is practically exclusive and notice
is not required in other cases. Thus it has been held that the
Judge of the bankruptcy court may appoint a special as well as a
general referee without any notice to any of the parties. (Bray
v. Cobb, 1 Am. B. R. 153; 91 Fed. 102.) No notice is required
to creditors before the referee may settle attorney's fees, and
presumably costs of administration. (In re Stotts, 1 Am. B. R.
641593 Fed. 438.)
Necessity of Notice to Give Jurisdiction. — The courts hold that
a proceeding in bankruptcy is in the nature of a proceeding in
rem; that jurisdiction is obtained by the petition, adjudication,
and the taking of the property into the custody of the court. Ac-
tual personal notice to the creditors, though required by the statute,
is not necessary to give the court jurisdiction over the creditors.
In Rayl v. Lapham (27 Ohio St. 452; s. c. 15 N. B. R. 508), it
was said : " The statute directs certain acts to be done and publi-
cation to be made for the purpose of affording a reasonable op-
portunity of notice to the creditors, but the proceedings are so
far in rem that actual notice to the creditors is not essential to
the jurisdiction of the court, nor will the want of it invalidate
CREDITORS. 3 j
§ 59.] Who may File and Dismiss Petitions.
the discharge which the court is empowered to grant to a ban!
rupt."
And see decided under the present Act, Southern Loan an
Trust Co. v. Benbow, 3 Am. B. R. 9; 96 Fed. 514; in re Ulfe
der Clothing Co. 3 Am. B. R. 425 ; 98 Fed. 409.
The question as to the effect of want of notice has most fr<
quently arisen in determining the effect of a discharge in ban!
ruptcy upon the claims of creditors to whom no personal notic
was given, and the rule enunciated in Rayl v. Lapham is in hai
mony with the decision of nearly all the courts under the forme
act. (Thurmond v. Andrews, 13 N. B. R. 157; s. c. 10 Bus
[Ky.] 400; Piatt v. Parker, 13 N. B. R. 14 [citing Payne ;
Albe, 4 N. B. R. 220; s. c. 7 Bush (Ky.) 344] ; Heard v. Arnol<
15 N: B. R. 543; s. c. 56 Ga. 570; Pattison v. Wilbur, 10R.
448; s. c. 12 N. B. R. 193; Williams v. Butcher, 12 N. B. R. 14;
in re Archenbrown, Fed. Cas. 504 ; 1 1 N. B. R. 149 [citing Hi
v. Robbins, 22 Mich. 475] ; Symonds v. Barnes, 6 N. B. R. 37;
Corey v. Ripley, 4 N. B. R. 503.)
But under the present act creditors whose claims have not bee
scheduled in time for proof and allowance with the name of tr
creditor if known to the bankrupt, unless such creditor had notk
or actual knowledge of the bankruptcy proceedings, will not t
discharged. (Section 17 [3].)
Sec. 59. Who may File and Dismiss Petitions. — a Any qualifie
person may file a petition to be adjudged a voluntary bankrupt.
b Three or more creditors who have provable claims again;
any person which amount in the aggregate, in excess of the valt
of securities held by them, if any, to five hundred dollars or ovei
or if all of the creditors of such person are less than twelve i
number, then one of such creditors whose claim equals sue
amount may file a petition to have him adjudged a bankrupt.
c Petitions shall be filed in duplicate, one copy for the clerk an
one for service on the bankrupt.
d If it be averred in the petition that the creditors of the bank
rupt are less than twelve in number, and less than three creditoi
328 THE NATIONAL BANKRUPTCY LAW.
Who May File and Dismiss Petitions— Voluntary Petitioners. [Ch. VI.
have joined as petitioners therein, and the answer avers the exist-
ence qf 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 delay the hearing upon
such petition for a reasonable time, to the end that parties in
interest shall have an opportunity to be heard ; if upon such hear-
ing it shall appear that a sufficient number have joined in such
getition, 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 dismissed.
e In computing the number of creditors of a bankrupt for the
purpose of determining how many creditors must join in the
petition, such creditors as were employed by him at the time of
the filing of the petition or are related to him by consanguinity
or affinity within the third degree, as determined by the common
law, and have not joined in the petition, shall not be counted.
/ Creditors other than original petitioners may at any time
enter their appearance and join in the petition, or file an answer
and be heard in opposition to the prayer of the petition.
g A voluntary or involuntary petition shall not be dismissed
by the petitioner or petitioners or for want of prosecution or by
consent of parties until after notice to the creditors.
Analogous Provisions of Former Acts. —
As to voluntary petition: R. S. section 5044; act of 1867, section 11 ; act of
1841, section 7. As to involuntary petitions, and the necessary amount of pe-
titioners' claims : R. S. section 5021 ; act of 1867, section 39 ; act of 1841, sec-
tion 7; act of 1800, sections 1 and 2.
Voluntary Petitioners. Section 59a. — There is some conflict of
authority as to the right of a person to file a voluntary petition
after an involuntary petition has been filed against him. It was
held that this could be done, In re Canfield ( 1 N. Y. Leg. Obs. 234 ;
s. c. 5 Law Rep. 415), a case decided under the act of 1841. The
contrary was held in re R. Stewart (Fed. Cas. 13,419; 3 N. B. R.
108), decided under the act of 1867. In this case an adjudication
was made upon the voluntary petition by the register, but the same
was set aside by the court on motion. The court, in granting the
motion, said : " It was never intended by the Bankrupt Act, and
CREDITORS. 329
§ 59.] Who May Become Bankrupts — Petitioners in Involuntary Proceedings.
no correct rule of practice can tolerate, that when a creditor has
instituted proceedings to force his debtor into bankruptcy, such
debtor should be allowed to become a bankrupt, and be adjudi-
cated as such on his own petition before the determination of the
creditor's petition. To permit such a practice might work a most
flagrant wrong upon the rights of the petitioning creditor." In re
C. A. Davidson (Fed. Cas. 3,599; 3 N. B. R. 418), a case arising
in the southern district of New York, it appears from the facts
stated in the opinion that creditors filed an involuntary petition;
that the debtor denied the facts of the petition, and upon a trial
was adjudged a bankrupt upon the petition of the creditors ; but
in the meantime the bankrupt filed in the same court his voluntary
petition to be adjudged a bankrupt, and was so adjudged prior to
the adjudication upon the involuntary petition, and the usual pro-
ceedings subsequent to an adjudication followed the adjudication
on the voluntary petition, and none of these proceedings were as-
sailed or were questioned by the court.
But under the present act it has been held that the pendency
of an involuntary petition before adjudication will not necessarily
invalidate a subsequent voluntary petition filed in the same or in
another district. The question of jurisdiction must be determined
upon each petition and neither is necessarily conclusive of the
other. (In re Waxelbaum, 3 Am. B. R. 392; 98 Fed. 589, So.
Dist. of N. Y.)
Who May Become Bankrupts.— Compare notes to section 4. A
State court has no right to enjoin a party from applying to the
court of bankruptcy to be adjudged a voluntary bankrupt.
(Fillingin v. Thornton, 49 Ga. 384; s. c. 12 N. B. R. 92.)
Petitioners in Involuntary Proceedings. Section 59b, et seq.—lt
has been held that a State court has the power to restrain, by in-
junction, a creditor from prosecuting a fraudulent and oppressive
petition in bankruptcy against a debtor, especially in cases where
the petitioning creditor has, prior to filing the petition, sought
the aid of the State court with reference to the claim held by him.
(Pusey v. Bradley, 46 How. Pr. 255; s. c. 1 N. Y. Supr. [T
(42)
33o THE NATIONAL BANKRUPTCY LAW.
Petitioners in Involuntary Proceedings. [Ch. VI.
& C] 66 1, citing 3 Edw. Ch. 203, 205 ; 17 How. Pr. 464; 6 Abb.
Pr. 239.)
A person may request his creditors to institute proceedings in
bankruptcy against him, and the adjudication will not be assail-
able as being fraudulently obtained. (In re Bouton. Fed. Cas.
1,706; 5 Saw. 427.)
A person may lawfully buy up claims so that he may enable
himself to join in a petition in bankruptcy, and make up the nec-
essary amount .of claims. (In re Shouse, Crabbe, 482 ; in re
Woodford & Chamberlain, Fed. Cas. 17,972; 13 N. B. R. 575. )
It is not necessary that the debt of the petitioning creditor be one
existing at the time of the act of bankruptcy which is alleged
in the petition. (Phelps v. Clasen, 3 N. B. R. 87; Fed. Cas.
11,074; s. c. Wool. 204.) As to the right of a creditor holding a
claim which is barred by the statute of limitations to file a pe-
tition based thereon compare section 63, paragraph on Debts
Barred by the Statute of Limitations.
It seems to be the rule that where, upon the filing of an invol-
untary petition in bankruptcy there are not the proper number of
petitioning creditors nor a sufficient amount of claims to support
the petition but subsequently and before the adjudication other
creditors enter their appearances and join in the petition, such
creditors and the amounts of their claims will be reckoned in
making up the number of the creditors and the amount of claims
necessary to support an involuntary petition in bankruptcy. (In
re Romanow, 1 Am. B. R. 461 ; 92 Fed. 510.) It was also held
in this case that where there were not a proper number of peti-
tioning creditors nor a sufficient amount of claims to support the
petition but subsequently and before the adjudication but more
than four months after the act of bankruptcy other creditors
entered their appearances and joined in the petition, the petition is
valid and an adjudication may be had upon it as it is immaterial
when the other creditors join in the petition since it was filed
within the four months after the commission of the act of bank-
ruptcy by the insolvent debtor. But a later case, (In re Bedding-
field, 2 Am. B. R. 355; 96 Fed. 190,) limits the practice to cases
CREDITORS.
331
§ 59-] Petitioners in Involuntary Proceedings.
where apparently the original petition represented a sufficient
number of creditors and claims and conferred jurisdiction. In
the case of In re Mercur (2 Am. B. R. 626; 95 Fed. 634), the rule
was clearly laid down that where but one creditor has made a
petition to his debtor to be adjudicated a bankrupt alleging that
the creditors are less than twelve in number when in fact there
are more than twelve, other creditors may be allowed to join in
the petition and the original petition may be amended, even
though the amended petition sets up an act of bankruptcy other
than that alleged in the original petition. Where a creditor has
joined in an involuntary petition and has subsequently obtained
a settlement of his claims he cannot withdraw from the proceed-
ings. (See In re Beddingfield, supra, and Dismissal of Peti-
tion, post, under this section.) Where the petition is filed by
one creditor who alleges that all the creditors of the debtor are
less than twelve in number and that with his own claim the
amount of all equals or exceeds five hundred dollars, it is prob-
able that such allegation may be made upon information or be-
lief,. (See In re Scammon, 10 N. B. R. 66; 6 Biss. 130; Fed.
.Cas. No. 12,427.)
Where a petition is filed against one who is a member of a part-
nership, his debts due as a member of the firm and those due indi-
vidually are both to be taken into consideration in determining the
number and amount. {In re Lloyd, Fed. Cas. 8,429; 15 N. B.
R. 257.) In the same case it was held that a debt due by the
partner to the firm could not be computed in ascertaining the num-
ber and amount of his debts, and that where he is a member of
two firms, one of which owed the other, that debt could not be
counted. In ascertaining whether the debt of the petitioning cred-
itors equals the amount required by the statute, the interest as well
as the principal of the indebtedness may be taken in consideration.
(Sloan v. Lewis, 22 Wall. 150.) Debts not due, as well as those
that are due, may be made the foundation of a petition in bank-
ruptcy; they are provable claims, although not then payable. (In
re W. Alexander, Fed. Cas. 161; 4 N. B. R. 178; s. c. 1 Low.
470; Linn v. Smith, Fed. Cas. 8,375; 4 N. B. R. 46.) If the
332
THE NATIONAL BANKRUPTCY LAW.
Counting Preferred Creditors in Computing Number of Creditors. [Ch. VI.
debt of the petitioning creditor is equal to the amount required by
the statute, and his petition alleges the other material facts, he
has an absolute right to have an adjudication upon it by the court.
Although he may be the only creditor and may have ample reme-
dies in courts of law or equity, that fact furnishes no ground for
refusing to adjudicate (in re W. Alexander, supra) and this is
true, even though it be shown that the proceedings in bankruptcy
would be detrimental to the interests of the debtor. If the peti-
tioner's debts really amount to the sum mentioned in the statute,
the fact that the debtor has tendered payment is insufficient to
prevent an adjudication. This results in part from the fact that
if the debtor is insolvent, payment in full would be a preference.
(In re Ouimette, Fed. Cas. 10,622; 3 N. B. R. 566; s. c. 1 Saw.
47; in re Williams, Fed. Cas. 17,703; 3 N. B. R. 286; s. c. 1
Low. 406. ) But if a payment of the indebtedness is actually ac-
cepted after the filing of the petition, it may be set up and is a suffi-
cient defense. If it is a preference accepted knowingly, it estops
the petitioner.
Counting Preferred Creditors in Computing the Number of Cred-
itors.— The question whether preferred creditors are to be counted
in determining the number and amount of outstanding claims
against the bankrupt differs somewhat from the question whether
such creditors may be petitioners. The courts which hold that
they may be petitioners have imposed as the condition of their
doing so the surrender by them of the property preferentially
transferred; and further hold that the filing of a petition by a
preferred creditor is in itself a waiver of the preference. But
until they do surrender their preference, under section 57 (g),
their claims are not provable, and therefore, on principle and au-
thority, and in accordance with the statutory definition in section
1 (9), they should not be regarded as creditors. (In re Israel,
Fed. Cas. 7,111; 12 N. B. R. 204; s. c. 3 Dill. 511; in re Cur-
rier, Fed. Cas. 3,492; 13 N. B. R. 68; Clinton v. Mayo, Fed.
Cas. 2,899; 12 N. B. R. 39.) And see under present act In re
Rogers Milling Co. (4 Am. B. R. 540; 102 Fed. 687.)
CREDITORS. 333
§ 59.] Attaching Creditors.
Attaching Creditors. — Under the former act there was a conflict
of authority as to whether creditors, who had secured attachments
upon the bankrupt's property within four months prior to the fil-
ing of the petition, were to be counted in the number of creditors.
It was held in re Scrafford (Fed. Cas. 12,556; 15 N. B. R. 104;
s. c. reversing the same case, Fed. Cas. 12,557; J4 N. B. R. 184),
that they could not be so reckoned; the contrary was held in re
Broich (15 N. B. R. 11). In both of these cases the attaching
creditors appeared in opposition to the petition and claimed the
right to oppose the adjudication, even without a surrender of
their liens. We consider the rule laid down in re Scrafford as
more just. A creditor who has secured an attachment or other
lien pursuant to legal proceedings is substantially a preferred cred-
itor, if the proceedings were instituted within four months before
the petition. It is true, such liens are made void by the adjudica-
tion of bankruptcy per se (section 67 [c] ) ; but until that time, at
least, they have all the elements of preferential transfers. Until
there is a surrender of the property attached or subjected to the
lien, the attaching creditor would probably not be allowed to prove
his claim in bankruptcy. Until he could prove it, he would not be
a " creditor," as that word is used in the Bankruptcy Act. (Com-
pare section 1 [9].)
But under the present act Referee Eastman of the Northern
District of Illinois, whose report in this respect has been approved
by the district judge, without opinion has held, In re Cain, 2
Am. B. R. 378, that preferential payments made within four
months of bankruptcy in violation of the Bankruptcy Act are to
be counted in determining the amount of the debts of the bank-
rupt. The part of the opinion which passes on the law is here-
with quoted.
" The point is made by the attorneys for the alleged bankrupt, that the
statute implies the present debts, in speaking of the amount of indebtedness
necessary to give jurisdiction in involuntary cases. It uses the word ' owing '
debts to the amount of one thousand dollars, and, therefore, it is claimed that
it means only those debts which exist at the time of the filing of the petition,
irrespective of what creditors the debtor may have paid off in violation of the
Bankruptcy Act, are to be counted.
334 THE NATIONAL BANKRUPTCY LAW.
Attaching Creditors. [Ch. VI.
Under the Bankruptcy Law of 1867, it was an important matter to determine
the number and amount of the creditors, and contest arose as to whether
creditors, who had commenced attachment proceedings, or who had received
preferences by transfer or otherwise, should be counted in estimating the
number of creditors, as in some instances bankruptcy proceedings would have
been defeated if such parties were to be excluded.
In re Scrafford, 15 N. B. R. 104; 21 Fed Cas. 866, Judge Dillon held that
where it was denied by the bankrupt that the petitioners constituted the re-
quisite one-fourth in number and one-third in amount, and in support of that
contention counted creditors who had levied attachments on the debtor's
property within four months, it being contended by the petitioning creditors
that all those who held such attachment should be excluded from the court,
made use of the following language:
' One object of the Bankruptcy Law is to secure an equal distribution of the
estate of the bankrupt amongst all of his unsecured creditors, and in order the
more effectually to accomplish this, creditors who have obtained preferences
are excluded from participation in the proceedings until after the election of
an assignee. I can see no reason why attaching creditors should not be
governed by the same rules which apply to other creditors, whose debts are
secured by preferences which the adjudication will defeat. Indeed, as all at-
tachments levied within four months between the filing of the petition in bank-
ruptcy would be dissolved, ipso facto, by an assignment under the bankruptcy
proceedings, persons holding liens by such attachments would seem to have
a peculiar interest in defeating an adjudication, and for this reason should not
be reckoned, for the purpose of those proceedings, as creditors of the alleged
bankrupt. Of course they could not be counted if the attachments were
sued out with a view of obtaining a preference over other creditors ; and as, in
most cases, a ground of attachment is also an act of bankruptcy, the pre-
sumption would be strong that such was the object of an attaching creditor.
A person with a knowledge that his debtor has committed an act of bankruptcy,
should not be permitted by attachment to hold a preference over the credit-
ors. I do not think that creditors, any more than the debtor, should be per-
mitted thus to defeat the object of the Bankruptcy Law. A secured creditor
cannot vote for assignee, nor can he have his debtor adjudged a bankrupt. If
he cannot be counted in favor of the proceedings to put the debtor into bank-
ruptcy because he is secured, there is no principle upon which he could be
counted against them.'
The reasoning of that case, if applied to the matter in hand would seem to
suggest the converse, viz. : that in ascertaining the number of creditors which
the bankrupt was owing at the time of the filing of the petition, the one who
has secured a preference which it is assumed is voidable, would be counted.
Otherwise, as suggested in the case cited, the object of the law in providing
for an equal distribution of the estate of the bankrupt amongst all his creditors
would be defeated. I do not think that the voidable transaction should be
treated as valid whereby the bankrupt could prevent the adjudication."
CREDITORS. 335
§ 59.] Secured Creditors — Exclusion of Employes — Dismissal of Petition.
Secured Creditors. — By the express provision of the statute, se-
cured creditors may now be petitioners; but only the excess of
their claim over the value of the securities held by them is con-
sidered as the debt due to them.
Exclusion of Employes. Section 59c — The statute provides that
the claims of employes and of relatives within the third degree
shall be excluded in computing the number of creditors. Under an
analogous provision in the former act excluding creditors holding
claims amounting to less than two hundred and fifty dollars, it
was held by nearly all the courts that there was nothing in the
language of the act excluding such persons from being counted
in computations as to the amount of the bankrupt's debts. But
under the present act the amount of the claims of creditors, other
than the petitioners, is entirely immaterial. Only the number is
considered ; and even that is not material, if there are three peti-
tioners with claims aggregating five hundred dollars. It will be
noted that by the terms of the present statute such persons are ex-
cluded only in case they have not joined in the petition. The
manifest purpose of the statute is to prevent an insolvent debtor
from stopping an adjudication against himself by the creation of
a number of small debts to persons related to or dependent upon
him. As to the determination of degrees of relationship by the
rule of the common law, compare notes to section 35.
Dismissal of Petition. Section $gg. — This subdivision as to the
notice to the creditors is mandatory and the notice to be given is
the notice provided in section 58. See Neustadter v. Chicago
Drygoods Co. (3 Am. B. R. 96; 96 Fed. 830), which holds that
the provisions of law contained in section 58 (8) and in section
59g mean dismissals which in effect withdraw the case without the
decision of the court as to its merits and do not require notice to
the creditors who have not appeared at trials or hearings in in-
voluntary cases. But even where a majority of the petitioning
creditors consent to the dismissal of the petition for involuntary
bankruptcy the remaining minority have the right to insist upon
336 THE NATIONAL BANKRUPTCY LAW.
Dismissal of Petition — Estoppel of Creditors to Petition. [Ch. VI.
an adjudication if an act of bankruptcy has been committed. The
leading case on this subject under the present act is In re Cronin
(3 Am. B. R. 552; 98 Fed. 584). The following is from the
opinion of Lowell, J., in that case:
" If a respondent has committed an act of bankruptcy, and the statutory num-
ber of his creditors has duly petitioned for his adjudication as a bankrupt, the
court must make the adjudication, even though it is satisfied that a compromise
offered by the respondent would be for the best interest of the creditors.
Bankruptcy is not a remedy like an injunction or the appointment of a receiver,
granted in the discretion of a court of equity. The distribution of a debtor's
assets is to be made in bankruptcy if he has committed an act of bankruptcy,
and the other statutory requisites have been complied with. Fraud, oppres-
sion, or even mistake may, in some cases, be sufficient grounds for dismissal
of the petition ; but none of these grounds exist here. Lowell, Bankr. p. 39 ;
King v. Henderson (1898), App. Cas. 720. Is the condition altered by the
fact that the majority of the petitioners have come to desire a dismissal of the
petition, which dismissal is resisted by the minority? Will the assent of a
majority of the petitioners enable the court to act for the interest of the
creditors by dismissing the petition, or has the minority the right to insist upon
an adjudication, if an act of bankruptcy has been committed? I think that in
this case the right of the minority is absolute. After petitioners have joined
a petition, they cannot ordinarily withdraw against the wishes of their fellow
petitioners. Lowell, Bankr. p. 34; In re Heffron. 10 N. B. R. 213, Fed. Cas.
6321 ; In re Sargent, 13 N. B. R. 144, Fed. Cas. 12361. In re Indianapolis,
C. & L. R. Co. 5 Biss. 287, Fed. Cas. 7023, the court did, indeed, dismiss an
involuntary petition, against the objection of two creditors, but only after pay-
ment in full had been secured to the objectors; and Judge Drummond said:
' I think that the Bankrupt Court, as a court of equity, has a full, equitable
discretion upon this subject, and can allow a case to be withdrawn from it,
provided it is done without prejudice to the interests of any of the parties,
debtors or creditors, who are before it. And in this case I think it was compe-
tent for the Bankrupt Court to allow the case to be withdrawn from it. pro-
tecting the interests of the different non-assenting creditors.' "
Estoppel of Creditors to Petition. — Even creditors holding prov-
able claims may not always be petitioners in bankruptcy. Like
parties to legal proceedings in general, they are subject to the prin-
ciples and doctrines of estoppel. Applying these principles, it has
been generally held that a creditor who has given his consent to
an act is estopped from thereafter urging it as an act of bank-
ruptcy. (In re Israel, Fed. Cas. 7,111; 12 N. B. R. 204; s. c.
3 Dill. 511; in re Schuvler, Fed. Cas. 12,494; 2 N. B. R. 549;
s. c. 3 Ben. 200; in re Currier, Fed. Cas. 3,492; 13 N. B. R. 68;
CREDITORS. 337
§ 59.] Estoppel of Creditors to Petition.
s. c. 2 Lowell, 436; Perry v. Langley, Fed. Cas. 11,006; 1 N.
B. R. 559; s. c. 7 A. L. Reg. 429; Everett v. Derby, 5 Law Rep.
225.) In general, a creditor who assents to a preferential trans-
fer to himself, or who accepts the benefits of a general assignment
for the benefit of creditors, is estopped from alleging it as an act of
bankruptcy. (In re E. G. Williams, Fed. Cas. 17,703; 14 N.
B. R. 132.) But the mere receiving of a preference, not being in
itself a fraud, and not heing even voidable at the time, and never
voidable unless the petition in bankruptcy is filed within four
months thereafter, does not estop one from filing a petition if he
surrenders his preference. (In re Hunt & Hornell, Fed. Cas.
6,882; 5 N. B. R. 433; in re Rado, Fed. Cas. 6,230; 6 Ben.
230.) In re Sheehan (Fed. Cas. 12,737; 8 N. B. R. 345), it was
held that the levy by a creditor of an execution on property of
his debtor does not estop him from petitioning to have his debtor
adjudged a bankrupt ; but the filing of the petition in bankruptcy
will be held to be a waiver of the levy and an election by the cred-
itor to proceed in the bankruptcy court. In Coxe v. Hale, de-
cided by the United States Circuit Court for the Northern District
of New York (Fed. Cas. 3,310; 10 Blatch. 56; s. c. 8 N. B. R.
562), it was held that a creditor knowing his debtor to be insolv-
ent might prosecute his debtor to judgment, issue execution, and
levy on the property of his debtor, and afterwards have the debtor
adjudicated bankrupt for allowing his property to be taken on the
execution. The court in this case based its decision upon the
fact that there was no evidence of an intent on the part of the judg-
ment creditor to secure a preference; and held that one was not
estopped from proceeding to put his debtor into bankruptcy by
taking a transfer, unless he took it with an intention to secure a
preference.
But under the present act a creditor receiving such a preference,
even innocently, may have to surrender it before petitioning.
(See discussion under section 57g.)
Under the present act it has been held that where a bankrupt
made an assignment and various creditors filed their claims therein
but no other proceedings were taken with reference thereto and
(43)
338 THE NATIONAL BANKRUPTCY LAW.
Estoppel of Creditors to Petition — Preferred Creditors. [Ch. VI.
no dividends received, such creditors were not estopped from
thereafter filing an involuntary petition in bankruptcy against
their debtor. (See Curtis, 2 Am. B. R. 226; 36 C. C. A. 430; 94
Fed. 630. ) This case which was decided by the Circuit Court of
Appeals of the 7th Circuit contains a valuable discussion of the
doctrine of estoppel. (See also decision of the Circuit Court of
Appeals for the 6th Circuit in Simonson v. Sinsheimer, 3 Am. B.
R. 824; 100 Fed. 426.) And even where in a general assign-
ment under a State law creditors appear in a State court and at-
tack the alleged preferences under such assignment, they are not
thereby precluded from attacking such preferences against the as-
signor in the bankruptcy court. The bankruptcy proceedings and
the assignment are not similar suits on the same cause of action.
(See decision of the Circuit Court of Appeals for the 6th Circuit,
Leidigh Carriage Co. v. Stengle, 2 Am. B. R. 383; 37 C. C. A.
210; 95 Fed. 637.) In order that a creditor may be estopped by
any act- of his from impeaching the validity of an assignment it
must appear that he has accepted an actual benefit under it or that
he has assumed such an attitude as would be inconsistent with his
attacking it, as where he has recognized it for the purpose of gain-
ing some advantage. In such cases he may not assert its validity
whether he did or did not receive, in fact, the benefit supposed.
(See Groves v. Rice, 148 N. Y. 22"j; Haydock v. Coope, 53 id.
68.)
Sec. 60. Preferred Creditors.— a A person shall be deemed to
have given a preference if, being insolvent, he has procured or
suffered a judgment to be entered against himself in favor of any
person, or made a transfer of any of his property, and the effect
of the enforcement of such judgment or transfer 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.
& If a bankrupt shall have given a preference within four
months before the filing of a petition, or after the filing of the
petition and before the adjudication, and the person receiving it,
or to be benefited thereby, or his agent acting therein, shall have
had reasonable cause to believe that it was intended thereby to
CREDITORS. 33
§ 60.] What are Preferences ? — Suffering Judgments.
give a preference, it shall be voidable by the trustee, and he ma;
recover the property or its value from such person.
c If a creditor has been preferred, and afterwards in good fait]
gives the debtor further credit without security of any kind fo
property which becomes a part of the debtor's estates, the amoun
of such new credit remaining unpaid at the time of the adjudica
tion in bankruptcy may be set off against the amount which wouL
otherwise be recoverable from him.
d If a debtor shall, directly or indirectly, in contemplation o
the filing of a petition by or against him, pay money or transfe
property to an attorney and counselor at law, solicitor in equitj
or proctor in admiralty for services to be rendered, the transac
tion shall be re-examined by the court on petition of the truste
or any creditor and shall only be held valid to the extent of
reasonable amount to be determined by the court, and the exces
may be recovered by the trustee for the benefit of the estate.
Analogous Provisions of Former Acts. —
As to voidable preferences: R. S. section 5128; act of 1867, section 35
act of 1841, section 2; act of 1800, section 28; also, R. S. section 5129. As t
transfers out of the ordinary course of business being presumptively fraudi
lent: R. S. section 513°; act of 1867, section 35.
Construction of Section 60, Subdivisions a and b — What are pref e:
enoes? — Most of the preferences arising under this section fa
under these two subdivisions. It will be seen by collating th
subdivisions that the preferences may consist ( 1 ) in the bankrup
suffering judgment to be entered against him, or (2) in making
transfer of his property, with certain other characterizing circum
stances to be discussed post.
Suffering Judgments. — The question as to what constitutes th
" suffering " of a judgment has already been examined unde
section 3a (3), sub nom. Suffering or Permitting Prefei
ences Through Legal Proceedings. In the comments on tha
section we have seen that in the case of a preference obtained b
legal proceedings the debtor's intent is immaterial and it is enoug
that the creditor has received a preference by such proceeding an
the debtor has permitted it to remain undischarged. It is nc
34o THE NATIONAL BANKRUPTCY LAW.
Suffering Judgments. [Cb- VI_
necessary as it was under the act of 1867, that the debtor should
do any affirmative act. If he remains passive and allows his
property to be taken by one creditor at the expense of another he
has suffered a preference. It is true that the words used in sec-
tion 3a (3) are " suffered or permitted," while the words used in
section 60 are " procured or suffered." But as there is no dis-
tinguishable difference between the word " suffered " and the
word " permit " except that perhaps that " suffered " implies a
greater degree of passivity, and as the words " procured or suf-
fered " are used in the disjunctive, there seems to be no reason
for holding that there is any difference between the application of
section 3a (3) and section 60 as to the effect of a judgment as an
act of bankruptcy or as a preference. In respect to both judg-
ments and transfers, intent on the part of the bankrupt is not
made an essential element of a preference by section 60, although
it is necessary in a transfer claimed to be an act of bankruptcy
under section 3a (2).
The cases decided under the act of 1867 are not applicable be-
cause section 35 of that act relating to preferences and fraudulent
conveyances declares " that if any person, being insolvent, or in
contemplation of insolvency, within four months before the filing
of the petition by or against him, zvith a view to give, a preference
to any creditor or person having a claim against him, * * * pro-
cures any part of his property to be attached, * * * the person
receiving such payment * * * having reasonable cause to believe
such person is insolvent," the preference is void.
The word " suffer " is not used in section 35 of the act of 1867.
(See discussion of this question in the case of In re Thomas, 103
Fed. 272; 4 Am. B. R. 571.)
The present law seems to judge a preference by its effect. 'If a
transfer of the bankrupt's property is made by him, or if he pro-
cures, or suffers a judgment against himself, and if 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, then the trans-
ferrer is deemed to have given preference.
CREDITORS. 3
§ 60.] The Elements of a Preferential Transfer,
The Elements of a Preferential Transfer. — There are many diffi
ences between the language of the present act and the former a(
as to what are to be deemed preferences. The provisions of t
section under consideration make insolvency an essential elemei
Contemplation of insolvency or contemplation of bankruptcy
not sufficient as under the former acts. The present statute,
declaring (section 1 [15]) that insolvency means the state of o
whose property is not sufficient in amount at a fair valuation
pay his debts, gives to the word a meaning different from that ge
erally given to it by judicial definition in cases decided under t
former act, where it was held to mean inability to pay debts in t
ordinary course of business as they matured. Consequently t
cases under that statute, deciding what acts are evidence of ;
intent to give a preference, have only a modified applicability,
is apparent that an act done by one whose property is in reali
insufficient in amount at a fair valuation to pay his just debts, m
manifest a different intent from the same act done by one wl
cannot pay his bills as they mature. A person in the latter co
dition may make a transfer fully believing, and perhaps justified
the belief, that his property, when turned into money, will ever
ually pay all his debts. Under the former act many a person w
an insolvent as the word was then defined by the courts, wl
would not be under the definition fixed by the present statute ; ai
the reverse is equally true.
Moreover there is a marked difference between the arrangeme
of the act of 1867 and that of the present act. Under the act
1867 many of the provisions contained in section 67c, of the pn
ent act, relating to fraudulent transfers, were consolidated wi
the provisions now contained in section 60 of the existing a<
Some confusion has arisen because of the failure to distingui
between the provisions of section 60 of the present act and sectic
67, the first relating to preferences which are not necessarily voi
able at common law or contrary to any rule of ethics, and tl
second relating to transfers which are as a rule voidable at cor
mon law irrespective of the Bankruptcy Statute.
Under the act of 1867, sec. 35, it was provided that,
342 THE NATIONAL BANKRUPTCY LAW.
The Elements of a Preferential Transfer. [Ch. VI.
" 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 his property to any person who then has reasonable cause to believe him
to be insolvent or to be acting in contemplation of insolvency, and that such
payment, sale, assignment, transfer or other conveyance is made with a view
to prevent his property coming to his assignee in bankruptcy or to prevent
the same from being distributed under this act or to defeat the object of,
or in any way impair, hinder or delay the operation and effect of or evade
any provision of this act, the sale, assignment, transfer or conveyance shall
be void, and if any such sale, assignment, transfer or conveyance is not made
in the usual or ordinary course of business of the debtor, the facts shall be
prima facie evidence of fraud."
The present act divides these provisions into several classes.
The first class is provided for in sec. 60, which in substance pro-
vides that where a bankrupt shall have given preferences within
four months before the filing of the petition or after the filing of
the petition and before the adjudication, and the person receiving
it or to be benefited thereby shall have had reasonable cause to
believe that it was intended to be a preference, it is voidable by
the trustee. It will be noticed that under this provision the ques-
tion of intent is not important. The only two elements which are
necessary are that the transferrer should be insolvent and the
transferee should have reasonable cause to believe it to be intended
as a preference. It must be further kept in mind that as to all per-
sons but' the trustee, such transfers are valid.
Another class is the class referred to in section 67c, in which the
transfer or incumbrance which has been made with the intent
to hinder, delay or defraud his creditors or any of them. Such
transfers are void as to creditors if made within the prescribed
time, except as to purchasers in good faith and for a present fair
consideration.
Keeping these distinctions in mind it will be seen that a trans-
fer cannot be invalidated under section 60 unless all the following
elements concur.
First, there must have been a transfer made while the trans-
ferrer was insolvent, the effect of which was to enable one creditor
to obtain a greater percentage of his debt than other creditors of
CREDITORS.
§ 60.] Reasonable Cause.
the same class. Secondly, the transferee must have had at tl
time of the transfer, reasonable cause to believe that the tram
ferrer intended thereby to give a preference. This would invoh
that the transferee had reasonable cause to believe, (a) that at tl
time of the transfer the transferrer was insolvent; and (b) th«
the transferrer intended to create a preference. Third, the tram
fer must have been made within four months before the filing c
the petition in bankruptcy. The insolvency must exist at th
time of the transfer, so must the reasonable cause to believe ths
a preference was intended. Subsequent grounds for reasonabl
cause are not sufficient. (In re Eggert, 3 Am. B. R. 541 ; 98 Fee
843 ; Crooks v. Bank, 3 Am. B. R. 242 ; 46 N. Y. App. Div. 33c
in re Conhaim, 3 Am. B. R. 249 ; 97 Fed. 923 ; see also referee
opinion in re Jacobs, 1 Am. B. R. 518, with note.)
Reasonable Cause. — The present statute does not make any pre:
erences voidable unless the transferee had reasonable cause at th
time of the transfer to believe that a preference was intended. ]
is to be noted that the reasonable cause is cause to believe, not thj
the transferrer is insolvent, but cause to believe that a preferenc
was intended. This would, however, seem to require reasonab
cause to believe that insolvency existed, and also reasonable caus
to believe there was a preferential intent. The former act 1
amended(R. S. §§ 5 128, 5 129), required that the transferee shoul
have reasonable cause to believe the transferrer insolvent, and the
he should also know that the transfer was made as a preference c
to defeat the object of the act. Now no positive knowledge c
any fact is required, but simply a reasonable cause to believe th;
a preference was intended.
The expression " reasonable cause " is one difficult to explaii
It is a question of degree rather than of quality; it admits mor
easily of determination by comparison than of exact defmitior
One may be said to have reasonable cause to believe a fact whe
he has such knowledge as would induce belief of the facts, in th
mind of a man of ordinary intelligence and capacity.
The question for determination, if an action is brought to in
344 THE NATIONAL BANKRUPTCY LAW.
Reasonable Cause. [Ch. VI.
validate the transfer is not whether the transferee had actual
knowledge or even actual belief of the intent to give a preference,
but whether the transferee as a business man, acting with ordinary-
prudence, sagacity and discretion, had reasonable cause to believe
that the debtor was insolvent, and that by the transfer he intended
to give an advantage to one creditor over the others. (Rice v.
Melendy, 41 Iowa, 399; Toof v. Martin, 13 Wall. 40; Wager v.
Hall, 16 Wall. 584; Buchanan v. Smith, 16 Wall. 2yj; Hill v.
Simpson, 7 Ves. 170.)
Whether or not there was reasonable cause to believe that a
preference was intended, may be inferred from all the facts and
circumstances of the case, but their determination must be some-
thing more than a guess, and the transferee must have had more
than reasonable cause to suspect. (Forbes v. Howe, 102 Mass.
427.) In the case of Wager v. Hall {supra), it was said :
" All experience shows that positive proof of fraudulent acts between debtor
and creditor is not generally to be expected, and it is for that reason, among
others, that the law allows in such controversies a resort to circumstances as
the means of ascertaining the truth ; and the rule of evidence is well settled that
circumstances altogether inconclusive, if separately considered, may by their
number and joint operation, especially when corroborated by moral coin-
cidences, be sufficient to constitute conclusive proof."
The case of In re Eggert (3 Am. B. R. 541 ; 98 Fed. 843), aris-
ing under the present act, contains a discussion of this subject ; the
opinion of Seaman, D. J., is as follows :
" The findings of fact certified in this matter are conclusive against the con-
tention of a preference received by the creditor within the definitions of the
statute. The transaction, as so found, was substantially this: The bankrupt
was indebted to Rundle-Spence Manufacturing Company in the sum of
$i>373-04 for supplies sold between April 28 and June 5, iSoxjj on credit, and on
July 1st the account was adjusted by giving the bankrupt ' a discount of ten
per cent, which is the usual discount for cash in that line of business,' and
' pursuant to the contract under which the goods were purchased,' and by the
acceptance of an order on the city of Milwaukee for $1,241.10, due or to become
due from said city on a contract with the bankrupt. The creditor 'had no
knowledge of the fact that the said ' bankrupt ' was insolvent and had no rea-
sonable cause to believe that it was intended by the transfer to give it a prefer-
ence.' The transaction thus stated is not prohibited by the act ; and the further
findings of knowledge that the bankrupt ' was behind in his payments with his
CREDITORS. 345
§ 60.] Transfers Out of the Ordinary Course of Business.
creditors,' and that no inquiries were made by the creditor to ascertain his
solvency, do not affect the liability, when followed by the finding that the
creditor ' practiced no fraud or deceit, nor did it act in collusion with the
bankrupt.' To constitute a voidable preference, as defined in sections 60a, 60b,
the creditor must have reasonable cause to believe the debtor to be insolvent
in fact, as the foundation for reasonable cause to believe that an unlawful
preference is intended; and on that inquiry the test of insolvency under the
present act differs so materially from that established under the Act of 1867
that decisions under the earlier act are not applicable. As now defined (section
1, cl. 15). a person is to be deemed insolvent when the aggregate of his present
property ' shall not, at a fair valuation, be sufficient in amount to pay his
debts,' while insolvency was found to exist under the Act of 1867 when one
' was unable to pay his debts as they became due in the ordinary course of his
daily transactions' (Buchanan v. Smith, 16 Wall. 277, 308, 21 L. Ed. 280),
and the state of facts which would constitute notice must differ accordingly.
Even under that act, however, mere grounds of suspicion were not sufficient
notice, but the creditor must have a knowledge of facts calculated to produce
a belief of insolvency in the mind of an ordinarily intelligent man. Grant v.
Bank, 97 U. S. 80, 82, 24 L. Ed. 971. Both findings and testimony in this case
disclose a fair business transaction, without taint or suspicion of fraudulent
preference, and the conclusions of the referee in favor of the claimant are
approved."
And in affirming this case the Circuit Court of Appeals for the
7th Circuit (4 Am. B. R. 449; 102 Fed. 735) reviews the au-
thorities very exhaustively and comes to the following conclusion
per Jenkins, J. :
" The resultant of all these decisions we take to be this : That the creditor
is not to be charged with knowledge of his debtor's financial condition from
mere nonpayment of his debt, or from circumstances, which give rise to mere
suspicion in his mind of possible insolvency; that it is not essential that the
creditor should have actual knowledge of, or belief in, his debtor's insolvency,
but that he should have reasonable cause to believe his debtor to be insolvent ;
that if facts and circumstances with respect to the debtor's financial condition
are brought home to him, such as would put an ordinarily prudent man upon
inquiry, the creditor is chargeable with knowledge of the facts which such
inquiry should reasonably be expected to disclose."
Transfers Out of the Ordinary Course of Business.— By the former
bankruptcy act (§ 35 of act of 1867; § 5130, R. S.), the fact that
a transfer was not made in the usual and ordinary course of busi-
ness of the debtor, was made prima facie evidence of the fraud.
The present statute contains no such provision, but it has been
(44)
346 THE NATIONAL BANKRUPTCY LAW.
Reasonable Cause Must Have Existed at Time of Transfer. [Ch. VI.
said by very eminent authority : " Independent of the express pro-
visions of the Bankrupt Act, the general rule of law is that the
transfer or delivery of property will be considered fraudulent
when it is not delivered in the usual course of trade or of the ac-
customed dealings between the parties." (Rison v. Kriapp, 4 N.
B. R. 349; s. c. 1 Dill. 186; Fed. Cas. No. 11,861; citing Dea-
con on Bankruptcy.)
It was held by the United States Supreme Court (Walbrun v.
Babbitt, 16 Wall. 577; s. c. 9 N. B. R. 1) : " The presumption
of fraud arising from the unusual nature of the transaction can
only be overcome by proof on the part of the buyer that he took
the proper steps to find out the pecuniary condition of the seller.
All reasonable means pursued in good faith must be used for this
purpose." And this would be equally applicable under the pres-
ent law whenever there was a presumption arising from the nature
of the transaction, that the transferee had reasonable cause to
believe a preference was intended. The degree of diligence re-
quired on the part of the transferee in making the inquiry de-
pends upon the circumstances of the transaction; the more sus-
picious they are, the more diligent in his inquiries must the trans-
feree be. (Schulenberg v. Kabwreck, Fed. Cas. 12,487; 2 Dill.
132.) This decision is, in fact, nothing more than an application
of the rule above stated that where one has notice of facts tending
to show fraud, he is chargeable with all knowledge which he
might have obtained by reasonable inquiry, and such reasonable
inquiry is that which an ordinary man would make under the cir-
cumstances.
Reasonable Cause Must Have Existed at the Time of the Transfer.
—The transfer is voidable only if the transferee had at the time of
the transfer reasonable cause to believe that a preference was in-
tended. It is absolutely necessary that this reasonable cause of
belief must have existed at the time of the transfer. Unless there
is then reasonable cause to believe that it is made with intent to
prefer, no matter what may subsequently develop, the transfer
cannot be avoided. Compare the following cases, bearing in mind
CREDITOR^. 347
§ 60.] Reasonable Cause Must Have Existed at Time of Transfer.
that at the time they were decided, other facts than those now
essential to the invalidating of a preference would make it void-
able, and that, therefore, the cases are cited only as authorities for
the statement that the reasonable cause to believe a preference was
intended must be simultaneous with the transfer, in order to in-
validate it: Dow v. Sargent (15 N. H. 115); Toof v. Martin
(13 Wall. 40) ; Clark z>. Iselin (21 Wall. 360).
In an action to invalidate the transfer, evidence is not even
competent and admissible unless it tends to show that this cause
for relief existed simultaneously with the transfer. And if the
complaint or declaration does not contain a specific allegation that
the reasonable cause existed at the time of the transfer, it is de-
murrable, or judgment may be asked for on the pleadings. (In re
J. D. Hunt, Fed. Cas. 6,881 ; 2 N. B. R. 539; Crump v. Chap-
man, Fed. Cas. 3,455; 15 N. B. R. 571.) But evidence of the
debtor's financial condition and reputation within a limited period
previous to the transfer is competent as tending to show what
means the creditor had .to know, or what cause to believe that the
debtor was insolvent. (Forbes v. Howe, 102 Mass. 427.) But
it ought to be shown that such reputation was general, or else that
it was brought actually or constructively to the notice of the trans-
feree. In accordance with the rule above set forth, that the rea-
sonable cause to believe that the transfer was made with prefer-
ential intent must exist at the time of the transfer, it has been held
that where one gave to his creditor notes of a third party, which
by the law as laid down by the courts of New York and most of
the other States, and also by the Federal courts, are only a condi-
tional payment — that is, a payment if the same shall be collected
(unless the transfer has been made expressly as a payment), yet
even in cases of such conditional payment to render them voidable
the reasonable cause to believe that they were given with intent
to prefer must exist at the time the notes were accepted, not at the
time they were payable. (In re Ouimette, 3 N. B. R. 566; s. c.
Fed. Cas. 10,622; 1 Saw. 47.)
And in the case of Sabin v. Camp (3 Am. B. R. 578; 98 Fed.
974), arising under the present act, the defendant vendor took
348 THE NATIONAL BANKRUPTCY LAW.
Knowledge of Agent — Sub-agents and Collection Agencies. [Ch. VI.
property theretofore sold by him to the bankrupt under a clause of
defeasance in the contract of sale in the form of an option to re-
purchase, made more than four months prior to bankruptcy,
though the taking of the property was within the four months.
This was held not to be an unlawful preference. Judge Bellin-
ger says :
" The transfer by the Colby Company (the bankrupt) to Camp was not a
preference under the Bankruptcy Act. It is true, the transaction was consum-
mated within the four months, but it originated in October, 1897. What was
done was in pursuance of the pre-existing contract, to which no objection is
made. Camp furnished the money out of which the property which is the
subject of the sale to him was created. He had good right, in equity and in
law, to make provisions for the security of the money so advanced, and the
property purchased by his money is a legitimate security and one frequently
employed. There is always a strong equity in favor of a lien by one who
advances money upon the property which is the product of the money so ad-
vanced. This was what the parties intended at the time, and to this, as al-
ready stated, there is, and can be, no objection in law or in morals. And so
when, at a later date, but still prior to the filing of the petition in bankruptcy,
Camp exercised his rights under this valid and equitable arrangement to
possess himself of the property and make sale of it in pursuance of his contract,
he was not guilty of securing a preference under the bankruptcy law. It is not
pretended that the sale was for an inadequate price, or that there was any
fraud, or that the interests of the creditors have been in any way injuriously
affected, any further than it may be to the interests of the creditors to secure
to their own benefit the property purchased with Camp's money."
Knowledge of the Agent. — The statute makes preferences void-
able if the agent of the transferee had reasonable cause to believe a
preference was intended. Independently of any statute, the prin-
cipal would be chargeable with all the knowledge that his agent
had at the time of the transaction, which the latter might properly
communicate to him. (Rogers v. Palmer, 102 U. S. 263; Sage
v. Wynkoop, 104 U. S. 319; Bank of U. S. v. Davis, 2 Hill [N.
Y.] 451; Ingalls v. Morgan, 10 N. Y. 178; Fulton Bank v. N.
Y. & S. C. Co. 4 Paige, 127; Griswold v. Haven, 25 N. Y. 595;
North River Bank v. Aymar, 3 Hill, 262; David v. Bemis, 4
N. Y. 453-)
Sub-agents and Collection Agencies. — Where an agent has power
to employ a sub-agent, the latter's knowledge is deemed to be the
CREDITORS. 349
§ 60.] Sub-agents and Collection Agencies.
knowledge of the original principal. (Story on Agency, §§ 452,
454; Storrs v. City of Utica, 17 N. Y. 104; Boyd v. Vander-
kamp, 1 Barb. Ch. 273; Rourke v. Story, 4 E. D. Smith, 54; Lin-
coln v. Batelle, 6 Wend. 475.) But because of the legal principle
that, although the acts of a sub-agent have the same effect as if
done by the principal, the acts of the agent of an intermediate in-
dependent employer do not bind the original employer, it was
held by the Court of Appeals of New York and by the Supreme
Court of the United States, that where one gave a claim to a col-
lection agency for collection, and the latter employed attorneys to
collect the claim, and the attorneys with full knowledge of the
debtor's insolvency induced him to make a preferential transfer
by confessing a judgment in favor of the creditors (not in favor
of the collection agency), the creditor was not chargeable with the
knowledge of the debtor's insolvency which the attorneys had,
the creditor never having received the proceeds of the judgment.
It was further held that the attorneys were agents of the collec-
tion agency, and that the agency was not an agent of the cred-
itor, but an independent contractor. (Hoover v. Wise, 91 U. S.
308, citing, as to the relations of commercial agencies to creditors,
whose claims they take for collection : Reeves v. State Bank of
Ohio, 80 Ohio St. 465 ; Mackersy v. Ramsay, 9 Clark & Fin. 818^
Montgomery Co. Bank v. The Albany City Bank, 7 N. Y. 459;
Com. Bank of Penn. v. Union Bank, 1 1 N. Y. 203 ; Allen v. Mer-
chant's Bank, 22 Wend. 215; Bradstreet v. Everson, 72 Penn.
124; Lewis v. Peck, 10 Ala. 142; Cobb v. Becke, 6 Ad. & Ellis,
N. S. 930. As has been said in the case above discussed (Hoover
v. Wise) the proceeds of the judgment had not been paid over to
the creditors. Whether any moneys had, in fact, been collected
does not appear, but the court decided the case on the ground that
the collection agency was a debtor to the creditor, and added that
whether a different conclusion would be reached if the money had
come to the hands of the creditors was a question they were not
called on to consider. It is interesting to note that this decision was.
rendered by a divided court, three of the justices dissenting from
the opinion of the court, and in their dissenting opinion clearly
3 so THE NATIONAL BANKRUPTCY LAW.
Knowledge of an Attorney of Creditor. [Ch. VI.
setting forth the dangers which would result from the rule laid
down by the majority. It appears that the attorneys appeared as
attorneys of record for the creditors; that the collection agency
had no interest in the notes collected; that the notes were indorsed
over to it ; that it did not appear as a party to the action in which
the judgment was confessed, and had no control over the proceed-
ings of the attorneys, but that the creditors had full power to con-
trol the action. That in the face of all these facts the majority of
the court should hold that the creditors were not chargeable with
knowledge of the acts of the attorneys, is of the greatest impor-
tance. As was said in the dissenting opinion : " The effect of the
decision is that a non-resident creditor, by sending his claim to a
lawyer through some indirect agency, may secure all the advan-
tages of priority and preference which the attorney can obtain
from the debtor, well knowing his insolvency,, without any re-
sponsibility under the bankrupt law. Very few creditors, when
this becomes well known, will fail to act on this politic sugges-
tion." The case was reported below in 61 N. Y. 305; sub nom.
Hoover v. Greenbaum.
Knowledge of an Attorney of the Creditor Derived as Attorney of
the Debtor. — It is a general rule of law that the knowledge of the
agent to be imputed to the principal must be knowledge acquired
in the transaction of the business of the principal, or else knowl-
edge acquired in a prior transaction then present to his mind,
and which can properly be communicated to his principal. Some
question arises, then, as to when the knowledge of an attorney
of a creditor, acquired when the attorney was the attorney of the
debtor or of another, can be imputed to the creditor. The gen-
eral rule that a principal is bound by the knowledge of his agent,
is based on the principle of law that it is an agent's duty to com-
municate to the principal, the knowledge which he has respecting
the subject-matter of negotiation. When it is not the agent's
duty to communicate, when it would be unlawful for him to do
so, for example, when it has been acquired confidentially as at-
torney for a former client in a prior transaction, the reason of
CREDITORS. 351
§ 60.] Transfers Made Under Coercion.
the rule ceases, and as the agent would not be expected to do
that which would involve a betrayal of his professional confi-
dence, the principal is not bound by the agent's secret and confi-
dential information. (The Distilled Spirits, 11 Wall. 356, [cit-
ing Dresser v. Norwood, 17 Common Bench, N. S. 466; War-
rick v. Warrick, 3 Atkyns, 291 ; Mountford v. Scott, Turner &
Russell, 274; Hart v. Farmers' Bank, 33 Vermont, 252; N. Y.
C. Ins. Co. v. Nat. Prot. Co. 20 Barb. 468 ; in re Ebert, 1 Am. B.
R. 340.]) But if a person retains one with knowledge that he
is retained in the same transaction by another, then he cannot
expect the attorney to treat his information as confidential. If
knowing that the other party has a right to the full and com-
plete services, knowledge, and skill of the attorney, he also re-
tains him and imparts information to him, it must be considered
as done with the understanding that the information imparted
shall be imparted or used for the benefit of the other client also.
" Where the attorney of a creditor is prosecuting a debtor to enforce payment
of a debt, and by reason thereof the debtor discloses to him that he is in-
solvent and asks his advice, although the attorney may possibly find himself in-
volved in some conflict of duty, for he certainly has no right to accept in con-
fidence from the adverse party information which his client ought to know, yet
he cannot by accepting such retainer evade the operation of the rule. In every
step of the prosecution of the claim to collection he is the agent of the creditor ;
the performance of his duty to that creditor involves the gaining of knowl-
edge of the debtor's insolvency, and no proffered confidence put in him by the
adverse party can make that information less his client's property or less in-
formation acquired in his agency and imputable to such client." Woodruff,
J., in Mayer v. Herrman, Fed. Cas. 9,344, 10 Blatch. 256.
Transfers Made Under Coercion.— A preference being determined
by the effect of the transfer, the fact that the transferrer yielded
to coercion is immaterial. (Clarion Bank v. Jones, 21 Wall.
325; Giddings v: Dodd, 1 Dill. 115; Fed. Cas. 5,405; s. c. 4 N.
B. R. 657; in re Batchelder, Fed. Cas. 1098; 1 Low. 373; com-
pare notes to section 3, paragraph on Intent to be Distin-
guished from Motive.
Transfers Not Giving Advantages to the Transferees. — The law
aims to prevent and it invalidates as preferences only those trans-
352 THE NATIONAL BANKRUPTCY LAW.
Transfers Not Giving Advantages to the Transferees. [Ch. VI.
fers the effect of which is to enable one creditor to secure an ad-
vantage over others. By another section (67c), it avoids all
transfers which are made with intent to hinder, delay, or de-
fraud creditors ; but these are invalidated, not as preferences, but
as fraudulent conveyances. If a transfer does not lessen the fund
distributable among creditors, it is not a preference. Sales made
at a fair price (and not as a payment upon an antecedent indebt-
edness) or equal exchanges of property, if made fairly and in good
faith, do not injure creditors, and are not prohibited by the bank-
ruptcy law. So there is nothing in that act which restrains one
from loaning money to an insolvent and from taking his notes in
return, or from taking, in good faith, ample security for the pay-
ment of such notes. Such security is not invalidated by the Bank-
ruptcy Act, if the effect of taking it is not to lessen the fund or tc
diminish the property which would otherwise go to creditors.
The question is very well presented in the case of In re
Wolf, 3 Am. B. R. 555; 98 Fed. 84. That was a case where
some time prior to an application in bankruptcy, the bankrupl
borrowed in May a sum of $200, payable in ninety days fron
date, and subsequently, in July, borrowed from the same persor
the sum of $100 on a note for thirty days, and at the time of th«
execution of the last note gave a chattel mortgage to secure nol
only the $100, but also the $200, and subsequently went intc
bankruptcy.
In passing upon this question Judge Shiras said :
" Viewed as a security given to secure the payment of the pre-existing in-
debtedness evidenced by the note dated May 15th, the holding of the referei
that the mortgage was invalid, because thereby a preference was intended to b(
created in favor of the creditor, is sustained. Viewed, however, as a security
tor the sum of $100, money advanced to the bankrupt at the time of the execu
tion of the mortgage, there is nothing shown in the evidence which requirec
the holding that the security given for this loan is not valid. As the security
was given for a debt then created, it was a present security, and not a prefer
ence which was created by the mortgage; and the case comes within the ruli
announced by Judge Dillon, in Darby v. Institution, 1 Dill. 144 ; Fed. Cas. No
3.571, wherein it is said that:
'An insolvent person may properly make efforts to extricate himself fron
his embarrassments, and therefore he may borrow money, and give at the tim
CREDITORS. 353
§ 60.] Transfers Not Giving Advantages to the Transferees.
security therefor, provided, always, the transaction be free from fraud in fact
and upon the Bankrupt Act. And hence it is a settled principle of bankrupt
law, both in England and in this country, that advances made in good faith to
a debtor to carry on business, upon security taken at the time, do not violate
either the terms or policy of the Bankrupt Act.'
When the mortgage security was taken in this instance, it was shown on the
face of the instrument that it was given in part to secure a pre-existing debt,
and in part to secure a note of even date. The mortgage was duly recorded,
and no other creditor could be misled by the provisions thereof. As between
the bankrupt and the creditor the mortgage was valid, was not tainted with
fraud in fact, and the only objection to be urged against the same is that if
the trustee should pay the note for $200 dated May 15th, it would be giving
a preference to the mortgagee over the other creditors, as that was a debt
created before the giving of the mortgage, whereas the bankrupt had full right
to give security for the present loan of $100. In other words, if the bankrupt
had given on the 22d of July a chattel mortgage on his stock to secure the pre-
existing debt, evidenced by the note dated May 15th, and on the same day had
given a second mortgage to secure the loan of $100 then advanced as a present
consideration, the first mortgage might be non-enforcible against other credit-
ors, under the provisions of the Bankrupt Act, but the second mortgage would
be valid, being given for a present consideration advanced in good faith upon
the faith of the security created by the second mortgage. In equity the rights
of the parties are not affected by the fact that both the past and present debt
are secured by one mortgage instead of two. As already said, there was no
effort to mislead creditors by uniting the past debt with the present loan in one
note, thus apparently making the past debt a present one, but the actual
situation was made plain on the face of the mortgage. There being no actual
fraud in the transaction, no provision of the Bankrupt Act is violated by hold-
ing that Arkin is entitled to the benefit of his security so far as the note for
$100 is involved, and it is so ordered."
(See also Sabin v. Camp, 3 Am. B. R. 578; 98 Fed. 974.)
But in the case of In re Sheridan (3 Am. B. R. 554 ; 98 Fed. 406) ,
where there was an agreement to pledge made more than four
months prior to the petition in bankruptcy, but there was no
pledge of the goods covered thereby until a few days before the
petition was filed. The pledgee's title was pledged only on the
last day and the transaction was in violation of the Act.
The foregoing general principles have been sustained in a
number of cases under the old Act in the U. S. Supreme Court,
which are applicable here. In Clark v. Iselin (21 Wall. 360), it
was held that when a person borrowed money of another and
(45)
354 THE NATIONAL BANKRUPTCY LAW.
Transfers Not Giving Advantages to the Transferees. [Ch. V.
pledged with him as collateral for the loan, a number of bill
receivable, and subsequently took them out for the purpose o
collection and replaced them with other bills receivable, but no
to such an amount as to impair the estate of the debtor, th
transaction not being conducted with any purpose of delayinj
or defrauding the pledger's creditors or giving a preference t
any one, the fact that the pledger was very shortly thereafte
adjudged a bankrupt did not avoid the transaction. In the sam
case it appeared that a creditor had obtained by execution a valii
lien on the debtor's stock of goods, which were in value mucl
greater than the amount of the lien, and it was held that payment
applied on the execution could not be considered preferential, a
each payment released property of equivalent value. In Sawye
v. Turpin (91 U. S. 114), the facts were that a chattel mortgag
was taken by a creditor who knew of the insolvency of the mort
gagor, but who took it in exchange for a prior valid bill of sal
of the same property, executed more than four months prior ti
the filing of the petition. It was held not to be a prefereno
voidable under the Act, since it was merely an exchange of on
security for another of equal value; and this was held to be th
result of the exchange notwithstanding the exchange itself wa
made within the four months prior to the filing of the petition
In Burnhisel v. Firman (22 Wall. 170), it was held that when
a person owed money, principal and interest for some time over
due, but secured by mortgage, and afterwards had an account
ing with the mortgagee and gave in place of the old mortgage ;
new mortgage for the sum found to be due as principal and in
terest, the new mortgage being upon the same property as the oli
mortgage, such a person could not be considered as creating b
this transaction a preference, the old security being a valid am
unimpeachable lien and being surrendered upon the executioi
of the new mortgage.
In Cook v. Tullis (18 Wall. 332; s. c. 9 N. B. R. 433), it ap
peared that a depositary of certain government bonds use
some of them without the permission of the owner, and sut
stituted in their place a bond and mortgage, and the owner of th
CREDITORS. 3SS
§ 60.] Preferences Arise Only in Cases of Antecedent Debts.
bonds, upon hearing of the transaction, ratified it. The court
held that the ratification by one of the unauthorized acts of an-
other operates upon the act ratified precisely as though authority
to do the act had been previously given, except where the rights
of third parties have intervened between the act and the ratifica-
tion; the retroactive efficacy of the ratification is only subject to
this qualification ; that intervening rights of third persons are not
defeated by the ratification, and the court in the following language
reiterated the doctrine that an even exchange of property by an
insolvent debtor is no preference:
" A fair exchange of values may be made at any time, even if one of the
parties to the transaction be insolvent. There is nothing in the bankrupt act
either in its language or object, which prevents an insolvent from dealing with
his property, selling or exchanging it for other property at any time before
proceedings in bankruptcy are taken by or against him, provided such dealing
be conducted without any purpose to defraud, or delay his creditors, or give
preference to any one, and does not impair the value of his estate. An in-
solvent is not bound, in the misfortune of his insolvency, to abandon all deal-
ing with his property; his creditors can only complain if he waste his estate,
or give preference in its disposition to one over another. His dealing will
stand if it leave his estate in as good plight and condition as previously."
It follows from what has been said that a payment to a secured
creditor is not a preference. (Halleck v. Tritch, 17 N. B. R. 293 ;
11 Fed. Cas. 286.) Payment of rent for leased premises is
therefore not usually a preference unless done as a means of
carrying on business in fraud of creditors. (In re Lange, 3 Am.
B. R. 231; 97 Fed. 197.)
Preferences Arise Only in Cases of Antecedent Debts.— As a corol-
lary to the proposition that only transfers which diminish the
estate of the bankrupt are preferences, it may be stated that pref-
erences arise only in the case of antecedent debts. The distinc-
tion between a security and a preference is determined in ac-
cordance with that corollary. Property transferred by a bor-
rower at the time of receiving the loan, and for the purpose of
making the lender safe, is a security. Its validity, if accom-
panied by positive fraud, is recognized and enforced in bank-
ruptcy. But a transfer intended to enable one to secure pay-
356 THE NATIONAL BANKRUPTCY LAW.
Mode of Transfer Immaterial. [Ch.
ment of antecedent debt is a preference, if its effect is to give tr
creditor an advantage over others. If that is not its effect, it
a valid payment. The difference between preferences in pa
ment of antecedent debts, and securities given at the time
incurring liabilities was clearly stated by Justice Davis of t
United States Supreme Court in Tiffany v. Boatman's Savin
Inst. (18 Wall. 376), who said:
" Neither the terms or policy of the bankrupt act are violated if these o
laterals be taken at the time the debt is incurred. His (the bankrupt's) 1
tate is not impaired or diminished in consequence, as he gets a present equn
lent for the securities he pledges for the repayment of the money borrowi
Nor in doing this does he prefer one creditor over another, which is one
the great objects of the bankrupt law to prevent. The preference at which t]
law is directed can only arise in case of antecedent debts. To secure such
debt would be a fraud on the act, as it would work an unequal distribution
the bankrupt's property; and, therefore, the debtor and creditor are alike pi
hibited from giving or receiving any security whatever for a debt already i
curred, if the creditor had good reason to believe the debtor to be insolve:
But the giving of securities when the debt is created is not within the law, a
if the transaction be free from fraud in fact, the party who loans the mon
can retain them until the debt is paid. In the administration of the bankm
.law in England this subject has frequently come before the courts, who ha
uniformly held that advances may be made in good faith to a debtor to car
on his business, no matter what his condition may be, and that the party ma
ing these advances can lawfully take securities at the time for their repaymei
And the decisions in this country are to the same effect. (Hilliard on Ban
ruptcy, 333, ch. 10 sec. 10 ; Hutten v. Crutwell, 1 El. & Bl. 15 ; Harris v. Ric
ett, 4 Hurl. & N. 1 ; Bruteston v. Cooke, 6 E. & B. 296 ; Lee v. Hart, 34 Er
Law and Eq. 569 ; Belle v. Simpson, 2 H. & N. 410 ; Hunt v. Mortimer, 10 B.
C. 44 ; Ex p. Shouse. Crabbe R. 482 ; Wadsworth v. Tyler, Fed. Cas. 17,032
N. B. R. 101; quarto.)"
(See also In re Cobb, 3 Am. B. R. 129; 96 Fed. 821, as d
cided under the present Act; in re Wolf, 3 Am. B. R. 555; <
Fed. 84; in re Sheridan, 3 Am. B. R. 554; 98 Fed. 406, ai
cases cited hereinbefore.)
Mode of Transfer Immaterial.— If the transfer does diminish t
assets of the bankrupt's estate, and does tend to give one credit
an advantage over another, then whatever may be the mode
transfer, or however indirect or circuitous the means by whi
it was carried into execution, it will constitute a preference; ai
CREDITORS. 357
§ 60.] Partnership Preferences — Effect of Failure to Record Deeds, etc.
if the transferee has reasonable cause to believe a preference was
intended, it will be voidable unless the rights of third parties
have intervened. Thus, where a debtor conveyed property to his
wife without any consideration and she mortgaged it in favor
of his creditors, it was held to be a preference by the debtor.
(Gibson v. Dobie, 5 Biss. 198; 14 N. B. R. 156; Fed. Cas. 5,394.)
So a transfer of the firm assets to one partner, for the purpose
of enabling the individual creditors of the purchasing partner
to obtain an advantage over firm creditors, constitutes a pref-
erence. (In re Waite, 1 Low. 207; Fed. Cas. No. 17,044.) And
where a creditor through another person purchased certain prop-
erty of his debtor, and through the purchaser gave notes of the
debtor in payment, it was held to be a preference. And it must
be remembered in this connection that " transfer " includes pledg-
ing or mortgaging or giving or any other mode of parting
with property. (Section 1 [25].)
Partnership Preferences. — If preferential transfers are made by
a firm, only one member of which is adjudged bankrupt, the
transfers are not voidable. The transfer being a firm act, to in-
validate it, the firm must be put into bankruptcy within four
months. And if the transfer is of firm property, though made as
a payment of an individual debt of one of the partners, the firm
itself must be put into bankruptcy before the transfer can be in-
validated. (Withrow v. Fowler. Fed. Cas. 17,919; 7 N. B. R.
339. Compare Amsinck v. Bean, 22 Wall. 395.)
Date of the Transfer: Effect of Failure to Record Deeds, etc.—
Section 60 provides that preferential transfers may be avoided
if "the bankrupt shall have given the preference within four
months before the filing of the petition." Since by the common
law and by the statutes of most States, the recording of an in-
strument of transfer is not essential to its validity, in all those
States the transfer is complete upon delivery.
The date of delivery would seem therefore the date to be taken
into account in determining whether a preference has been given
under section 60. (See In re Kindt, 4 Am. B. R. 148; 101 Fed.
358 THE NATIONAL BANKRUPTCY LAW.
Effect of Failure to Record Deeds, etc. [Ch- ^
107.) And it must be remembered in addition that by sectic
67a claims which, for want of record or other reasons, wou
not have been valid liens as against the claims of the credito:
of the bankrupt shall not be liens against his estate. By the san
section, subdivision e, it is provided that all conveyances, tran
fers or incumbrances of his property made by a debtor at ar
time within four months prior to the filing of the petition again
him, and while insolvent, which are held null and void as again
the creditors of such debtor by the laws of the State, etc., in whic
such property is situate, shall be deemed null and void under th
Act against the creditors of such debtor if he be adjudged
bankrupt. It seems from a study of section 67 and its provisioi
that all rights which creditors can possibly have under Sta
law with reference to the bankrupt's unrecorded conveyances 1
transfers are preserved and enforced by the Bankruptcy A(
Compare, however, section 3b as to the time within which tl
petition can be filed where the Act of Bankruptcy consists of
fraudulent transfer or conveyance, where the time runs fro
the recording or registering of the instrument of transfer whe
that is permitted or required or from the date of open, notoriov.
etc., possession.
But in a recent case decided in the Southern District of low
In re Klingman (4 Am. B. R. 254; 101 Fed. 691), the court seer
to hold that under section 60 the transfer is made effectual
against creditors only at the time of recording or when in actu
and open possession. The facts in that case were that with
four months of bankruptcy but without notice of insolvency ce
tain claimants shipped goods to the bankrupt, stipulating that t!
goods were " pledged and hypothecated " to them as securi
for the payment of the purchase price. Afterward learnii
of the insolvency of the vendee the claimants secured a retu
of part of the goods. Under these facts the court held that t
act of taking possession of part of the goods constituted an u
lawful preference and that the claimants must surrender tl
preference before being allowed their claim. In passing up<
the question Judge Shiras said:
CREDITORS. 359
§ 60.] Effect of Failure to Record Deeds, etc.
" As I understand the facts of the case, at the time the twine was delivered
back to Luthy & Co. (the claimants) Klingaman was then insolvent, and Luthy
& Co. knew such to be the fact. By section 60 of the act it is declared that
' A person shall be deemed to have given a preference, if, being insolvent,
he had . . . made a transfer of any of his property, and the effect of
. . . such 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.'
It cannot be questioned that if Luthy & Co. are permitted to retain the
property delivered to them on August 1, 1898, and to prove up the balance of
the debt due them, they will be enabled to secure a greater percentage of their
debt than the general creditors ; and therefore it is clear that the pivotal ques-
tion is whether as between Luthy & Co. and the contesting creditors the
transfer of the property in fact took place on the 1st day of August, 1898, or
on the 17th day of June, 1898, the date of the contract of purchase — it not
being shown that on that date Klingaman was insolvent. It will be kept in
mind that Luthy & Co. by their own act, in seeking to prove up their claim,
have invoked the aid of the court in bankruptcy for the enforcement of the
provisions of the act; and they cannot insist upon their right to share in the
dividends payable from the estate unless they meet the obligations imposed up-
on them by the provisions of the act, which are intended to enforce the equit-
able rule, established by the act, that among the creditors equality is equity.
On behalf of the contesting creditors it is claimed that, as against them, the
transfer of the property must be deemed to have taken place on the 1st of
August, 1898, whereas on behalf of Luthy & Co. it is claimed that the actual
delivery then made to them of the property in question was in pursuance of the
terms of the contract of purchase; that this contract gave them an equitable
lien upon the goods then sold to the bankrupt, which they could enforce at any
time ; that, as it is not shown that Klingaman was insolvent when the contract
of purchase was executed, giving the lien cannot be deemed to be a preference;
and, therefore, they are not required to surrender the goods received by them,
or account for the proceeds, as a condition precedent to the allowance of their
claim. Under the provisions of the Bankrupt Act of 1867 it was held that a
preference given by means of a chattel mortgage dated from the time of the
delivery of the instrument, and not from the time when the same was recorded
or possession thereunder was taken. Gibson v. Warden, 14 Wall. 244 20 L
Ed. 797; Sawyer v. Turpin, 91 U. S. 114, 23 L. Ed. 235. In the act now in
force it is enacted (in section 3) that a petition for adjudication may be filed
against an insolvent debtor within four months after the commission of an act
of bankruptcy, and that, when the act charged consists in having made a
transfer of property with intent to defraud creditors, or for the purpose of giv-
ing a preference the four-months' period is to date from the recording or regis-
tering of the transfer, when that is done, or, if not, then from the time the
beneficiary takes notorious, exclusive, and continuing possession of the prop-
erty. Under this section it is clear that if the creditors of Klingaman had
360 THE NATIONAL BANKRUPTCY LAW.
Effect of Failure to Record Deeds, etc. [Ch. VI.
filed a petition for adjudication against him, on the ground that, being in-
solvent, he had given a preference to Luthy & Co. by transferring to them
the goods received on August i, 1898, the act of preference would have been
held to have been committed on the day the goods were delivered, and not
upon the day the lien was contracted for. In other words, the commission
of an act of bankruptcy, by transferring property while insolvent to one or
more creditors with intent to prefer them, is declared to be committed when
the instrument of transfer is recorded or registered or if not recorded or regis-
tered, then when the beneficiary takes open possession of the property, or when
the creditors have received actual notice of the transfer.
Under the prior Act of 1867, the preference was held to have been given
when a lien, valid between the parties thereto, was created, although no notice
thereof was given to the other creditors. Under the present act a preference
is not created until notice thereof is given to the other creditors, either by
recording or registering the instrument of transfer, or by taking actual or
open possession of the property by the creditor, or by giving actual notice of the
transfer to the creditors. It does not seem possible that Congress did not in-
tend this change in the rule to apply to questions arising between a creditor
claiming the benefit of a preference and the other creditors. This would re-
quire the holding that upon a petition filed by creditors, based upon an act
of bankruptcy in giving a preference when insolvent, the act of bankruptcy
must be held to have been committed when the creditor recorded the instru-
ment of transfer or took open possession of the property ; but if the trustee or
creditors, after the adjudication has been had, should seek to avoid the same
transfer, it would be held that the transfer constituting the preference took
place when the mortgage or contract was delivered to the creditor, although
the same was not recorded, nor was possession then taken of the property in-
tended to be transferred. In my judgment, it was the purpose of this enact-
ment to declare generally that, with respect to acts of bankruptcy consisting
of making transfers of property when insolvent with intent to give a prefer-
ence, the act is to be held to have been committed when the transfer is made
effectual as against other creditors by recording or registering the instrument
of transfer, or by the beneficiary taking actual and open possession of the
property, or by otherwise giving actual notice of the transfer to creditors. In
other words, the intent of this section is to declare that, as against creditors of
an insolvent, the limitation of time for invoking relief against a preference
does not begin to run until in some form they have received actual or con-
structive notice of the transfer to the preferred creditor; and this intent is
reached by the declaration that in such cases the transfer constituting the act
of bankruptcy shall be held to date from the time the instrument of transfer
is recorded, or the possession is taken, or notice is otherwise brought home to
the creditors of the bankrupt.
The referee in this case correctly held that under the provisions of the Code
of Iowa the failure to record the contract of purchase did not affect the validity
of the equitable lien secured thereby as between the parties thereto, and that,
as no subsequent lien had been obtained against the same up to the date when
possession was taken on August 1, 1898, the lien was made effectual as against
CREDITORS. 361
§ 60.] Effect of Failure to Record Deeds, etc.
third parties by the act of taking possession ; but the pivotal question under the
Bankrupt Act is, when did this transfer take effect as against creditors, in the
sense that thereby a preference was given to Luthy & Co.? If, as against
creditors, it took effect on August 1, 1898, then it constituted a preference, as
on that day Klingaman was insolvent, and Luthy & Co. knew it. If, however,
the transfer, as against creditors, dates back to June 17, 1898, then it cannot
be held to be a preference, as it is not shown that at that date Klingaman was
insolvent. Under the provisions of the Bankrupt Act, it must be held, for the
reasons already stated, that the transfer of the property to Luthy & Co. took
effect on August 1st, and therefore this transfer constituted a preference to
Luthy & Co.; and it follows that, under the provisions of section 57 of the
Bankrupt Act, the claim of Luthy & Co. cannot be allowed, unless they sur-
render the preference they have received."
But the learned judge does not clearly point out how the pro-
visions of section 3b can be " read into " section 60. Under the
facts in the case the goods were not really " pledged," which was
the agreement, until August when the delivery back took place,
by reason of the familiar principle of the common law alluded
to in the cases cited in Judge Shiras' opinion, that a pledge does
not become effective as to third persons until a change of posses-
sion. On the whole the reasoning In re Sheridan, 3 Am. B. R.
554; 98 Fed. 406, is more satisfactory. In that case it was held
that where the agreement- to pledge was made more than four
months prior to the petition in bankruptcy, but there was no
pledge of the goods covered thereby until a few days before the
petition was filed, the pledgee's title attached only upon that day,
and the transaction created a preference in violation of the act.
Judge McPherson says in his opinion :
" The exceptant relies on Ex parte Potts, Fed. Cas. No. 11,344, but an ex-
amination of that case will show that the decision was upon a different state of
facts. One question there was whether a pledge actually made was fraudulent ■
and it appeared that the alleged bankrupts, when they were admittedly solvent'
had assigned to a creditor, as collateral security for advances, several policies
of insurance and bills of lading upon a vessel and cargo then at sea. Under
such circumstances it was correctly held that the transfer was not in fraud
of creditors. The assignment of the policies was a completed transfer of the
debtor s interest ,n those instruments, and the assignment of the bills of lading
r nsferred the title to the property therein described, without any further
trLtU fc T°U , n^ Pr°Perty then Under consideration, therefore, the
transaction had been fully executed. One policy or one bill of lading wa ap-
362 THE NATIONAL BANKRUPTCY LAW.
Ratification of Unauthorized Acts of Agents. [Ch.
parently not transferred until May, when the alleged bankrupts had beco
' involved ; there was no averment of insolvency in the petition ; but as
last advance by the creditor had been made in March, in pursuance of an agr
ment made in February, the court was clearly right in holding that no part
the transaction was fraudulent. No question of preference arose, wher
here the question is one of preference simply. The goods here were ne1
actually pledged until the exceptant, for the first time, took them into his p
session a few days before the petition was filed. Before that time there v
a mere agreement to pledge. The goods were never delivered to the exce
ant, nor (assuming, for present purposes, that this would have been gc
against the other creditors) were they even set apart and continuously treal
as his property. Under the facts proved, the pledge was not completed ur
the date of removal. Lucketts v. Townsend, 49 Am. Dec. 730, note. T.
being so, the exceptant's title attached upon that date, and the transfer creal
a preference in violation of the act."
It would seem that the reasoning in this case might be ma
applicable to the facts in the Klingaman case without resort
the doctrine of equitable lien, or necessity of record, etc.
Ratification of Past Unauthorized Acts of Agents with Respe
to Time of Receiving Preference.— Since the date when the pre
erential transfer was made is of the highest importance as d
termining whether it may be invalidated or not and also as d
termining reasonable cause to believe, etc., on the part of the trail
feree, and moreover, since we have seen in many cases that tl
knowledge of the agent is the knowledge of his principal, it b
comes important to discuss the question as to how far an una
thorized preference taken by the agent may be ratified by h
principle. The rule in bankruptcy, it is believed, is the same ;
the general common law rule.
The doctrine of subsequent ratification of the unauthoriz*
acts of agents received extended consideration in re Kansas Ci
contains a review of many of the authorities, we here quo
from it.
" It is the general doctrine that ratification relates back to the inception
the transaction, and has a complete retroactive efficacy, and that the ratifi
act is to be treated as if it were originally authorized by the principal. B
this doctrine is a fiction of the law, for the act of one cannot be made t
act of another, but by relation the law gives to the act of one the effect of
act of another; the law will not feign a fiction to do a wrong, to make val
CREDITORS. 363
§ 60.] Ratification of Unauthorized Acts of Agents.
an invalid act, or to defeat the rights of others ; hence this doctrine cannot be
extended to the prejudice of strangers to the transaction. In Fleckner v. Bank
of the United States (8 Wheat. 338), there had been a ratification, and Judge
Story, delivering the opinion of the court, held the act binding upon the
bank, and upon all other persons who had not an adverse interest; that no
maxim is better settled, in reason and law, than omnis ratihabitio retrotrahitur,
etc., at all events, where it does not prejudice the rights of strangers. The
language of Judge Story is adopted by Mr. Broom, in his Legal Maxims.
In re Stoddart, 4th Ct. of Claims R. 511. it was held the law will not admit a
ratification of the acts of an agent which will defeat the intervening rights
of a third party. See Wood v. McCain, 7 Ala. 800; Taylor v. Robinson, 14
Cal. 396; Parnedee v. Simpson, 5 Wall 81. This must be the law, else that
doctrine which has been built for the protection of those dealing with agents
will be converted into an instrument of fraud to defeat the equities of others.
The strangers and third parties in the present case are the other creditors,
of the bankrupt. Of these the assignee is the trustee, and for their benefit the
ratification will not be permitted to relate back so as to bind him. As the
doctrine of relation is a fiction of the law, and the law will not feign a fiction
to make valid an invalid act, the act of ratification, to relate back, must
take place at a time and under circumstances when the ratifying party might
himself have lawfully done the act which he ratifies. In McCracken v. San
Francisco, 16 Cal. 624, Field, C. J., said : ' It follows also from the general
doctrine that a ratification is equivalent to previous authority ; that a ratification
can only be made when the principal possesses at the time the power to do the
act ratified. He must be able, at the time, to make the contract to which by his
ratification he gives validity. The ratification is the first proceeding by which
he becomes a party to the transaction, and he cannot acquire or confer the
rights resulting from that transaction unless in a position to enter directly
upon a similiar transaction himself ; and the very forcible illustration is given
that a contract made upon an assumed agency for a single woman cannot be
ratified by her alone after marriage, for her power to contract alone ceases
with her marriage. The doctrine here stated is fully discussed in Bird v.
Brown, 4 Welsby, H. & G. 786."
The principles just enunciated were applied in the case of
Strain v. Gourdin, 11 N. B. R. 156; s. c. 2 Woods, 380; Fed.
Cas. 13,521, decided by the United States Circuit Court for
the Southern District of Georgia. The facts in that case were as
follows : S. had a sum of money on deposit with K. & H. bankers
who, in April, 1873, became satisfied that they must stop pay-
ment, and took legal advice as to the propriety and duty of pro-
viding for the payment of their depositors, and were advised that
they would be liable to a criminal prosecution if they failed to
pay their depositors. K. & H. thereupon procured certificates
364 THE NATIONAL BANKRUPTCY LAW.
When Do the Four Months Expire. [Ch. VI.
of deposit on a certain bank for the amount due S. The next
day they telegraphed him that they had stopped payment, and
wanted to know where to deposit his funds. He replied, and in
accordance therewith his certificate was placed to his credit in
another bank which he named. It was held by the court that the
procuring by K. & H. of a certificate of deposit on the bank for
the amount due to S. and payable to his order, was not a pay-
ment, and could not be made to relate back to the date of the
certificate instead of the date of the ratification, so as to make
it a payment before S. had notice of the failure of K. & H. In
rendering its opinion the court quoted from Cook v. Tullis, 18
Wall. 332:
" The general rule as to the effect of a ratification by one of the unauthorized
act of another respecting the property of the former is well settled. The ratifi-
cation operates upon the act ratified precisely as though authority to do the act
had been previously given, except when the rights of third parties have inter-
vened between them and the ratification. The retroactive efficacy of the ratifi-
cation is subject to this qualification. The intervening rights of third persons
cannot be defeated by the ratification."
The facts in Cook v. Tullis were that a depositary of certain
government bonds used some of them without the permission of
the owner, and substituted in their place a bond and mortgage.
It was held that the owner might lawfully ratify his act, and
that even if the ratification were within four months before the
filing of the petition in bankruptcy by the depositary, the ratifi-
cation would relate back to the time of the substitution ; but this
was distinctly put upon the ground that no rights of creditors
had intervened — that is, that no rights of creditors had been in-
jured by the ratification; it was a case of mere exchange of se-
curities.
When Do the Four Months Expire.— In computing the four
months before filing the petition in bankruptcy within which time
a preference is voidable, the day on which the petition was filed
must be excluded. (Dutcher v. Wright, 94 U. S. 553.) In the
case just cited the confusion that exists in regard to the com-
putation of time, was commented upon at length, and the opin-
CREDITORS. 365
§ 60.] The Preference May be Voidable — It is Not Void.
ion quotes Lord Mansfield's statements that the cases for two
hundred years had only served to embarrass a point which a plain
man of common sense and understanding would find no difficulty
in construing. The extent of the uncertainty of this point may be
seen by reference to the closing sentence of the opinion in Dutcher
v. Wright, which was : " It must be admitted as difficult, if not
impossible, to deduce from the reported decisions any rule which
will apply in all cases." Without attempting to lay down any
rule, the court simply decided that in the case before them, the
day on which the petition was filed must be excluded. In Cooley
v. Cook (125 Mass. 406), it was held that the four months be-
fore the bankruptcy must be reckoned exclusive of the first day,
and if the last day is Sunday, exclusive of that also. Further
authorities for excluding the day of the filing of the petition are
Cowie v. Harris, 1 Moody & N. 141 ; Ex p. Farquhar, 1 Mont.
& McA. 7. Authorities for considering parts of a day are : in re
Richardson, Fed. Cas. 11,777; 2 Story, 571; Sadler v. Leigh, 4
Camp. 197; Ex p. Farquhar, supra; Ex p. D'Obree, 8 Ves. 82;
in re Wydown, 14 Ves. 87; Thomas v. Desanges, 2 B. & Aid.
586; contra in re Howes, 6 Law Rept. 297; in re Wellman, 7
Law Rep. 25. Compare notes to section 31, on Computation of
Time.
The Preference May Be Voidable— It is Not Void.— The distinc-
tion between voidable and void acts is often overlooked, but is
most important, as on it, to a great extent, depend the rights
of innocent third parties, besides the rights of the parties them-
selves in case no proceedings are taken. The preferences which
this section discountenances are voidable, not absolutely void.
As against all persons but the trustee as representative of credit-
ors, such thransfers are valid. The preferential transfer or as-
signment being voidable only by the assignee or trustee it has
been held that after such assignment or transfer, no one can seize
the property upon execution or attachment, or acquire a lien upon
it by judgment or otherwise, or procure a good title thereto by
subsequent purchase. (Cook v. Rogers, 13 N. B. R 97- s c 31
3 66 THE NATIONAL BANKRUPTCY LAW.
The Preference May be Voidable — It is Not Void. [Ch. VI
Mich. 391 [citing James v. Whitbread, 11 C. B. 406; Coale v.
Williams, 7 Exch. 205; and distinguishing and limiting Buch-
anan v. Smith, 7 N. B. R. 513; s. c. 16 Wall, 277; and McLean
v. Meline, Fed. Cas. 8,890; 3 McLean, 199] ; see also Dodge v.
Sheldon, 6 Hill, 8.)
Under section 67c and f certain liens and fraudulent transfers
are declared to be void, but such transfers are those which could
be set aside in any ordinary creditor's suit and the declaration
that the liens are void merely means that they may not be en-
forced. (See commentary on section 67 post.) But under sec-
tion 60 as before pointed out the preferential transfers are not
necessarily illegal except under the Bankruptcy Law, because the
element of fraud is not an essential element.
It follows from what has been said above that a preferential
transfer under section 60 may, as a general rule, be avoided by
the trustee alone. (See Glenny v. Langdon. 98 U. S. 20; Moyer
v. Dewey, 103 U. S. 301, overruling Dewey v. Moyer, 72 N. Y.
70.) In a case arising under the present Act (In re Little River
Lumber Co. 3 Am. B. R. 682; 101 Fed. 568) it was held by the
District Court in Arkansas that where the trustee who should
have resisted a claim had removed from the State and declined
to employ counsel for that purpose and one of the creditors re-
sisted such claim and successfully defeated it, thus increasing
the assets of the estate to the benefit of all the creditors, the at-
torney of such estate should be allowed a reasonable sum for his
services. It is obvious, however, that the principle applied in this
case must be limited to parallel cases. Generally speaking the
power of the court over the trustee as its officer would seem to be
sufficient to compel him upon the application of any creditor to
take such steps as are necessary for the preservation of the estate.
See, on the analogous question of who may appeal, the decision of
the Court of Appeals of the 8th Circuit in Chatfield v. O'Dwyer,
(4 Am. B. R. 313; 101 Fed. 797), which holds that while the
trustee is the only person who may appeal from the allowance of
a claim, if he refuses to do so the District Court upon applica-
tion by a creditor may either direct an appeal by the trustee or
CREDITORS. 367
§ 60.] Revival of Merged Liens by Annulment of Preferential Transfers.
permit the creditor to appeal in the name of the trustee. This
seems to be a correct statement of the law. See contra in re
Roche (C. C. A. 4 Am. B. R. 369; 101 Fed. 956.)
The evil which would follow if every factious creditor was
allowed to litigate individually and in his own name the claims
of other creditors is obvious. Besides that there are three other
reasons which are set forth in the opinion in Glenny v. Lang-
don as follows :
First, because all such property, by the express words of the
Bankruptcy Act, vests in the assignee by virtue of the adjudi-
cation in bankruptcy and of his appointment; secondly, because
creditors cannot sustain any suit against the bankrupt; and,
thirdly, because their remedies are absorbed in the great and com-
prehensive remedy under the commission, by virtue of which the
assignee is to collect and distribute among them the property, of
their debtor, to which they are justly and legally entitled.
Revival of Merged liens by Annulment of Preferential Transfers.
— When one has a valid lien which is merged, or which is sur-
rendered by him, when a transfer is made to him, if the transfer
is thereafter declared void, his lien may be revived; and he will
have a right to assert it, so far as it would have been valid had
there been no transfer. It is manifest that if the transfer is de-
clared invalid, the lien cannot be said to be merged, for merger
only occurs when a lesser title and a greater are united in one
and the same person, and if the greater title is void, it is precisely
as if no transfer had ever taken place. The creditors through
the trustee in bankruptcy electing to avoid the transfer, take the
property as though no transfer had ever been made, and subject
to all lawful liens upon it. (Avery v. Hackley, 20 Wall. 407.)
On the same principle, if old securities are given in exchange
for new, if the new are adjudged invalid, the cancellation and
surrender of the old ones having been without consideration, a
court of equity will annul the cancellation and revive the old se-
curities. Thus, it is well settled that if a security founded upon
a prior one be fatally tairfted with the vice of usury, and if the
368 THE NATIONAL BANKRUPTCY LAW.
Recovery from the Party Benefited. [Ch. VI.
prior one be given up and canceled, and the latter one be there-
after adjudged void, the prior one will be revived and may be
enforced as if the latter had never been given. (Burnhisel v.
Firman, 22 Wall. 170; [citing Parker v. Cousins, 2 Grattan,
389; Farmers' and Merchants' Bank v. Joslyn, 37 N. Y. 353;
Cook v. Barnes, 36 N. Y. 521; Rice v. Welling & Fake, 5
Wendell, 595].) A vendor's lien may be revived under the same
circumstances. (Crippen v. Heermance, 9 Paige, 211.)
Recovery from the Party Benefited. — The statute provides that
the property or its value may be recovered from the person re-
ceiving it or to be benefited thereby. A study of paragraph a of
this section will show that a transfer need not be made directly to
the person to whom it is intended to give the advantage over
others, in order to make it a preference in his favor. Thus, pay-
ments may be made by the maker of a note to the holder of it,
and such payment may constitute a preference in favor of the
surety. In fact, such a payment may be a practical advantage to
the surety alone. Such will be the case where the surety is a
person of ample means and ability to pay the note, and the maker
of it is insolvent. In such cases the holder receives no practical
benefit, inasmuch as he can collect the amount from the surety,
but the surety is benefited by the payment made by the debtor to
the holder, as it releases him from his liability. If the result of
such a payment is to give the surety an advantage over other
creditors, then it constitutes a preference, and if he has reason-
able cause at the time to believe that a preference was intended^, a
recovery of the amount paid may be had from him, although the
payment was made only to the holder. Under the former Act
there was some question as to the right of such recovery inas-
much as it permitted a recovery by the assignee only where a
preference was given to a " creditor," or a person having a claim
against the one making the transfer. The word creditor in that
act had only its usual popular signification, but the courts held that
a fair construction of all the provisions of the statute gave the
trsutee the right to recover from the preferred indorser or surety
CREDITORS. 369
§ 60.] Bona Fide Purchasers — Recovery of the Property or its Value.
in cases where the circumstances were of the character just men-
tioned ; and the highest authority was to the effect that such pay-
ments were preferences to the holder of the note as well as to the
indorser, and that it was a preference to both, regardless of the
ability of the indorser to pay the note, and regardless of the fact
that the holder on account of this ability to collect in full from
the indorser really received no advantage. (Bartholow v. Bean,
18 Wall. 635.) Under the present act the word " creditor " in-
cludes anyone having a demand or claim provable in bankruptcy,
and since the statute provides that where a person has a claim
against the bankrupt for which another person is secondarily
liable, and fails to prove the same, the latter may prove it and be
subrogated to the rights of the creditor; indorsers and sureties
may fairly be considered as creditors, and there can be no ques-
tion of the applicability of the cases just cited.
Subsequent Transferees — Bona Fide Purchasers. — The title ac-
quired by a preferred transferee being, at the most, voidable only,
not void per se, if the preferred creditor transfer the property to
a subsequent purchaser who takes the property in good faith and
without notice and for a valuable consideration, the latter's title
is not voidable. (Rison v. Knapp, 4 N. B. R. 349; s. c. 1 Dill.
186; Fed. Cas. 11,861 ; in re Mullen, 4 Am. B. R. 224; 101 Fed.
4I3-)
Recovery of the Property or its Value. — Although the Bank-
ruptcy Act declares that the trustee may recover the property or
its value, an action to recover the value of property can only be
maintained when the property itself has been actually or con-
structively converted to the use of the defendant, and the com-
plaint must allege a conversion in terms or its legal equivalent,
a demand or refusal. A transfer of property as a preference be-
ing not void but voidable, the receipt of the property by the
party taking the transfer is not tortious, and unless the subse-
quent detention became wrongful for some other reason, there
must be a demand and refusal. Until such demand and refusal
(47)
37o THE NATIONAL BANKRUPTCY LAW.
Recovery of the Property or its Value. [Ch. VI.
the transferee cannot be considered a tort feasor. The right
given to the trustee to recovery, the property or its value is in effect
a right to maintain replevin for the specific property or in trover
to recover for the conversion of the same. The transferee com-
ing into the possession of the property rightfully, a demand and
refusal are necessary unless there has been an actual conversion.
The demand must be for the goods and property transferred, not
for the value of the goods. This necessity of a demand and re-
fusal, if there has been no actual conversion, exists equally under
the new code practice as under the old practice. The clause em-
powering the trustee " to recover the property or its value " is a
mere legal conclusion or result from the annulment of the trans-
fer. It neither restricts nor enlarges the remedy of the trustee.
If action of replevin is brought, the trustee may also recover in
the same action damages for injury to or for the detention of the
goods. So held in Schuman v. Flickenstein (15 N. B. R. 224;
Fed. Cas. 12,826).
This case, however, was not generally followed under the Act
of 1867 because of the difference in the meaning of the word
" preference " under that Act. It seems to be good authority
under the present act. The question has been very ably passed
upon by Referee Hotchkiss of Buffalo in the case of In re Phelps
(3 Am. B. R. 396). He says on this point :
" The creditor, Fuller, insists that since he has tendered back the goods
and the money, no suit can be maintained by the trustee because the action
must necessarily be one of or in the nature of trover, and he, the trustee,
cannot allege, much less prove, a demand and refusal to restore; he thus
rests his case on Shuman v. Flickenstein, Fed. Cas. 12,826; 15 N. B. R., 224.
This is unquestionably the English rule (Lowell on Bankruptcy, sec. 97, and
cases cited), or, rather, was before a preference became an act of bankruptcy.
(See English Act of 1883.) But, in spite of Shuman v. Flickenstein, the
American rule, as interpreted by the majority of decisions under the Law of
1867, is that a preference, followed by an adjudication within four months
being absolutely void, no title passes even between the original parties, and the
transaction constituting an inchoate fraud, the assignee may maintain trover
even without a demand. Foster v. Hackley, 2 N. B. R., 406; Fed. Cas. 4,971;
Tapley v. Forbes, 2 Allen (Mass.). 21.
The serious question, however, is whether the fact that, unlike section 35 of
the former law, section 60b of the present act makes preferences voidable
CREDITORS. 371
§ 60.] Recovery of the Property or its Value— Measure of Damages.
merely; in other words, seemingly recognizes that a valid title has passed to the
transferee at the time of the preference has brought us within the rule of the
English cases and Shuman v. Flickenstein, supra. After much hesitation, I
have come to the conclusion that it has. The cases which held to the contrary
doctrine under the Law of 1867 went on the theory that there was no title
in the preferential transferee. See also Gaytes v. American, 14 N. B. R. 141 ;
Fed. Cas. 5,286, which was a case of preference pure and simple, without the
element of fraud. The present statute expressly recognizes that title. It is
not likely that Congress foresaw this effect of the change. It was doubtless
made, as was the provision vesting title as of the date of the adjudication (sec.
70a), instead of the time proceedings were commenced (sec. 14, Act of 1867) in
the interest of intervening innocent purchasers. But the result seems inevitable,
and it follows that, if the trustee here proposes to stand on the theory of
preference only, he cannot sue for goods or value, as they have already been
tendered to him."
See what was said in the beginning of the notes to this section
ante on the difference between section 60 of the present Act and
section 35 of the old Act. For trustee's rights to recover under
section 67c where property has been fraudulently transferred,
see that section.
Measure of Damages. — If the transferee has himself parted with
title to the property, the true measure of damages recoverable
by the trustee is the value of the property, and not the amount
realized upon the sale by him, and this is so even though the prop-
erty was taken on execution and sold at public sale and only the
proceeds of it came to the person preferentially transferred.
(Clarion Bank v. Jones, 21 Wall. 325; [Citing Conrad v. Ins.
Co. 6 Pet. 274; Comly v. Fisher, Taney's Decs. 121 ; Marshall v.
Knox, 16 Wall. 559; Eby v. Schumacker, 29 Penn. St. 40;
Sedgw. on Dam. (6th ed.) 634; Mayne on Dam. (2d ed.) 317].)
But this does not prevent the plaintiff from adopting the sale;
he may do so if he chooses and then sue for the proceeds as for
money had and received to his use, but he is not limited to the
amount of the proceeds unless he chooses to adopt the sale.
(Schuman v. Fleckenstein, supra.) If the trustee adopts the sale
and treats the proceeds as money had and received to his use, he
is entitled to interest from the time of the receipt of the money
by the transferee, or at least from the time of the trustee's de-
372 THE NATIONAL BANKRUPTCY LAW.
Debtor's Collusion in Preferential Transfers. [Ch. VI.
mand for it. He is further entitled to the gross proceeds.
(Cookingham v. Morgan, 7 Blatch. 480; Traders' Nat. Bank v.
Campbell, 14 Wall. 87; s. c. below, 2 Biss. 423.)
Debtor's Collusion in Preferential Transfers. — In the case of Fox
v. Gardner (21 Wall. 475), the United States Supreme Court held
that where a debtor, knowing that his creditor is insolvent, accepts
a draft drawn on him by such creditor, the draft being drawn
and accepted for the purpose of giving a preference, the trans-
action is a fraud on the Bankrupt Act, and the assignee in bank-
ruptcy can recover from the acceptor the amount of the draft.
In rendering its opinion the court said : " The language of the
statute authorizing the assignee ' to recover the property or the
value of it from the person receiving it or so to be benefited,'
does not create a qualification or limitation of power. There is
no implication that the party paying is not also liable. The words
are those of caution merely, and give the assignee no power that
he would not possess had they been omitted from the statute. In
the present case the property or value attempted to be transferred
belonged originally to the bankrupt. On the adjudication of bank-
ruptcy the possession and ownership of the same were transferred
to the assignee. The attempted transfer by the bankrupt was
fraudulent and void. It follows logically that the debtor yet holds
it for the assignee, and that the assignee may sue him for its re-
covery." (Citing Bolander v. Gentry, 36 Cal. 105; Hanson v.
Herrick, 100 Mass. 323.) Though a valid agreement to sub-
stitute another person as creditor may be made and pleaded as a
discharge of a debt in the nature of a payment, it is not payment
in fact, and is binding only when the contract is fair and honest.
If a debtor agree to pay not his creditor, but a creditor of his
creditor, the consideration of his paying the substituted creditor
is his release from the indebtedness due to his original creditor.
If his promise to pay the substituted creditor is made knowing
that it is to accomplish a purpose forbidden by law, the consider-
ation for his release fails, it being an illegal consideration. It is
an attempt to pay a debt in a manner the law forbids, and it is
CREDITORS, 373
§ 60.] Annulling Fraudulent Transfers — Set-off — Re-Examination of Fee.
therefore no payment. The debt still remains. The right of the
assignee in bankruptcy to recover from the debtor in such case
is a right to collect an indebtedness which is unpaid and still due
and owing to the bankrupt.
Annulling Fraudulent Transfers. — It may not be improper to
add by way of caution that the trustee may bring action as the
representative of the creditors to annul any transfer, which, be-
cause of its being fraudulent as to creditors, may be annulled in-
dependently of the Bankruptcy Act. See sections 67 and 70
post; also in re Gray (3 Am. B. R. 647; 47 N. Y. App. Div. 554),
in which Barrett, J., carefully discusses this question; and see in
re Adams (1 Am. B. R. 94), and note.
Set-off Against New Unsecured Credit Given in Good Faith. Sec-
tion 60c. — It has been recently held in very thoughtful opinions
(In re Christensen, 4 Am. B. R. 202 ; 101 Fed. 802), both by Ref-
eree James and by Judge Shiras of the Northen District of Iowa,
that this subdivision of the section applies only to cases where
the preferred creditor is compelled against his will to return
what he has received and is therefore limited to proceedings
taken under subdivision " b " and does not apply to a case where
he seeks to enforce a claim which the trustee resists under sec-
tion S7g on the ground of preference. The opinions of both
referee and judge are very conclusive on this subject.
He-examination of Fee Paid to Attorney, etc. Section 6od. —
Compare on this subject section 64b (3) on what are reasonable
attorney's fees. It follows from this section that prior payment
for attorney's services is authorized by the Act. In the case of
In re Kross (3 Am. B. R. 187; 96 Fed. 816), Brown, J., used the
following language:
" While by the general terms of the act, the debtor is required to turn over
all his unexempt property to the trustee, an exception is here created in
favor of an attorney, to a reasonable amount, for services to be rendered to the
debtor in bankruptcy; although this is valid so far only as subsequently
approved by the court. The charges to be " approved " are, I cannot doubt,
374 THE NATIONAL BANKRUPTCY LAW.
Re-Examination of Fee Paid to Attorney, etc. [Ch. VI.
for the same services which the " fee " is designed to be allowed for under
section 64, subd. b, par. 3. Both paragraphs are to be construed together, so
that it becomes immaterial in the result whether the attorney obtains his com-
pensation in the first instance from the bankrupt under section 60, refunding
what, if anything, is disallowed by the court, or whether he waits for an
allowance by the court under section 64. The latter is evidently the more con-
venient and desirable practice; and considering that prior payment for an
attorney's services to the bankrupt is expressly allowed by section 60, I can-
not agree to any such construction of the act as would deprive the attorney of
a proper compensation for a necessary service, merely because he did not take
it out of the estate at his own estimate in advance."
CHAPTER VII.
ESTATES.
Sec. 6i. Depositories for Money.— a Courts of bankruptcy-
shall designate, by order, banking institutions as depositories for
the money of bankrupt 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
of any bond or change such depositories.
No Analogous Provisions in Former Acts.
Cross-reference. — As to the duty of the trustee to deposit all funds in the
designated depositories, and as to the requirement that all disbursements shall
be made only by check or draft on the designated depositories, compare section
47a (3 & 4)-
See G. O. 29 which is as follows :
XXIX. PAYMENT OF MONEYS DEPOSITED.
No moneys deposited as required by the act shall be drawn from the deposi-
tory 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 furnished to the depository, and also the name of any referee or
clerk authorized to countersign said checks.
Sec. 62. Expenses of Administering Estates. — a The actual
and necessary expenses incurred by officers in the administration
of estates shall, except where other provisions are made for their
375
376 THE NATIONAL BANKRUPTCY LAW.
Cross References. [Ch. VII.
payment, be reported in detail, under oath, and examined and
approved or disapproved by the court. If approved, they shall
be paid or allowed out of the estates in which they were incurred.
Analogous Provisions of Former Acts. —
R. S. § S099 ; act of 1867, § 28; act of 1800, § 29; also R. S. §§ 5127 A, 5127B.
Cross References. — For provisions of the Act and of the Gen-
eral Orders providing for compensation and disbursements of
referee and trustee, see chapter 5, sections 40-48. By G. O. 35
the expenses incurred by referees in the performance of their
duties must be allowed by special order of the judge.
It is difficult to lay down any general rule as to how far the
trustee or referee should incur expenses in the administration of
the estate.
The circumstances of each particular case must be considered,
and it is then in the sound discretion of the court to allow a
reasonable sum to be paid for such services as were needed and
were properly rendered. In in re Noyes (6 N. B. R. 277; Fed.
Cas. 10,371), Judge Longyear of the U. S. District Court for
the Eastern District of Michigan said :
" It would be difficult, and I think impracticable, to prescribe any general
rule defining the circumstances under which, and the extent to which, an as-
signee is at liberty to charge the assets of the estate in his hands for profes-
sional and clerical services in the execution of his trust. This must be left
to be decided in each individual case according to its peculiar exigencies. The
assignee is not at liberty to charge the assets of the estate in his hands for
professional or clerical services rendered him in the execution of his trust,
until the same shall have been first duly allowed by the court. The assignee
may, of course, apply to the court in the first instance for authority to employ
professional or clerical assistance, but in such case the court could do but
little more than grant such authority in general terms, leaving the instances
in and to which such assistance may be employed, largely to the discretion of
the assignee, as emergencies shall arise, making such assistance necessary.
Such authority the assignee already possesses under his general powers,
subject, however, to the control of the court; such power must be used by him
cautiously, and in the exercise of a sound discretion, and with the understand-
ing that any abuse of it will be corrected by the court when applied to for
authority to charge the estate for such assistance."
ESTATES.
377
§ 62.] Auctioneer's Services — Sums Paid for the Preservation of Property.
Courts require satisfactory evidence going to show the neces-
sity of legal aid on the part of the assignee. In re Davenport (3
N. B. R. 77; Fed. Cas. 3,587), Judge Duval of the U. S. District
Court for the Western District of Texas said that while in prose-
cuting or defending suits the assignee had the right to employ
counsel, and also had the right to obtain legal advice whenever
really necessary to enable him to act for the interests of the estate
or of creditors, still an allowance to an assignee for the services
of counsel in connection with the compromise of an ordinary
claim could not be allowed, it being a proceeding of such a char-
acter that an assignee of ordinary intelligence would be able to
act for himself and without the aid of an attorney. But in re
Colwell (15 N. B. R. 92), the U. S. District Court for Massa-
chusetts held that an allowance was proper to the trustee for pro-
curing the services of counsel to investigate as to the affairs of
the estate, although no litigation resulted.
See section 64b on the subject of attorney's fees.
Auctioneer's Services. — The courts are reluctant to allow a trus-
tee any sum in payment of the fees of an auctioneer. In re
Pegues (3 N. B. R. 80; Fed. Cas. 10,907), it was said: "The
law contemplates that the assignee shall himself sell the property
of the estate. There may be cases in which it will be proper to
employ an auctioneer, but the necessity for so doing should be
first shown to the court and leave obtained." This language was
quoted with approval by Judge Longyear of the U. S. District
Court for the Eastern District of Michigan in re Sweet (Fed.
Cas. 13,688; 9N. B. R. 48).
Sums Paid for the Preservation of Property. — The trustee may
be allowed for all sums necessarily paid for the preservation of
the property. If such sums have been paid by other parties, he
may, with approval of the court, repay them, especially if they
had an interest in the preservation of the property, and if there
were circumstances which necessitated prompt action on their
part. Thus, if creditors, prior to the appointment of a trustee,
(48)
378 THE NATIONAL BANKRUPTCY LAW.
Allowances to Assignees for the Benefit of Creditors. [Ch. VII.
should pay off liens which were being enforced, in order to save
the property for the estate, they would be subrogated to the rights
of the lienors. (In re T. Gregg, Fed. Cas. 5,976; 3 N. B. R.
S29-)
And in the case of In re Lesser (3 Am. B. R. 815; 100 Fed.
433), it was held that where creditors have secured a lien of which
they are deprived by the operation of the Bankruptcy Law and
the full benefit of their litigation accrues to others, the bank-
ruptcy court may make a reasonable allowance as an indemnity
for the costs and expenses through which such benefit has been
obtained. See also In re Little River Lumber Co. (3 Am. B. R.
682; 101 Fed. 558).
The compensation of a receiver in bankruptcy lies in the sound
discretion of the court. This rule also applies to marshals in
taking care of property where the allowance is not given for the
time of employment but in consideration of the surrounding cir-
cumstances. ( See in re Scott, 3 Am. B. R. 625 ; 99 Fed. 404. )
Allowances to Assignees for the Benefit of Creditors. — Where a
general assignment for the benefit of creditors is set aside, the
weight of authority is that the trustee in bankruptcy may properly
allow to the assignee for the benefit of his creditors, his expenses
in converting the property into money, but to the extent only to
which his conversion of it into money has saved the estate in
bankruptcy similar expenditure. (MacDonald v. Moore, 15 N.
B. R. 26; s. c. 1 Abb. N. C. 53; Burkholder v. Stump, 4 N. B.
R. 597; Fed. Cas. 2,165 ; in re J- Cohn, 6 N. B. R. 379; Fed. Cas.
2,966.) The money paid by an assignee for the benefit of cred-
itors to discharge valid liens upon the property may certainly be
allowed him. (Livingston v. Bruce, 1 Blatch. 318.) And it
has further been held that the assignee for the benefit of creditors
may be allowed sums which, pursuant to the terms of the assign-
ment, he has paid over to the creditors. (Cragin v. Thompson,
2 Dill. 513; s. c. 12 N. B. R. 81 ; Fed. Cas. 3,320; Jones v. Kin-
ney, 5 Ben. 259; s. c. 4 N. B. R. 649; Fed. Cas. 7,473.)
And see opinion of Referee Hotchkiss, in re Pauley (2 Am. B.
ESTATES. 379
§ 63.] Examination of Accounts Under this Section — Provable Debts.
R- 333 )> which holds that a general assignee in possession prior
to bankruptcy will be allowed, out of the estate, his disburse-
ments in preserving the same, and that he will also be allowed
reasonable fees as custodian of the estate, but he cannot be given
fees as assignee, and that the attorneys of such assignee should
not be allowed, except in unusual circumstances, anything out
of the estate.
Examination of Accounts "Under this Section. — Upon the ac-
counting by the trustee the account must be examined by the
court (which means the referee) while creditors have the right
to examine the trustee's account and urge any objection and be
heard upon the same, the duty of examining in detail the items of
the account devolves upon the referee. (See opinion of Gurley,
Ref. in re Baginsky, 2 Am. B. R. 243.)
Sec. 63. Debts which may be Proved.^a Debts of the bank-
rupt 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 peti-
tion against him, whether then payable or not, with any interest
thereon which would have been recoverable at that date or with
a rebate of interest upon such as were not then payable and did
not bear interest; (2) due as costs taxable against an involuntary
bankrupt who was at the time of the filing of the petition against
him plaintiff in a cause of action which would pass to the trustee
and which the trustee declines to prosecute after notice; (3)
founded upon a claim for taxable costs incurred in good faith by
a creditor before the filing of the petition in an action to recover
a provable debt; (4) founded upon an open account, or upon a
contract, express or implied; and (5) founded upon provable
debts reduced to judgments after the filing of the petition and
before the consideration of the bankrupt's application for a dis-
charge, less costs incurred and interests accrued after the filing
of the petition and up to the time of the entry of such judgments.
b 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.
380 THE NATIONAL BANKRUPTCY LAW.
Differences Between the Old and New Law. [Ch. VII,
Analogous Provisions of Former Acts.
As to provable debts in general : R. S., § 5067 ; act of 1867, § 19 ; act of 1841,
;§ 5 ; act of 1800, § 39. As to proof of contingent claims : R. S. § 5068 ; act of
1867, § 19 ; act of 1841, § S ; act of 1800, § 39. As to proof of bankrupt's lia-
Isility as a surety : R. S., § 5069 ; act of 1867 § 19 ; act of 1841, § 5. As to
proof of claim of a surety of a bankrupt: R. S., § 5°70; act of 1867 § 19; act
of 1841, § 5-
Differences Between the Old and New Law. — The provisions of
the present Bankruptcy Act as to provable debts differ materially
from those of preceding acts. The following are the most impor-
tant differences; first, omission from the present act of any express
provision authorizing the proving of contingent debts and liabili-
ties, or the liability of the bankrupt as surety, indorser or guaran-
tor ; second, omission of any express provision as to the proving of
damages resulting from a conversion or trespass by the bank-
rupt; third, omission of any express provision as to apportion-
ment of rent and proving for the same; fourth, the embodiment
in the present act of an express provision as to proving a judg-
ment recovered after the commencement of proceedings in bank-
ruptcy upon a debt at that time provable; fifth, the embodiment
of express provisions making costs incurred by the bankrupt in
certain suits by and against him provable debts; sixth, the em-
bodiment of a provision that unliquidated claims against the bank-
rupt may, pursuant to application to the court, be liquidated in
such a manner as it shall direct, and may thereafter be proved and
allowed against the bankrupt's estate; seventh, the lack of any
general provision as to the time when a debt must have become
fixed and owing in order to be provable. It is not meant, how-
ever, by the statement that the present statute contains no express
provision for the proof of debts of the classes mentioned in the first
three points of difference, that such debts are in no cases provable
under the present law. The language of this entire section is
materially different from that used in the analogous sections of
previous laws, and in certain cases the construction demanded by
the act makes some of the debts mentioned in the first three points
of difference given above, provable notwithstanding the lack of
ESTATES. 38 r
§ 63.] Date of Debt— Contingent Liabilities.
express provisions. These cases will be considered below in the
notes to the several subdivisions of the section.
Time When the Debt Must Have Come Into Existence in Order to
be Provable. — It will be noted that nowhere in the section is there
any express provision as to the time when a debt must have come
into existence in order to be provable. The former act provided
(R. S. § 5067, act of 1867, § 19), that all debts due and payable
by the bankrupt at the time of the commencement of the proceed-
ings in bankruptcy, and all debts then existing, but not payable
until a future day, were provable; but under this act, while four
of the subdivisions contain provisions as to the time when the
debts therein mentioned must have come into existence in order
to be provable, there is no express provision as to the time when
debts founded upon an open contract or upon a contract express
or implied, must have come into existence. But the manifest in-
tent and policy of the act must be held in this case as in the cases
mentioned in the other subdivisions, to limit provable debts to
those existing at the time of the petition.
Indeed it is clear that the only debts which can be proved under
the present Bankruptcy Act are those which were in existence at
the time of the filing of the petition, although it is also clear that,
under subdivision b, where such a debt is in existence at the time
of the filing of the petition unliquidated but otherwise provable,
it may be liquidated under the direction of the court, subsequent
to the petition. {In re Bingham, 2 Am. B. R. 223; 94 Fed.
796; in re McBryde, 3 Am. B. R. 729; 99 Fed. 686; in re Sil-
verman, 4 Am. B. R. 89; 101 Fed. 219.)
Contingent Liabilities. — It follows from what has been said that
while contingent liabilities in certain cases were provable under
U. S. R. S. section 5069 (act of 1867, section 19), they are pre-
sumably not in general provable under the present Bankruptcy
Act. The provisions of the act of 1898 concerning the proof
of contingent claims differ materially from those contained in
the acts of 1841 and 1867. Section 63a (1) provides for fixed
382 THE NATIONAL BANKRUPTCY LAW.
Contingent Liabilities. [Ch. VII.
liabilities absolutely owing at the time of the petition but not then
payable. Section 57! provides for the proof of contingent claims
of the surety of the bankrupt where the creditor has not proved
his claim. G. O. 21 (4) has only to do with the claims of a
surety. Apart from these provisions there is nothing in the act
of 1898 or the General Orders which refers expressly to con-
tingent claims. It must therefore be assumed that Congress did
not intend to include such claims among provable debts. (See
cases cited under the preceding paragraph.) This will be seen
by a comparison with the terms of the preceding act.
Revised Statutes, section 5069 (section 19 of the act of 1867)
reads :
" When the bankrupt is bound as drawer, indorser, surety, bail, or guarantor
upon any bill, bond, note, or any other specialty or contract, or for any debt of
another person, but his liability does not become absolute until after the
adjudication of bankruptcy, the creditor may prove the" same after such
liability becomes fixed and before final dividend is declared."
Clearly, then, in enacting this paragraph (subdivision 1), Con-
gress must have had in mind this liability of sureties and other
persons in similar relations, as well as other contingent liabilities,
and under the present law such claims or debts cannot be proved
unless the liability has become fixed and absolutely owing before
the commencement of the proceedings in bankruptcy. Subdi-
vision 4 provides that " debts are provable which are founded
upon an open account or upon a contract express or implied."
But contingent liabilities are not in any proper sense debts ; they
are mere contracts, and do not become debts until the contingen-
cies happen on which demand for payment can be made. Those
contingencies may indeed happen pending proceedings in bank-
ruptcy, but there is no provision in the present act for the proof
of such a debt if the liability becomes fixed after the commence-
ment of proceedings but before final dividend. The statute of
1867 did permit proof in such cases, but it is believed that under
the present statute it cannot be done. Inasmuch as in all pre-
vious bankruptcy acts legislators have thought it necessary to
ESTATES. 383
§ 63.] Proof by a Surety of the Bankrupt.
insert an express provision in order to give to one the right to
prove such contingent debts and contingent liabilities, the omis-
sion of such provisions from the present act seems to show
an intention on the part of Congress to leave the liability of the
bankrupt on such contracts unaffected. Such construction of the
statute cannot be assailed as not in conformity with the spirit and
tendency of bankruptcy legislation. It is true that such liabili-
ties, if not provable, are not in any way affected by a discharge.
And there may be many liabilities which, in consequence, will
remain outstanding against the bankrupt after the proceedings
in bankruptcy. But to a certain extent that was true under the
former act. Under all bankruptcy laws there is a certain date
fixed after which debts which come into existence may be col-
lected from the after-acquired property of the bankrupt. That
time, under the present act, is the date of filing the petition. The
bankrupt's property at that time (§ 70 [5]), is applied by the
officers of the law to pay certain liabilities owing by him at that
time.
Proof by a Surety of the Bankrupt. — What has been said about
the liability of sureties not being provable until it has become
fixed and absolute has reference only to those cases where the
surety is himself the bankrupt. Where the bankrupt is the prin-
cipal debtor, and there is a fixed liability on his part, even though
the liability of his surety to the creditor is not fixed, and though,
as a consequence, the liability of the bankrupt principal to the
surety is not fixed, yet the surety by the provisions of section 57
(i) (q. v.) may prove the claim if the creditor does not do so.
But in this case it is the fixed liability of the bankrupt to the cred-
itor which is proved, not the contingent liability of the bankrupt
to the surety. The surety proves not his contingent claim, but
the claim of the creditor, and he must prove it in the creditor's
name. If he makes such proof and discharges such undertaking
in whole or in part, he is to that extent subrogated to the rights
of the creditor.
384 THE NATIONAL BANKRUPTCY LAW.
Judgments as Provable Debts — Unliquidated Claims. [Ch. VII.
Judgments as Provable Debts. — It seems to be clear from the lan-
guage of subdivision 1 that all judgments, except perhaps such
as are imposed in the nature of ounishments and which are not
therefore dischargeable (as to which see post), are provable, it
is true that no judgment recovered within four months of bank-
ruptcy becomes a lien under section 6yi, but that presumably does
not render the judgment as a debt non-provable, though perhaps
there is some doubt about that where the judgment is not founded
upon a provable debt. If it be founded upon a provable debt
there can be no doubt that the debt itself may be proven notwith-
standing the judgment.
On the other hand where a provable debt is reduced to judg-
ment after the filing of the petition and before the discharge, less
costs incurred and interest accrued, after the filing of the peti-
tion, under subdivision 5, the better opinion is that the claim is
not merged in the judgment so far as to change the indebtedness
out of which it arose, but is merely liquidated. Under the act of
1867 there was a good deal of confusion upon this subject. Many
of the District Courts applied the old doctrine of merger and held
that upon the entry of judgment the debt was merged in the judg-
ment which thereby became a new debt and could not be proven
and was not dischargeable, but after a long time the question came
to the U. S. Supreme Court after the repeal of the act of 1867 in
the case of Boynton v. Ball (121 U. S. 457), which held that the
doctrine of merger did not apply and that the debt still remained
the same. (See under the present act In re McBryde, 3 Am. B.
R. 729; 99 Fed. 686; Beers v. Hanlin, 3 Am. B. R. 745; 99
Fed. 695 ; and a very able opinion by Referee Hotchkiss of Buf-
falo, In re Pinkel, 1 Am. B. R. 333.)
Unliquidated Claims. Section 63b. — The provisions of para-
graph b differ considerably from those of the former act. Sec-
tion 5067 of the Revised Statutes (act of 1867, § 19), provided:
" When the bankrupt is 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
ESTATES. 385
§ 63.] Unliquidated Claims — Impeaching Judgments.
cause such damages to be assessed in such a mode as it may deem
best, and the sum so assessed may be proved against the estate."
Whether, indeed, this new provision in paragraph b of the present
statute is intended to permit the proving of claims in contradis-
tinction to or in addition to the debts mentioned in the various
subdivisions in paragraph a of the section, or whether, on the
other hand, it is a mere rule of procedure, enacted for the purpose
of defining the mode in which the amount of certain debts, the
right to prove which is given by paragraph a, shall be ascertained,
is not altogether free from question.
The language of paragraph " b " taken by itself is broad
enough to justify the conclusion that Congress intended to allow
claims arising out of torts as well as out of contracts to be proved.
But as we have seen under the preceding paragraph as to judg-
ments obtained after the petition is filed the general tendency is
to hold that the debt retains its original status and character and
is not merged in the judgment. Consequently it is difficult to
believe, if the rule laid down in the preceding paragraph is cor-
rect, that there was any intention by Congress to include any
debts under paragraph " b " which could not be provable by the
operation of paragraph " a " ( 5 ) . The specific casses of torts which
might be proved under the act of 1867, to wit. : conversion, etc.,
of property, are probably still provable if the tort be abandoned
and the action be brought as upon an implied contract. But as
to the mere torts arising out of the injuries to persons and the
like the construction of paragraph " b," which would allow such
claims to be liquidated subsequently to the filing of the petition,
would result in much practical inconvenience, and while, as has
been pointed out, the question is not yet free from doubt, the
more reasonable conclusion is that paragraph " b " is governed
and limited by the provisions of paragraph " a." (See cases cited
under preceding paragraph herein. But see the language of Judge
Bellinger in Beers v. Hanlin, 3 Am. B. R. 745; 99 Fed. 695.)
Impeaching Judgments. — As to impeaching judgments offered
for proof for fraud or collusion see section 57 and commentaries
(49)
3 86 THE NATIONAL BANKRUPTCY LAW.
Judgments Imposing Fines. [Ch. VII.
thereon, sub nom. Questioning the Validity of Judgments
Presented for Allowance.
Judgments Imposing Fines. — Such judgments entered before
commencement of proceedings in bankruptcy do indeed evidence
a fixed liability absolutely owing at the time, but we feel confident
that they are not provable. They may be within the letter of the
law, but not within the spirit of it. Under all former acts they
have been considered as not provable. Such fines imposed as a
punishment are not to be considered debts. (In re Sutherland,
3 N. B. R. 314; Fed. Cas. 13,639; s. c. Deady, 416; People v.
Spalding, 10 Paige, 284; affirmed by Court of Errors, 7 Hill,
301 ; affirmed by the United States Supreme Court, 4 How. 21.)
The first case cited was one in which a fine was imposed as a pen-
alty ; the second, one in which a fine was imposed for a contempt
of an injunction order, the fine being a punishment for the con-
tempt, though payable to the party who sued out the injunction
and who was damaged by the violation of it. It would thus seem
that a fine imposed by a judgment is not a provable debt if im-
posed nominally as a punishment, although in reality as a com-
pensation to the creditor for the pecuniary injury he has sustained
by reason of the commission of the act constituting the offense.
To hold that fines imposed as punishment are provable and con-
sequently dischargeable, would be in effect to make the discharge a
pardon of the offense punished. Such debts are not among the
classes which by section 17 are declared as not released by a dis-
charge. Consequently, if provable, they would be dischargeable,
and a person guilty of a felony or a gross misdemeanor, and fined
therefor, would be released from punishment, while those who
had incurred debts by fraud or in manners certainly more venial,
would still be hoi den under the provisions of section 17. It can
hardly be supposed that any such result was intended by the law-
makers.
But in the case of In re Alderson (3 Am. B. R. 544; 98 Fed.
588) it was held that a judgment obtained in a State court against
a bankrupt for fines upon indictments was a dischargeable judg-
ESTATES. 387
§ 63.] Judgments Imposing Fines — Alimony.
ment. This does not seem to be good law. This question is
thoroughly discussed under section 17a (1) sub nam. Debts to
the United States, Etc., and. see the case of Re Baker (3 Am.
B. R. 1 01 ; 96 Fed. 964), discussed and quoted from under that
section, holding that a judgment against a father for the support
of a bastard child was not a civil debt but one in the nature of
police regulation which is not released by a discharge in bank-
ruptcy. But a judgment for breach of promise to marry is a
provable and dischargeable debt. (See In re McCauley, 4 Am.
B. R. 122; 101 Fed. 223; in re Sidle, 2 N. B. R. 220; Fed. Cas.
No. 12,844.) As this is a judgment upon a contract there seems
to be no reason why it should not be discharged under any view.
As to penalties and forfeitures see what is said under section 17a
(1) sub nom Debts to the United States, Etc.
Alimony. — The general tendency under this law as under the
previous law is to hold arrears of alimony not a provable debt,
and to hold future alimony not a fixed liability, absolutely owing
and hence impossible of valuation. A very recent case on that
subject, In re Nowell, decided in the District of Massachusetts,
March, 1900, 3 Am. B. R. 837; 99 Fed. 931, discusses the ques-
tion very thoroughly and the following quotation from the opin-
ion of Judge Lowell gives a very admirable review of the cases.
" The bankrupt here seeks an injunction to restrain his wife from prosecut-
ing in the State court contempt proceedings against him to obtain alimony
granted her by a decree of that court. This court has, therefore, to determine
the effect of bankruptcy upon alimony. If a discharge in bankruptcy will
bar the wife's claim for alimony, she may be enjoined from seeking to collect
it by contempt proceedings or otherwise.
Section 17 of the Bankrupt Act provides that a discharge in bankruptcy
shall release the bankrupt from all his provable debts, with certain inapplicable
exceptions. This court has here to consider, therefore, if alimony be a prov-
able debt. Section 63 defines those debts which may be proved. The only
clause in the section supposed to be applicable to alimony is the first : " A fixed
liability, as evidenced by a judgment or an instrument in writing, absolutely
owing at the time of the filing of the petition." The nature of alimony is not
precisely the same in all jurisdictions, and this case is concerned only with ali-
mony allowed by virtue of the laws of Massachusetts.
**********
Is a claim for arrears of alimony, which has been decreed by a court of
388 THE NATIONAL BANKRUPTCY LAW.
Alimony. [Ch. VII.
Massachusetts, released by a discharge in bankruptcy? As has been said,
these arrears are not, prior to the issue of an execution to collect them, a
fixed liability, absolutely owing; for the amount of the liability may be modi-
fied by the court which has decreed the alimony and issues the execution. Even
arrears of alimony, therefore, are not a provable debt, within the letter of the
present bankrupt law, and upon the whole, the decisions concerning alimony
and bankrupt laws in general hold alimony not to be provable.
In Kerr v. Kerr (1897), 2 Q. B. 439, it was held, by two able judges against
the dissent of one, that arrears of alimony were not a provable debt, under the
present English Bankrupt Act. The dissent was founded altogether upon the
case of Hardy v. Fothergill, 13 App. Cas. 351, which permitted the proof of
contingent debts, under the English Bankrupt Act, to an extent outside the
utmost possibility of the construction of the present Bankrupt Act of the United
States. No judge treated arrears of alimony as a fixed liability. The analogy
of the English law is, therefore, strongly against the contention of the bank-
rupt in this case.
In re Cotton, Fed. Cas. No. 3,269, it was held that a payment ordered by a
State court to be made for the maintenance of a bastard child was not provable
under the Bankrupt Act of 1841 ; and a similar decision was reached by the
Supreme Court of Ohio in Hawes v. Cooksey, 13 Ohio, 242. The Act of 1841
permitted the proof of " debts," which, as applied to alimony, does not seem
a more restricted term than that of the present act, a " fixed liability absolutely
owing." Generally speaking, that which is owed is a debt. See, further, In re
Baker (D. C.) (3 Am. B. R. 101), 96 Fed. 954.
In re Lachemeyer, 18 N. B. R. 270; Fed Cas. No. 7,966, Judge Choate held,
in an able and careful opinion, that arrears of alimony were not barred by a
discharge granted under the Bankrupt Act of 1867. The decision was based
principally upon the fact that the order to pay alimony was at all times sub-
ject to modification, and that, moreover, the wife ought not to be allowed to
prove what is essentially a claim for support in competition with her hus-
band's creditors. The reasoning of Judge Choate is as applicable to the present
act as to the act of 1867. The act of 1867 permitted the proof of " debts due
and payable."
Under the Act of 1898 have been made several decisions supposed to favor
the bankrupt's contention in this case.
In re Houston (D. C.) (2 Am. B. R. 107), 94 Fed. 119, the District Court
of Kentucky discharged a bankrupt from an arrest made by order of the State
court to enforce the payment of arrears of alimony. Most of the opinion is
devoted to a. vindication of the unquestionable authority of the District Court,
under proper conditions, to release a bankrupt from arrest by a State court
but incidentally the court decided that alimony was a provable debt. Ap-
parently the decision was based upon the authority of Tyler v. Tyler, 99 Ky.
34, 34 S. W. 898. where it was said that a judgment for alimony " makes him
(the husband) an ordinary debtor to the wife for a fixed sum of money that his
estate is liable for, in the same manner that it would be for a debt due upon
any contract." If this is the nature of alimony in Kentucky, a claim for
arrears of alimony there may well be barred by a discharge in bankruptcy; but,
ESTATES. 38g
§ 63] Alimony.
as this is not the nature of alimony in Massachusetts, In re Houston is here
inapplicable.
In re Van Orden (D. C.) (2 Am. B. R. 801), 96 Fed. 86, the bankrupt
sought to enjoin his wife from prosecuting in New Jersey a suit in equity
to recover arrears of alimony decreed by a State court of New York, and the
District Court of New Jersey granted an injunction. In that case the liability
was apparently fixed, inasmuch as its enforcement was sought in an inde-
pendent suit, in which no modification of the original decree could be obtained.
The decision has, therefore, no bearing on the present case, although the
learned judge doubtless expressed his opinion that arrears of alimony in general
are a provable debt.
In re Challoner (3 Am. B. R. 442), 98 Fed. 82, the District Court for the
Northern District of Illinois enjoined the bankrupt's wife from attempting to
collect alimony. The judge briefly said that, " under the decisions of the courts
of Illinois, I am satisfied that money due under the decree, prior to the
adjudication as a ba/nkrupt in this court, is a debt under the bankruptcy law."
By the law of Illinois, it seems that arrears of alimony cannot be reduced
by the court which made the original decree, but that they constitute a
fixed debt. Craig v. Craig, 163 111. 176, 45 N. E. 153. This difference
between the nature of alimony in Massachusetts and in Illinois renders
the decision in re Challoner inapplicable to this case. That alimony is not
a provable debt, under the existing bankrupt law, was decided in re
Shepard, 97 Fed. 187, by the District Court for the Southern District of New
York, and it does not appear that, by the laws of New York, alimony is any
the less a fixed liability absolutely owing than it is in Massachusetts. The
difficulties that may arise in applying the ordinary statutory exemptions of the
bankrupt to a liability for alimony are somewhat illustrated by in re Garrett,
Fed. Cas. No. 5,252. Upon the whole, I hold that arrears of alimony in Massa-
chusetts are not in general a provable debt, but I do not pass upon the effect
of a discharge in bankruptcy upon an execution for alimony issued by the State
court before the filing of the petition in bankruptcy. If that execution be held
to create an absolute liability in favor of the wife, it may be that a levy of
the execution upon the after-acquired property of the bankrupt will be stayed
by the Court of Bankruptcy.
As to future alimony, there is no difficulty. It certainly is not a fixed
liability, absolutely owing. On the contrary, it is contingent upon many cir-
cumstances— upon the life of both husband and wife, as well as upon a modi-
fication of the original decree by reason of the future-acquired property and
earning capacity of the husband, of the future needs, and, it may be, the health
of the wife, of her remarriage, and her receipt of property from other sources.
Even if the present act permits the valuation and proof of contingent liabilities
generally, yet this contingent claim is impossible of valuation. As to future
alimony. I must think that the decree made in re Challoner, supra and
naturally followed by the referee in this case, was made hastily. The learned
judge there refused to pass upon " the status of the money which may become
due thereunder after such adjudication." yet restrained suit for it for twelve
months. But the bankrupt is not exempt from suit generally, but only from
39°
THE NATIONAL BANKRUPTCY LAW.
Alimony — Debts Not Yet Due. [Ch. VII.
suit upon provable debts. To deprive the wife of alimony altogether for
twelve months seems to me unwarrantable, inasmuch as future alimony is
not a provable debt. The injunction granted by the referee is vacated, and the
petition for the injunction denied."
And see very excellent discussion on this subject by Referee
Hotchkiss (In re Emil J. Smith, 3 Am. B. R. 67), in which the
cases are carefully collated and it is held that alimony is not a
debt but an obligation depending upon natural duty.
Debts Not Yet Due. — A debt is provable if absolutely owing at
the time of filing the petition, though not then payable. The use
of the term " at the time of the filing of the petition," instead of
" the time of adjudication," clears up a point as to which in the
early cases under the act of 1867 there was much conflict of au-
thority. When that act was amended and incorporated in the
Revised Statutes, it was provided as in this subdivision that the
time of the filing of the petition was to be the date when the lia-
bilities and debts must exist in order to be provable. The lia-
bility must be fixed or the debt must be owing at the time of the
petition, otherwise it is not provable. If then owing, but not due,
a rebate of interest must be allowed from the time of the petition
to the time of maturity of the debt. As to interest-bearing debts,
the provision of the statute is that principal and interest thereon,
which would have been recoverable at that date, shall be provable.
While this is not a definite statement that accrued interest not due
shall be provable, yet it is manifest that the intent of the act is
that such interest which has accrued up to the time of the petition
is provable. An interest-bearing debt not due is a debt to become
due at some future time for the amount of the principal plus the
interest. Rebating the unearned interest produces the same re-
sult as allowing the accrued interest. (Sloan v. Lewis, 22 Wall.
150.) The provision that any interest which would have been
recoverable at the time of the petition is provable must then be
construed as meaning the interest that would have been recover-
able if at that time there had been a right of action. As a matter
of fact, if the claim is not due, no right of action exists for either
ESTATES.
391
§ 63-] Debts Not Yet Due.
the principal or the interest, but if owing the principal is prov-
able, and if the principal, then also the accrued interest. Interest
may be proved as a claim whenever the party is entitled to demand
it, whether or not there is an express agreement to pay it. After
maturity of the contract, it will be at the legal rate, rather than the
agreed rate. (In re Bartenbach, 11 N. B. R. 61 ; Fed. Cas.
1,068.) As against the bankrupt's general estate interest can be
allowed only to the date of filing the petition. (In re Haake, 7
N. B. R. 61 ; s. c. 2 Saw. 231 ; Fed. Cas. 5,883 ; in re Orne, 1 N. B.
R. 57; s. c. 1 Ben. 361 ; Fed. Cas. 10,581 ; Robson on Bankruptcy,
106.) But where a creditor holds property of the bankrupt as se-
curity for a debt due him, which by the terms of the contract he is
authorized to appropriate to the satisfaction of the debt with in-
terest till payment, the property passes to the trustee subject to the
lien, and this being intended to secure interest as well as prin-
cipal, it would seem the lienor is entitled out of the proceeds of the
sale to the amount due as principal and as interest to the date of
the payment of the principal. If the trustee should sell the prop-
erty subject to the lien, it is clear that the vendee would take it
subject to the lien for the interest till the time of payment of prin-
cipal; and there seems to be no valid reason for holding that
where the sale is made free of incumbrances there should be any
different rule. In so far as the property is security for a sum of
money, the secured creditor is entitled to the whole sum secured,
to be paid out of the proceeds of the property, if they are suffi-
cient for the purpose. (In re Newland, Fed. Cas. 10,171; 7
Ben. 63; in re Haake, 7 N. B. R. 61; s. c. 2 Saw. 231; Fed.
Cas. 5,883.)
The propositions just stated with reference to a lienor's right
as against the property, subject to his lien, to interest on his claim
till time of payment, were applied in the case last cited, though the
court, in so doing, intimated that it was departing from the Eng-
lish rule. In the opinion it was said : " ' The rule in England as
to stoppage of interest at the time of the adjudication applies,
says Mr. Robson [in his work on Bankruptcy], to mortgagees
who come to the court for assistance, but if the mortgagee relies
392 THE NATIONAL BANKRUPTCY LAW.
Debts Not Yet Due. [Ch. VII.
on his security, the trustee cannot redeem without paying the in-
terest then due.' " But if a mortgagee who relies on his security
is entitled to interest until payment, it would seem that in every
case in bankruptcy he would be entitled to it unless he proved his
claim as unsecured. A mortgagee cannot be said to waive his
security by delivering the property over to the trustee in accord-
ance with the mandate of a law which requires him to do so, but
which at the same time recognizes the existence of his lien. If
he proves only for the amount of his debt in excess of the value
of the security, instead of waiving the security, he certainly relies
on it. If he makes no proof he certainly must be deemed to be
content to seek his recovery out of the mortgaged property — a
most perfect and absolute reliance on the security. Even if upon
his motion, the court directs a sale of the property free from in-
cumbrances, with a direction that his lien be transferred to the
proceeds, he can hardly be said to seek the assistance of the court;
he merely sets in motion the very court which would otherwise
have to act upon the motion of some other interested party, and
make that or a similar order, and which in making any order in
the matter would have to recognize his right as a lienor. The
lienor in these cases certainly does not fail to rely upon his se-
curity ; on the contrary, the very proceeding is in reliance upon it.
It is only when he waives his security, and proves as if unsecured,
and takes his place among the general creditors that he can truly
be said to seek the assistance of a court of bankruptcy.
A deficiency existing after applying proceeds of the sale of
mortgaged property may be proved and is an allowable claim,
even, it seems, where the deficiency is less in amount than the in-
terest on the principal indebtedness from the time of the petition
to the sale and subsequent payment. If it could be said that such
deficiency was interest, then it would follow that not being a debt
existing at the time of the petition, it was not provable, but the
deficiency may be treated as an unpaid portion of principal rather
than as unpaid interest. Where a party has a security covering
debts in general, some of which are provable and some are not,
the security may be applied by him in payment of the debts not
ESTATES.
393
§ 63.] Debts Not Yet Due — Provability of Claims for Rent.
provable. Thus, in Ex p. Kensington (2 M. & A. 362), quoted in
re Haake (supra), a party having a lien on merchandise, delayed
at the instance of the assignee, a sale of it, by means whereof a
greatly enhanced price was realized. He was allowed to apply
the proceeds first to the payment of the interest which had accrued
since the fiat. In that case it was said : " The petitioner may be
considered as having a security for a debt, part of which, viz., the
principal and interest before the fiat is provable, and part, viz., the
interest since the fiat, is not provable, and he applies the security
to the part not provable. There is nothing in this which disturbs
the rule that interest stops at the bankruptcy; the circumstances
take it out of that rule."
Provability of Claims for Kent. — The former act contained a pro-
vision for the apportionment of rent and for proving the claim
for such amount as was thus found to be earned. It was as fal-
lows : " Where the bankrupt is liable to pay rent or other debt
falling due at stated and fixed 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." (Section 5071 of the Revised Statutes; § 16
of the act of 1867.) The present act contains no such provision.
The question has been raised as to rent coming due under a
subsisting lease after the adjudication in bankruptcy. It seems
to be pretty clearly settled by all the cases that such rent is not
provable. But if the trustee elects to use the leasehold the rent
becomes part of the costs of administration. But some of the
cases hold that the adjudication in bankruptcy severs the relation
of landlord and tenant and abroates the contract by operation of
law. (In re Jefferson, 2 Am. B. R. 206 ; 93 Fed. 848 ; Bray v.
Cobb, 3 Am. B. R. 788; 100 Fed. 270.) In the case of In re
Ells (3 Am. B. R. 564; 98 Fed. 967), there is a disapproval of the
doctrine laid down in the case of In re Jefferson to this extent, and
it is held that while if the trustee takes the lease with the consent
of the landlord the liability of the bankrupt is ended, if he does
not do so the bankrupt is still liable, the theory being that unless
(50)
394
THE NATIONAL BANKRUPTCY LAW.
Provability of Claims for Rent — Costs. [Ch. VII.
the landlord terminates the lease the bankrupt is still held on the
ground that he is not discharged from his covenants, citing Ex
parte Houghton, i Low. 554; Fed. Cas. 6,725. Compare also
cases cited in In re> Arnstein, 4 Am. B. R. 246; 101 Fed. 706,
and in re Collignon, 4 Am. B. R. 250.
If the landlord re-enters, the lease is ended in accordance with
the well-known principle of the law of landlord and tenant. (In re
Ells, supra.)
Costs. Section 63a (2) (3) — If a judgment for costs has been
entered before the filing of the petition, it is a provable debt,
though the action may not have been upon a provable debt ; and
where judgment is recovered before the filing of the petition, the
costs are part of the debt. (Graham v. Pierson, 6 Hill, 247 ; in re
O'Neil, Fed. Cas. 10,527; 1 Lowell, 162.) The provisions of
subdivisions 2 and 3 of this section provide, however, for the
proving and allowing of costs incurred in certain cases, though
not at the time of the petition, reduced to the form of a judgment.
Although in subdivision 2 they are spoken of as " due," the word
" due " must be construed as permitting the proof not only of such
costs as were then actually due, but also of such costs as had been
incurred prior to the filing of the petition and which would then
have been taxable if the suit had been discontinued upon a stipula-
tion that each party would pay the usual taxable costs ; but there
is no provision for proof and allowance in favor of a defendant
of any costs where the plaintiff afterward goes into voluntary
bankruptcy, if the trustee declines to prosecute the suit. In such
case the costs not being provable are not dischargeable. If after
the petition the plaintiff's (bankrupt's) action is dismissed and a
judgment for costs entered against him, his liability to pay it re-
mains unaffected by his bankruptcy. If the bankrupt was the
plaintiff in the action, it is immaterial whether or not the cause of
action was a provable debt or otherwise. But if the creditor was
the plaintiff, he can recover his taxable costs up to the time of the
petition, only if the action was brought on a provable debt. If
a provable debt is reduced to judgment after the petition, and
ESTATES. 395
§ 63.J Costs.
before the consideration of the bankrupt's application for a dis-
charge, the judgment may be proved, less interest from the time
of the petition and less costs incurred since the filing of the peti-
tion. (Compare subdivision 5.)
The costs and disbursements in an attachment suit pending
against a bankrupt at the time of the filing of the petition, the at-
tachment lien being dissolved by the adjudication, are not a claim
which should be paid by the trustee out of the bankrupt's estate.
The costs and disbursements are a mere incident of the lien and
fail with the lien. (In re Young, 2 Am. B. R. 673; 96 Fed.
606.) But see In re Allen (3 Am. B. R. 38; 96 Fed. 512), in
which it is held that such a claim incurred in good faith by a
creditor though within four months of bankruptcy, is a provable
claim against the estate though the lien is dissolved. But such
a claim is not entitled to priority.
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 following cases
under the act of 1867: In re Fortune, 2 N. B. R. 662; s. c. 1
Low, 306; Fed. Cas. 4,955; Gardner v. Cook, 7 N. B. R. 346;
Fed. Cas. 5,226; in re Geo. S. Ward, 9 N. B. R. 349; Fed. Cas.
17,145; in re Hatje, 12 N. B. R. 548; s. c. 6 Biss. 436; Fed.
Cas. 6,215; in re C. H. Preston, 6 N. B. R. 545; Fed. Cas.
11,394; see, however, apparently contra, In re John S. Foster, 2
Story, 131 ; Fed. Cas. 4,960; in re Housberger, 2 Ben. 504; s. c.
2 N. B. R. 92 ; London v. King, 50 Ga. 302 ; in re C. H. Pres-
ton, 5 N. B. R. 293. An examination of the above cases 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 bankrupt court
may, in the exercise of its equitable jurisdiction, require the trus-
tee to pay such charges as have benefited the estate in his hands,
though incurred before the bankruptcy; if he received the benefit
of the costs of an attachment he was obliged to sustain the bur-
den. (See In re Fortune, Gardner v. Cook, and in re Geo. S.
Ward, supra; also in re H. E. P. Jenks, Fed. Cas. 7,276; 15 N.
396 THE NATIONAL BANKRUPTCY LAW.
Debts Founded on Contract, Express or Implied or Open Account. [Ch. VII.
B. R. 301 ; Zeiber v. Hill, Fed. Cas. 18,206; 1 Sawyer, 268; s. c.
8 N. B. R. 239; and in re Holmes, Fed. Cas. 6,631 ; 14 N. B. R.
493-)
It would seem that under the act of 1898 the case of Allen,
supra, is the better authority.
Debts Founded on Contract, Express or Implied or on Open Account.
— No debt can be proved unless it exists at the time of the filing
of the petition. It is true that under this subdivision there is no
requirement that the debt must be owing at the time of the peti-
tion, but that is the manifest intent of the act. Such debts need
not, however, be payable at that time. (In re Orne, Fed. Cas.
10,581 ; 1 N. B. R. 57; s. c. 1 Ben. 361.) That which is prov-
able is the debt founded on the contract, not the contract liability.
There is no method of proving a mere contract liability unless
there is something owing, either because of a breach of the con-
tract before the petition was filed, or because of performance.
The Bankruptcy Act does not intend to release one from his con-
tracts and obligations. See as to claim for rent, preceding para-
graph on that subject under this section. In a case arising under
the present law (In re Silverman, 4 Am. B. R. 83; 101 Fed.
219) it was held by the District Court in Missouri that where
prior to bankruptcy, the bankrupts made a deed of trust in favor
of creditors, this constituted a breach of a subsisting contract of
employment with the claimant, as it operated to terminate such
contract by rendering performance on their part impossible, and,
upon this breach a cause of action immediately arose in favor of
claimant for damages therefor which was not affected by the sub-
sequent adjudication in bankruptcy, and which constituted a prov-
able claim in bankruptcy, to be computed upon the basis of the sal-
ary which he would have received during the period over which
the contract was to extend, less such amount as he had earned else-
where.
This is in accordance with the principle of the law of contracts
in most common law jurisdictions, that where there is a renuncia-
tion of the contract or an impossibility created by one party be-
ESTATES. 397
§ 63.J Continuing Contracts.
fore performance is due, or during course of performance, the
innocent party may treat the rescission as conclusive, and begin
his action straightway. ( Hochster v. Delatour, 23 E. & B. 678 ;
Windmuller v. Pope, 107 N. Y. 674; Chicago v. Tilley, 103 U.
S. 146.) Such a claim would therefore fall under 63 (4), as being
founded upon a contract, and, being immediately payable upon
breach, undoubtedly constitutes a provable debt. (As to rule of
damages, compare Howard v. Daly, 61 N. Y. 362 ; 19 Am. Rep.
285.)
Continuing Contracts. — The bankrupt's liability to fulfill his con-
tract is not released by the discharge. It is only the debt which
may have been incurred by him by reason of the contract which is
affected. If there are covenants in the contract which are of a
continuing character, he remains liable to fulfill those covenants ;
if the covenants are of such a continuing character that there may
be successive breaches of the covenants, then the discharge simply
releases the bankrupt from his indebtedness upon the breaches
which have occurred prior to the petition in bankruptcy. A dis-
charge does not operate upon a contract of a continuing charac-
ter in such a manner as to permit the bankrupt to enjoy the bene-
fits arising therefrom after the filing of the petition, and at the
same time exempt him from liability to pay for such subsequent
enjoyment. (Robinson v. Pesant, 8 N. B. R. 426; s. c. 53
N. Y. 419, citing Stienmetz v. Ainslie, 4 Denio, 573.) As to
claims for rent see paragraph ante under this section, sub. nom.
Provabiity of Claims for Rent. 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 payable in advance and had become due before the
petition, although the term 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 instalments prior to the petition
would give rise to a debt which would be provable, but it
would not release the covenantor from liability to pay subse-
398 THE NATIONAL BANKRUPTCY LAW.
Continuing Contracts — Claims Against More Than One Person. Ch. VII.
quent assessments. (Murray v. DeRottenham, 6 Johns. Ch. 52.)
So since covenants 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 claimants ; and there being no provable debt, the
covenantor is not released from the obligation. But if the cov-
enant 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. (Parker v. Bradford, 45 Iowa,
311.) 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
and is released, but this does not destroy the continuing obliga-
tion of the bond. (Fowler v. Kendall 44 Me. 448.)
Claims 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 othersi Thus, a party dealing with an agent has a right
to hold the principal liable for the agent's acts within the scope
of his authority. This rule of law also applies, although the
agent contracts in his own name without disclosing his principal,
and the other party supposes the agent to be contracting for him-
self. In such a case the party contracting may sue either the
agent or the principal. If the principal has become bankrupt,
then the claim may be proved in bankruptcy against him. ( In re
Troy Woolen Co. Fed. Cas. 14,203 ; 8 N. B. R. 412.) 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. (Downing v. Trader's
Bank, 2 Dill. 136; s. c. n N. B. R. 371.) If one holds a firm
obligation indorsed by one or more of the individual members,
ESTATES. 399
3 63.] Claims Against More Than One Person — Implied Contracts.
all of whom as a firm and as individuals afterwards go into bank-
ruptcy, he may prove his entire claim against the partnership
estate, and the estate of each individual indorser; but in the ag-
gregate can recover no more than his full claim. (In re Howard,
Cole & Co. Fed. Cas. 6,750; 4 N. B. R. 571 ; Mead v. Bank, Fed.
Cas. 9,366; 6 Blatch. 185; s. c. 2 N. B. R. 173; Emery v. Bank,
Fed. Cas. 4,446; 7 N. B. R. 217; s. c. 3 Cliff. 507.) Compare
commentaries on section 5.
( See also on Claims against Partnerships, Debts of one Partner
to Another, etc., section 5, sub. nom. Rights of Creditors
Holding Joint and Several Obligations, Proving Claims
of the Partnership Estate Against Individual Estate
and Vice Versa, et id. omne. )
Implied Contracts. — It is a well-recognized rule of law that one
whose property has been converted by another, or wrongfully
taken or used, has in many cases the privilege of waiving his
right to sue for damages in tort and of suing the tort feasor for
the value of the property which the latter has wrongfully ac-
quired, as upon a promise to pay for the same. If such property
has been sold and the proceeds have come into the hands of the
tort feasor, it is universally admitted that an action for money
had and received will lie. The right to this latter remedy is based ■
on the fact that the tort feasor has acquired something which he
cannot rightfully retain, and the right is limited to those cases of
tortious injuries to property where the tort feasor has enriched
himself. It should be firmly borne in mind that one can sue as
upon an implied contract only when the defendant has unjustly
enriched himself ; the mere fact that the other party has been im-
poverished by the tort is insufficient. Thus, where one by his
fraud has induced another to part with his money to a third per-
son, there is no implied promise of the defrauding party to pay
therefor, and no action as for money had and received will lie.
These principles will most frequently have to be applied in bank-
ruptcy to cases of conversion and trespass. But there is a ques-
tion whether in all cases of conversion a party has a remedy upon
400 THE NATIONAL BANKRUPTCY LAW.
Implied Contracts. [Ch. VII.
implied contract. When money has been received by the tort
feasor, it is universally admitted that an action as for money had
and received will lie; but where the property is wrongfully re-
tained or consumed, there is conflict of authority as to the right
to sue as for goods sold and delivered. If the defendant has con-
verted the plaintiff's property and in the act of conversion sells
the same, or thereafter sells the same, the plaintiff may waive his
right to sue in tort and sue in assumpsit, using the count for
money had and received to recover proceeds of the sale. Having
the right to sue in assumpsit, he may, under this subdivision
of this section of the Bankruptcy Act, prove his claim for the
proceeds. Further, it is laid down by writers on the subject of
Implied Contract that since the right to recover money which
has been stolen, fraudulently obtained, or wrongfully converted
to another's use rests on the equitable principle of unjust enrich-
ment, the claim may be asserted not only against the immediate
tort feasor, but against any one into whose possession the money
may be traced, until it reaches the hands of a holder without
notice. (Keener on Quasi-Contracts, ist ed. chapter on " Waiver
of Tort.") And in Keener's treatise it is stated that as the claim
is maintained only on strict equitable principles, it cannot be
asserted against a holder for value without notice. So, if the
property has been wrongfully taken and used, though afterwards
returned, one may waive his action for a trespass and sue on a
count for use and hire. Thus, if a servant of one is enticed
away by another and the latter makes use of his services, the facts
existing which would sustain an action in tort, the tort may be
waived and the injured party sue for the value of the services ; but
no action will lie for the wrongful use and occupation of real
property. The lack of this remedy in cases of the wrongful use
of land is due to purely historical reasons. Further, it is said
that logically it would seem that where one has tortiously taken
or retained the goods of another and has not disposed of them,
an action as for goods sold and delivered should lie against him to
recover their value. But in many jurisdictions this remedy as
against the tort feasor is denied, but is allowed in others. Thus,
ESTATES. 40 1
§ 63.] Claims for Damages for Conversion Have no Right of Priority.
in Keener on Quasi-Contracts, chapter on " Waiver of Tort,"
page 194, of first edition, it is stated that such an action has been
allowed in California, Georgia, Illinois, Indiana, Kansas, Michi-
gan, Mississippi, New York, North Carolina, Tennessee, Texas,
West Virginia, Wisconsin; but has been disallowed in Alabama,
Arkansas, Delaware, Maine, Massachusetts, Missouri, New
Hampshire, Pennsylvania, South Carolina, Vermont. Under
the Act of 1867, section 19, section 5067 of the R. S., it was pro-
vided : " All demands against the bankrupt for or on account of
any goods or chattels wrongfully taken, converted, or withheld
by him, may be proved and allowed as debts to the amount of the
value of the property so taken or withheld, with interest."
If it be held that the terms of paragraph b of this section per-
mit the liquidation of damages arising from torts of any and every
kind, then the question as to what torts may be waived, and action
brought as upon implied contracts, loses its practical importance.
But if the paragraph is not so construed, the determination of
that question is of vital importance, because in that case only
those torts which may be waived and for which actions as upon
implied contracts may be brought would be provable. Those
actions, do not, at least in some jurisdictions, embrace all actions
for trespass and conversion, and hence many claims arising from
such torts will have to be proved, if proved at all, under the terms
of paragraph b, and not under subdivision 4 of paragraph a.
Creditors Whose Claims are for Damages for Conversion Have no
Right of Priority. — If the bankrupt has converted another's prop-
erty, and the latter elects to prove his claim for damages as if it
were upon contract, he is not preferred over the creditors. Thus
where one had advanced money to another, who afterwards be-
came bankrupt, to buy stock for him which was purchased by the
bankrupt, and wrongfully taken in his own name, and by him
hypothecated for money loaned to him, as against other cred-
itors, the one whose property has been converted has merely a
provable debt to the amount of the value of the stock so directed
to be purchased. Not being able to receive his money in specie,
(51)
4oa THE NATIONAL BANKRUPTCY LAW.
. Changes in Form of Debt After Filing Petition. [Ch. VII.
he has now merely a claim for damages. (Ungewitter v. Von
Sachs, Fed. Cas. 14,343; 4 Ben. 167; s. c. 3 N. B. R. 723.) And
a creditor whose claim consists of liquidated damages for any
other tortious injury is not entitled to a right of priority. He
receives merely a pro rata share, although in many instances his
claim will not be released by a discharge under section 17.
Open Accounts.— Compare section 68 as to mutual debts and
mutual credits and set-off.
Changes in the Form of the Debt After Filing the Petition.—
Somewhat analogous to the question of the provability of a debt
existing at the time of the petition, but afterwards reduced to the
form of a judgment, is the question of the provability of a debt
evidenced by a note made prior to the filing of a petition, but
taken up thereafter by the giving of a new note. Under the
former act it was held In re Montgomery (3 N. B. R. 426; Fed.
Cas. 9,730) that a new note thus given in the place of an old one
was a new debt or obligation, and therefore not provable in bank-
ruptcy. This decision was based on the decision in re Williams,
(Fed. Cas. 17,705 ; 2 N. B. R. 229), which held that a debt exist-
ing at the time of filing the petition and thereafter reduced to a
judgment, was merged in the judgment and could not be proved,
and that the judgment could not be proved, inasmuch as it was
not a debt owing at the time of the petition. That decision was
of doubtful correctness under the old act, and would be at
variance with the statutory rule laid down in subdivision 5 of this
section. The weight of authority before there was any statutory
provision was that a change in the form did not extinguish the
debt, but left it provable, and this, as has been seen, applied to
a debt merged into a judgment. So, as to a debt for which a
note was given after the filing of the petition, or to a debt evi-
denced by a note taken up by a new note. According to the rule
laid down by our Federal courts, and most of our State courts,
a promissory note of the debtor or of a stranger, does not dis-
charge the precedent debt for which it is given unless such be
the agreement of the parties to it. The note only extends the
ESTATES. 403
§ 63.] Provable Debts in General.
time of payment of the debt. If the note is given contemporan-
eously with the debt, and is the note of a third party, it is pre-
sumptively in payment of the indebtedness; if the note of the
debtor, it is presumptively not a payment. ("Anson on Con-
tracts," Huffcuts' ed. 346 n.)
But the giving of a new note in place of a note existing at the
time of the filing of a petition presents another question, and that
is the question of the reviving of an indebtedness by a new prom-
ise. There are numerous decisions to the effect that a new note,
although given between the time of filing the petition and the
time of the discharge, is a new promise reviving the discharged
debt, since the discharge, although it may be granted later, re-
lates back to the time of the filing of the petition. (Compare
Jersey City v. Archer, 122 N. Y. 376.)
Compare cases cited under section 17 Revival of a Dis-
charged Debt by a New Promise.
Provable Debts in General. — 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
bankruptcy. (In re Prescott, 5 Biss. 523 ; Fed. Cas. 11,389; s. c.
9 N. B. R. 385.) Thus, a feme covert may set up her coverture
as a defense to a claim made against her estate. (In re Rachel
Goodman, Fed. Cas. 5,540; 5 Biss. 401; s. c. 8 N. B. R. 380.)
And if a corporation enters into a contract ultra vires, upon
which it could not bring an action, it cannot prove a claim arising
thereon in bankruptcy. (In re Jaycox & Greene, 12 Blatch. 209;
Fed. Cas. 7,244.) So contracts void because of the considera-
tion being illegal, or because the contract is against public policy,
cannot be the foundation of a debt provable, or at least allowable, in
bankruptcy. (Ex p. Jones, 17 Ves. 332; Lowe v. Waller, Doug.
736; in re Chandler, 6 Biss. 53 ; s. c. Fed. Cas. 2,590; 9 N. B. R.
514; in re Young, Fed. Cas. 18,145; 6 Biss. 53; ex p. Mumford,
15 Ves. 289; Lehman v. Strassberg, 2 Woods, 554; in re Green,
4o4 THE NATIONAL BANKRUPTCY LAW.
Claims Cognizable Only in Equity. [Ch. VII.
Fed. Cas. 5,751 ; 15 N. B. R. 19S ; ex p. Cottrell, Cowp. 742 ; ex p.
Daniels, 14 Ves. 191.) So as to "Stock Gambling" transac-
tions. But the burden of proof rests upon those disputing a
contract apparently valid. (Compare Hill v. Levy, 3 Am. B. R.
374 and note; 98 Fed. 94.) 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. (Capell v. Trinity Church, Fed. Cas.
2,392; 11 N. B. R. 536.) In addition to claims upon which ac-
tions could be brought, debts existing at the time of the filing of
the petition, but not then payable, are provable in bankruptcy,
and being provable, the holder of such debts may be a petitioner
to have the debtor involuntarily adjudged a bankrupt. (In re
Alexander, Fed. Cas. 161 ; 4 N. B. R. 178; s. c. 1 Low. 470.)
Claims Cognizable Only in Equity. — Not only may debts which
are cognizable in courts of law be proven in bankruptcy, but also
those which are cognizable only in courts of equity. In re Blandin
(5 N. B. R. 39; Fed. Cas. 1,527; s. c. 1 Low, 543), Judge
Lowell of the District of Massachusetts decided that the wife of
a bankrupt might prove in bankruptcy as a creditor of the estate
of her husband, for money realized by him out of property which
she held as her separate estate, under the statutes of Massachu-
setts, the evidence clearly showing that the transaction between
her and her husband was intended to be a loan and not a gift.
In rendering his opinion the judge said : " It seems to be the in-
tent of the 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. In respect to both
debtors and creditors the act is highly remedial, and the district
court is vested with most ample equitable powers to enable it to
work out full remedies to all persons. It has always been the law
of England that equitable demands may be proved in bankruptcy.
(Ex p. Williamson, 2 Ves. [Sen.] 252; ex p. Taylor, 1 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 payment of those cred-
ESTATES. 405
§ 63.] Claims Affected by the Statute of Limitations.
itors who could by legal action or equitable suit have compelled
payment.' (Ex p. Dewdney, 15 Ves. 498.) Our statute makes
provable all debts and liabilities, 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
bankruptcy, would be properly cognizable in a court of admiralty.
If this be not so, I do not see how the law can be uniform ; for proof
of debts will depend on the remedies given in the several States, in
one of which the very same debt might be sued at law which in an-
other must be prosecuted in equity, and in some of which there
is no distinction between law and equity." There is probably no
doubt now at least in most of the States, that a wife may be the
creditor of her husband and so initiate proceedings against him.
(In re Novak, 4 Am. B. R. 311 ; 101 Fed. 800.)
Debts Sue to Aliens and Effect of Foreign Discharges. — See section
17, ante.
Claims Affected by the Statute of limitations. — A conflict of
opinion is found in the decisions under the Act of 1867 on the
question whether after a debtor has been adjudged a bankrupt,
a claim to which the statute of limitations would have been a
good defense had an action been brought thereon in a State court,
is provable in bankruptcy. The bankruptcy courts for both the
Northern and Southern Districts of New York held, under the
last act, that such debts were provable unless they were debts pay-
able in States where the statute of limitations was an absolute
bar to the claim and a complete extinguishment of the indebted-
ness, so that nowhere could an action be maintained upon it.
Where the statute of limitations merely affected the remedy in
one particular jurisdiction, but did not prevent a suit thereupon
in other jurisdictions, the debt, being still in existence, was held
by these courts to be provable in bankruptcy, and the creditor
was considered entitled to a dividend upon it. The leading case
stating this doctrine was In re Ray ( 1 N. B. R. 203 ; Fed. Cas.
11,589; s. c. 2 Ben. 53), Judge Blatchford writing the opinion.
4o6 THE NATIONAL BANKRUPTCY LAW.
Claims Affected by the Statute of Limitations. [Ch. II.
To the same effect as the decision just cited was in re Shep-
pard (Fed. Cas. 12,753; 1 N. B. R. 439; s. c. 7 A. L. Reg. 484),
which was decided by the District Court for the Northern Dis-
trict of New York. But the weight of authority is clearly op-
posed to the rule laid down in these cases. (See in re D. Kings-
ley, 1 N. B. R. 329; Fed. Cas. 7,819; s. c. 1 Low. 216; followed
in re Hardin, Fed. Cas. 6,048 ; 1 N. B. R. 395 ; and also in re
Noeson, Fed. Cas. 10,288; 12 N. B. R. 422; s. c. 6 Biss. 443;
in re C. Reed, Fed. Cas. 11,635; 11 N. B. R. 94; s- c- 6 Biss. 250;
in re Cornwall, Fed. Cas. 3,250; 6 N. B. R. 305; s. c. 9 Blatch.
114.) These latter cases hold that a debt barred by the statute
of limitations where the bankrupt resides, cannot be proved
against his estate in bankruptcy; and in re Kingsley, the court
went so far as to hold that if the claim was barred by the laws of
the State of the debtor's residence, it could not be proved in
bankruptcy, even if not barred by the laws of the State of resi-
dence of the creditor, notwithstanding at the time of the creation
of the debt both parties resided therein. The decisions in the
cases last cited are based upon the fact that by the statutes and
rules of practice of the United States courts, when an action
against a resident of a particular State is brought in a Federal
court, embracing that State within its jurisdiction, the Federal
court is governed by the statute of limitations of that particular
State.
And the cases under the Act of 1898 generally follow the last
cited cases. (In re Lipman, 2 Am. B. R. 46; 94 Fed. 353; in re
Resler, 2 Am. B. R. 602; 95 Fed. 804.)
If a debt is not barred by the statute of limitations at the time
of the filing of the petition, the weight of authority is that it may
be proved against the estate at any time within the period al-
lowed for proving claims, even though the time within which an
action could be brought thereon would have expired earlier. The
statute of limitations ceases to run against the creditor of a
bankrupt from the commencement of the proceedings in bank-
ruptcy. (In re Eldridge, Fed. Cas. 4,331 ; 12 N. B. R. 540; in re
Wright, Fed. Cas. 18,068; 6 Biss. 317; compare, however, to the
ESTATES. 407
§ 63.] Proof of Claim Subjects Creditor to All Orders of Court.
contrary, Nicholas v. Murray, Fed. Cas. 10,223; 5 Saw. 320;
s. c. 18 N. B. R. 469.)
Proving Debts Which Are Not Actionable in State Courts. — Some-
what analogous to the question of the right to prove claims as to
which the statute of limitations could be pleaded as a defense, is
the question of the right to prove claims which by positive pro-
visions of statutory laws are not enforceable in the State courts.
Such a claim may be proved if the State statute affects only the
remedy and not the validity of the contract. Thus if two persons
enter into a contract of sale, valid by the laws of the State where
the contract is made, but which cannot be enforced as against
the purchaser in the courts of the State of his residence, yet the
contractual liability existing and the person being liable to be
sued thereon if jurisdiction is obtained over him elsewhere, there
is such a debt as is provable in bankruptcy. The mere fact that the
courts of the State will not give a seller the right to sue, goes only
to the remedy, not to the existence of the contractual obligation.
So held where a resident of the State of Maine bought liquors
in another State by a contract valid in the State of purchase, but
which the court of Maine would not enforce because of their pro-
hibitory laws. (In re Murray, Fed. Cas. 9,954; 3 N- B- R-
765-)
Debts Not Provable, Unaffected by Bankruptcy Proceedings. —
" The provisions in regard to what debts may be proved are arbi-
trary, but do not affect the existence or validity of such debts as
are not provable, nor does a discharge release them. If a debt
is provable, it comes in for a dividend, and can, unless it is an
excepted debt, be discharged. If it is not provable, it does not
come in for a dividend, but it will not be discharged." (In re
May & Merwin, 9 N. B. R. 419; s. c. 47 How. Pr. 37; s. c. 7
Ben. 238.) Compare section 17a.
Proof of Claim Subjects the Creditor to All Orders of the Court.
The creditor, wherever he may reside, by proving his debts, sub-
mits himself personally to the jurisdiction of the court of bank-
4o8 THE NATIONAL BANKRUPTCY LAW.
Cross-references — Debts Which Have Priority. [Ch. VII.
ruptcy, and becomes subject to all its orders in so far as they
affect his claim, and the bankruptcy court may deprive him of all
the benefits which otherwise he would have, and may expunge
his proof as a punishment for offenses of which he may be guilty.
(In re Kyler, Fed. Cas. 7,956; 2 Ben. 414.) A creditor proving
his debt makes himself a party to an equitable proceeding, and
the court may deny him relief, in cases where a court of equity
would be justified in so doing. Thus, if knowingly and with inten-
tional fraud, a creditor includes in his claim a claim which is in-
valid and illegal, and not owing to him, it has been held that the
court may refuse to give him any relief whatever ; it may even re-
fuse to allow the valid portion. (Marrett v. Atterbury, Fed.
Cas. 9,102; 11 N. B. R. 225; s. c. 3 Dill. 444.)
Cross references. — As to claims against partnerships, compare
section 5. As to manner of proof, compare section 57. As to
provable debts which are not released by a discharge, compare
section 17. As to dividends on proved claims, compare section
65. As to set-off of mutual debts and credits, compare section 68.
Sec. 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 ques-
tion arises as to the amount or legality of any such tax the same
shall be heard and determined by the court.
b 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 involuntary cases; (3) the cost of administration, includ-
ing 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 petition-
ESTATES. 409
§ 64-] Priority of the United States.
ing creditors 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, 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 claim-
ant; 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-
rupt in addition to his estate at the time the composition was con-
firmed or the adjudication was made shall be applied to the pay-
ment 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 Provisions of Former Acts.
R. S., § 5101 ; act of 1867, § 28; act of 1841, § 5; act of 1800, § 62.
Priority of the United States. — Section 3,466 of the U. S. Re-
vised Statutes provides :
" Whenever any person indebted to the United States is insolvent, or
whenever the estate of any deceased debtor, in the hands of the executors or
administrators, is sufficient to pay all the debts due from the deceased the debts
due to the United States shall be first satisfied, and the priority hereby estab-
lished shall extend as well to cases in which a debtor, not having sufficient
property to pay all his debts, makes a voluntary assignment thereof, or in
which the estate and effects of an absconding, concealed, or absent debtor
are attached by process of law as to cases in which an act of bankruptcy is
committed."
The well-recognized principle that a statute is not to be con-
strued as limiting the prerogative of the sovereign and that the
sovereign is not affected by the provisions of a statute, unless ex-
pressly so declared, necessitates the belief that the section of the
Revised Statutes above quoted is still in force, and that debts due
to the United States have a priority over all claims other than
taxes.
(52)
4io THE NATIONAL BANKRUPTCY LAW.
Priority of the United States — Payment of Taxes by Trustee. [Ch. VII.
Section 3,466 was construed by the United States Supreme
Court in the case of the U. S. v. Lewis (92 U. S. 618; s. c.
below, 13 N. B. R. 33), and it was there said:
" The language of that section is general, and it is without qualification. The
form of the indebtedness is immaterial. It may be by simple contract, speci-
alty, judgment, decree, or otherwise by record. The debt may be legal or
equitable, and may have been incurred in this country or abroad. A valid
indebtedness is as effectual in one form as in another. No discrimination is
made by the statute."
In that case it was held that the United States was not in any
wise bound by the Bankruptcy Act of 1867, and the fact that it
did not prove its claim in bankruptcy proceedings was immaterial
and did not affect its right to a priority.
And see what is said under section 17 as to the non-discharge-
ability of claims of the United States and the various States,
sub nom. Debts to the United States, etc.
It will be noted that the statute gives precedence expressly
only to taxes so far as the State or municipal division is con-
cerned, except so far as such priority may arise out of sub-
division b (5).
In the district of Massachusetts it has lately been held that a
county is a gwawi-municipal corporation, and a claim held by it
arising out of services of convicts in a county house of correction
is entitled to priority. (In re Worcester County, s. c. In re
Derby, 4 Am. B. R. 496; 102 Fed. 808.)
Payment of Taxes by Trustee. Section 64a. — It has been held
that the trustee must at the request of the bankrupt pay the taxes
legally owing by such bankrupt even though assessed against
property which is set off as exempt and though the said taxes are
a lien upon and enforcible against the exempt property and their
payment would exhaust the fund otherwise going to the general
creditors. (In re Tilden [D. C. Iowa], 1 Am. B. R. 300; 91
Fed. 500. ) But in the District Court of Connecticut it was held
that where, under the statute of a State, taxes are a prior secured
lien upon real estate, and the result of their payment would be to
ESTATES. 4]
§ 64.] Payment of Taxes by Trustee.
give a secured mortgagee an additional advantage over the ger
eral creditors, their payment by the trustee will not be orderec
The following extract from the opinion of Townsend, J., gives tt
reasoning in that case:
" That the practical result of payment of these taxes on real estate by tt
trustee would be to take the amount from the general creditors and gn
it to the mortgagee must, of course, be conceded. If the tax collector is ol
liged to enforce his lien, there are legal fees compensating him for his troubl
The municipalities to which the tax is due have no real interest in the coi
troversy. The only precedent under the law of 1867, so far as I am awar
is Foster v. Inglee, 13 N. B. R. 239, Fed Cas. 4,973. In this case an execi
tion had been levied upon real estate subject to taxes. It was held tha
if the taxes had been deducted in estimating the value of the real estat
the rules of equity would forbid their payment by the trustee. It follow
then, that, upon precedent, taxes should not be paid by the trustee, whei
such payment would operate to the advantage of a third party against ar
other; the taxes being, in any event, secured. Under the law of 1898, in t
Tilden, 1 Am. B. R. 300, 91 Fed. 500, the taxes were assessed against an es
empt homestead of the bankrupt. The referee refused to order the taxes pai
by the trustee. The attention of the court was not called to any decisio
under former bankruptcy statutes throwing light on the question. Hel<
" the exemption laws are to be liberally construed to accomplish the purpos
of the exemption," and ordered the taxes paid. The contest in that case wa
apparently between the bankrupt and the general creditors, the tax collecto
taking no part; and the decision does not indicate that the tax collector wa
considered as having any interest therein. John C. Hurley, referee for th
Eastern District of Texas, made the same decision in a similar case. In r
Baker, 1 Am. B. R. 526. In that case the taxes were a lien upon the persona
as well as upon the real property. No precedent under bankruptcy laws wa
cited by counsel, and no case similar to the present has been found by m<
Under section 64b, taxes seem to come fifth in order among the debts whic
have priority. It has always been recognized that the general rules of equit
are to govern the administration of bankruptcy laws. These rules include th
marshaling of assets, where necessary to do justice between the parties. I
ought not to be construed to be the intent of the law that taxes should be paii
where it is not questioned but that they are otherwise secured, and wher
such payment would work supra, and so far as is shown, has not been heli
otherwise."
(Compare In re Veitch, 4 Am. B. R. 112; 101 Fed. 251.)
It was further held, in re Conhaim (4 Am. B. R. 58; 100 Fed
268), that where goods have been sold by the trustee and the ven
dees resist the payment of the taxes thereon on the ground tha
4i2 THE NATIONAL BANKRUPTCY LAW.
Cost of Preserving the Estate — Administration — Attorney's Fees. [Ch. VII.
such taxes accrued before the sale the trustee will not be ordered
to pay such taxes upon their petition but will be ordered to have
the goods assessed at a fair valuaton in his name as trustee and
gay the legal assessment thereon. As to right of subrogation of
remainderman who has paid the taxes on the life estate of the
bankrupt as against the trustee, see In re Force (referee's opin-
ion, 4 Am. B. R. 114).
Cost of Preserving the Estate. Section 64b. ( 1 ) . — See commen-
tary under section 62 ante, sub nom. Sums Paid for the Preser-
vation of Property.
Sec. 64b (2). Compare the provisions of G. O. 10 which are
intended to cover money which the bankrupt, or some third party,
may be called upon to furnish after the initiation of the pro-
ceedings in order to meet the expenses for the purposes cited in
that order, but which do not, however, include the money depositd
with the clerk to meet the fees of such clerk, the trustee and the
referee. Money advanced under G. O. 10, if the bankrupt has
met with all the requirements of the law, is to be repaid out of
the estate. (See In re Matthews, 3 Am. B. R. 265; 97 Fed.
772.)
Costs of Administration. Section 64b (3). —The costs of admin-
istration are a prior lien upon the assets of the bankrupt's estate,
and take precedence of specific liens thereon.
The expenses of a referee, including a reasonable allowance for
clerk hire, fall within section 64b (3) . {In re Tebo, 4 Am. B. R.
235; 1 01 Fed. 419.) See section 62 ante.
Attorney's Fees. Section 64b (3).— The attorney's fees pro-
vided for in this section rest in the sound legal and judicial dis-
cretion of the court to be determined from the circumstances of
each case upon evidence of the service performed and its value or
from knowledge of its worth. But such fees do not rest in un-
restrained discretion, and the Circuit Court of Appeals has the
right to review the allowance of an attorney's fee which exceeds
the sum of $500 under section 25a, subdivision 3. See very ex-
ESTATES. 41,
§ 64.] Attorney's Fees — Wages, etc.
haustive opinion on this subject in re Curtis, (Bank of Waverly
C. C. A. 4 Am. B. R. 17; 100 Fed. 784). See also In r<
Burrus (3 Am. B. R. 296; 97 Fed. 926). Where assets are re
covered from fraudulent transfers of the bankrupt they shouk
not be made subject to an allowance for his attorney, especiall]
where it appears that such attorney has been paid in advana
under the provisions of section 6od. (See in re O'Connell, '■
Am. B. R. 422; 98 Fed. 83. Compare also in re Kross (3 Am
B. R. 187; 96 Fed. 816).
Wages, etc. Section 64b (4) . — This priority has been held to bi
personal and where an assignment of the wages took place prio:
to the filing of the petition no priority was allowed. (In re West
lund, 3 Am. B. R. 646; 99 Fed. 399.) But where the assign
ment took place after the bankruptcy proceedings were com
menced it was held that the claims for wages are entitled t(
priority in the hands of the assignee. (In re Campbell, 4 Am
B. R. 53s; 102 Fed. 686.) Although under section 38 (5) ai
examination of the bankrupt and the employment of a stenogra
pher may as a general rule be allowed at the expense of the estafc
it should not be allowed for the benefit of the general creditor
out of the wages claims of the workmen objecting thereto whei
the funds in hand are only sufficient to pay the preferred claims
But this fact should be brought to the attention of the court
(In re Rozinsky, 3 Am. B. R. 830; 101 Fed. 229.)
It follows from what has been said under section 63 in regan
to reducing claims to judgment that a wages claim reduced t<
judgment does not thereby lose its priority. (In re Anson, ,
Am. B. R. 231, and note; 101 Fed. 698.)
The meaning of the words " workmen, clerks or servants " un
der this section has been held not to be synonymous with th
definition of wage earners under section 1 (27) and the defini
tions generally confine the application of the words to their or
dinary significance. Thus it has been held that a person engagei
in merely an incidental agency in procuring customers with n<
obligation to serve does not thereby obtain a priority. (In r
4I4 THE NATIONAL BANKRUPTCY LAW.
Wages, etc. [Ch. VII.
Mayer, 4 Am. B. R. 119; 101 Fed 695.) And it has been held
that traveling salesmen are not " workmen, clerks or servants ".
(In re Greenewald, 3 Am. B. R. 696; 99 Fed. 705 ; in re Scanlon,
3 Am. B. R. 202; 97 Fed. 26.) The question being an im-
portant one quotations are made from these opinions. In the
case of in re Scanlon, Judge Evans said :
" C. A. Weaver proved his claim in this case for $300 for services rendered
as a ' traveling salesman ' for the bankrupts within three months before the
filing of the petition, and claimed a priority for the amount under section
64b (4) of the Bankruptcy Act. Weaver was employed by the bankrupt
company as a traveling salesman at a salary of $5,000 per annum, and, the
referee having refused to allow the priority claimed by him, he has petitioned
the court to review that decision. The clause of the bankruptcy law referred
to is in the following language : ' The debts to have priority . . . shall
be; . . . (4) Wages due to workmen, clerks or servants which have
been earned within three months before the date of the commencement of
the proceedings, not to exceed three hundred dollars to each claimant.' The
determination of the question involved depends upon what is the correct
meaning of the words ' workmen, clerks or servants,' and whether a traveling
salesman is such an employe as would come within the proper definition
of any one of these words. It is argued that the definition should be controlled
by the definition in the Bankruptcy Act of the phrase ' wage earner.' While
the court thinks it possible that that definition may throw some light upon
the question, yet it is not at all clear that Congress had in mind wage
earners merely as defined by the act when it used the language in section
64 which has just been quoted. The Bankruptcy Act in express terms ex-
cluded wage earners from the list of those against whom an involuntary pe-
tition of bankruptcy might be filed, and, in order that there might be no doubt
as to what persons should be included in that term, defined it in the first
section to mean an individual who works for wages, salary, or hire at a rate
of compensation not to exceed $1,500 per year. If the same thing had been
intended by Congress in section 64, doubtless it would have used the words
' wage earner ' there instead of the language actually employed. This makes
it necessary to endeavor to ascertain their meaning from other sources, and
there would seem to be nothing to indicate that Congress used the words
' workmen, servants and clerks ' in any other than their ordinary significa-
tion. Taking up each of them separately, we find that Webster defines a
clerk to be one who is employed to keep records or accounts; a scribe; an
accountant. And the Century Dictionary defines a clerk to be one who is
employed in a shop or warehouse to keep records or accounts; one who is
employed by another as a writer or amanuensis. The court can not resist
the conclusion that these definitions describe the intention of Congress in
its use of the word 'clerk.' Webster defines 'servant' as being, among
other things, a person who is employed by another for menial offices, or fojr
ESTATES. 415
§ 64-] Wages, etc.
other labor, and is subject to command; a subordinate helper. The Century
Dictionary says that a servant is- one who exerts himself or labors for the
benefit of a master or employer ; an attendant ; a subordinate assistant. Bou-
vier's Law Dictionary adopts Webster's definition of this word, and it is
also approved in the case of Flesh v. Lindsay, 115 Mo. 1, 21 S. W. 907.
Bouvier adds to this definition that they are called menial servants from liv-
ing infra mcenia — within the walls of the house — and also says that persons
that are laborers hired by the day's work or any longer time are not con-
sidered servants. While in general terms, therefore, any one is a servant
who serves another, still the court is of opinion that Congress used the word
' servant ' in section 64 of the Bankruptcy Act in the general sense given
in the definitions above. Webster defines a workman to be a man employed
in labor, whether in tillage or manufacture; a worker; hence, especially, a
skillful artificer or laborer. The Century Dictionary gives the definition as
a man who is employed in menial labor, whether skilled or unskilled; a
worker; a toiler; specifically, an artificer, a mechanic or artisan, a handi-
craftsman. . While Bouvier defines a workman generally as one who labors,
one who is employed to do business for another, the court is of opinion
that Congress used the word ' workman ' in the section referred to, in the
general sense covered by the definition of the lexicographers above given.
It seems to the court that none of these definitions cover such a ' traveling
salesman ' as the creditor in this case describes himself to be. It might be
difficult, and possibly undesirable, to attempt to define with too much pre-
cision the exact character of employe who would come within the language
of section 64, but it seems to the court to be very clear that the claimant in
this case is not a ' workman,' a ' servant,' or a ' clerk,' within the con-
templation of that clause of the Bankruptcy Law. For these reasons, the
decision of the referee is approved."
In the case of in re Greenewald, Judge McPherson said:
" The question for decision certified to the court by the referee is whether
a traveling salesman is a workman, clerk or servant, within the meaning
of section 64b, par. 4, of the Bankrupt Act, and is therefore entitled to priority
of payment to the extent of $300. The referee followed in re Scanlon (D. C.)
3 Am. B. R. 202, 97 Fed. 26, and rejected the claim of priority. I agree with
the result reached by Judge Evans in that case, although I incline to believe
that the meaning of ' workmen, clerks or servants ' may perhaps be somewhat
more extensive than his opinion seems to allow. The scope of these words
is to be determined, I think, not exclusively by the lexicographers, but in part
at least, by modern usage, which is continually modifying the content of words
and phrases. ' Clerk,' for example, has come to include, not only a subordi-
nate who writes letters or keeps books, but also a salesman in a retail store.
Mr. Justice Fell, in Mulholland v. Wood, 166 Pa. St. 486, 31 Atl. 248, recog-
nizes this enlargement of meaning, while declining to regard the phrase ' clerk
employed in a store or elsewhere,' as broad enough to include a traveling
41 6 THE NATIONAL BANKRUPTCY LAW.
Wages, etc. [Ch. VII.
salesman. The Pennsylvania statute which he was then considering is
broader than the Bankrupt Act. The Federal statute says ' clerk,' without
more; and no one, I think, would understand that word, standing by itself t
to include an employe whose duties call him habitually away from his em-
ployer's store or factory, and require him to travel frequently for the purpose
of selling goods.
" Nor would such an employe be ordinarily thought of as included in the
word ' workman.' The essential idea conveyed by this word, as commonly
used, is the idea of a subordinate, whose occupation has nothing to do with
correspondence or books of account, but requires nim to use his hands to a
considerable degree in manufacturing or building, or in similar pursuits. He
may be skilled or unskilled; he may, or may not be, aided by tools or ma-
chinery; but he does not belong to the same class as the man that is neither
making goods nor erecting buildings, nor accomplishing similar results but
is exclusively engaged in the sale of a finished product.
" ' Servants ' is a more indeterminate word. It includes, I think, other than
domestic servants, or those who receive small wages for doing work of an
inferior grade ; for the act contemplates that ' servants ' may be receiving at
least $100 a month, and this sum of itself shows that the word is not narrowly
restricted in its meaning. Where the line is to be drawn, I am unable to say.
A particular context might indicate a very broad meaning indeed; for ex-
ample, if one should speak of ' an employer and all his servants,' the sense
there might well be, all who serve the employer in any capacity. But this
cannot be the meaning in the paragraph under consideration. If it were,
' clerks ' and ' workmen ' would be superfluous, and therefore the use of the
three words in one phrase seems to indicate that Congress had in mind
three classes of employes, substantially distinct, although here and there
a particular employe might perhaps be properly included in more classes
than one. A farm laborer might, I think, be indifferently regarded as a
servant or a workman, and other examples will readily present themselves.
Taking ' servants,' then, as used in the act, to refer to a restricted class of
subordinates, I am of opinion that the common usage of the word does not
permit the inclusion of a traveling salesman.
" There is some hardship in this result, for the act apparently gives priority
to a salesman or clerk who sells at retail in a store, but does not give priority
to a salesman who sells in large quantities to customers elsewhere. The con-
clusion seems inevitable, however, if the ordinary meaning of the words is to
prevail."
It necessarily follows that the officers of corporations are in
no sense " workmen, clerks or servants " and. are not entitled to
priority thereby. (See in re Grubbs, Wiley Co. 2 Am. B. R.
442; 96 Fed. 183; in re Carolina Cooperage Co. 3 Am. B. R.
154; 96 Fed. 950.)
ESTATES. 417
§ 65.] Priorities under Federal and State Laws — Dividends.
Priorities Under the Laws of States or United States. Section
64b (5). — Where a priority is sought under a statute of a State it
must be determined under the laws of that State. (In re Byrne,
3 Am. B. R. 268; 97 Fed. 762.) Under this section it was the
intention of Congress to recognize liens in priority precisely
as the State laws had fixed them, and the fact that the language of
the section groups such debts as are entitled to priority under the
laws of the State together, does not mean that these liens are to
be leveled to a common plane. But when an adjudication is made
in bankruptcy, the rules of State practice, regarding the acts to
be done within a specified time, yield to the rules of the Federal
court. So held in construing the effect of the Kentucky statute
respecting the time of assertion of a landlord's lien. (In re Falls
City Shirt Manufacturing Co. 3 Am. B. R. 437; 98 Fed. 592.)
Disposition of Property Upon Revocation of Discharge or Composi-
tion. Section 64c. — Compare sections 13 and 15 with commen-
taries thereon. Presumably this section does not affect the right
of the bankrupt to all property which he acquires after adjudica-
tion. (See section 70.)
Sec. 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.
b 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, equal five
per centum or more of such allowed claims. Dividends subse-
quent 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.
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 cred-
(53)
4i8 THE NATIONAL BANKRUPTCY LAW.
Declaration and Payment of Dividends. [Ch. VI!
itors proving and securing the allowance of such claims shall b
paid dividends equal in amount to those already received by th
other creditors if the estate equals so much before such othe
creditors are paid any further dividends.
d Whenever a person shall have been adjudged a bankrupt b;
a court within the United States and also by a court of bank
ruptcy, creditors residing within the United States shall first b
paid a dividend equal to that received in the court without th
United States by other creditors before creditors who hav
received a dividend in such court shall be paid any amounts.
e A claimant shall not be entitled to collect from a bankrup
estate any greater amount than shall accrue pursuant to the pro
visions of this act.
Analogous Provisions of former Acts. —
As to first dividend : R. S. § 5092 ; act of 1867, § 27 ; act of 1841, § 10 ; act 0
1800, § 29. As to subsequent dividend: R. S. § 5093; act of 1867, § 28; act 0
1841, § 10; act of 1800, § 30. As to filing of accounts preparatory to fina
dividend: R. S. § 5096; act of 1867, § 28. As to rights of creditors whos
claims are allowed after first dividend : R. S. § 5097 ; act of 1867. § 28 ; act 0
1841, § 10.
Section 39a (1) provides that the referee shall declare the dividends and pre
pare and deliver to the trustees dividend sheets showing the dividends de
clared and to whom payable.
Section 58a (5) provides that the creditors shall have ten days' notic
of the declaration and time of the payment of dividends.
For list of claims and dividends to be recorded by the referei
and by him delivered to the trustee, see Form No. 40. Notice o
dividend is thereupon given by the trustee. (Form No. 41.'
A dividend in bankruptcy has been defined as a parcel of fund
arising from the assets of the estate rightfully allotted to th
creditor entitled to share in the fund whether in the same pro
portion with the other creditors or in a different proportion
In re Barber (3 Am. B. R. 306; 97 Fed. 547), in which it wa
held that the referee was entitled to charge commissions upon th
gross proceeds of the property which by the consent of the se
cured creditors had been sold free from liens. Compare in r
Coffin (referee's decision, 2 Am. B. R. 344). But in the cas
of the Fort Wayne Electric Corporation it was held that wher
ESTATES. 419
g 65.] Declaration and Payment of Dividends.
a payment is made by the trustee upon secured claims such pay-
ment is not a dividend within the meaning of the Bankruptcy Act
and the referee is not entitled to a commission thereon. See also
In re Sabine (1 Am. B. R. 322, referee's decision), and In re
Fielding (3 Am. B. R. 135; 96 Fed. 800), in which it was held
that commissions of the referee and trustee could not be based
upon the disbursements made in payment of claims entitled to
priority but must be limited to dividends and commissions on the
residue of the estate. See sections 40 and 48 as to compensation
of referees and trustees.
When the assets of the estate have all been converted 'nto cash
and the accounts of the trustee are ready for a complete and final
judicial settlement, such settlement should not be delayed be-
cause certain creditors whose claims are included in the schedules*
have not proved their claims. The money ready for distribution
should be paid out on allowed claims and the referee should not
retain money for the payment of claims of negligent creditors who
have delayed proving their claims. (In re Stein, 1 Am. B. R.
662; 94 Fed. 124.) In declaring the first dividend the referee
should hold from distribution sufficient funds to cover expenses
of all administration and priorities. He is required to hold back
only sufficient funds to cover claims that will probably be allowed.
(In re Scott, 2 Am. B. R. 324; 96 Fed. 607.) But where money
has been held back by the referee on account of defective proof
of claims such claimants do not thereby obtain a lien upon such
amount. Id. As to claims of persons contingently liable see
G. O. 21 (4).
Under the former act it was held that at the second meeting
of the creditors (the first meeting at which dividends were de-
clared), the creditors might vote in favor of the disposition of all
the funds as dividends other than those needed for the payment
of expenses and those needed for claims then undetermined, which
by reason of the distant residence of the creditor, or for other
sufficient reason, had not been proved; but they were not obliged
to leave any funds in the hands of the assignee to pay claims of
creditors whose names appeared upon the schedule, but for whose
420 THE NATIONAL BANKRUPTCY LAW.
Unclaimed Dividends Not Subject to Attachment. [Ch. \
failure to prove, there appeared no sufficient excuse. Compan
the words " such claims as have not been, but probably will
allowed," in paragraph b, with the provisions of paragraph
it would seem as if a similar construction of the present act woi
not be improper. If the dividend has been declared, the coi
has power in a proper case to restrain the payment of it by 1
trustee in order to give to parties in interest an opportunity
move to have the order of dividend vacated. {In re N. Y. M;
S. S. Co. Fed. Cas. 10,212; 3 N. B. R. 280.) But a divide
so declared cannot be disturbed except for some error or otl
cause. It cannot be opened for the purpose of paying an expei
which would have been allowed, had it been brought to the atti
tion of the court before the declaration of the dividend. {In
B. K. Smith, Fed. Cas. 12,989; 15 N. B. R. 97.) Neither cai
State court in any way interfere with the bankruptcy court in
distribution of the assets of the bankrupt. {In re Bridgm;
Fed. Cas. 1,867; 2 N. B. R. 252.) Where the assets are mi
than sufficient to pay all the claims which have been allow
interest upon them may be allowed. {In re Hagan, Fed. C
5,898; 10 N. B. R. 383.)
Sec. 66. Unclaimed Dividends. — a Dividends which remain 1
claimed for six months after the final dividend has been declai
shall be paid by the trustee into court.
b Dividends remaining unclaimed for one year shall, under 1
direction of the court, be distributed to the creditors whose clai
have been allowed but not paid in full, and after such claims hi
been paid in full the balance shall be paid to the bankrupt : P
vided, That in case unclaimed dividends belong to minors si
minors may have one year after arriving at majority to cla
such dividends.
No Analogous Plovisions in Former Acts. —
Unclaimed Dividends Not Subject to Attachment. — In Jackson
Miller (9 N. B. R. 143), it was held (following in re Bridgm
Fed. Cas. 1,867; 2 N- B- R- 252), that dividends in the hands
ESTATES. 421
§ 67.] Liens.
the trustee were not subject to attachment by a creditor of the
dividend creditor. To the same effect, Gilbert v. Lynch, 17
Blatch. 402, holding that when a dividend is declared in favor
of a creditor it is not property, but a right to secure property.
The former act contained no express provision as to the method
of disposing of unclaimed dividends, but the decisions of the
court established substantially the same rules which now appear
in statutory form.
See as applicable to this section in re Stein and in re Fielding
cited under preceding section.
Sec. 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 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 lien was obtained and permitted while the defendant was
insolvent and that its existence and enforcement will work a pref-
erence, 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 dissolu-
tion 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.
422 THE NATIONAL BANKRUPTCY LAW.
Liens. [Ch- V]
d Liens given or accepted in good faith and not in confer]
plation of or in fraud upon this act, and for a present consider;
tion, which have been recorded according to law, if record therec
was necessary in order to impart notice, shall not be affected t
this act.
e That all conveyances, transfers, assignments, or incumbranci
of his property, or any part thereof, made or given by a perse
adjudged a bankrupt under the provisions of this act subsequei
to the passage of this act and within four months prior to tl
filing of the petition, with the intent and purpose on his part 1
hinder, delay, or defraud his creditors, or any of them, shall t
null and void as against the creditors of such debtor, except as 1
purchasers in good faith and for a present fair consideration ; an
all property of the debtor conveyed, transferred, assigned, or ei
cumbered as .aforesaid shall, if he be adjudged a bankrupt, an
the same is not exempt from execution and liability for debts t
the law of his domicile, be and remain a part of the assets an
estate of the bankrupt and shall pass to his said trustee, who!
duty it shall be to recover and reclaim the same by legal procee<
ings or otherwise for the benefit of the creditors. And all conve;
ances, transfers, or incumbrances of his property made by a debt(
at any time within four months prior to the filing of the petitic
against him, and while insolvent, which are held null and void ;
against the creditors of such debtor by the laws of the Stat
Territory, or District in which such property is. situate, shall 1
deemed null and void under this act against the creditors of sue
debtor if he be adjudged a bankrupt, and such property shall pa
to the assignee and be .by him reclaimed and recovered for tl
benefit of the creditors of the bankrupt.
/ That all levies, judgments, attachments, or other liens, o
tained through legal proceedings against a person who is insol
ent, at any time within four months prior to the filing of
petition in bankruptcy against him, shall be deemed null and vo
in case he is adjudged a bankrupt, and the property affected 1
the levy, judgment, attachment, or other lien shall be deemi
wholly discharged and released from the same, and shall pass
the trustee as a part of the estate of the bankrupt, unless tl
court shall, on due notice, order that the right under such lev
judgment, attachment, or other lien shall be preserved for tl
benefit of the estate; and thereupon the same may pass to ai
shall be preserved by the trustee for the benefit of the estate
aforesaid. And the court may order such conveyance as shall
ESTATES. 433
§ 67.] Liens in General Unaffected.
necessary to carry the purposes of this section into effect : Pro-
vided, That nothing herein contained shall have the effect to
destroy or impair the title obtained by such levy, judgment, at-
tachment, or other lien, of a bona fide purchaser for value who
shall have acquired the same without notice or reasonable cause
for inquiry.
Analogous Provisions of former Acts. —
As to liens being unaffected: R. S. § 5075; act of 1867, § 20; act of 1841, § 2;
act of 1800, § 63. As to dissolution of attachment l.ens : R. S. § 5044 ; act of
1867, § 14. And see sec. 60, ante, as to Preferences.
Liens in General Unaffected.— In general the trustee in bank-
ruptcy becomes vested only with the title, which the bankrupt
himself has. With the exceptions referred to in this section he
takes the property subject to all existing liens, claims charges, and
equitable rights. He is not a purchaser for value, but stands in the
shoes of the bankrupt himself except in so far as the statute has
given to him, as the representative of creditors, the right to avoid
fraudulent and preferential transfers and the liens voidable under
the provisions of this section. Unless liens are voidable under the
provisions mentioned, the persons possessing them retain all their
rights against the property, after it passes to the trustee. Courts
of bankruptcy may in certain cases compel the lienors to enforce
their rights in these courts, but the rights themselves continue
unimpaired and unaffected. {Ex p. Christy, 3 How. 292 ; in re
Stuyvesant Bank, 12 Blatch. 179; s. c. 10 N. B. R. 399; s. c.
49 How. Pr. 133.) The general doctrine on this subject was
laid down by the United States Supreme Court, in Yeatman v.
Savings Inst. (95 U. S. 764), in which the court said :
"The established rule is that [except in certain cases] the assignee takes
the title subject to all the equities, liens, or incumbrances, whether created
by operation of law or by act of the bankrupt, which existed against the prop-
erty in the hands of the bankrupt. (Brown v. Heathcote, 1 Atk. 160;
Mitchell v. Winslow, 2 Story, 630; Gibson v. Warder, 14 Wall. 244; Cook v.
Tullis 18 id. 332 ; Donaldson v. Farwell, 93 U. S. 631 ; Jerome v. McCarter,
94 id- 734-) He takes the property in the same ' plight and condition ' that the
bankrupt held it. (Winsor v. McLellan. Fed. Cas. 17,887; 2 Story, 492.) In
Goddard v. Weaver, Fed. Cas. 5495 ; 1 Woods, 260.it was well said that the as-
424 THE NATIONAL BANKRUPTCY LAW.
Liens in General Unaffected — Mechanics' Liens. [Ch. VII.
signee takes only the bankrupt's interest in property. He has no right or title to
the interest which other parties have therein or any control over same, further
than is expressly given to him by the bankrupt act as auxiliary to the preser-
vation of the bankrupt estate for the benefit of the creditors. It would be
absurd to contend that the assignee in bankruptcy becomes ipso facto seized
and possessed in entirety, as trustee, of every article of property in which
the bankrupt has any interest or share."
Applying that doctrine to the case before it, the court, in Yeat-
man v. Savings Inst, held that a pledgee is entitled to the pos-
session of the property which he holds under a valid pledge as
the security for his claim against the pledger, notwithstanding a
subsequent adjudication of bankruptcy against the latter; and
the refusal of the pledgee to surrender the pledged property to
the assignee in bankruptcy is not a conversion of it.
Under the present act there is a dictum in the case of In re
Booth (3 Am. B. R. 574; 98 Fed. 975), in which it is said with-
out citing authority that the trustee in bankruptcy stands in the
position of an innocent purchaser without notice. But this is
clearly erroneous and the general doctrine is as set forth above.
{ See Chattanooga National Bank v. Rome Iron Co. 4 Am. B. R.
441; 102 Fed. 755, and cases cited.)
The liens that are preserved unaffected by the bankruptcy pro-
ceedings include all which are recognized by State laws. It is
immaterial whether they be statutory or be based on usage and
custom, or whether they be legal or equitable. Whatever the
character or description or name of the lien, provided it is a privi-
lege or charge upon property, recognized by the statutes or usages
of the State or by common law principles as a security for a means
of enforcing the payment of a debt or the fulfillment of a duty, it is
a " lien " affecting the property after it passes to the trustee, to
the same extent as it affected it while in the hands of the bank-
rupt himself. (In re Davis, Fed. Cas. 3,618; 2 N. B. R. 391;
in re Waddell, 1 N. Y. Leg. Obs. 53 ; Peck v. Jenness, 7 How.
612; Downer v. Brackett, 21 Vt. 599.)
Mechanics' liens.— And it has been held under the present act
that a mechanic's lien obtained within four months of bankruptcy,
ESTATES. 425
§ 67.] Mortgages to Secure Future Advances, etc.
if perfected according to the State statute, is not invalidated
under section 6yi because it is not created or obtained through
legal proceedings in strict definition or in the ordinary meaning
of the term nor is such lien an encumbrance created by the debtor.
( So held by the Circuit Court of Appeals for the 2d and 7th Cir-
cuits, in re Kerby-Denis Co. 2 Am. B. R. 402; 95 Fed. 116:
in re Emslie, 4 Am. B. R. 126; 102 Fed. 291).
Mortgages to Secure Future Advances — liens on Rents and Profits
— Mortgages of Property to be Acquired. — So, where a mortgage
is given to secure future sales of goods to the mortgagor and is
shown to be executed in good faith it is protected by the Bank-
rupt Law, and to the extent of the advances actually made is
valid as against the trustee in bankruptcy. (Marvin v. Cham-
bers, Fed. Cas. 9,179; 12 Blatch. 495; s. c. 13 N. B. R. yy.) So
the equitable right of the mortgagee to obtain the rents and
profits of the mortgaged property when the property itself is in-
sufficient security is recognized by the courts of bankruptcy when
such right exists. There is no dispute about this right in cases
where prior to the bankruptcy proceedings the mortgagee has
a receiver appointed in order to obtain such rents and profits.
That is recognized by all courts as giving to him a valid and en-
forceable lien but the weight of authority is that until such a re-
ceiver is appointed there is no lien upon the rents and profits.
{In re Bennett, Fed. Cas. 1,313; 12 N. B. R. 257; in re Sned-
aker, 4 N. B. R. 168.) In the latter case the authorities as to the
nature of the right of a mortgagee over the rents and profits of
the mortgaged property were exhaustively reviewed, and it was
held that where a mortgagee fails to secure the appointment of
a receiver and thereby neglects to acquire a lien on the products
or rents of the mortgaged premises, before the petition in bank-
ruptcy is filed, even though the premises sell for less than his
claim at a sale by the mortgagor's assignee in bankruptcy, he will
only be entitled out of the bankrupt's assets to a pro rata share
on the deficiency of his claim ; if the trustee in bankruptcy reduces
to possession the products of the mortgaged estate prior to the
(54)
426 THE NATIONAL BANKRUPTCY LAW.
Mortgages of Property to be Acquired. [Ch. VI
sale of the mortgaged estate, such products are to be treated a
assets to be distributed under the Bankrupt Act, and the mon
gagee cannot claim that a deficiency after sale on his mortgag
shall be paid therefrom in preference to the claims of other crec
itors. But other courts of bankruptcy have recognized the equitc
ble right of the mortgagee to take the rents and profits in cas
the security is insufficient, as a right which may ripen into
specific lien by proceedings instituted even after bankruptc}
Thus In re Sacchi (6 N. B. R. 497; s. c. 43 How. Pr. 250), it wa
said:
" If there be doubt whether the mortgaged premises are adequate securit
for the payment of the debt and interest (when finally adjudged due upon
valid mortgage) the court will recognize the prior lien of the mortgag
upon the land and the equitable right of the mortgagee to have tfc
rents separated from the general estate of the bankrupt by a receive!
ship or otherwise, and not permit them to be applied to the payment of otht
debts or even to the expenses of the assignee or his fees ; and on the ol
vious ground that he is only entitled to the interest which the bankrupt h«
in the premises. Nor will any delay be permitted without just reference t
the interest of all who are concerned, the mortgagees as well as other credi
ors."
Mortgages of Property to be Acquired. — As to the nature an
character of the lien obtained by a mortgage of property to b
subsequently acquired, and as to whether or not it is an equitabl
lien which may be enforced against the trustee, compare Brett z
Carter (Fed. Cas. 1,844; H N. B. R. 301), citing and reviewin
numerous authorities and distinguishing Moody v. Wright (5
Mass. 17) from Mitchell v. Winslow (Fed. Cas. 9,673; 2 Stor)
630). The weight of modern authority is, that a mortgage 0
property to be subsequently acquired gives to the mortgagee a
equitable title to the property, which may be enforced again;
the assignee. In the case of Barnard v. Norwich & Worceste
R. R. Co. (Fed. Cas. 1,007; l4 N. B. R. 469), decided in th
United States Circuit Court for Massachusetts, Justice Clifforc
in delivering the opinion of the court, said : " Assignees in bant
ruptcy, except in cases of fraud, take only such rights and ir
terests in the property of the bankrupt as he himself had, an
ESTATES. 42'
§ 67.] Liens by Judgment and Execution.
could himself have claimed and asserted at the time of his bank-
ruptcy, and they are affected with all the equities which woulc
affect the bankrupt himself if he were asserting those rights and
interests. No person' can sell a thing which he does not own
unless as the duly authorized agent of the owner. Nemo dm
quod non habet. Nor can he convey in praesenti property not in
existence, the rule being that every such deed or mortgage is in-
operative and void. Authorities to support those propositions
are not wanting; but the law will permit the grant or conveyance
to take effect upon property when it is brought into existence,
and comes to belong to the grantor, in fulfilment of an express
agreement, if the agreement is founded on good and valuable
consideration, unless it infringes some rule of law, or will preju-
dice the rights of third persons. (Pennock v. Coe, 23 How.
117 and 138.) Whenever the parties, by their contract, intend
to create a lien or charge, either upon real or personal property,
whether then owned by the assignor or contractor or not, or, if
personal property, whether it is in esse or not, it attaches in
equity as a lien or charge upon the particular property as soon as
the assignor or contractor acquires a title thereto against the
latter, and against all persons asserting a claim to the same under
him, either voluntarily or with notice, or in bankruptcy.
( Mitchell v. Winslow, Fed. Cas. 9,673 ; 2 Story, 630 and 644. ) "
liens by Judgment and Execution. — Liens obtained by judg-
ment or execution, unless obtained within four months prior to
the filing of the petition, and invalidated by some one of the pro-
visions of this section, are enforcible in bankruptcy. If by the
laws of the State in which the property is situated a judgment or
an execution or a levy creates a valid and enforcible lien, the
lienor's rights are not impaired by .the subsequent bank-
ruptcy of his debtor. (Marshall v. Knox, 16 Wall. 551;
Clark v. Iselin, 21 Wall. 360; Wilson v. City Bank, 17 Wall.
473.) In cases where the State law makes the lien to attach
from the time of the delivery of the writ of execution to the sheriff
or other officer, the lien is recognized in the bankruptcy court as
428 THE NATIONAL BANKRUPTCY LAW.
Miscellaneous Liens Enf orcible in Bankruptcy. [Ch. V]
existing from that date. Actual levy is not necessary in order 1
create a lien, unless made so by the laws of the State. (In j
Smith, Fed. Cas. 12,973; 2 Ben. 432; in re Weeks, Fed. Ca
17,350; 2 Biss. 259; s. c. 4 N. B. R. 364,) The first test in d<
termining the validity of any lien under the Bankruptcy Act i
the State law. Is there a lien recognized by the law of the Stat
where the property is situated ? If so, it is valid as against th
trustee in bankruptcy unless he can procure its invalidation as
preferential transfer, or unless it has been secured within fou
months prior to the filing of the petition, and is invalidated by th
provisions of this section.
Miscellaneous Liens Enforcible in Bankruptcy. — Whenever b
State law the lien of a vendor upon the property sold for th
purchase price thereof is recognized, there the court of bank
ruptcy will recognize and enforce such lien. (In re Hutto, Fed
Cas. 6,960; 3 N. B. R. 787.) So the lien of an attorney upoi
the papers of his client which he has prepared will be recognize!
and enforced in bankruptcy; and this notwithstanding the fac
that by the terms of section 70 the books and papers and docu
ments relating to a bankrupt's property pass to the trustee. (/;
re N. Y. Mail Steamship Co. Fed. Cas. 10,209; 2 N. B. R. 74
Rogers v. Winsor, Fed. Cas. 12,023; 6 N. B. R. 246.) So th«
lien of a pledgee is not only recognized, but is unimpaired, and h<
has the right to retain the property until it is released by a pay
ment of his claim. (Jerome v. McCarter, 15 N. B. R. 546
Yeatman v. Savings Inst. 95 U. S. 764; Clark v. Iselin, 21 Wall
360.) So the lien of a partner upon the partnership property foi
the surplus which may be due to him after the partnership debt:
have been paid, will be recognized by the bankruptcy court; anc
if prior to the proceedings in bankruptcy a receiver has been ap-
pointed in an action to dissolve the partnership and procure ar
accounting, and has taken possession of the property, the posses
sion of the State court through it officer will not be disturbed
(Clark v. Bininger, 38 How. Pr. 341; s. c. 3 N. B. R. 518.)
So the lien which a bank may have upon the shares of its stock-
ESTATES. 421
g 67.] Claims Void for Want of Record.
holders for the payment of any indebtedness due by the stock-
holder is good as against the trustee in bankruptcy of the latter
A bank has the power to establish a rule providing that the share:
of stockholders shall be considered as subject to a lien for th<
unpaid indebtedness to it, but unless there is such an express rul<
or statute, no such lien exists. (In re Dunkerson, Fed. Cas
4,156; 4 Biss. 227.) So a lessor's right of distraint for ren
may, by virtue of State statutes, be a lien enforcible in bank
ruptcy. (Marshall v. Knox, 16 Wall. 551.)
Trustee Has Wo Interest in lienors' Relative Rights of Priority.—
Inasmuch as the trustee takes subject to all liens (with excep
tion of those voidable by this section) he cannot object to ar
rangements made between the various lienors as to their respect
ive rights of priority. He cannot object that one of the lienor:
is entitled to payment in preference to the other, questions as t(
priorities being entirely and exclusively questions affecting thi
lienors themselves. (Jerome v. McCarter, 94 U. S. 734.)
Liens Dissolvable and Liens Deemed Null and Void Under thi
Section.
Claims Void for Want of Record. Section 67a. — This section i
simply declaratory of the law. In re Yukon Woolen Co. (2 Am
B. R. 805; 96 Fed. 326), it was held that where goods are sole
under a conditional bill of sale in a State where registration o
such sale is not required, but, by the contract are to be delivered ii
another State where such registration is required, the law of tb
latter State prevails. This decision follows the general principli
of law recognized by the federal courts that where a contract con
templates or provides that property is to be delivered or usee
in another State the lex loci solutionis governs. But in the casi
of in re Wright (2 Am. B. R. 364; 96 Fed. 187), it was held tha
where more than four months prior to the filing of the voluntas
petition the insolvent debtor executed and delivered a mortgag
not recorded within the statutory four months such mortgag
was a valid and subsisting lien as against the trustee. This de
43Q THE NATIONAL BANKRUPTCY LAW.
Liens Dissolved by Adjudication in Bankruptcy. [Ch. VII
cision was based upon the law of the State which only necessi
tated the recording of a mortgage to make it good as against m
tervening liens and conveyances. In general it may be said tha
paragraph "a" gives merely such rights to the trustee as th<
State laws provide for the protection of the creditors to whosi
rights the trustee is subrogated.
Subrogation of Trustee to Eights of Creditors. Section 67b — Thi:
paragraph is merely declaratory of the general principles of thi
Bankruptcy Act. (See in re Yukon Woolen Co. cited supra.)
Liens Dissolved by Adjudication in Bankruptcy. Section 67c, f .—
The provisions of paragraphs c and / of this section mak
the statute very different from the former statute as to liens ob
tained in or pursuant to legal proceedings. Under the forme
statute (R. S. § 5044, act of 1867, § 14), it was provided that th
assignment in bankruptcy should vest in the assignee the title fc
all the bankrupt's property and estate, both real and personal
although the same was then attached on mesne process, as th
property of the debtor, and that such assignment should dissolv
any such attachment made within four months next precedini
the commencement of the bankruptcy proceedings. All lien
other than attachments and those which could be avoided a
preferential transfers were valid under the former act, eve:
though the lienor in obtaining his lien knew of the insolvency o
his debtor. But the present act declares that the proceedings i:
bankruptcy shall affect not only attachments, but judgments
levies and all other liens created by or obtained pursuant to legs
proceedings. Considered separately, either of the paragraphs
and / though presenting many serious questions as to the right
of such lienors, would not be impossible of construction ; but it i
difficult to construe the two together. Paragraph f seems to ir
elude, as a rule, nearly all cases which might arise under para
graph c. It is possible that there might be some cases arisin
under the third subdivision of the latter paragraph (c) whic
would not fall within the terms of paragraph /, but aside fror
ESTATES. 431
§ 67.] Liens Dissolved by Adjudication in Bankruptcy.
these possible instances the liens which by paragraph c are de-
clared to be dissolved by an adjudication in bankruptcy if certain
facts appear, would seem to be absolutely void under the terms of
paragraph / whether or not those facts existed. Both paragraphs
relate to the same subject-matter. Each is an enactment concern-
ing judgments, attachments, and, in general, all liens created by
or obtained in or pursuant to legal proceedings. Paragraph c
imposes certain limitations as to the liens which will be dissolved
by its terms, which do not appear in the provisions of paragraph f.
Thus, to dissolve a lien under the terms of paragraph c it is nec-
essary that it be one created pursuant to a legal proceeding com-
menced within the four months prior to the filing of the petition.
If the action is commenced earlier, although the lien is perfected
within the four months, it is dissolved under the terms of para-
graph c. But by paragraph f, if the lien itself is obtained within
four months, it is deemed null and void. By paragraph c the
liens which are dissolved are those existing on the property of one
thereafter adjudged bankrupt. By paragraph / the lien which is
to be deemed null and void must have been obtained against one
who was insolvent at the time of the lien. This fact, that in-
solvency at the time of obtaining the lien is not in express terms
required to exist in all cases in order that the subsequent adjudica-
tion may act as a dissolution, possibly makes certain liens liable
to dissolution which could not be deemed null and void under the
terms of paragraph f. But as two of the three subdivisions of
paragraph c, declaring in what instances the dissolution may oc-
cur, require the existence of insolvency at the time of the creation
of the lien, the possible instances in which a lien may be dissolved
but not deemed null and void, are limited to those set up in sub-
division three. If liens can be sought and permitted in fraud of
the provisions of the present Bankruptcy Act, when the person
upon whose property the lien is acquired is not insolvent, then
such liens would fall within the terms of paragraph c, but not of
paragraph /. With reference to the appearance in the present
statute on bankruptcy of these two paragraphs, it may be noted
that in the House bill which, with the changes made by the con-
432 THE NATIONAL BANKRUPTCY LAW.
Liens Dissolved by Adjudication in Bankruptcy. [Ch. V
ference committee, became the present bankruptcy law, pai
graphs e and / of this section did not appear. Paragraph c w
the only paragraph or provision in that bill invalidating liens c
tained through legal proceedings, other than the provisions
section 60 invalidating preferential transfers. The word " trai
fer " in that bill included " the creation of a lien on property
any means other than by compulsory process, prosecuted in go
faith." Paragraphs e and f of the present law, in substance, we
section 7 of the Senate bill. It, therefore, appears that in t
compromise between the House and Senate the provisions of be
bills were incorporated into the present statute without any ;
tempt to enact all the law upon the subject of the invalidation
dissolution of liens obtained by legal proceedings, in one concii
clear and comprehensive paragraph.
It is to be noted also that in paragraph c the lien referred to
one obtained within four months prior to the filing of a petitii
" by or against " the bankrupt, while in paragraph f the wor
used are " within four months prior to the filing of a petition
bankruptcy against him.
On account of this disparity in the language of the two pai
graphs some courts have endeavored to distinguish by holdii
that paragraph c refers to voluntary cases and that paragraph
to involuntary cases alone. Thus in the case of In re De Lue
Am. B. R. 387; 91 Fed. 510), it was held that where an attac
ment of the property of a voluntary bankrupt had been ma
by virtue of a precept issued within four months prior to the filii
of the petition but in a suit that was commenced a year befo
the filing of the petition the lien of attachment was not destroy
by an adjudication of the petitioner in bankruptcy on the groui
that the case falls within section 67c, and the provisions of secti<
67f being limited to involuntary bankruptcy, have no applicatio
This case was followed by In re Easley ( 1 Am. B. R. 715 ; 93 Fe
419). where property had been levied upon by an execution issu
upon a judgment prior to the statutory four months but the Sc
had taken place within the four months, and also by the case of .
re O'Connor (95 Fed. 943). But the weight of authority is tl
ESTATES. 433
§ 67.] Liens Dissolved by Adjudication in Bankruptcy.
other way. In the case of In re Richards (3 Am. B. R. 145 ; 37 C.
C. A. 634; 96 Fed. 935), decided in the Circuit Court of Appeals
for the 7th Circuit, it was held that paragraph f applies not only to
involuntary cases but to voluntary proceedings as well in analogy
to the definition in section 1, where it is stated that " a person
against whom a petition has been filed " shall include a person
who has filed a voluntary petition. In that case liens obtained by
judgment notes which gave the holder the power of attorney to
enter up judgment were considered to be annulled and rendered
void by the adjudication where the notes had been given before
the statutory period but the entry of the judgment had been made
within that time. So in the case of In re Higgins (3 Am. B. R.
364; 97 Fed. 775), an attachment issued within four months
though the case in which the attachment was issued was begun
long before was annulled. See In re Vaughn (3 Am. B. R.
362; 97 Fed. 560), in which the cases are collected. (See also
In re Rhoades, 3 Am. B. R. 380; 98 Fed. 399; in re Dobson, 3
Am. B. R. 420; 98 Fed. 86; in re Lesser, 3 Am. B. R. 815; 100
Fed. 433; in re Kemp, 4 Am. B. R. 242; 101 Fed. 689.) These
cases hold that wherever there is an inconsistency between the
provisions of paragraphs c and f the latter controls and super-
sedes the former under the well-known rule of statutory con-
struction as the last statement of legislative will. Therefore the
broad provisions of paragraph f, annulling and avoiding all liens
obtained through legal proceedings against a person who is in-
solvent, upon his adjudication either in voluntary or involuntary
bankruptcy, govern. The facts which must appear in order to
make an adjudication of bankruptcy a dissolution of liens, are
set forth in detail under paragraph c. In contrast with para-
graph c, it is to be noted that under the terms of paragraph f
nothing need be shown in order that the liens obtained through
legal proceedings shall be deemed null and void except the fact
of the insolvency, at the time of the creation of the lien, of the
person on whose property the lien exists, and the subsequent
adjudication in bankruptcy. The intentions of the debtor, the
intentions and knowledge or the reasonable cause of belief of
(55)
434 THE NATIONAL BANKRUPTCY LAW.
Liens Dissolved by Adjudication in Bankruptcy. [Ch- "V
the lienors, the effect of the enforcement of the lien, and 1
motives of the parties, are all alike immaterial. The rule is fix
and arbitrary that all liens obtained through legal proceedir
against a person who is insolvent, if obtained within four monl
prior to the filing of a petition in bankruptcy against him sh
be deemed null and void in case he is adjudged a bankrupt. T
only exception is that in the proviso at the end of the sectie
saving the rights of bona fide purchasers for value, who ha
purchased without notice and without reasonable cause for
quiry. It might at first seem as if under paragraph f no f;
other than the adjudication or those facts established by the i
judication need be shown in order to make certain liens deerr
null and void. But it is not to be forgotten that paragraph
refers only to liens obtained against a person who is insolve
Not all liens obtained against one afterwards and within fc
months adjudged bankrupt are deemed null and void. It mi
appear that the person whose property is subject to the lien w
insolvent at the time of the creation of the lien. It is evidenl
lien might be obtained against one who is adjudged bankn
within four months thereafter, but who was not insolvent at 1
time the lien was obtained. The act of bankruptcy and the
solvency might have occurred at some period subsequent to 1
creation of the lien. If so, the adjudication of bankruptcy wot
in no way determine whether or not the party was insolvent at 1
time the lien was created.
But the provisions of section 67 f are not to be extended so
to affect a judgment obtained after the filing of a petition. (K
mouth v. Braeutigam, 46 Atl. 769 ; 4 Am. B. R. 344 ; N. Y. Si
Ct. June, 1900.)
Inasmuch, however, as paragraph c may be applied in so
cases it becomes necessary to define the specific conditions there
Nearly all of the words and phrases appearing in subdivisic
1, 2,, and 3 of paragraph c have been defined or discussed in p
vious sections. Compare section 3, paragraph on Suffering
Permitting Preferences through Legal Proceedings, as
the phrase " obtained and permitted." " Insolvency " has been
ESTATES. 435
§ 67.] Proceedings to Annul Liens.
fined in section 1 (15). " Reasonable cause to believe that one is
insolvent " was considered under paragraph 60. The expression
" in contemplation of bankruptcy " was defined in section 14.
The phrase " in fraud of the provisions of this act " should
now be considered. That phrase appeared in section 5,128 of the
Revised Statutes, transfers made " in fraud of the provisions of
that act " being voidable in the same manner as preferences. The
general purpose of the Bankruptcy Act is to insure the equitable
pro rata distribution among creditors of the property of one un-
able to pay all creditors in full. Anything which is undertaken
for the purpose of defeating this purpose must be considered as
a fraud upon the act. Courts are invariably reluctant about
giving any exact definition of the word " fraud," fearing that if
a definition were framed it would give an opportunity to the un-
scrupulous to commit fraud and yet upon technicalities to escape
punishment, enabling them to do acts which would be fraudulent
in spirit, although perhaps not within the letter of the definition.
Similarly the courts have been careful not to attempt to frame a
comprehensive definition for the phrase " in fraud of the pro-
visions of this act," but have contented themselves with determin-
ing for each particular case in which the question arose whether
or not the fraud existed. The answer must always depend upon
the special circumstances of each case. Compare the following
cases decided under the former act in which the question arose
whether or not certain acts constituted frauds upon the Bank-
ruptcy Law. (Wager v. Hall, 16 Wall, 584; Toof v. Martin,
13 Wall. 40; Buchanan v. Smith, 16 Wall. 277.)
Proceedings to Annul Liens.— While under the provisions of this
section, the adjudication in bankruptcy operates to dissolve or
annul the prohibited liens, it will be necessary in many cases to
take some action in order to establish the right to annul the lien
as against a lien-holder defending. The question is, in what
forum these proceedings to annul must take place. Prior to the
decisions of the Supreme Court holding that the District Court
lad no jurisdiction except by consent of the defendant to enter-
436 THE NATIONAL BANKRUPTCY LAW.
Proceedings to Annul Liens. [Ck* •
tain suits by the trustee to set aside fraudulent or preferent
transfers (see section 23 and section 2), many courts held tl
the District Court had jurisdiction to compel dissolution or s
nulments of liens by summary process. This they exercised
the theory that the trustee was immediately vested with the ti
to the property, covered by the liens by the express provisic
of the section. (See Bear Co. v. Chase, 3 Am. B. R. 746; 40
C. A. 182; 99 Fed. 920; in re Francis- Valentine Co. (D. C.)
Am. B. R. 188; 93 Fed. 953; same case on appeal, 2 Am. B.
522 ; 36 C. C. A. 499 ; 94 Fed. 793 ; in re Kenney, (D. C. ) 2 A
B. R. 494; 95 Fed. 427; and see cases collected in the note
section 23b.) These cases seem to have overlooked the fact tl
the defending lien-holder, or the sheriff, or other official holdi
in his hands goods which have been levied upon and attached
the proceeds thereof, is an " adverse " party within the meant
of the law and entitled to his " day in court." The rights of t
trustee so far as the liens are concerned are no greater than as
property which is fraudulently transferred. Therefore it wot
seem to follow that in order to annul the liens a plenary acti
should be brought. Clearly this action cannot be brought in t
bankruptcy court except by consent of the defendant but must
brought in a State court or, where there is " diversity of citize
ship " and the requisite amount, in the Circuit Court of t
United States. See discussion of this subject under sections
and 23. And so ran the better authority even prior to the dec
ions of the Supreme Court. {In re Kelly, 1 Am. B. R. 306 ;
Fed. 504; in re Franks, 2 Am. B. R. 632; 95 Fed. 635; in
Abraham, 2 Am. B. R. 266; 35 C. C. A. 592; 93 Fed. 76;
These cases are all collected and discussed in the case of In
Hammond, decided in the District Court of Massachusetts a
reported in 3 Am. B. R. 466; 98 Fed 845. It is absurd to s
that the District Court can, for example, order the sheriff
surrender property or the proceeds thereof when he may prope:
defend by saying that he holds the property under an order
the court of which he is an officer. In case of his refusal 1
only remedy would be for the trustee to sue in the State cou
ESTATES. 437
§ 67.] The Effect of Dissolving the Lien.
There may be some difference in the case of an assignment for
the benefit of creditors which the trustee seeks to set aside. The
assignee is not properly an adverse claimant. He holds in the
right of a creditor and perhaps the summary jurisdiction of the
District Court may be properly exercised to compel him to hand
over the assigned property. But see contra In re Abraham,
cited, supra, now on appeal in the Supreme Court sub nom. Bern-
heimer v. Bryan.
As bearing upon the question of the summary jurisdiction of
the bankruptcy court it has been held by the Supreme Court in
White v. Schloerb, 4 Am. B. R. 178; 178 U. S. 542, that where
the goods are seized from the actual possession of the bankrupt
after the date of adjudication and after they have been taken into
possession by the referee, summary proceedings will lie. The
opinion in this case seems to indicate that summary proceedings
would not lie if the bankruptcy court had not first obtained actual
manual possession.
The Effect of Dissolving the lien. — Nothing but the lien is af-
fected by the dissolution provided for by paragraph c. That
paragraph provides that the lien shall be dissolved, but this does
not affect the debt which the lien secures, nor does it annul the
process or judgment, nor act as a dismissal of the cause. A
judgment creditor may lose his lien upon the property passing to
the trustee, but his judgment continues to be a judgment estab-
lishing the indebtedness due him and conclusive on all parties
privy to it and their assigns ; and it remains unaffected, except as
a lien, until the bankrupt is released from it by a discharge. If
not barred by a' discharge there is no question but that the judg-
ment creditor can enforce it from the after-acquired property of
the debtor. (Bracken v. Johnston, Fed. Cas. 1,761 ; 15 N. B. R.
106.) The language of paragraph / would seem to indicate
that all judgments recovered within the four months are null
and void, but on the other hand it is clear that only liens are
within the contemplation of the lawmakers. (See ^opinion of
Hotchkiss, referee, In re Pease, 4 Am. B. R. 547.
438 THE NATIONAL BANKRUPTCY LAW.
Liens Given in Good Faith — Conveyances in Fraud of Creditors [Ch. V
liens Given or Accepted in Good Faith and for Present Consi
eration. Section 67c!. — If this subdivision is to be preserved ai
applied notwithstanding the provisions of paragraph / it mu
be taken as limited strictly by the language " not in conter
plation of or in fraud upon this act." Such are the valid lie:
referred to at the beginning of the commentary on this se
tion. That is to say while paragraph d does not cover all val
liens because there may be liens which are not referred to in tl
Bankruptcy Act at all, it does refer to all liens obtained with
four months which are not obtained through legal proceeding
such as mechanics' liens, as to which see ante under this sectio
Compare also proviso at the end of paragraph f as to purchas
for value. And in case the lien is foreclosed or enforced t
purchaser for value is protected, the proceeds standing in li
of the property. (See In re Kenney, cited supra.)
Conveyances and Encumbrances in Fraud of Creditors. Sectii
67c — An examination of paragraph e shows that the transfe
and incumbrances therein declared void are those made with ;
intent to hinder, delay or defraud creditors. The provision th
such transfers and incumbrances, if made within four mont
prior to the filing of the petition shall be null and void, does n
mean that the trustee cannot bring action to invalidate any frau
ulent transfers made earlier than that time. The right given
him by section 70 (4) is co-extensive with the right which ere
itors prior to the bankruptcy proceedings had of invalidate
fraudulent transfers.
There is no reason to believe that the intent to hinder, delay
defraud is in any respect different under this section from wr
it was at common law. In construing similar provisions unc
the Act of 1867, Mr. Justice Davis said (Tiffany v. Lucas,
Wall. 410) :
" There would seem to be no difficulty in ascertaining the meaning of O
gress on the subject embraced in this section in its application to this case.
' Clearly all sales are not forbidden. It would be absurd to suppose t
Congress intended to set the seal of condemnation on every transaction
ESTATES. 439
§ 68.] Cross-references — Set-offs and Counterclaims.
the bankrupt which occurred within six months of bankruptcy, without re-
gard to its character. A policy leading to such a result would be an excellent
contrivance for paralyzing business, and cannot be imputed to Congress with-
out an express declaration to that effect. The interdiction applies to sales
for a fraudulent object, not to those with an honest purpose. The law does not
recognize that every sale of property by an embarrassed person is necessarily
in fraud of the Bankrupt Act. If it were so. no one would know with whom
he could safely deal, and besides, a person in this condition would have no
encouragement to make proper efforts to extricate himself from difficulty.
" It is for the interest of the community that everyone should continue his
business, and avoid, if possible, going into bankruptcy ; and yet how could this
result be obtained if the privilege were denied a person who was unable to
command ready money to meet his debts as they fell due, of making a fair
disposition of his property in order to accomplish this object.
" It is true he may fail, notwithstanding all his efforts, in keeping out of
bankruptcy, and in that case any sale he has made within six months of that
event is subject to examination. If it shall turn out on that examination
that it was made in good faith, for the honest purpose of discharging his
indebtedness, and in the confident expectation that by so doing he could con-
tinue his business, it will be upheld. On the contrary, if he made it to evade
the provisions of the Bankrupt Act, and to withdraw his property from its
control, and the vendee either knew, or had reasonable cause to believe, that
his intention was of that character, it will be avoided. Two things must con-
cur to bring the sale within the prohibition of the law ; the fraudulent design
of the bankrupt and the knowledge of it on the part of the vendee, or rea-
sonable cause to believe that it existed."
(See, however, In re McLam, 3 Am. B. R. 245 ; 97 Fed. 922,
in which there seems to be a curious confusion of ideas as to the
meaning of the various provisions of the Bankruptcy Act. )
Cross-references.— As to the trustee's title being subject to all
liens, incumbrances and equities, compare section 70. As to
the power of bankruptcy courts to enforce the rights of lienors
and secured creditors, and to restrain lienors from enforcing their
rights in other courts, compare section 2, paragraph on Jurisdic-
tion to Determine the Rights of Lienors. Compare also sec-
tion 57 (h), and notes thereto. As to sales of encumbered prop-
erty free from liens, compare section 70 and commentary thereon.
Sec. 68. Set-offs and Counterclaims. — a In all cases of mutual
debts or mutual credits between the estate of a bankrupt and a
440 THE NATIONAL BANKRUPTCY LAW.
Section Declaratory of General Legal Principles [Ch. ^
creditor the account shall be stated and one debt shall be set
against the other, and the balance only shall be allowed or paid
b A set-off or counterclaim shall not be allowed in favor of i
debtor of the bankrupt which (i) is not provable against
estate; or (2) was purchased by or transferred to him after
filing of the petition, or within four months before such nlii
with a view to such use and with knowledge or notice that si
bankrupt was insolvent, or had committed an act of bankrupt
Analogous Provisions of former Acts. —
R. S. § 5073 ; act of 1867, § 20; act of 1841, § 5 ; act of 1800, § 42.
Section Declaratory of General Legal Principles. — In Sawyer
Hoag, 17 Wall. 610; s. c. 9 N. B. R. 145, it was said by '
United States Supreme Court, with reference to Revised St
utes, section 5,073 (Act of 1867, sec. 20), the section analogous
the one now under consideration : " This section was not intenc
to enlarge the doctrine of. set-off, or to enable the party to tin
a set-off in cases where the principles of legal or equitable set-
did not previously authorize it. The debts must be mutual ; m
be in the same right." It would be well, in considering t
statement, to consider also the provision of this section wh
declares that claims which have been purchased within fc
months prior to the filing of the petition, if purchased with
view to use them as set-offs and with notice or knowledge of 1
insolvency of the debtor cannot be so used. That provision i
pliedly enacts that claims purchased more than four months 1
fore the filing of the petition may be used as set-offs, howe^
much the use of the claims as a set-off may tend to give on«
preference over other creditors. It has been observed by the N
York Court of Appeals that equity does not allow a set-off unl
there is a recognized rule of law or a recognized equitable reas
that requires it. It does not interfere to declare either a set-off
a stoppage unless there is one debt contracted on the faith of i
other, or an agreement between the parties that one should be d
counted from the other, or unless there is a rule of law on which
ESTATES. 441
§ 68.] Debts Which May be Set-off — Mutual Credits.
base its action, or unless some intervening equity that renders the
interposition of the court necessary for the protection of the de-
mand. Equity sometimes allows a set-off when law will not, be-
cause of the insolvency of one of the debtors and the willingness
of the other to anticipate the time for the payment of the debt
owing by him if the whole or a part of that owing to him may be
applied as a set-off. (Munger v. Albany Bank, 85 N. Y. 580,
citing with approval the above quotation from Sawyer v. Hoag. )
Debts Which May Be Set-off.— The term " debt " must be con-
strued in accordance with the definition given in section 1 (11)
as including any debt, demand or claim provable in bankruptcy.
Any debt which may be proved, and to the owner of which a
dividend must be paid, may be a set-off against a claim held by
the bankrupt's estate. Consequently, a debt payable in futuro
may be a set-off against a debt payable in praesenti. (Collins v.
Jones, 10 B. & C. 777; Ex p. Wagstaff, 13 Ves. 65; Sheldon v.
Rothschild, 8 Taunt. 157; Ex p. Prescott, 1 Atk. 230; Drake v.
Rollo, 3 Biss. 273 ; Fed. Cas. 4,066 ; s. c. 4 N. B. R. 689 ; in re
City Bank, Fed. Cas. 2,742; 6 N. B. R. 71 ; Bittlestone v. Tem-
mis, 1 C. B. 389.) If a debt payable in futuro be owing by the
bankrupt, it is clear that it is a debt provable under the terms of
the present statute, but it is no less a set-off if the debt payable
in futuro be one owing by the creditor to the bankrupt. There
is no set-off of unliquidated damages. (Bell v. Carey, 8 C. B.
887.) But where one who has been injured by a tort has a right
to waive a tort and sue in assumpsit, the damages, if liquidated,
may be set off against a debt due to the tort feasor. And under
the present act, which permits the liquidation of all unliquidated
claims, probably damages for any tort could be set off against
claims of the tort feasor, even though it was not such a tort that
one could sue upon an implied contract.
Mutual Credits. — It has been said : " The term ' mutual credits '
in the Bankruptcy Act has a more comprehensive meaning than
the term ' mutual debts ' in the statutes of set-off. The term
credit is synonymous with trust, and the trust need not be of
(56)
442 THE NATIONAL BANKRUPTCY LAW.
Mutual Credits. [Ch- V
money on both sides, but if one party intrusts the other with goo
or value, it will be a case of mutual credit." (In re Catlin, Fe
Cas. 2,519; 3 N. B. R. 540, at 545; citing 7 Bac. Ab. 170; al
citing Rose v. Hart, 8 Taunt. 499.) In Rose v. Hart, which
one of the leading cases on the law of set-off, it was ruled th
where cloth was deposited with a fuller to dress, by a party wl
afterwards became a bankrupt, there was a case of mutual crec
to the value of the service for dressing the cloth, but not for
general balance due from the bankrupt, and in that case the ge
eral rule was laid down that the credits intended by the act we
only such as must, in their very nature, terminate in cross debl
This rule has continued to be settled by law from the time of th
decision. Applying this rule, it has been held that where a de
is due from one party and credit is given by him on the othe
for a sum of money payable at a future date, and which will thi
become a debt; or where there is a debt owing by one and a d
livery of property by him to his creditor with directions to tui
it into money; or a delivery of a chose in action with power
collect, in all these cases mutual credits spring up ; but where the
is a mere deposit of property without authority to turn it in
money, no debt can ever arise out of it, and therefore it is not
credit within the meaning of the statute. (Compare Murray
Riggs, 15 Johns. Rep. 571. The subject of mutual credits w
also exhaustively considered in re Dow, Ex p. Whiting, Fe
Cas. 17,573; J4 N. B. R. 307, citing and reviewing the followii
cases: Young v. Bank of Bengal, 1 Moore P C. 150; s. c.
Deac. 622 ; Naoroji v. Chartered Bank of India. L. R. 3 C.
444; Astley v. Gurney, L. R. 4 C. P. 714; American Notes
Rose v. Hart, 2 Smith's Lead. Cas. ; McLaren v. Pennington,
Paige, 102; Receivers v. Paterson Gas Co. 23 N. J. 283; Aldri
v. Campbell, 70 Mass. 284 ; Clark v. Hawkins, 5 R. I. 219 ; Med
mac Bank v. Curtis, 24 Me. 36; Phelps v. Rice, 51 Mass. 12
Myers v. Day, 22 N. Y. 489 ; Morrison's Assignee v. Bright, :
Mo. 298.) A study of these cases shows that the courts in t
United States, following the English courts, liberally construe t
laws on the subject of set-off in the matter of mutual credit
ESTATES. 443
§ 68.] Mutual Credits.
cases of bankruptcy and insolvency. The rule then, it is said,
in re Dow (supra), " is that a creditor, who at the time of bank-
ruptcy has in his hands goods or chattels of the bankrupt with a
power of sale, or choses in action with a power of collection, may
sell the goods or collect the claims and set them off against any
debt which the bankrupt owes him (at time of bankruptcy), and
this although the power to sell or collect would have been re-
vocable by the bankrupt before his bankruptcy; in other words,
the very fact of bankruptcy, in such cases, gives a sort of lien
which did not exist before." Before the decision in Rose v.
Hart (8 Taunt. 499), set-off was admitted even where there was
no power of sale. Since that decision it has been settled law that
set-off can be had only when the mutual credits are such as must
terminate in debts. (Groom v. West, 8 Ad. & E. 758; Russell v.
Bell, 8 Mees. & W. 277.) The case of Young v. Bank of Bengal
(supra) established as a limitation to the rule that a mutual
credit arises if a creditor is intrusted by his debtor with goods
to sell, that if the right to sell does not arise until after the bank-
ruptcy, then there is no set-off for the surplus, for the reason
that the assignee in bankruptcy may redeem instantly and before
any such power existed, and the creditors shall not be prejudiced
by any failure on his part to redeem. The rights of the parties are
fixed at the date of the bankruptcy ; if the credit does not exist at
that time, then there can be no set-off. Applying these principles,
it was held in re Dow (supra), that where securities have been
deposited with one as collateral to a debt owing to him, with a
power of sale existing at the time of the bankruptcy, notwith-
standing there was a promise implied by law, if not express, to
return the surplus, yet such surplus might be set off against a
debt due by the person holding the collateral to the one deposit-
ing it ; that a promise, even express, to return the surplus did not
prevent the surplus from being held and used as a set-off unless
the property had been intrusted to one for a particular purpose,
inconsistent with such application of the surplus, so that to retain
it would be a fraud or breach of trust. (In re Dow, Ex. p.
Whiting, Fed. Cas. 17,573; x4 N. B. R. 307; see also cases cited
444 THE NATIONAL BANKRUPTCY LAW.
Entrusting Property to One does not Create a Mutual Credit. [Ch.
therein, viz. Marks v. Barker, i Wash. 178; Eland v. Can
East, 175; Mayor v. Nias, 8 Moore, 275; Cornforth v. Ri\
2 M. & S. 510.) For an instance of a deposit creating a tr
see In re Troy .Woolen Co. (Fed. Cas. 14,203; 8 N. B. R. 41
Entrusting Property to One for a Specific Purpose Does not Cri
a Mutual Credit.— To constitute mutual credits there must h
actually been a credit given by one with an understanding tha
could or might be used as an offset to a debt due by the
giving the credit. If property is intrusted by one to another
a specific purpose, not with an intent to create a debt, this is
giving of a credit which can be set off. Compare Alsagei
Currie( 12 Mees. & W. 758). The Bankruptcy Act being inten
to prevent fraud, will not allow one to avail himself of an
debtedness created by his own wrongful conduct, and set it
in reduction or as a payment of a claim due to him. Thus,
England it has been held that an attorney with whom bills of
change have been deposited for a specific purpose cannot c
vert the proceeds to his own use and claim that he retains tr.
as a payment on a debt due to him. Buchanan v. Findley
B. & C. 738).
The matter of " mutual credit " was considered in the case
Libby v. Hopkins, 104 U. S. 303. The facts in that case v»
that A being indebted to B upon a note secured by a mortga
and also upon account, sent to B money with instructions to en
it upon the note. Afterwards A was adjudged a bankrupt. 1
U. S. Supreme Court in this case held that the money whicl
received was received in trust by him to apply it pursuant to c
tain instructions, and that having refused to make such appli
tion of the funds, he could not set if off against the account,
was liable to the assignee in bankruptcy for the amount recei-
by him. The money was sent by A to B in the form of dra
and the contention of plaintiff was that this was a deposit of pr
erty on one side with authority to turn it into money, and t
that authority enabled him to retain the money and incur by
doing an indebtedness, which could be off-set against his cla
ESTATES. 445
§ 68.] Knowledge of Intent to Give Credit — Debts Must be in Same Right.
The court disapproving of this contention, laid down the rule
that the term " mutual credit " includes only such where a debt
might have been within the contemplation of the parties; citing
and approving Smith v. Hodson (4 T. R. 211) ; Esen v. Cato (5
Barn. & Aid. 261) ; Rose v. Hart {supra) ; Easman v. Cato (5
Barn. & Aid. 861 );Ex p. Ockendon ( 1 Atk. 235) ; and criticising
the dictum of Lord Hardwick, in Ex p. Deeze (1 Atk. 228), to the
effect that the words " mutual credit " have a larger meaning
than " mutual debts."
Knowledge of the Indebtedness and Intent to Give Credit Must
Exist. — Mutual credits do not exist where there is not a connec-
tion between the claims. A mutual credit is a knowledge on
both sides of an existing debt due to one party and a credit by the
other party founded on and trusting to that debt as a means of
discharging it. (Munger v. Albany Bank, 85 N. Y. 580; Ex p.
Prescott, 1 Atk. 231 ; Key v. Flint, 8 Taunt. 23.) Applying this
principle, it has been held that where the same persons constituted
separate firms doing business under different names, if a party
has a credit with one firm and an indebtedness with the other,
the indebtedness due to the latter cannot be set off against the
credit with the former unless the party knew that both firms were
composed of the same persons, and the course of business be-
tween him and them showed that his transactions with each firm
were considered as having a connection. (Sparhawk v. Drexel,
Fed. Cas. 13,204; 12 N. B. R. 450.)
Debts Must Be in the Same Eight. — Mutual debts must be in the
same right. To be mutual, debts between parties must be owing
to and be due in the same rights and capacities. (West v. Pryer,
2 Bing. N. C. 455; Ex p. Bailey, 1 M. D. & D. 263.) Thus, a
debt due one as a guardian or trustee cannot be set off against a
debt due him individually. (Bishop v. Church, 3 Atk. 610.)
And upon the principle that the capital of a corporation is a
trust fund for the payment of the debts due to general creditors,
it has been held that one could not set off an indebtedness due to
446 THE NATIONAL BANKRUPTCY LAW.
Set-off of Joint and Partnership Claims, etc. [Ch.
him personally against a claim for an unpaid subscription tc
stock. And where to evade this liability he had made a non
payment of his subscription, but at the same time had v
drawn an equivalent amount from the company's treasury ;
loan and given his note therefor, the purpose being to turn
stock liability into a contract liability, the whole transaction
held to be fraudulent. (Sawyer v. Hoag, 17 Wall. 610; £
9 N. B. R. 145 ; followed in Jenkins v. Armour, Fed. Cas. 7,2
6 Biss. 312; s. c. 14 N. B. R. 276; see also Drake v. Rollo, ]
Cas. 4,066; 3 Biss. 276; s. c. 4 N. B. R. 689; Scammon v. K
ball, Fed. Cas. 12,435; 5 Biss. 431 ; s. c. 8 N. B. R. 337; and
under present act in re Goodman Co. 3 Am. B. R. 200.) '
cases just cited not only authoritatively established the princ
that trust debts cannot be set off against individual claims,
also show that all debts incurred between parties in the s;
rights and capacities are subject to set-off. Thus, in Drak(
Rollo, and Scammon v. Kimball, while the court refused to al
a set-off of a personal claim against an indebtedness upon
unpaid stock subscription, in each of these cases personal cla
were set off against personal debts. Claims for indemnity un
insurance policies were allowed as set-offs against debts for mo
borrowed in good faith. But where the money was loaned w
the intent to change the liability of the stockholder as one of
trustees of the capital for the benefit of general creditors int
mere contract liability, claims for indemnity under insura
policies were not allowed to be set off against notes given for
purpose stated. So where the ownership of a claim is met
nominal, and no more than a bare legal title, and not an act
interest, it cannot be set off against a debt due by the owner hav
this bare legal title. (In re Lane, 2 Low. 305 ; Fed. Cas. 8,04
Set-off of Joint and Partnership Claims Against Individual
debtedness.— One who has a claim against several persons join
and owes one of them individually may set off his claim agai
his indebtedness against the estate of either of the joint debt
who may become bankrupt. The fact that it may be subject
ESTATES. 447
§ 68.] Set-off of Joint and Partnership Estate, etc.
be marshaled makes no difference. The joint debtors are liable
in solido for the whole debt. (Tucker v. Oxley, 5 Cranch, 34.)
But a joint claim, that is, a debt due to several joint creditors,
cannot, it seems, be set off against a debt due by one of them.
Thus, if the debt is due to A and B it cannot be appropriated to
pay the indebtedness of A to the common debtor. The debtor
who has incurred an indebtedness to several persons jointly can-
not discharge it by setting up a claim which he has against one
of those persons, if the others have no concern with his claim
and cannot be affected by it. No more can one of several joint
creditors, against whom an action is brought by the common
debtor upon a claim which the latter has against him, use the joint
claim as an offset to his own debt, for he has no right thus to
appropriate it. Equity will not permit him to pay his individual
debt out of the joint property, and if he had the assent of his co-
obligees to do this, it would be unjust to the suing debtor be-
cause he has no reciprocal right to do the same thing. (So held
in Gray v. Rollo, 18 Wall. 629; s. c. 9 N. B. R. 337, citing and
distinguishing Tucker v. Oxley, 5 Cranch. 34.) The facts in the
case of Gray v. Rollo, to which the doctrine just stated was ap-
plied, were as follows: A and B were joint makers of certain
notes which were transferred to an insurance company. B and C
held policies in the same company which became due in conse-
quence of loss by fire. The company afterwards becoming bank-
rupt, its assignee claimed the full amount of the notes from A
and B. B sought to set off against his half of the liability the
claim due to him and C on the policies of insurance, the latter
consenting thereto. But it was held in accordance with the prin-
ciples above stated that the two obligations had not been con-
tracted with reference to each other, and hence it was not a proper
case for set-off. And see under present act In re Crystal Spring
&c. Co. (4 Am. B. R. 55 ; 100 Fed. 265).
(Compare on this subject of the offset of partnership debts
against individual debts, Ex p. Twogood, n Ves. 517; Ex p.
Christie, 10 Ves. 105; Ex p. Hanson, 12 Ves. 346; Ex p.
Stephens, 1 1 Ves. 24. )
448 THE NATIONAL BANKRUPTCY LAW.
Claims Purchased After Filing of the Petition, etc. [Ch
Claims Purchased After the Filing of the Petition or Within
Months Prior Thereto. — Under the present act, if a claim has
purchased by the debtor of the bankrupt after the filing oi
petition or within four months prior to that time, it cannc
used as a set-off if it was procured with a view to such use
with knowledge or notice that such bankrupt was insolvent or
committed an act of bankruptcy. The intent or " view to
use " and the knowledge or notice of the act of bankruptcy (
insolvency must concur or else the claim can be used as a se1
Strictly construed, the language of the section would pern
debt purchased after the filing of a petition to be used as a
off, unless purchased with the " view to such use," but to a
such a set-off would certainly seem to be inconsistent with
purpose and policy of the Bankruptcy Act, and would open
gates to the obtaining of improper advantages. The commf
ment of the proceedings in bankruptcy is in law notice to af.
world, and if all persons are chargeable with this notice, it w
follow that any purchase of a claim made after that time i
be admitted to have been made with a view to use it as a set
The rights of all parties, it must be conceded, are fixed at
time of the petition. (In re Dow; Ex p. Whiting, Fed.
17,573; T4 N. B. R. 307; Young v. Bank of Bengal, 1 Mc
P. C. 150; s. c. 1 Deacon, 622; Dickson v. Evans, 6 T. R.
Marsh v. Chambers, Strange, 1,234.) Unless the credit
exists there can be no set-off. After the filing of the petitioi]
rights of creditors of the bankrupt cannot be enlarged. If a
off then exists against a creditor's claim, any subsequent assij
takes subject to that equity. This is true even if the assij
chose be a negotiable instrument not yet due, and though i
taken in good faith and for value and without notice or km
edge of the set-off. The note is subject to the same offsets w
in the hands of the indorsee, as existed against the one who
it at the time of the commencement of the proceedings, an
cannot be set off by an indorsee who took it after petition
filed, against a claim of the bankrupt against the indoi
(Smith v. Brinkerhoff, 6 N. Y. 305; s. c. below, 18 Barb. ■
ESTATES. 449
§ 68.] Claims Purchased After the Filing of the Petition, etc.
Humphries v. Blight, 4 Dill. 370; s. c. 1 Wash. C. C. 44. To
same effect, Dickson v. Evans, 6 T. R. 57.) But the indorsee
is subrogated to the rights of the indorser, and can prove the
claim in his name and be allowed what the indorser would have
been allowed. (Ex p. Atkins, Buch. 479; Ex p. Rogers, Buch.
490.) In the original act of 1867, section 20, it was provided
that no set-off should be allowed in favor of a creditor of the
bankrupt of a claim in its nature not provable against the estate of
the bankrupt or of a claim purchased by one or transferred to
him after the filing of the petition. When this section was em-
bodied in the Revised Statutes (section 5,073), there was added
to it a clause that no set-off should be allowed in favor of a debtor
upon a claim purchased by him or transferred to him in cases of
compulsory bankruptcy after the act of bankruptcy upon or in
respect to which the adjudication shall be made, and with a view
of making such set-off. Before that amendment was made it was
held In re City Bank (Fed. Cas. 2,742; 6 N. B. R. 71), and in
Hovey v. Insurance Co. (Fed. Cas. 6,743; 10 N. B. R. 224), that
a debt of one who was insolvent which was purchased by his deb-
tor immediately prior to the filing of the petition in bankruptcy
and purchased in order to use the same as an offset against his in-
debtedness, is protected by the Bankruptcy Act, inasmuch as that
act (the original Act of 1867) only forbade the set-off of claims
purchased after the petition was filed. Compare Hawkins v.
Whittier (10 B. & P. 217) ; Dickson v. Cast (1 B. & Ad. 343) ;
Contrary to in re City Bank and Hovey v. Ins. Co. was Hitch-
cock v. Rollo (Fed. Cas. 6,535 ; 4 N. B. R. 689; s. c. 3 Biss. 276),
holding that where one purchased a claim with knowledge of
the insolvency of the debtor, and with a view to use it as a set-
off, it could not be considered a case of mutual credit, and that the
allowance of such purchased claim as a set-off against a pre-ex-
existing indebtedness would be inequitable and would act in a
manner contrary to the manifest spirit and intent of the Bank-
ruptcy Act, and that set-off would be allowed in bankruptcy only
where one had good grounds for equitable relief. It was further
held that the Bankruptcy Act should be so construed as to further
(57)
45 o THE NATIONAL BANKRUPTCY LAW.
Banker's Right to Offset Loans Against Deposits. [Ch. VII.
its manifest purpose of an equitable pro rata distribution of the
bankrupt's assets, and not in such a manner as to permit one
creditor to obtain an advantage by purchasing a claim and using
it as an offset. (See the following cases and authorities cited in
Hitchcock v. Rollo; Smith v. Hill, 8 Gray, 572; Hilliard on
Bankruptcy, 224; Avery & Hobbs on Bankruptcy, 157; Water-
man on Set-off, 141. Compare the following cases under the
English act: Hawkins v. Whitten, 10 Barn. & Cress. 217; 21
Eng. Com. Law, 10; Fair v. Mclver, 16 East, 130; Jakington v.
Combes, 6 Bing. 71; 37 Eng. Com. Law, 51; Howe v. Stow,
3 Allen, 113. See also Ogden v. Coweley, 2 Johns. 274; Dick-
son v. Evans, 6 Term Rep. 57; Smith v. Brinkerhoff, 8 Barb.
5I9-)
Under the present act a liability which has accrued to the trus-
tee which had not accrued to bankrupt may be set off against the
claim of a creditor when the claim and liability are mutual. (In
re Crystal Spring, etc. Co. 4 Am. B. R. 55; 100 Fed. 265.)
Banker's Eight to Offset Loans Against Deposits. — The relation
between a banker and a depositor is that of debtor and creditor.
Hence a banker may offset the debt due to him on loans, over-
drafts, or otherwise against deposits which are made with him.
(In re Bank of Madison, Fed. Cas. 890; 9 N. B. R. 184; in re
Petrie, Fed. Cas. 11,040; 7 N. B. R. 332; Denman v. Boylston,
5 Cush. 194.) So if the banker has received drafts for collection
the proceeds of which afterwards came into his hands, he may
offset them against debts due to him. (In re Farnsworth, Fed.
Cas. 4,673; 14 N. B. R. 148.) In Traders' Bank v. Campbell (14
Wall. 87; s. c. 6 N. B. R. 353), it appeared that insolvents upon
the eve of bankruptcy gave to their banker a check upon funds
to their credit in that bank to apply upon the indebtedness due to
the bank, although the banker and the bankrupts knew of the in-
solvency of the latter. The Supreme Court held the transaction
to be a preference and voidable by the assignee in bankruptcy and
that he had the right to recover the amount so paid, and further
held that although possibly had the bank stood upon its right of
ESTATES. 451
§ 68.] Waiver of Set-off.
offset, that right might have been available to them, yet when
they treated the money as the bankrupt's own property, taking
his check and crediting the amount as a payment on the indebted-
ness, the transaction became a voidable preference.
Claims of a Provable Nature and Claims Which. Can Be Proved. —
There is a distinction between claims provable in their nature
and claims which can be proved. A claim may be of the former
character and yet because of lack of evidence not fall within the
last category. (In re Kingsley, Fed. Cas. 7,819; 1 N. B. R.
329; s. c. 1 Low. 216.) Between the language of the old act and
of the present this difference is to be noted : the former act pro-
vided that claims in their nature provable can be set off against a
debt due the bankrupt. The present act says provable claims.
Whether a provable claim is the same as a claim provable in its
nature, quaere; we think the terms are synonymous. Under the
former act it was held that where a debtor of the bankrupt was
also a creditor holding a claim upon which he had attempted to
obtain a preference, which, under that act, debarred him from
proving his claim, he could, however, use it as a set-off because it
was provable in its nature. (Clark v. Iselin, 21 Wall. 360; s. c.
11 N. B. R. 337; s. c. below, 10 Blatch. 204; s. c. 9 N. B. R. 19.)
Waiver of Set-off. — Under the former act, it was held that a
creditor who, in making proof of his claim in bankruptcy, fails
to show that the bankrupt has an unsatisfied claim against him,
cannot when sued by the trustee in bankruptcy on the unsatisfied
claim which he omitted to make mention of in his proof, plead
as a set-off the amount at which his claim was allowed. (Russell
v. Owen, 61 Mo. 185; s. c. 15 N. B. R. 322, citing Brown v.
Bank, 6 Bush. [Ky.J 198.) The decision in that case was placed
upon the provision of the statute prohibiting one who had proved
a claim in bankruptcy from bringing any action or suit to en-
force it; an express provision not contained in the present law.
The court considered the pleading of an offset as a defense, the
equivalent of bringing an action upon it.
452 THE NATIONAL BANKRUPTCY LAW.
Possession of Property — Marshal's Liability in Serving Warrant. [Ch. VI!
Sec. 69. Possession of Property. — a A Judge may, upon satis
factory proof, by affidavit, that a bankrupt against whom an in
voluntary petition has been filed and is pending has committee
an act of bankruptcy, or has neglected or is neglecting, or is abou
to so neglect his property that it has thereby deteriorated or i:
thereby deteriorating or is about thereby to deteriorate in value
issue a warrant to the marshal to seize and hold it subject to fur
ther orders. Before such warrant is issued the petitioners apply
ing therefor shall enter into a bond in such an amount as th<
judge shall fix, with such sureties as he shall approve, conditionec
to indemnify such bankrupt for such damages as he shall sustair
in the event such seizure shall prove to have been wrongful^
obtained. Such property shall be released, if such bankrupt shal
give bond in a sum which shall be fixed by the judge, with sucl
sureties as he shall approve, conditioned to turn over such prop
erty, or pay the value thereof in money to the trustee, in th<
event he is adjudged a bankrupt pursuant to such petition.
Analogous Provisions of former Acts. —
R. S. § 5024; act of 1867, § 40.
Taking Possession of the Property.— The remedy provided foi
in this section is provisional. It can be used only during the
pendency of the petition, and it is limited to cases where there ii
a neglect by the alleged bankrupt of his property, causing j
deterioration thereof. It does not in express terms authorize th<
seizure of property upon the ground that the bankrupt is aboul
to remove the same, or to conceal it, or to preferentially transfei
it; neither is there any authority under this act as under the
former act for arresting one against whom a petition has beer
filed, because of attempts to remove, or conceal, or fraudulentlj
dispose of his property. The provisions requiring the giving of a
bond are new. The section should be read in connection with
section 3 (e).
Marshal's liability in Serving the Warrant.— If the warrant is
in general terms to seize and take possession of the property oi
the bankrupt, it will be the duty of the marshal to take possession
of all the assignable property and effects of the bankrupt. The
ESTATES. 453
§ 70.] Title to Property.
responsibility of determining the ownership of seized property
rests upon him. He must determine for himself whether or not
the property which he takes is the property of the bankrupt or
of another. If he should seize the property of another, although
he acts in good faith, he is liable to the injured party for any dam-
ages which the latter may sustain. The warrant is no protection
to him in seizing the property of any person other than the bank-
rupt. (Marsh v. Armstrong, 11 N. B. R. 125; s. c. 20 Minn.
81 ; in re Muller v. Brentano, 3 N. B. R. 329; s. c. Deady, 513.
Compare, however, in re Vogel, Fed. Cas. 16,982 ; 7 Blatch. 18; 3
N. B. R. 198; in re Havens, Fed. Cas. 6,230; 8 Ben. 309; in re
Marks, Fed. Cas. 9,095 ; 2 N. B. R. 575.) He cannot seize prop-
erty belonging to a person other than the debtor, even though the
transfer to the latter by the bankrupt may be one voidable under
the Bankruptcy Act. The bankruptcy court has no authority
under such a provisional warrant to order the seizure of prop-
erty from such transferee. Until the adjudication at least the
title of the transferee will not be questioned.
See section 67 Proceedings to Annul Liens.
Sec. 70. Title to Property.— a The trustee of the estate of a
bankrupt, upon his appointment and qualification, and his suc-
cessor or successors if he shall have one or more, upon his or their
appointment and qualification, shall in turn be vested by opera-
tion 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) 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 per-
son ; (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 sur-
render value payable to himself, his estate, or personal representa-
tives, he may, within thirty days after the cash surrender value
has been ascertained and stated to the trustee by the company
454 THE NATIONAL BANKRUPTCY LAW.
Date as of Which the Trustee's Title Vests. [Ch. VII,
issuing the same, pay or secure to the trustee the sum so ascer-
tained 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 de-
tention of, or injury to, his property.
b 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 prop-
erty shall, when practicable, be sold subject to the approval of
the court; it shall not be sold otherwise than subject to the ap-
proval 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,
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 tide
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.
/ Upon the confirmation of a composition offered by a bank-
rupt, the title to his property shall thereupon revest in him.
Analogous Provisions of former Acts
As to property in general passing to trustee: R. S. section 5044; act oi
1867, section 14; act of 1841, section 3; act of 1800, sections 10, 11, 17, 27, 50.
As to rights of action, patent rights, copyrights, and kindred rights, and the
right to recover property fraudulently conveyed: R. S. section 5046; act oi
1867, section 14; act of 1841, section 3; .act of 1800, sections 13, 17.
Date as of Which the Trustee's Title Vests. — The Act of 1867
section 14, R. S. section 5,044, provided that after the adjudica-
ESTATES. 455
§ 70.] Date as of Which the Trustee's Title Vests.
tion the register should execute a written assignment of the estate
of the bankrupt to the assignee and " such assignment should
relate back to the commencement of the proceedings in bank-
ruptcy and by operation of law should vest the title to all such
property and estate, both real and personal, in the assignee."
Under the Act of 1841, there was much conflict of authority as
to whether the assignee's title related back earlier than the de-
cree. The provisions of the present act as to time of the vesting
of the title are somewhat peculiar, since the general provision
is that the assignee shall be vested by operation of law with the
title of the bankrupt as the date he was adjudged a bankrupt;
and yet subdivision (5) provides that he shall be vested with
title to all property which prior to the filing of the petition the
bankrupt could by any means have transferred or which might
have been levied upon or sold under judicial process against him.
The two provisions, at first, seem difficult to reconcile. The state-
ment of the framers of the bill may be of aid in ascertaining their
intention. In submitting its report to the Fifty-fourth Congress
(House Report, number 1,228), the judiciary committee said
with reference to section 70 of House Bill, number 8,110, the
provisions of which as to the trustee's title were the same as those
of the present law : "
" Under section 70 an important change has been made from the former
laws, as well as from proposed legislation. Under the act of 1867, as inter-
preted by the courts, it was held that the title to the bankrupt's property vested
by operation of law as of the date of the filing of the petition. By the proposed
bill it is provided that the trustee shall be vested with the title of the bank-
rupt as of the date he was adjudged a bankrupt. By this change the alleged
bankrupt can sell and convey a perfect title up to the date of the adjudication,
and the purchaser does not buy at his own risk and in danger of having
secured an imperfect title by reason of an adjudication which may be made
subsequent to the purchase. It does not follow that because a petition is filed
against a person in a bankruptcy court he will be adjudged a bankrupt, and it
seems but proper that the public in dealing with him until he is adjudged a
bankrupt should deal without fear of loss or danger as to title. It may be
suggested that this is too liberal a provision, and that the bankrupt may neglect
his business or estate as soon as bankruptcy proceedings are commenced
against him, and that he may allow it to deteriorate in value. But this is
provided for in section 69, where it is provided that ' a judge may, upon
456 THE NATIONAL BANKRUPTCY LAW.
Date as of Which the Trustee's Ttile Vests. [Ch. VII
satisfactory proof, by affidavit, that a bankrupt against whom an involuntary
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 thereby to
deteriorate in value, issue a warrant to the marshal to seize and hold it sub-
ject to further orders.' "
Whether, indeed, the provisions of section 69 are adequate to
protect the bankrupt's estate, is a question as to which there may
be some dispute; but to us they would seem to be totally inad-
equate. They may be sufficient to prevent a deterioration of the
property while it remains in the hands of the bankrupt; it can
hardly be said that they will restrain a conveyance which one
may wish to make. Greater protection will, we think, be found
in an application for a receivership under the provisions of sec-
tion 2 (3). But whatever means are afforded by the statute for
the preservation of the property it is clear that the bankrupt's
title is divested as of the date of the adjudication ; but only prop-
erty owned at the time of the petition passes to the trustee.
That is to say the words " prior to the filing of the petition "
refer to what passes, and the words " as of the date he was ad-
judged bankrupt " refer to the time when it passes. (See In re
Barrow, 3 Am. B. R. 414; 98 Fed. 582.) A very recent opinion
(Oct., 1900), by Referee Hotchkiss {In re Pease, 4 Am. B. R
578) contains a very complete discussion of this question. Be-
cause of the clearness of the opinion and because of its author's
knowledge of the bankruptcy law and legal scholarship the state-
ment of fact and the opinion are here quoted at length.
" The bankrupt, up to November 22nd, 1899, was doing business at Buffalo,
N. Y., under the name of the F. S. Pease Oil Co. On that day the sheriff
took possession of her store on executions, and continued in possession until
the appointment of a trustee in bankruptcy on February 16th, 1900. Cer-
tain creditors filed a petition in bankruptcy on December 15th, 1899. An ad-
judication of bankruptcy followed on January 8th, 1900. Delays incident tc
negotiations toward a settlement satisfactory to all creditors delayed the
appointment of a trustee until February 16th, 1900.
"Meanwhile, the alleged bankrupt continued business as before, filling
orders, as she claims, by purchase of goods outside, and receiving payments
on account of goods sold previous to the filing of the petition as well as in th<
interval between that date and the dates of the adjudication and the appoint-
ESTATES. 457
§ 70.J Date as of Which the Trustee's Title Vests.
ment of the trustee, all charges for goods sold and credits for moneys received
being entered in her books without opening new accounts or in any other way
recognizing the changed condition of affairs. She gave as a reason for this
that she expected to settle with her creditors and to resume business through
a composition or payment in full, and thus sought to keep the business alive.
" On this state of facts the trustee brings the bankrupt in on an order to
show cause why she should not turn over the moneys collected by her subse-
quent to the date of filing the petition, December 15, 1899, for goods sold
by her prior to January 8, 1900, the date of adjudication. The trustee con-
cedes that he has no claim for moneys received for sales after the adjudication,
the sheriff having been in possession until the trustee relieved him, and the
stock thus continuing intact; the bankrupt admits that she must account for
moneys received for sales prior to the filing of the petition, provided they were
from her.
" Opinion by Hotchkiss, Referee : The only question of law to be de-
termined here is: Under section 70a, what vested in the trustee in bankruptcy
— that which the bankrupt had on the day the proceedings were begun by the
filing of the petition, or that which she had on the day she was adjudged a
bankrupt? Were this a voluntary case, the question would be unimportant.
In involuntary cases, however, there is of necessity an interregnum of from
three weeks upward; in this case, the two dates are December 15th, 1899.
and January 8th, 1900. The bankrupt here also insists that even if the
trustee's contention that his title relates back only to the adjudication is
true, she is still entitled to retain her collections for goods sold since Decem-
ber 15th, 1899, nay, since November 22nd, 1899, the day the sheriff took pos-
session, for the reason that she can show that all of such sales were of goods
purchased from other dealers and not from her stock. But the legal question
is raised preliminary to such proof, for the purpose of limiting the testimony
if possible. It is also urged that, even if her sales subsequent to the sheriff's
possession were of goods purchased elsewhere, her creditors are entitled to the
profits thereon during the interregnum, that is, up to the date of the adjudica-
tion, and that for these she must be ordered to account.
" This question seems to have been up but once before, and then in a form
not entirely alike or necessarily controlling on the decision here. In re
Harris, 2 Am. B. R. 360. The trustee relies on several cases as supporting his
contention that the date of adjudication, not the day when the proceedings were
commenced, is the day of cleavage ; In re Gutwillig 90 Fed. 481, 1 Am. B. R.
78; Carter v. Hobbs, 92 Fed. 599; 1 Am. B. R. 215; In re Abraham, 93 Fed.
779, 2 Am. B. R. 266. To these might be added In re Clute, 1 N. B. N. 386,
2 Am. B. R. 376; In re Becker, 2 N. B. N. 24, 3 Am. B. R. 412. In none of
these cases, however, is the exact point at issue, nor do the opinions go fur-
ther than quote one or both of the seemingly contradictory phrases in sec-
tion 70a.
" In but two cases is there even a hint as to what the judge writing the
opinion really thought: (1) Judge Baker, in Keegan v. King, 3 Am. B. R.
84, says : ' After an adjudication of bankruptcy has been made, the title
(58)
458 THE NATIONAL BANKRUPTCY LAW.
Date as of Which the Trustee's Title Vests. [Ch. V]
to all of the property of the banrkupt, as of that date, passes to the person wr
is subsequently chosen trustee,' thus seemingly hinting toward the contentic
of the trustee here ; (2) while in In re Yukon Woolen Co. 1 N. B. N. 420 ;
Am. B. JR. 805, Judge Townsend, in discussing section 70a, quite clearly in
plies that the words ' shalle be vested by operation of law with the title of tr
bankrupt as of the date of the adjudication,' refer to time merely, while tr
apparently contradictory words in the subsequent clause, ' property which prk
to the filing of the petition he could by any means have transferred, etc' (se
7°a [5]), refer to what title passes, rather than the time of vesting.
" There was no such difficulty under the law of 1867. By section 14 of th£
statute the assignee's title vested by relation as of the date the proceeding
were commenced. As a result, a merchant against whom a petition in bank
ruptcy was pending could not do business — the title being in the aid until ad
judication or dismissal. There seems little doubt that the insertion of th
words ' as of the date of the adjudication ' in the present law was intended t
meet the difficulty; Collier on Bankruptcy, p. 405; Analysis of Torrey Bank
rupt Bill, Senate Bill 1035, 55th Congress, p. 76. Two of the text boo]
writers came to the belief that as to title a new day of cleavage has beei
established; compare Bush on Bankruptcy, p. 385; Loveland on Bankruptcj
PP- 284. 327- Mr. Bradenburg is non-committal, merely quoting the lav
(p. 414) ; while Mr. Collier (pp. 405, 406) and Mr. Lowell (p. 508) inclim
to the belief, to put it tersely, that the words ' prior to the filing of the petition
refer to what passes, and the seemingly antagonistic words earlier in the sec
tion refer only to when it passes.
" This later view seems the more reasonable. It meets the difficulty com
plained of under the law of 1867, and applies to business the doctrine tha
the debtor is innocent of bankruptcy until proven guilty. It protects ad in
terim purchasers and keeps going concerns alive, for the benefit of the cred
itors, if adjudications follow, and the benefit of the debtors themselves, i:
dismissals result. Nor can it be said that, by recognizing a valid title in th<
bankrupt until adjudication, creditors may be at the mercy of a dishones
debtor; Congress, foreseeing that, also enacted section 69, by which creditor:
may take possession of the property of debtors likely to take advantage
of the situation, a privilege emphasized by the almost identical words of sec-
tion 3e.
" This view also comports with well-established principles of bankruptcj
legislation in the United States. Our policy has been to establish a day of
cleavage, that is, a day before which the relation of debtor and creditor ex-
ists, but after which, at the debtor's option, it ceases; a day before which all
the debtor has become his creditors, but after which that which he acquires
is his, subject only to his new trusteeship to new creditors. With us that daj
has always been the day proceedings are commenced, and the present law re-
peatedly recognizes it. Compare sections 1 (10), 3b, 6, 9b, 11a, 29b (4), 60b
63a (1), (2), (3), (s), 64b (4), 67c-e-f, 68b. Where a point of time is
indicated by the words 'the date of the adjudication.' the impracticability
of using the other date is apparent; compare sections 7 (8), 14a, 55a, 65a, and
even 70a, as previously explained.
ESTATES. 459
| 70.] Bankrupt's Title and Interest After the Adjudication.
" The English Bankruptcy Act distinguishes sharply between the time of
vesting and the property which vests. Section 54 vests the title in the trus-
tee, immediately on the debtor being adjudged a bankrupt. But, by section
44, the property divisible among the creditors is denned as ' all such property
as may belong to or be vested in the bankrupt at the commencement of the
bankruptcy, or may be acquired by or devolve on him before his discharge ; '
while by section ,43, ' the commencement of the bankruptcy ' is defined as the
day on which the voluntary petition is filed, or, if involuntary, the day on
which the first act of bankruptcy (not earlier than three months prior) re-
lied on was committed. In other words, in England, while the title vests on
the date of the adjudication, it may relate backward to three months before the
petition, and may also include everything acquired before the discharge. It
is a little difficult to understand the justice of this, especially as by sections
30 and 37 of the same act, a discharge, operates only on debts existant or
obligations created prior to the date of the ' receiving order,' i. e., in actual
practice, the date of filing the petition. In other words, it would seem that in
England creditors may share in after-acquisitions prior to the discharge,
though their debts postdate the beginning of the proceeding, and yet, if not
paid in full, still have undischarged debts for the deficit. But the point to
which attention is called is that, in spite of this period of probation, during
which the English bankrupt must continue to surrender all that he may ac-
quire, the English law, like ours, and probably for the same reason, dis-
tinguishes between the time of vesting and the title which vests, and further
fixes the time on the day we fix it.
" I am satisfied, therefore, that, though the words are confusing, Congress
has accomplished what it intended, namely, that for the protection of those
who deal with the bankrupt in the interval between the filing of the petition
and the adjudication, he shall have a title capable of transfer, but that the day
of cleavage, both as to provable and dischargeable debts and as to property
with which to pay those debts, is the day when the petition is filed. The other
view would mark an innovation contrary to settled principles in this country
neither intended by Congress nor warranted by the words of the statute.
" It follows, therefore, that the bankrupt need account only for moneys re-
ceived by her for goods sold from her stock as it existed on the day the pe-
tition was filed; that all collections for goods purchased by her elsewhere,
whether received by her or by the trustee, are her property; that the profits
on any such goods so purchased and sold before the petition should be turned
over to the trustee; and that any subsequent profits are hers, and not her
creditors.
" Evidence may be offered by both parties in accordance with the views
here expressed, and the determination of the exact amount for which the
bankrupt is accountable will be announced when the case is closed."
Bankrupt's Title and Interest After the Adjudication and Before
the Appointment of the Trustee. — The trustee's title, it thus appears,
under the present act,' does not relate back beyond the time of the
46o THE NATIONAL BANKRUPTCY LAW.
Bankrupt's Title and Interest After the Adjudication. [Ch. V]
decree. But although his appointment may be some time subs
quent to the adjudication, when once appointed his title does rela
back to the time of the adjudication in such a manner as to mal
any transfer by the bankrupt after that date a nullity. Even aft<
the adjudication until the appointment of the trustee, the title r<
mains in the bankrupt. The decree itself does not, as under tr
act of 1841, divest the bankrupt's title. Its date, however, marl
the point of time to which the title subsequently acquired by tl
assignee relates back. The title of the bankrupt in the interv;
between the adjudication and the appointment exists, but is di
feasible; and when the appointment of the trustee is made it
divested as of the time of the adjudication. All titles derive
under or through him subsequent to that date are by force of lav
and without regard to the knowledge or the motives of the or
claiming title, overreached and defeated. (Compare Connor ;
Long, 104 U. S. 228; citing Bank v. Sherman, 101 U. S. 40;
also Hampton v. Rouse, 22 Wall. 263.) In the case last cite
(Hampton v. Rouse), it was held that after the adjudication, bi
before the assignment, the bankrupt retained such title that he ha
authority to redeem real estate belonging to him, from a sale fc
taxes. This defeasible title which the bankrupt has between tl
adjudication and the appointment of the trustee exists in the ca;
of personal property as well as of real estate, and likewise tl
trustee's title as to such property when acquired relates back 1
the date of the adjudication. Hence it has been held that if pa;
ments are made by a debtor of the bankrupt to the bankrupt pe
sonally after the adjudication, and before the appointment of tl
trustee, they become, upon the appointment of the trustee, mei
nullities ; and although they were made in good faith and withoi
knowledge, the trustee may sue and compel the bankrupt's debtc
to make payments again to him. (Mays v. Manufacturers' Na
Bank, 64 Penn. [14 Smith] 74; s. c. 4 N. B. R. 660.) The ai
judication in bankruptcy is notice to all the world. (Hitchcox
Sedgwick, 2 Vernon, 156; Wickersham v. Nicholson, 14 S.
R. 118.) Hence, although the one making the payment may ha1
no actual knowledge of the bankruptcy of his creditor, he has co:
ESTATES. 461
§ 70.] Bankrupt's Title and Interest After the Adjudication.
structive notice, and payments made by him after the date as of
which the creditor's title is divested, are in law payments made not
to the owner of the debt, and are also payments made with notice
of the fact of the change of ownership of the claim. (Compare
Ex p. Foster, 2 Story, 158; Carr v. Gale, 3 Woodb. & M. 67;
Bramwell v. Eglinton, Law Rep. 1 Q. B. 494; Exley v. Inglis,
Law Rep. 3 Exch. 247. Compare also the following American
cases as to the invalidity of titles acquired from the bankrupt after
the date to which the trustee's title when vested relates back:
Stevens v. Bank, 101 Mass. 109 ; Miller v. O'Brien, 9 Blatch. 270;
Fed. Cas. 9,586; s. c. 9 N. B. R. 26; in re Lake, Fed. Cas. 7,992;
3 Biss. 204; s. c. 6 B. R. 542; Chapman v. Brewer, 114 U. S.
158; Morgan v. Campbell, 22 Wall. 381; McLean v. Rockey, 3
McLean, 235; Fed. Cas. 8,891; in re Pryor, Fed. Cas. 11,457;
4 Biss. 262; in re Randall, Fed. Cas. 11,552; 1 Sawy. 56. It is
apparent that the rule laid down in Mays v. Manufacturers' Bank
{supra), is technical and liable to work injustice, but it seems to
be required by the provisions of the law. In Babbit v. Burgess
(Fed. Cas. 693; 2 Dill. 169; s. c. 7 N. B. R. 561), it was said:
" It is not necessary for this court to take the extreme position held by the
Supreme Court of Pennsylvania (Mays v. Manufacturers' Bank), and rule that
all payments made to a debtor after a petition is filed [the date as of which
under the act of 1867 title vested in the assignee] against him in bankruptcy,
are to be adjudged void, if the debtor is subsequently declared bankrupt.
This court, however, holds that payments thus made mala fide, or with a view
of defeating the bankruptcy act in any of its essential requirements, are void,
and the person by whom such payment was made can be held to answer for
the original demand of the assignee, whose title relates back to the day of com-
mencing proceedings in bankruptcy."
Compare also Howard v. Crompton (Fed. Cas. 6,758; 14
Blatch. 328). In examining the cases above cited and applying
them, it is to be borne in mind that the decisions were rendered
under the act of 1867, which made the title of the assignee relate
back to the time of the filing of the petition, and not merely to the
time of the adjudication, as under the present act.
During the time between the adjudication and the appointment
of the trustee, the bankrupt is a trustee of the property. The
462 THE NATIONAL BANKRUPTCY LAW.
Title Subject to all Equities. [Ch. VJ
property is in the custody of the court, although the officer wr
is to take charge of it may not have been designated. (In i
Rosenberg, Fed. Cas. 12,055; 3 N. B. R. 130; s. c. 3 Ben. 36^
March v. Heaton, Fed. Cas. 9,061; 2 N. B. R. 180; s. c.
Lowell, 278.) In case the bankrupt attempts to remove or d<
stroy or injure the property or neglects to preserve it, the cou:
may exercise the usual powers of a court of equity for the pre
ervation of the subject-matter of the action pending before i
Under the terms of section 2 (3) it may in such cases appoint
receiver to take charge of the property, and it may unquestionabl
enjoin the bankrupt from improper use of the property.
Title Subject to all Equities.— In the absence of any fraud givin
to the trustee as the representative of creditors the right to avoi
transfers and incumbrances made by the bankrupt, the trust*
takes only such rights and interest in the property as the bankruj
himself could have asserted at the time of the bankruptcy. Tt
trustee is affected with every equity which would affect the -ban!
rupt himself if he were asserting those rights and interests. (In t
Dow, Fed. Cas. 4,036; 6 N. B. R. 10, quoting from Bacon -t
Heathcote, 1 Atk. 160: " The ground that the court goes upon :
this, that assignees of bankrupts, though they are trustees for th
creditors, yet stand in the place of the bankrupt, and they ca
take in no better manner than he could." See also Stewart *
Piatt, 101 U. S. 731; Yeatman v. Savings Inst. 95 U. S. 764
Montgomery v. Bucyrus Mach. Co. 92 U. S. 257; Strong 1
Clawson, 5 Gilman, 346; and cases cited under section 67; als
Jewson v. Moulson, 2 Atk. 417; Mitford v. Mitford, 9 Ves. 87
Worrall v. Marlur, 1 P. Wms. 459 ; Mitchell v. Winslow, Fee
Cas. 9,673; 2 Story, 630; Winson v. McLellan, 2 Story, 495
Ex p. Newhall, Fed. Cas. 10,159; 2 Story, 363; Fiske v. Hun
Fed. Cas. 4,831; 2 Story, 584.) Thus, where a party fraudt
lently induces an owner to part with his title to goods, the d<
frauded party having the right to disaffirm the contract and t
recover the goods, may assert that right against the trustee i
bankruptcy as well as against the bankrupt himself. (Donaldso
ESTATES. 463
§ -70.] Title Subject to all Equities.
v. Farwell, 15 N. B. R. 277; s. c. Fed. Cas. 3,983; 5 Biss. 451;
s. c. affirmed 93 U. S. 631 ; In re Gany, So. Dist. of N. Y. Sept.
1900, 4 Am. B. R. 576.) So where there was an action to
foreclose a mortgage, and proceedings for the appointment of a
receiver of the rents and profits were instituted before the adjudi-
cation of the mortgagor as bankrupt, and there was a deficiency
on the sale of the mortgaged premises, it was held that the as-
signee in bankruptcy could not claim the fund in the receiver's
hands, as against the mortgagee. (Hayes v. Dickinson, 15 N.
B. R. 350; s. c. 9 Hun, 277.) So where the bankrupts agreed to
build a locomotive for certain parties and notified them that it was
completed and had been shipped, and thereupon were paid the
price, it appearing that no engine existed at the time it was rep-
resented 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 de-
frauded. (In re McKay & Aldus, 1 Lowell, 345 ; s. c. 3 N. B.
R. 50.) Compare Kelly v. Scott (49 N. Y. 595), citing Mitchell v.
Winslow (2 Story, 630). So where a right of action passes to the
trustee any defense, legal or equitable, which might have been
raised against the bankrupt's claim may be raised against the
trustee. (Jenkins v. Pierce, 98 111. 646.) If property is im-
pressed with a trust in the hands of the bankrupt it passes to the
trustee subject to the same trust; thus, where a broker was in-
trusted with money to invest in exchequer bills for his principal,
but misappropriated the money, and invested it in stock and there-
after, upon being detected, surrendered the stock to his principal,
it was held that although he became bankrupt on the day of the
misappropriation and although the title of his assignee related
back to the time of the act of bankruptcy, yet the assignee could
not recover the stock from the principal to whom it had
been surrendered, since the property was affected by the trust.
The original trust created by the delivery of the money for an
express purpose was not divested by the change of the form of the
464 THE NATIONAL BANKRUPTCY LAW.
Title Subject to all Equities. [Ch. 1
security. (Taylor v. Plumer, 3 Maule & Selw. 562; to the sa
effect, Cook v. Tullis, 18 Wall. 332; Hawkins v. Blake, 108 U.
422. ) Except in so far as controversies among lienors may aff
directly or indirectly the funds or property passing to him, 1
trustee has no interest in such controversies. He cannot object
the order in which the priorities of lienors are fixed by a deer
(Jerome v. McCarter, 94 U. S. 734; Dudley v. Easton, 104 U.
99; McHenry v. Societe Francaise, 95 U. S. 58.)
Sec. 70a (1), (2), (3), (4). Subdivision 1 of this secti
requires no commentary. The bankrupt, as we have seen in si
tion 7 and section 67, must make all conveyances ordered by t
court, and it is necessary for him, section 7a (5), to execute
his trustee transfers of all of his property in foreign countries.
Subdivision 2 referring to interest in patents, etc., it is he
under the present act, does not include an application for a pate
pending at the time of adjudication, and the trustee takes no i
terest in the patent issued after adjudication in such a case. (
re McDonnell, 4 Am. B. R. 92 ; 101 Fed. 239.)
Subdivision 3 merely lays down the general principle which
further set forth in subdivision 5, that a power which is benefic
to the donee may be reached by the creditors while a power
trust for the benefit of a person other than the donee is in no sen
a property right which can be reached by his creditors. See
to beneficial interests under trusts, subdivision 5.
Subdivision 4 relating to property transferred by the bankru
in fraud of his creditors must be collated with paragraph
These paragraphs read together give to the trustee not only t
rights which any creditor might have had to set aside a fraud
lent transfer by a bill in equity, but also the right to set aside
preferential transfer under section 60. In this respect alone, t
trustee obtains a greater right than the bankrupt himself had f
the bankrupt might not have brought an action to set aside 1
own fraudulent conveyances. The trustee is by no means co
fined to the four months antedating bankruptcy in the case
fraudulent conveyances. There is a very good discussion of t
powers of the trustee in this respect in the case of In re Gray, c
ESTATES. 465
§ 70.] Property Transferable — Contingent Interests and Interests in Trust.
cided by the New York Supreme Court, App. Div. (3 Am. B. R.
647; 47 App. Div. 554).
As we have seen in prior discussions, sections 2 and 23, as to
jurisdiction, and section 67 as to void liens and fraudulent trans-
fers, the remedy of the trustee is to bring a plenary suit against
the transferee, of which action the Bankruptcy Court has no ju-
risdiction.
Property Transferable or Subject to levy. Section 70a (5) — In
considering the property rights which become vested in the trus-
tee by virtue of the provisions of subdivision 5 it is not advisable
to attempt an enumeration. However exhaustive it might be,
it would necessarily be incomplete. The subdivision is so general
in its terms that it must be held to include every vested right and
interest attaching to or growing out of property. It furnishes
the test that must be applied in determining whether or not the
property vests in the trustee. Could the property by any means
have been transferred, or was it subject to levy? If it could have
been transferred or levied upon, then it passes to the trustee. It
is immaterial that the property may be considered as having no
market value. (Kinzie v. Winston, Fed. Cas. 7,835 ; 4 N. B. R.
84.) If it is a property right it passes to the trustee; he may de-
cline, however, to accept it if it would prove a burden to the es-
tate.
This is the rule as we have seen in the case of leases (section 63
sub nom. Provability of Claims For Rent . .
See as to burdensome property in general (damnosa hereditas),
McHenry v. Societe Francaise (95 U. S. 58) ; Traders' Bank v.
Campbell (14 Wall. 87) . The trustee must exercise his option to
accept within a reasonable time or he will be held to have waived
his rights. (Smith v. Gordon, 6 Law Rep. 313.)
Contingent Interests and Interests in Trust. — The principal diffi-
culty in applying the rule that leviable and transferrable property
passes to the trustee arises in the case of contingent interests.
Generally speaking the law of the State will have to be consulted
(59)
466 THE NATIONAL BANKRUPTCY LAW.
Contingent Interests and Interests in Trust. [Ch. VII
in each case, as the nature of contingent interests, particularly ir
realty, differs very greatly under American statutes. In New
York, at least, an estate which is contingent not only as to the
event upon which it will become vested in interest, but also con-
tingent as to the person who will take, e. g., when such person is
the member of an unascertained class, the estate is inalienable and
does not pass in bankruptcy. (In re Hoadley, 3 Am. B. R. 780:
101 Fed. 233.) But under the statutes of New York the re-
mainder is vested when there is a person in being who will take
the estate upon the determination of the life estate. (Id.) So
it has been held in Pennsylvania that a bankrupt's interest in
personalty where he is one of an unascertained class, which inter-
est may be defeated by the exercise of a power, does not pass to
his trustee. (In re Wetmore, 4 Am. B. R. 335 ; 102 Fed. 290.)
As to when a contingent remainder in realty passes to the trustee,
see Belcher v. Bernard (106 Mass. 230).
A beneficial interest under a trust created by will or deed for the
support of the cestui que trust can be reached in equity so far as
the surplus income is concerned. But this must be done by a
plenary suit in equity. (In re Baudouine, 3 Am. B. R. 651 ; 41
C. C. A. ; 101 Fed. 574.) Property allotted to an Indian
under an act of Congress to be held in trust for such Indian by the
United States for twenty-five years, after which a conveyance is
to be made by the government to the Indian free and clear from
all charges and encumbrances, is not during the twenty-five years
an alienable estate and does not pass to the trustee. (In re Russie,
3 Am. B. R. 6; 96 Fed. 609.) And generally speaking where
property is devised in trust so that it is inalienable by the cestui
que trust and explicitly made not subject to the claims of his cred-
itors it will not pass to his trustee. (Monroe v. Dewey, Sup. Jud.
Ct. Mass. May, 1900; 4 Am. B. R. 264.)
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 bene-
ficiary should become bankrupt, the trust should cease; and there-
ESTATES. 467
§ 70.] Personal Privileges.
after the trustees in their discretion were to apply the income to
the support of the beneficiary and to his family, and the trustees
were empowered 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 the assignee in bankruptcy, the court saying : " No
case is cited; none is known to us which goes so far as to hold
that an absolute discretion in the trustee, a discretion which, by
the express language of the will, he is under no obligation to ex-
ercise in favor of the bankrupt, confers such an interest on the
latter that he or his assignee can successfully assert it in a court of
equity or in any other court."
Personal Privileges. — There are many property rights which by
the terms of their creation are expressly or impliedly restricted to
the person originally acquiring them, or which are by an express
provision made non-assignable without the consent of the other
party to their creation. Thus, leases often contain a clause for-
bidding an assignment; and licenses are usually considered as
personal privileges, even though not expressly so declared. Mem-
berships in associations of various characters, and in particular in
boards of exchange and business associations are aften declared
non-assignable without the consent of the other members of the
exchange. Franchises are considered in many cases personal
privileges non-assignable ; and contracts from their nature or by
the terms of the creation frequently call for personal services
which cannot be rendered by an assignee. So insurance policies
often contain conditions providing that an assignment of the prop-
erty shall terminate all rights under the policy. With reference
to leases, the general rule, both in America and England, is that
an assignment in an involuntary proceeding in bankruptcy is not a
breach of a covenant in a lease agreeing not to make an assign-
ment thereof. Property may be limited or leased to be void or
468 THE NATIONAL BANKRUPTCY LAW.
Personal Privileges. [Ch. VII
revert back in the event of bankruptcy, and if a lease to a person
contain such proviso the lease does not pass to his trustee in bank-
ruptcy, but reverts back. But to prevent its passage to the trus-
tee there must be an express proviso to that effect. The usual
covenant or proviso not to let, assign, or transfer without consent,
etc., will not be sufficient. If that is the only covenant restrict-
ing an assignment, the lease will, notwithstanding it, pass to the
trustee without the lessor's consent. The distinction, however,
is taken in England that, unlike bankruptcy, which is an involun-
tary proceeding, insolvency, being a voluntary proceeding on the
part of the debtor himself, is a breach of the covenant against as-
signment, and works forfeiture. (Hilliard on Bankruptcy, page
141 ; see also Doe v. Bevan, 3 Maule & S. 353 ; Doe v. Smith, 5
Taunt. 79s; s. c. 1 Marshall, 359; Gorney v. Warren, 2 Eq.
Cas. Abs. 100; Dommett z/„ Bedford, 3 Ves. 149; Wilkinson v.
Wilkinson, 10 Eng. Ch. 258; s. c. 2 Wils. Ch. 57; s. c. Cooper,
201; Holyland v. De Mendez, 3 Meriv. 184; and also Stark-
weather v. Cleveland Ins. Co. Fed. Cas. 13,308; 4 N. B. R. 341 ;
s. c. 10 A. L. Reg. N. S. 333; s. c. 2 Abb. U. S. 67. Compare
Smith v. Putnam, 3 Pick. 220; Copeland v. Stevens, 1 B. &
Aid. 592.) But many American courts consider that an assign-
ment of the lease, made in a proceeding in voluntary bankruptcy
(inasmuch as the transfer is still by operation of law) is not such
an assignment of the interest of the lessee as to be a breach of his
covenant not to assign, and they hold that upon the bankruptcy
of the lessee his leasehold interest passes to his assignee or trustee
in bankruptcy notwithstanding there is a covenant in the lease not
to assign. Compare Starkweather v. Cleveland Ins. Co. Fed.
Cas. 13,308; 4 N. B. R. 341 ; s. c. 10 A. L. Reg. N. S. 333; s. c.
2 Abb. U. S. 67; Perry v. Lorillard, 61 N. Y. 214; Brichta v.
N. Y. Lafayette Ins. Co. 2 Hall. 372; Lazarus v. Common-
wealth Ins. Co. 5 Pick. 76; Parsons on Contracts, Part II, chap-
ter XII, section IX. An examination of the American cases cited
in the treatise just mentioned shows that while the rule may not
be settled, there is at least a tendency on the part of the American
ESTATES. 469
§ 70.] Personal Privileges.
courts to disregard the distinction taken by the English courts
between the nature and effect of assignments in voluntary and in-
voluntary proceedings. The question whether a franchise or
license is assignable must depend greatly upon the nature of the
franchise or the license, and also upon the express terms by which
it was created. If it is of such a nature that it may be considered
as calling for the exercise of personal skill or personal discretion,
then it cannot be considered assignable. The same principles of
law which prevent the assignment of contracts of that character
will prevent the assignment of the franchise or the license. Thus,
in People v. Duncan (41 Cal. 507), it was 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 per-
son who had the franchise could not voluntarily assign it, the con-
sent of the party conferring the franchise being necessary by rea-
son of the personal character of the work to be performed. But
in Stewart v. Hargrove (23 Ala. 429), it was held that a franchise
which gave to one the right to take tolls from persons crossing a
certain bridge was assignable property.
The question of the assignability of a seat in a stock exchange
board has often arisen in bankruptcy. It is now clearly settled
that such membership is property which passes subject to the rules
of the association, as an asset of the bankrupt's estate. The latest
decision on this subject is In re Page, 4 Am. B. R. 467 ; 102 Fed.
747, citing authorities. So a license to occupy a city market stall
is property passing from the bankrupt licensee and the court will
order an assignment to the trustee of such property. (In re Em-
rich, 4 Am. B. R. 89; 101 Fed. 231.) So liquor licenses as-
signable only with the consent of the public authorities are assets
passing to the trustee. (In re Baker, 3 Am. B. R. 412 ; 98 Fed.
407 ; in re Brodbine, 2 Am. B. R. 53 ; 93 Fed. 643 ; in re Fisher,
3 Am. B. R.406 ; 98 Fed. 89. ) Contracts, which from their na-
ture or terms call for personal skill or discretion are inalienable
under the general rule of contracts and so do not pass to his trustee
in bankruptcy. See Parsons on Contracts, Part 2, chap. 12, sec. 9.
47 o THE NATIONAL BANKRUPTCY LAW.
Insurance Policies. [Ch. VII
Insurance Policies. — The proviso at the end of subdivision 5 has
been construed in several cases. Thus in the case of In re Steele,
3 Am. B. R. 549 ; 98 Fed. 78, it was held that under section 70
all insurance policies, having a cash surrender value, payable to
the bankrupt, his estate or personal representatives, form part of
the assets falling to the trustee, subject to the right of the bank-
rupt to secure to himself the future benefits thereof by paying to
the trustee a sum equal to the surrender value of the policy; and
this is true notwithstanding the fact that a State statute may make
such a policy exempt from the claims of creditors; but policies of
insurance payable to the wife, children or other kin of the bank-
rupt are not part of the assets of the estate.
So where a bankrupt, before the adoption of the Bankruptcy
Act, assigned a policy payable to his executors, administrators or
assigns, to the woman to whom he was then engaged and who
afterwards became his wife, the effect of this assignment was to
make the policy payable to the wife of the insured, and to take it
out of the assets of the bankrupt. Id.
And in the case of In re Diack (3 Am. B. R. 723 ; 100 Fed. 770)
it appeared that in 1892 an endowment policy was issued to D.,
upon the application of D. and his wife, payable 15 years there-
after to D. should he then survive, or in case of his death to his
wife, if surviving, and, if not, to D.'s personal representatives or
assigns. D. paid the premiums until the latter part of 1896,
when, becoming embarrassed, he ceased to pay them and they
were thereafter paid by Mrs. D. D. was adjudicated a bankrupt
March 24, 1899. Held, that under the law of New York, fol-
lowed by the District Court in this respect, Mrs. D., from the time
the policy had a surrender value, became entitled by its terms to a
contingent legal interest therein, which entitled her to pay the
premiums in order to prevent a lapse, and, on a surrender of the
policy, such payments previously made by her created in her favor
an equitable lien upon her husband's interest for the same pro-
portion of her payments that her husband's interest in the surren-
der value of the policy bore to the whole surrender value.
Held further, that as the trustee cannot require the wife to
ESTATES. 471
§ 70.] Rights of Action.
accept a paid-up policy or suffer it to lapse, and thus obtain an
immediate payment of the surrender value, the bankrupt should
be required, unless his wife elects to surrender, to execute an as-
signment to the trustee of his interest in the surrender value of the
policy as of the date of adjudication, and that sum, with interest
from such date, should be made payable out of the proceeds of the
policy when it matures, or whenever sooner paid.
Where an insurance policy has no surrender value it does not
pass to the trustee. (See In re Buelow, 3 Am. B. R. 389; 98
Fed. 86; in re Lange, 1 Am. B. R. 189; 91 Fed. 361; in re
McDonnell, 4 Am. B. R. 92; 10 1 Fed. 239.)
Eights of Action. Section 70a (6) — Subdivision 6, limiting
the rights of action which vest in the trustee to those arising upon
contracts or from the unlawful taking or detention of, or injury
to, the bankrupt's property, is simply declaratory of the general
principle of law that assignees and trustees cannot enforce those
rights of action which are of a peculiarly personal character —
those which, to use the common expression, die with the person.
Causes of action for personal injuries, such as assault and battery,
slander, seduction, and the like, do not vest in the assignee. (Beck-
ham v. Drake, 8 M. & W. 846 ; Noonan v. Orton, 12 N. B. R.
405 ; Howard v. Crowther, 8 M. & W. 601 ; Brewer v. Dew, 1 1
M. & W. 625.) Causes of action for deceit and fraud seem to
occupy debatable ground. Thus, In re Crockett (2 Ben. 514), it
was held that a suit brought for fraudulently recommending a
person as worthy of trust and confidence is not a claim which vests
as an asset in the assignee. But in Hyde v. Tufts (45 Sup. Ct.
[N. Y.] 56), where one who afterwards became a bankrupt was
induced by false representations, to engage in a business venture
in which, by reason of the false representations, he incurred great
loss, it was held that the cause of action for the fraud vested in
his assignee in bankruptcy. The right to sue for penalties is
analogous to the right to sue for damages for tort. In the ab-
sence of a statute authorizing it, a right to a penalty cannot be as-
signed. (Wright v. First National Bank of Greensburg, Fed.
472
THE NATIONAL BANKRUPTCY LAW.
Rights of Action. [Ch. VII.
Cas. 18,078; 18 N. B. R. 87; citing Gardner v. Adams, 12 Wend.
297. ) But in that case 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 penal, yet the
exacting of the usurious interest was in its nature an injury to
the property rights of the bankrupt, and that the sections of the
bankrupt law must be construed as giving the trustee the right to
sue for and recover such usurious interest. To the same effect
was Crocker v. First National Bank (Fed. Cas. 3,397; 3 Cent. L.
J. 527). But in Bromley v. Smith (Fed. Cas. 1,922; 5 N. B. R.
152; s. c. 2 Biss. 511), and in Nichols v. Bellows (22 Vt. 581),
both commented upon in Wright v. First Nat. Bank of Greens-
burg, the right of a trustee in bankruptcy to recover usurious
interests 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 did not pass to the trustee. Other cases holding
that a trustee can recover usurious interest are : Moore v. Jones,
(23 Vt. 739), and Tiffany v. Boatman's Sav. Inst. (18 Wall. 276;
s. c. below, 1 Dill. 141). In Wheelock v. Lee (64 N. Y. 242), the
trustee in bankruptcy was held to have the right to recover money
exacted usuriously, but the court based its decision upon the fact
that independent of the statutory right of recovery there existed a
right to recover upon principles of the common law, saying: " It
is claimed by the defendant that the right of the borrower to re-
cover back usurious interest paid by him is strictly a personal
right, and did not pass by the assignment to the plaintiff. Inter-
est paid by the borrower to the lender beyond the lawful rate is
received by the latter without right, and in violation of the stat-
ute. It is regarded as having been exacted from the borrower by
duress, and the payment is not voluntary, so as to bring the tran-
saction within the principle which precludes a recovery back of
money voluntarily paid. The borrower never parted with his
title to the money which he seeks to recover. It belonged to him
after the payment as before, and the lender wrongfully deprived
ESTATES. 473
§ 70.] Choses in Action of the Bankrupt's Wife.
him of it. The law allowes him to maintain the action to reclaim
the money, not as a penalty against the usurer, but because the
usurer never acquired any title to it. The right of the borrower
to recover the excessive interest paid on a usurious loan is ex-
pressly affirmed by our (the New York) statute of usury. But
this statute did not give the remedy. It existed before upon the
principles of the common law. (Doug. 697, notes; Briggs v.
Thompson, 20 J. R. 292 ; Palen v. Johnson, 50 N. Y. 49. ) In
Palen v. Johnson it was conceded that the principal, if not the
only, change made by our statute, was to limit the time within
which the borrower could bring the action. The cause of action
in favor of the borrower is founded upon the unlawful possession
by the lender of the borrower's money. The claim has relation
to his property, and it is entirely unlike a strictly personal injury
where the cause of action does not survive, and is not assignable.
The language of the bankrupt act is broad enough to vest in the
assignee a right of action of this character, and our statute was
not intended to confine this remedy to the borrower alone and to
exclude those who stood, in respect to the claim, in privity with
him." (See also Bosanquette v. Dashwood, Cas. Temp. Talbot,
38; Dey v. Dunham, 2 J. Ch. 181 ; Palmer v. Lord, 6 J. Ch. 95.)
Upon the same principle of a comman-law right of recovery, it
has been held that an assignee can maintain an action to recover
money lost at faro, although there was also a statute which gave
a right of action to the loser. (Meech v. Stoner, 19 N. Y. 26;
Carter v. Abbott, 1 Barn. & Cress. 444; Gray v. Bennett, 3 Met.
522.)
Choses in Action of the Bankrupt's Wife. — There has always been
much conflict of authority as to whether the trustee in bankruptcy
took the husband's right to reduce to possession the wife's choses
in action. In Parsons on Contracts, Part II, chapter XII, section
IX, it was said : " Whether insolvency operated a reduction to
possession or only transferred to the assignee the right to reduce
was much disputed. But the better reason and the better au-
thority favored the view that it gave only a right to reduce, and
(60)
474 THE NATIONAL BANKRUPTCY LAW.
Sale of Property, [Ch, VII.
therefore the assignee had no property in the thing until actually
reduced." The authorities both English and American are col-
lated in a note to the text of that work. The discussion seems to
have turned around the point whether the husband's right is a
right of property conditional upon a reduction of the choses in
action to possession, or is a mere power. Those which regard it
as a conditional title have held that it passed to the assignee in
bankruptcy, but those which regard it as a mere power have held
that the power did not pass to the assignee in bankruptcy. But as
under the provisions of subdivision 3 of section 70 of the present
bankruptcy act, powers which the bankrupt might have exercised
for his own benefit pass to his trustee, there would now seem to
be no principle upon which it could be held that the trustee was
prevented from reducing to possession the wife's choses in action.
Upon this subject compare the following cases, decided under
former acts: In re Brandt, Fed. Cas. 1,811; 5 Biss. 217; in re
Boyd, Fed. Cas. 1,745; 5 N. B. R. 199; Wickham v. Valle, Fed.
Cas. 17,613; 11 N. B. R. 83; Shay v. Sessaman, 10 Pa. St. 432.
The question at the present time has but little practical im-
portance, because under the modern statutes the husband has no
further interest in the wife's choses in action.
Sale of Property. Section 70b.— Together with the provisions
of this subdivision must be read G. O. 18, which is as follows :
XVIII. SALE 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 any specified portion of the bankrupt's estate at private
sale ; in which case he shall keep an accurate account of each article sold, and
the price received therefor, and to whom sold; which account he shall file at
once with the referee.
3. Upon petition by a bankrupt, creditor, receiver or trustee setting forth
that a part or the whole of the bankrupt's estate is perishable, the nature and
location of such perishable estate, and that there will be loss if the same is
not sold immediately, the court, if satisfied of the facts stated and that the sale
is required in the interest of the estate, may order the same to be sold with or
without notice to the creditors, and the proceeds to be deposited in court
ESTATES. 475
§ 39.] Sale of Property.
As to whether the Bankruptcy Court has the right to order a
sale of property free from liens and incumbrances there may be
some doubt under the present act, but there seems to have been no
doubt under the acts of 1841 and 1867 °f the power of the court
to make such order. As to forms of petition and order for sales
of property see Forms 42-46 inclusive. Form No. 44 seems to
contemplate the sale of the property subject to the lien, but the
majority of cases under the present act hold that the court in-
cluding the referee has the power to order the sale of land free of
the incumbrances thereon, and the proceeds are to stand as a sub-
stitute for the lands themselves, for the benefit of those holding
liens to the extent of their interests therein, and the surplus goes
to the general creditors. (See Southern Loan & Trust Co. v.
Benbow, 3 Am. B. R. 9; 96 Fed. 514; In re Sanborn, 3 Am. B.
R. 54 ; 96 Fed. 507 ; in re Vorland, 1 Am. B. R. 450 ; 92 Fed.
893 ; in re Pittelkow, 1 Am. B. R. 472 ; 92 Fed. 901 ; in re
Etheridge Furniture Co. 1 Am. B. R. 112; 92 Fed. 329.) The
opinion of Judge Wheeler, In re Sanborn, supra, is as follows :
" This is a petition for review of the approval by the referee of a sale by the
trustee of mortgaged personal property, free of incumbrance, for less than the
amount of the mortgage debt, which was large in proportion to this property,
and was further secured by a mortgage of real estate being foreclosed by pos-
session under a judgment on a writ of entry. That the referee, sitting as a
Court in Bankruptcy, has power to order and to approve a sale, free of in-
cumbrance, of property in possession by the trustee, on notice to the incum-
brancer, seems to be clear. This was deduced by the Supreme Court of the
United States from similar provisions in this respect to the present act in
the Act of 1841. In re Christy, 3 How. 292; Houston v. Bank, 6 How. 486.
The same conclusion was announced on the corresponding provisions of the
Act of 1867 in Ray v. Norseworthy, 23 Wall. 128. In the latter case Mr.
Justice Clifford, in delivering the opinion of the court, said, ' Beyond all doubt
the property of a bankrupt may, in a proper case, be sold, by order of the
Bankrupt Court, free of incumbrance.' What would be a proper case is a
matter of discretion. Loveland, Bankr. 574. There appears to have been
some confusion as to what property was covered by the mortgage, and a sale
free of incumbrance might be advantageous as to that in question. The
whole amount of the sales of that found to be covered by this mortgage is
only $65.40, which is found to be the fair cash value. Setting aside the sale
would have required the trustee to gather back numerous articles and ani-
mals of small and changeable value, and to return the prices paid to the pur-
chasers, and would give the mortgagee the right only to have them sold again in
476 THE NATIONAL BANKRUPTCY LAW.
Sale of Property. [Ch. VII.
the same way. The approval of the sale under these circumstances seems to
be within the scope of the fair exercise of the discretion involved. Pro-
ceedings affirmed."
As to whether the decisions of the Supreme Court in regard to
the jurisdiction of the Bankruptcy Court shall have any effect is a
question. In the case of In re Pittelkow, supra, Seaman, J.,
said:
" Whatever may be the construction placed upon definitions of jurisdiction
contained in section 23, I am of the opinion that the section is not applicable,
in any view, to mortgages of real estate, where possession of the res is vested
in the Bankruptcy Court, and is held in fact by the trustee; the distinctions
being well stated by Judge Baker, in re Goodykoontz (1 Am. B. R. 215) in
opinion of March 10, 1899. In section 57, jurisdiction over such claim-
ants is clearly conferred, is necesssarily complete; and, in accord with the
uniform rule in such cases, there can be no interference with the possession,
and no foreclosure proceedings, where the trustee is an indispensable party,
except on leave of the Bankruptcy Court. See cases cited supra. It is how-
ever the duty of the court to consider the interests of mortgagees and other se-
cured creditors; and unless it is apparent (1) that the mortgaged premises
in the given case will probably realize upon a sale an amount substantially in
excess of the mortgage, and (2) that there are no complications, by dower
rights, conveyances, or other conditions which require foreclosure under the
mortgage, the power to proceed summarily by sale, including the interest of the
mortgage, should not be exercised. In re Taliafero, 3 Hughes, 422 ; Fed Cas.
No. 13736; in re Kahley, 2 Biss. 383; Fed. Cas. 7593; Foster v. Ames, 1 Low.
313 ; Fed. Cas. 4965. Certainly, if foreclosure is necessary to bar rights which
cannot be brought before the court in bankruptcy proceeding, the mortgagee
should have leave to that end, on proper showing of cause; otherwise, he
would be compelled to bid for the protection of his mortgage interest, with-
out the benefits of complete foreclosure. On the other hand, in a simple case
in which the mortgagee and the owner of the equity are before the court,
or may be brought in, a sale by order of the Bankruptcy Court with provision
saving the rights of the mortgagee to bid up to the ascertained amount of his
mortgage without advancing the money, except for expenses, would be
beneficial to all parties and effective. No sale can be made which affects the
rights of mortgagees or other lien holders, without notice to them and due
opportunity to defend their interests.' Ray v. Norseworthy, 23 Wall. 128;
Insurance Co v. Murphy, in U. S. 738, 4 Sup. 679. The power to order a
sale, free of encumbrances ought not to be exercised in any instance unless
the court is 'accurately informed as to the facts' and all parties in interest
have full opportunity to be heard, and the respective interests are ascertained.
In re Taliafero. 3 Hughes, 422 ; Fed. Cas. No. 13,736, opinion by the chief jus-
tice; in re Sacchi, 10 Blatchf. 29; Fed. Cas. No. 12200, on review by Woodruff.
C. J."
ESTATES. 477
§ 70.] The Bankruptcy Law Suspends Operation of State Insolvency Laws.
And see In re Styer (3 Am. B. R. 424; 98 Fed. 290), in which
the power seems to be douhted and it is declared that it will not
be exercised in any case unless the interests of the lien-holders
would be clearly conserved, and those of the general creditors ad-
vanced. This case holds that a referee may ordinarily appoint
appraisers and order a sale, but when the property is in the hands
of a receiver the judge must make the order.
Cross References to Remaining Subdivision of Section 70.
As to subds. d and f relating to compositions compare sections 13, 14c, 64c.
Compare subd. e with section 70a (5). Subd. c simply gives the court power to
effectuate its own decrees.
THE TIME WHEN THIS ACT SHALL GO INTO EFFECT.
The present Bankruptcy Law was approved by the President, July 1st, 1898.
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 peti-
tion for involuntary bankruptcy shall be filed within four months
of the passage thereof.
b Proceedings commenced under State insolvency laws before
the passage of this act shall not be affected by it.
The Bankruptcy Law Suspends the Operation of State Insolvency
laws. — The Constitution of the United States gives to Congress
the power to establish a uniform system of bankruptcy, but since
the adoption of the Constitution, Congress has only upon four
occasions exercised that power, and the laws passed pursuant to it
have been in force, in all, not more than twenty years. When
Congress does not exercise that authority, the State legislatures
are not restrained from passing laws upon the same subject, al-
though the powers given to them are limited by the constitutional
provision that they shall pass no law impairing the obligation of
contracts. But when Congress does exercise its power of estab-
lishing a system of bankruptcy, then the law enacted by it is para-
mount and superior to other laws relating to the same subject-mat-
ter. The State laws upon the subject of insolvency are not repealed
478 THE NATIONAL BANKRUPTCY LAW.
Bankruptcy Law Suspends Operation of State Insolvency Laws. [Ch. VII.
by the Bankruptcy Law, but their operation and effect is suspended
as long as the national Bankruptcy Law remains a statute. This
doctrine was clearly stated by Chief Justice Marshall in the fol-
lowing language in Sturgis v. Crowninshield, 4 Wheat. 122 : " It
is not the mere existence of the power, but its exercise, which is in-
compatible with the exercise of the same power by the States. It
is not the right to establish these uniform laws, but the actual
establishment, which is inconsistent with the partial acts of the
States. It has been said that Congress has exercised this power,
and by doing so has extinguished the power of the States, which
cannot be revived by repealing the law of Congress. We do not
think so. If the right of the States to pass a bankrupt law is
not taken away by the mere grant of that power to Congress, it
cannot be extinguished, it can only be suspended by the enactment
of a general bankrupt law. The repeal of that law cannot, it is
true, confer that power upon the States; but it removes a dis-
ability to its exercise which was created by the Act of Congress."
And under the present act the State insolvency laws were sus-
pended on the 1st day of July, 1898. (Parmenter M'f'g Co. v.
Hamilton, 1 Am. B. R. 39; 172 Mass. 178; in re Bruss-Ritter
Co. 1 Am. B. R. 59; 90 Fed. 651 ; in re Etheridge Co. 1 Am. B.
R. 112; 92 Fed. 329; in re Gutwillig, 1 Am B. R. 78; 90 Fed.
475-)
While the Bankruptcy Act recognizes insolvency proceedings
pending in the State courts begun before the passage of the Act,
and provides for their continuance without interference, it has re-
gard to what has been or may be done therein. So that where, in
proceedings pending in the State court, there has been an adjudi-
cation of insolvency, but no discharge applied for, the Federal
court will not wait for said discharge in the State court, before
acting in bankruptcy proceeding brought in the Federal court
affecting the same persons. (In re Bates, 4 Am. B. R. 56; 100
Fed. 263.)
As to the distinction between an insolvency law and a common
law general assignment which is void as against proceedings in-
stituted in bankruptcy see commentary to section 3a (4) sub nom.
ESTATES. 479
§ 70.] The Bankruptcy Law Suspends Operation of State Insolvency Laws.
Assignment for Benefit of Creditors, and see same para-
graph for effect of State laws for winding up corporation.
The provisions in the first paragraph of this section simply post-
pone the time when the right secured by it to both debtors and
creditors may be exercised. The rights themselves accrued from
the passage of the act. (See Westcott Co. v. Berry [N. H. Sup.
Ct. March, 1899], 45 Atl. 352; 4 Am. B. R. 264.)
So where an attachment was levied upon the property of the
bankrupt on August 24, 1898, and the petition of bankruptcy
was filed on December 9, 1898, the attachment was held void as
to the trustee of the bankrupt. (Kosches v. Libowitz [Tex. Civ.
App. April, 1900], 56 S. W. 613; 4 Am. B. R. 265, in note.)
GENERAL ORDERS IN BANKRUPTCY
OF THE
Supreme Court of the United States.
Adopted in October Term, 1898.*
PREAMBLE.
In pursuance' of the powers conferred by the Constitution and
laws 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.
Power to Slake Rules.
Bankruptcy. Act, section 30. — The Supreme Court of the United States to
prescribe rules, forms and orders in bankruptcy, and these rules are binding
upon bankruptcy courts. Compare page 238, ante.
In every court there exists an inherent power, independently of any statute,
* These General Orders are referred to in the following notes as Bankruptcy
Rules.
(61) 481
482 GENERAL ORDERS IN BANKRUPTCY.
to prescribe rules as to procedure and practice in matters coming before it.
(Havemeyer v. Ingersoll, 12 Abb. Pr. N. S. [N. Y.] 301 ; Snyder v. Bauch-
tnan, 8 S. & R. [Pa.] 336; Angel v. Plume, 73 111- 412; Fullerton v. U. S.
Bank, 1 Peters, 604; Hill v. Barney, 18 N. H. 607; Thompson v. Pershing, 86
[nd. 303; Texas Land Co. v. Williams, 48 Tex. 602; and see an exhaustive
:itation of authorities in Am. & Eng. Encyc. of Law [2d ed.], title, Courts, vol.
3, page 29.) To the Supreme Court of the United States has been given by
section 30 of the bankruptcy act, power to prescribe necessary rules, forms and
arders as to procedure, and for carrying this act into force and effect. It has
seen held that where a law is incomplete in its details and yet is possible of
;xecution, a court may supply the incompleteness of detail, by prescribing rules.
(Cochran v. Loring, 17 Ohio, 409.) Pursuant to this general principle, as well
is to the authority expressly conferred upon it by the statute, the Supreme
Court of the United States undoubtedly has the right by rules, -not only to
regulate matters that are strictly matters of procedure, but to provide a plan of
:xecuting the statute, if there is an incompleteness in its details. But the rec-
ognized limit to the powers of a court to prescribe rules, is that the rules pre-
scribed shall not be inconsistent with the laws of the land. Rights acquired
;ither under statutes, or by virtue of common-law principles universally recog-
nized, cannot be divested or altered by rules prescribed by a court. (Ward v.
Chamberlin, 2 Blackf. [U. S.] 437 ; Saylor v. Taylor, 77 Fed. 476 ; Fisher v.
Bank, 73 111. 34 ; Gormerly v. McGlynn, 84 N. Y. 284 ; Atlantic Express Co. v.
Wilmington, 32 Am. St. Rep. 80s ; "» re Glaser, 2 Ben. 180 ; s. c. 1 N. B. R. 236 ;
Patterson v. Winn, 5 Peters, 233 ; The Illinois, 1 Brown, 13 ; Gray v. Chicago,
1 Woolworth, 63.)
Effect of Rules.
When a court prescribes rules pursuant either to its inherent powers or to
powers conferred upon it by statute, the rules should be made to apply to all
cases falling within their terms. The authorities, however, do not appear to be
harmonious in their decisions as to the right of a court to suspend the operation
of a rule in a particular case, when a discretionary power to suspend the rule
has not by the rule been given to the courts. In Massachusetts, it was held
that a rule once adopted has the force of law and is binding upon the courts as
well as the parties, until rescinded, and should not be dispensed with to suit the
circumstances of any particular case; and that a rule once made must be
applied to every case until it is rescinded by the authority which made it.
(Thompson v. Hatch, 3 Pick. [Mass.] 512.) This doctrine was laid down in a
case in which it was conceded that obedience to the rule worked a hardship, if
not an injustice; and that the circumstances of the case would have made it
perfectly proper for the court to have suspended the operation of the rule, had
it possessed the power to suspend the rules. This case was followed in Tripp
v. Brownell, 2 Gray (Mass) 402. See also Hughes v. Jackson. 12 Md. 450;
Hanson v. McCue, 43 Cal. 178. But the United States Supreme Court, in
U. S. v. Breitling, 20 How. 254, held that it is always in the power of a court
to suspend its own rules or to except a particular case from their operation
whenever the purposes of justice require it. To the same effect is Deming v.
Foster, 42 N. H. 165. See also Am. and Eng. Encyc. of Law as cited above. It
GENERAL ORDERS IN BANKRUPTCY. 483
would seem that the doctrine laid down by the U. S. Supreme Court in United
States v. Breitling must be conceded to be the correct statement of the principle,
or else the inherent power of a court to make rules must be denied. If, as is
admitted by all the authorities, a court may rescind or repeal its rules, it may
do so at any time. The suspension of a rule, or the act of excepting a case
from its operation, practically amounts merely to a repeal of the rule, followed
by a subsequent re-enactment of it. The ruling in Thompson v. Hatch very
clearly shows the necessity and propriety of a stringent application of rules;
but to hold that the court prescribing them cannot suspend their operation is,
we believe, a denial of the inherent powers of the court, and is opposed not only
to the weight of authority, but to an equitable and fair administration of jus-
tice. Thus it has frequently been held that rules prescribing the time within
which bills of exceptions must be presented or settled, are rules of procedure
which may be dispensed with in the discretion of the trial judge and that such
rules do not absolutely control the action of the judge, but that he is at liberty
to depart from their terms to subserve the ends of justice. (Southern Pacific
Co. v. Johnson, 69 Fed. 559, citing U. S. v. Breitling, 20 How. 254 ; Dredge v.
Forsyth, 2 Black. 568; Muller v. Ehlers, 91 U. S. 249; Hunnicutt v. Peyton, 102
U. S. 350; Chateaugay Ore & Iron Co., 128 U. S. 544; 9 Sup. Ct. 150; Humes'.
Bowie, 148 U. S. 24s ; 13 Sup. Ct. 582 ; Southern Pac. Co. v. Hamilton, 4 C. C.
A. 441; 54 Fed. 468, 474; and also citing and distinguishing Bank v. Eldred,
143 U. S. 293; 12 Sup. Ct. 450; U. S. v. Jones, 149 U. S. 262; 13 Sup. Ct. 840;
Morse v. Anderson, 150 U. S. 156; 14 Sup. Ct. 43; Ward v. Cochran, 150 U. S.
597; 14 Sup. Ct. 230; Railway Co. v. Russell, 9 C. C. A. 108; 60 Fed. 501; Mil-
ler v. Morgan, 14 C. C. A. 312; 67 Fed. 82.)
But the right to suspend the rules, like the right to repeal them, unless
specially conferred, can exist only in the court which has authority to prescribe
the rules. By the bankruptcy act this authority is conferred upon the Supreme
Court of the United States. Therefore neither the courts of bankruptcy nor
the judges or referees thereof have any authority for suspending the operation
of the rules in bankruptcy. Unless somewhere in these rules that power is
given to them, it does not exist. By Bankruptcy Rule XXXVII, which de-
clares 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 established by the Supreme
Court of the United States shall be followed as nearly as may be; and that in
proceedings at law instituted for the same purpose the practice and procedure
in cases at law shall be followed as nearly as may be ; it is also provided that
the judge may by special order in any case vary the time allowed for return
of process, for appearance and pleading, and for taking testimony and publica-
tion, and may otherwise modify the rules for the preparation of any particular
case so as to facilitate a speedy hearing.
Scope of the Rules.
Bankruptcy Rule, No. XXXVII.— Proceedings at law instituted for the pur-
pose of carrying the bankruptcy act into effect, to follow practice and procedure
in cases at law. Proceedings in equity instituted for same purpose* to follow
Equity Rules.
484 GENERAL ORDERS IN BANKRUPTCY.
Equity Rule, No. LXXXIX.— Circuit Courts may prescribe additional rules
for practice, etc., in their respective districts.
Equity Rule, No. XC. — Practice of the High Court of Chancery in England
to regulate practice in equity in the absence of express rules.
See Equity Rules index, post, see ante.
Practice in United States Courts.
The practice, pleadings and forms and modes of procedure in civil causes,
other than those in equity and admiralty, in the Circuit and District Courts,
must conform as near as may be to the practice, pleadings and forms and
modes of proceeding existing at the time in like causes in courts of record of
the state within which such Circuit or District Courts are held. (Rev. Stat.,
section 914.) The jurisdiction and practice of these courts in equity is, how-
ever, the same in all the states, and the rule of decision is the same in all of
them. As Courts of Equity, the United States Courts are not regulated by
the law or practice of the states, but equitable procedure in them is according
to the principles and usages which belong to courts of equity in the mother
country, England, except when it is otherwise provided by statute, or rule of
court made in pursuance thereof. The procedure is, however, always sub-
ject to alteration by the Supreme Court by rules prescribed from time to time,
to any circuit or district court, not inconsistent with the laws of the United
States. (Rev. Stat., section 913.)
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 Rule I, 1867, with changes specifying more fully the entries
to be made in the docket.]
The Socket, Its Contents.
Bankruptcy Act, section 1 (10).—" Commencement of proceedings" denned.
Equity Rule No. XVI.— When clerk to enter a suit upon the docket.
Bankruptcy Rule, No. IV.— Name of attorney and place of business to be
entered in docket.
Records of Referees.
Bankruptcy Act, section 42.— Records of referees to be kept, to be certified
and to be transmitted to the clerk.
GENERAL ORDERS IN BANKRUPTCY. 485
Bankruptcy Act, section 39 (7).— Duty of the referee to keep, perfect and
transmit records to the clerk.
Open, to Public Inspection.
Bankruptcy Act, section 29 c (3).— Duty of referee or trustee to permit in-
spection of records.
Bankruptcy Act, section 49. — Accounts and papers of trustees open to in-
spection.
Rule No. I, under the old Bankruptcy Act of 1867 required the clerk of the
court to keep not only a docket similar to the one here required, but also a
minute book in which was to be entered a minute of all proceedings either
of the court or the register.
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 char-
acter.
[Part of Rule I, 1867, but not so full.]
Piling of Papers.
Bankruptcy Rule, No. XX. — Filing of papers after a reference to the referee.
Compare pages 259 and 260, notes to section 31 of the Bankruptcy Act, as
to when a petition is filed.
III. PROCESS.
All process, summons 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.
[Rule II, 1867, except the word " referees " is substituted herein for the
word " registers."]
Forms: Nos. 5, 30.
Process and Service Thereof.
Bankruptcy Act, section 18 a. — The petition in involuntary cases to be served,
and also a writ of subpoena.
Equity Rules, Nos. 7, 11-16. — Process, how and by whom served. Compare
pages 219-224 ante.
IV. CONDUCT OF PROCEEDINGS.
Proceedings in bankruptcy may be conducted by the bankrupt
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
486 GENERAL ORDERS IN BANKRUPTCY.
proceedings by attorney, who shall be an attorney or counsellor
authorized to practice in the circuit or district court. The name
of the attorney or counsellor, with his place of business, shall be
entered upon the docket, with the date of the entry. All papers or
proceedings offered by an attorney to be filed shall be indorsed as
above required, and orders granted on motion shall contain the
name of the party or attorney making the motion. Notices and
orders which are not, by the act or by these general orders, re-
quired to be served on the party personally may be served upon his
attorney.
[Rule III, 1867, without substantial change, except that the old rule re-
quired the entry of the attorney's place of residence as well as his place of
business.]
Parties Appearing in Person.
Bankruptcy Act, section 4. — Who may become bankrupts. Compare pages
46-55, titles, Who May Become Bankrupts, Infants, Insane Persons, Married
Women, Aliens, Wage Earners, Executors, Corporations, Trading, Who Are
Manufacturers.
Bankruptcy, Act, section 5. — Partners as bankrupts. Compare pages 55 and
60, title, Who Must Petition.
Bankruptcy Act, section 18. — Appearances in bankruptcy proceedings; right
of the bankrupt or any creditor to appear and to oppose proceedings after
appearance. Compare pages 220-224, title, Jurisdiction by Voluntary Ap-
pearance.
Bankruptcy Act, section 59. — Who may file and dismiss petitions. Compare
pages 327-338, titles, Voluntary Petitioners, Who May Become Bankrupts,
Petitioners in Involuntary Proceedings, Creditors Who Cannot Petition, Se-
cured Creditors, Amount of Claims, Attaching Creditors, Preferred Credi-
tors, etc.
Appearance by Attorney.
Bankruptcy Act, section 64 b (3). — One reasonable attorney's fee allowed
for the professional services actually rendered irrespective of the number of
attorneys employed, to the petitioning creditors in involuntary c?ses, to the
bankrupt in involuntary cases while performing the duties required by the
bankruptcy act, and to the bankrupt in voluntary cases, as the court may allow.
Admission to Practice in United States Courts.
Each court of the United States is a separate and distinct organization in so
far as admission to practice is concerned. Each district court and each circuit
court as well as each circuit court of appeals may have its own peculiar rules as
to the admission of attorneys, and may impose different conditions and require-
ments. Usually attorneys and counselors who are admitted to practice in the
courts of the state and have been engaged in such practice for a limited time
GENERAL ORDERS IN BANKRUPTCY. 487
are admitted to any of the district courts upon motion, and upon subscribing
the roll and taking the proper oath of office, and usually upon the payment of
a small fee which generally amounts to $5.00. The rules of the respective dis-
tricts with reference to this matter should be consulted by those seeking ad-
Notice.
Bankruptcy Act, section 58. — Notice of certain proceedings to be given by
mail to creditors ; may be published ; by whom given. Compare pages 324-327.
Bankruptcy Rule, No. XXIII.— Order of referee, to recite the mode in which
notice was given. Compare Equity Rule No. IV as to notice of motion in
equity proceedings.
It is to be noted that the only express statutory provision as to notice in
bankruptcy cases is that contained in section 58, and such notice is given only
in certain specified proceedings. It does not provide a method of giving notice
of motions in general, nor is there any bankruptcy rule as to that point of
procedure other than the one under consideration and Equity Rule No. IV
in so far as the latter rule may be deemed adopted by Bankruptcy Rule No.
XXXVII.
V. FRAME OF PETITIONS.
All petitions and the schedules filed therewith shall be printed,
or written out plainly, without abbreviation or interlineation, exr
cept where such abbreviation and interlineation may be for the
purpose of reference.
[First part of rule XIV, 1867, without change.]
Forms : Nos. I, 2, 3.
The Petition and the Schedules.
Bankruptcy Act, section 18. — Process, pleading and adjudication. Compare
pages 221-223.
Bankruptcy Act, section 7 (8). — Form and contents of the schedules. Com-
pare pages 91-93, title, Schedule To Be Filed.
Bankruptcy Act, section 39 (6). — Duty of Referee in certain cases to make
out the schedules
Bankruptcy Rule, No. IX.— Duty of the petitioning creditor in certain cases
to file a schedule.
Plainly Written.
Under Rule XIV of 1867, which was like the one under consideration, it
was held by the U. S. District Court for the Northern District of New York
in a case reported anonymously in 1 N. B. R. 215, that an illegible petition
could not be filed ; and in re Orne, 1 Ben. 420 ; s. c. 1 N. B. R. 79, it was held
by Judge Blatchford of the Southern District of New York that dots or ditto
marks could not, consistently with the rule, be used for the purpose of indicat-
ing anything necessary to be stated Compare cases cited, page 92 ante.
488 GENERAL ORDERS IN BANKRUPTCY.
VI. PETITIONS IN DIFFERENT 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
iistrict in which the debtor has his domicil, and the petition may
)e amended by inserting an allegation of an act of bankruptcy
:ommitted at an earlier date than that first alleged, if such earlier
ict is charged in either of the other petitions ; and in case of two
)r more petitions against the same partnership in different courts,
:ach having jurisdiction over the case, the petition first filed shall
)e first heard, and may be amended by the insertion of an allega-
ion of an earlier act of bankruptcy than that first alleged, if such
sarlier act is charged in either of the other petitions; and, in
:ither case, the proceedings upon the other petitions may be stayed
intil an adjudication is made upon the petition first heard; and
he court which makes the first adjudication of bankruptcy shall
■etain jurisdiction over all proceedings therein until the same shall
>e closed. In case two or more petitions shall be filed in different
listricts by different members of the same partnership for an ad-
udication of the bankruptcy of said partnership, the court in
vhich the petition is first filed, having jurisdiction, shall take and
etain jurisdiction over all proceedings in such bankruptcy until
he same shall be closed ; and if such petitions shall be filed in the
ame district, action shall be first had upon the one first filed. But
he court so retaining jurisdiction shall, if satisfied that it is for the
greatest convenience of parties in interest that another of said
:ourts should proceed with the cases, order them to be transferred
o that court.
[Rule XVI, 1867, without change, except that the last sentence of Rule VI
inder consideration, is new.]
rurisdiction to Adjudge Individuals Bankrupt.
Bankruptcy Act, section 2 (1). — Jurisdiction of courts of bankruptcy to ad-
udge a person bankrupt either in the district in which he has for a certain
ime resided or had his domicil or had his principal place of business. Com-
lare pages 16-18, title, Jurisdiction to Adjudge Persons Bankrupt; also pages
161-262, title, Where May the Petition Be Filed.
Turisdiction. Over Partners.
Bankruptcy Act, section 5. c— The court of bankruptcy which has jurisdic-
ion of one partner has jurisdiction of all partners.
GENERAL ORDERS IN BANKRUPTCY. 489
Transfer of Cases.
Bankruptcy Act, section 2 (19).— Power of one court of bankruptcy to
transfer cases to another court of bankruptcy.
Bankruptcy Act, section 32. — In case of two or more petitions in different
districts against the same person or partnership, the case to be transferred to
the court which can administer the estate with the greatest convenience to the
parties.
It is familiar practice in courts of equity acting under the same general
jurisdiction, when their jurisdiction is invoked for the distribution of the same
fund by different complainants, to permit the court first obtaining jurisdiction
r the fund by the institution of a suit, to proceed therewith to its full and
complete disposal. In the main, the new bankruptcy rules adhere to that
general principle, there being, however, this exception, that in the case of two
petitions filed against an individual the first hearing shall be by the court of
the district where the bankrupt has his domicil. Compare page 261 ante.
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
the several acts of bankruptcy are alleged in the different petitions
to have been committed on the same day, the court before which
the same are pending may order them to be consolidated, and 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.
[Rule XV, 1867, without change other than that " four months " appears in
the new rule in place of " six months."]
VIII. PROCEEDINGS IN PARTNERSHIP CASES.
Any member of a partnership, who refuses to join in a petition
to have the partnership declared bankrupt, shall be entitled to
resist the prayer of the petition in the same manner as if the peti-
tion had been filed by a creditor of the partnership, and notice of
(62)
49o GENERAL ORDERS IN BANKRUPTCY.
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
fixed by the court for the hearing of the petition, and to make
proof, if he can, that the partnership is not insolvent or has not
committed an act of bankruptcy, and to make all defences which
any debtor proceeded against is entitled to take by the provisions
of the act; and in case an adjudication of bankruptcy is made
upon the petition, such partner shall be required to file a schedule
of his debts and an inventory of his property in the same manner
as is required by the act in cases of debtors against whom adjudi-
cation of bankruptcy shall be made.
[Rule XVIII, 1867, with no substantial changes.]
Form: No. 2.
Bankruptcy Proceedings against Partners.
'Bankruptcy Act, section 5. — Proceedings against partners. Compare pages
59-60, titles, Who Must Petition, The Act of Bankruptcy.
Proceedings upon Involuntary Petitions in Bankruptcy.
Bankruptcy. Act, section 18. — Service of Petition and writ of subpoena.
Equity Rules, Nos. 7, 11-16. — Process, how and by whom served.
Bankruptcy Act, section 3. — Acts of Bankruptcy. Compare pages 22-45.
Defences.
Bankruptcy Act, section 3 c. — Solvency at the time of filing the petition a
defense, when. Compare pages 222-223.
Bankruptcy Act, section 7 (8). — Duty of bankrupt to make out and file
schedule and inventory. Compare pages 91-93.
Bankruptcy Act, section 39 a (6). — Duty of the referee to compile schedules
in certain cases.
Bankruptcy Rule No. IX. — Duty of petitioning creditor in certain cases to
furnish schedule.
IX. SCHEDULE IN INVOLUNTARY BANKRUPTCY.
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
creditors of the bankrupt, according to the best information of the
petitioning creditor. If the debtor is found, and is served with
notice to furnish a schedule of his creditors and fails to do so, the
GENERAL ORDERS IN BANKRUPTCY. 491
petitioning creditor may apply for an attachment against the
debtor, or may himself furnish such schedule as aforesaid.
[New.]
Filing of Schedules.
Bankruptcy Act, section 7 (8).— Duty of bankrupt to file schedules and in-
ventory.
Bankruptcy Act, section 39 a (6).— Duty of the referee in certain cases to
compile the schedules. Compare page 269, ante.
X. INDEMNITY FOE EXPENSES.
Before incurring any expense in publishing or mailing notices,
or in traveling, or in procuring the attendance of witnesses, or in
perpetuating testimony, the clerk, marshal or referee may require,
from the bankrupt or other person in whose behalf the duty is to
be performed, indemnity for such expense. Money advanced for
this purpose by the bankrupt or other person shall be repaid him
out of the estate as part of the cost of administering the same.
Duties of the Referee Involving Expense.
Bankruptcy, Act, section 58. — Referee in certain cases to mail notices to
creditors.
Bankruptcy Act, section 65. — Referee (or judge) to preside at first meeting
of creditors, to be held at the county seat of the county in which the bankrupt
has his domicil or residence or in which he did business.
Bankruptcy Rule No. XXVI. — Referees account of expenses.
Fees and Services of Marshal.
Bankruptcy Act, section 52. — Compensation of the marshal.
Expenses of Officials in General.
Bankruptcy Rule, No. 35. — Compensation of officers not to cover expenses.
Bankruptcy Act, section 62. — Expenses of officers to be reported to the court
under oath.
Bankruptcy Act, section 64 b. — Necessary cost of preserving estate and costs
of administration treated as debts having a priority.
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
492 GENERAL ORDERS IN BANKRUPTCY.
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 rule is substantially the same as
a part of rule XIV, 1867.]
Amendments.
Bankruptcy Act, section 39 a (2). — Duty of the referee to examine and
cause defective schedules to be amended. " Amendment of Schedules," page
94, ante.
As to amendment of petitions, compare page 223, ante.
XII. DUTIES OF REFEREE.
1. The order referring a case to a referee shall name a day upon
which the bankrupt shall attend before the referee; and from that
day the bankrupt shall be subject to the orders of the court in all
matters relating to his bankruptcy, and may receive from the
referee a protection against arrest, to continue until the final ad-
judication on his application for a discharge, unless suspended or
vacated by order of the court. A copy of the order shall forth-
with be sent by mail to the referee, or be delivered to him person-
ally by the clerk or other officer of the court. And thereafter all
the proceedings, except such as are required by the act or by these
general orders to be had before the judge, shall be had before the
referee.
2. The time when 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 com-
position, or for an injunction to stay proceedings of a court or
officer of the United States or of a State, shall be heard and de-
cided by the judge. But he may refer such an application, or any
specified issue arising thereon, to the referee to ascertain and re-
port the facts.
[Paragraph 1. except the last sentence, is the second paragraph of Rule IV,
1867, with slight changes. Paragraph 2 is derived from Rule V, 1867. The
changes are in accordance with the increased power given to referees, they
having the power, subject to review by the court, to hear and determine con-
GENERAL ORDERS IN BANKRUPTCY.
493
tested matters; while the registers, in cases in which issues arose, were com-
pelled to certify the same to the court for determination. Paragraph 3 is new.]
Orders of Reference.
Bankruptcy. Act, sections 18 f and g. — References by the clerk to the referee
in case of absence of the judge.
Bankruptcy Act, section 22 a. — References by the judge to the referee after
adjudication; what matters referable.
Forms: Nos. 14, 15.
Duties and Powers of Referees.
Bankruptcy Act, section 39. — Duties of referees enumerated, pages 268 272.
Bankruptcy Act, section 55. — Referee to preside at first meeting of creditors.
Compare pages 301-303.
Bankruptcy Act, section 38. — Jurisdiction and powers of referees. Compare
pages 265-268.
Bankrupt's Subjection to Orders of the Court.
Bankruptcy Act, section 7 (2) . — Duty of bankrupt to comply with all law-
ful orders of the court. Compare " Examination of Bankrupt," page 95,
et seq.
Arrest of the Bankrupt.
Bankruptcy, Act, section 9 a. — Exemption of bankrupt from arrest in cer-
tain cases. Compare pages 109-113, titles, Purpose and Character of the Pro-
tection.
Bankruptcy Rule No. XXX. — Imprisoned debtor, when court will allow his
release.
The term " bankrupt " includes one by or against whom a petition has been
filed as well as one who has been adjudged a bankrupt and such a person
from the time of the filing of the petition is entitled to protection from arrest,
in the cases mentioned in the statute. Compare page 109, ante.
Time and Place of Performing Duties.
Bankrupcy Act, section 55. — First meeting of creditors to be held at the.
county seat of the county in which bankrupt resided or had his domicil or
principal place of business.
Limitations on Powers of Referees.
Bankruptcy Act, section 38 (4). — Questions arising out of the applications
of bankrupts for compositions or discharges not within the jurisdiction of
referees.
Bankruptcy Act, section 38 (4). — Powers of referees as prescribed by rules
or orders of the courts of bankruptcy of their respective districts.
Bankruptcy Act. section 12 d. — Confirmation of compositions to be by the
judge.
Bankruptcy Act, section 14 b. — Applications for a discharge to be heard by
the judge.
Bankruptcy Act, section 22. — Power of the court to refer a bankruptcy case
to the referee, generally or specially, with only limited authority to act in the
premises, or to consider and report upon specified issues.
494 GENERAL ORDERS IN BANKRUPTCY.
An examination of the rule under consideration shows that the Supreme
Court in prescribing it, has endeavored to carry out the intention of Congress
to bring home the administration of the bankruptcy act close to the people, and
has left with the referees, with one or two exceptions, all the power and au-
thority which by the terms of the act could be conferred on them. One restric-
tion upon their authority which is not expressly contained in the Bankruptcy
Act itself, is a restriction of the right to grant injunctions. It is to be noted
that the restrictions upon the powers of referees as to questions arising out
of applications of bankrupts for compositions or discharges do not, as shown
by paragraph 3 of the rule under consideration, prevent the judge from refer-
ring to referees such applications or specified issues arising thereon, to ascer-
tain and report the facts. Compare page 268.
XIII. APPOINTMENT AND EEMOVAL OF TETISTEE.
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, Rule"vXIII is new; but the former Bankruptcy Act
itself contained similar provisions as to the approval of the choice of a trustee.
(R. S., section 5034; Act of 1867, section 13.) 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. (R. S., section 5039; Act of 1867,
section 18.)]
Appointment of Trustees.
Bankruptcy Act, section 2 (17). — Courts of Bankruptcy have jurisdiction
pursuant to the recommendation of creditors, or when they neglect to recom-
mend appointments, to appoint trustees.
Bankruptcy Act, section 44. — Creditors' right to appoint trustees.
Bankruptcy Act, section 45. — Qualifications of trustees. Compare page 283,
title, Who May be Trustee ; also page 279, title, The Right of Appointment.
Forms: Nos. 22, 23.
Removal of Trustees.
Bankruptcy Rule, No. XVII. — Notice and practice upon proceedings to re-
move a trustee on complaint of creditors, for cause, after notice and hearing.
Bankruptcy Act, section 46. — Effect of removal of the trustee.
Compare pages 285-286, titles, Removal of Trustees, Removal by Vote of
Creditors.
Bankruptcy Rule, No. XVII. — Notice and practice upon proceedings to re-
move a trustee.
XIV. NO OFFICIAL OR GENERAL TRUSTEE.
No official trustee shall be appointed by the court, nor any gen-
eral trustee to act in classes of cases.
[Part of Rule IX, as amended in 1874, without substantial change.]
GENERAL ORDERS IN BANKRUPTCY. /05
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.
[New.]
Form : No. 27.
Appointment of Trustees.
Bankruptcy Act, section 2 (17). — Jurisdiction of courts of bankruptcy to
appoint trustees.
Bankruptcy Act, section 44. — Creditors' right to appoint trustees.
The rule under consideration introduces a new practice. Under the former
laws it was held that a trustee should be chosen even if no creditors proved
their claims and even though there were no known assets; it being further
said that the purpose of the appointment of a trustee was to seek and discover
assets.
XVI. NOTICE TO TRUSTEE 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 forthwith to notify the referee of his acceptance or rejection
of the trust, and shall contain a statement of the penal sum of the
trustee's bond.
[Rule IX, 1867, with some slight additions as to the contents of the notice
and with other minor changes.]
Form : No. 24.
Bonds of Trustees.
Bankruptcy Act, section 50 a-j.— Miscellaneous provisions as to bonds of
referees and trustees.
Bankruptcy Act, section so k.— Failure of trustee to file bond within time
limited, deemed to be a declination of appointment.
Form: No. 25.
XVII. DUTIES OF TRUSTEE.
The trustee shall, immediately upon entering upon his duties,
prepare a complete inventory of all the property of the bankrupt
496 GENERAL ORDERS IN BANKRUPTCY.
that comes into his possession. The trustee shall make report to
the court, within twenty days after receiving the notice of his
appointment, of the articles set off to the bankrupt by him, accord-
ing to the provisions of the forty-seventh section of the act, with
the estimated value of each article, and any creditor may take
exceptions to the determination of the trustee within twenty days
after the filing of the report. The referee may require the ex-
ceptions 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 requiring the trustee
to show cause before the judge, at a time specified in the order,
why he should not be removed from office. The referee shall
cause a copy of the order to be served upon the trustee at least
seven days before the time fixed for the hearing, and proof of the
service thereof to be delivered to the clerk. All accounts of trus-
tees shall be referred as of course to the referee for audit, unless
otherwise specially ordered by the court.
[Rule XIX as amended, with several slight changes.]
Duties of Trustees in General.
Bankruptcy Act, section 47. — Duties of trustees enumerated. Pages 286-292.
Bankruptcy Act, section 70 b. — Real and personal property to be appraised.
Duties as to Exemptions.
Bankruptcy Act, section 7 (8). — Duty of bankrupt in his schedules to claim
exemptions.
Bankruptcy Act, section 6. — -Exemptions allowed to bankrupts. Compare
pages 78-88, in particular the title, The Trustee's Rights in Exempt Property.
Bankruptcy Act, section 2 (11). — Jurisdiction of bankruptcy courts to de-
termine all claims of bankrupts to their exemptions.
Bankruptcy Act, section 1 (7). — The word " court " may include referee.
Bankruptcy Act, section 38 a.— Acts and orders of referees also subject to
review by the judge.
Bankruptcy Act, section 30 a (10).— Duty of referee to preserve evidence in
contested cases.
Bankruptcy Rule, No. XXVII.— Review of order of referee by the judge;
referee's duty to certify the question.
Form: No. 47.
GENERAL ORDERS IN BANKRUPTCY. 497
Bemoval of Trustee.
Compare cross-references and comments to Bankruptcy Rule No. XIII.
It is to be noted that the rules restrict the referee from entering an order
removing the trustee. The extent of his power in this matter is to enter an
order requiring the trustee to show cause before the judge why he should not
be removed from office.
Forms: Nos. 52, 53, 54.
Exceptions to Exemptions Set-off by the Trustee.
A trustee's action in setting apart exemptions is not final, and G. G. 17 al-
lowing twenty days for exceptions to such setting apart applies only to creditors
and not to the bankrupt. (In re White, 103 Fed. 774; 4 Am. B. R. 613.)
XVIII. SALE 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 any specified portion of the
bankrupt's estate at private sale; in which case he shall keep an
accurate account of each article sold, and the price received 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 immediately, the
court, if satisfied of the facts stated and that the sale is required
in the interest of the estate, may order the same to be sold, with or
without notice to the creditors, and the proceeds to be deposited in
court.
[Paragraph 1, is new; paragraph 2 is part of Rule XXI, 1867, without
change ; paragraph 3 is Rule XXII, 1867, with various changes.]
Sales.
Bankruptcy, Act, section 70 b. — Duty of the trustee to collect and reduce to
money the property of the estate. Compare pages 474-476.
Bankruptcy Act, section 58 a (4). — Creditors to have ten (10) days' notice
by mail of all proposed sales of property. Compare page 324, et seq.
Forms : Nos. 42, 43, 44, 45, 46.
Is Notice of Sale Always Necessary.
Whether the provisions of the second paragraph: were intended to dispense
with actual notice of the sale, in cases in which: a private sale is ordered, may
(63)
498 GENERAL ORDERS IN BANKRUPTCY.
be perhaps not altogether free from question, when the unqualified provision of
section 58 a (4) of the bankruptcy act itself, is considered. But it would seem
that this rule was intended to dispense with notice of the sale in certain cases.
That notice of the application for authority to sell at private sale is to be given,
is undoubtedly true and if such notice is given and an order is made directing a
private sale, especially if the order fixes the terms upon and the price at which
the sale is to be made, it would seem as if further notice of the sale itself would
not only be unnecessary, but that it is inconsistent with the notion of a private
sale. A notice of sale must be either for the purpose of giving the notified
party an opportunity to attend the sale and to bid thereat, — a privilege which
can hardly be held to exist in the case of private sales; or else it is for the
purpose of enabling one to oppose the act of selling. But the order directing
a. private sale conclusively settles the right to sell.
Paragraph (3) shows that the court has with foresight, provided for sales
of perishable property immediately ; that is, without notice. Under the former
bankruptcy system there was a provision of law to this effect as well as a rule.
The rule authorized a sale of property liable to deterioration as well as of
perishable property. Compare pages 325-326 ante.
XIX. ACCOUNTS OF MARSHAL.
The marshal shall make return, under oath, of his actual and
necessary expenses in the service of every warrant addressed to
him, and for custody of property, and other services, and other
actual and necessary expenses paid by him, with vouchers there-
for whenever practicable, and also with a statement that the
amounts charged by him are just and reasonable.
[Latter part of Rule XII, 1867, without any substantial change.]
Pees and Expenses of Mars.hal.
Bankruptcy Act, section 52 b. — Compensation of marshal.
Bankruptcy Rule, No. X.— Right of marshal and other officials to demand in-
demnity for expenses.
Services of the Marshal.
Bankruptcy Act, section 2 (3).— Power of courts of bankruptcy to appoint
receivers and marshals to take charge of property of bankrupt. Compare
page 18, title, Power to Take Charge of Property.
Bankruptcy Act, section 69.— Power of court to issue warrant to marshal to
take bankrupt's property into custody.
Bankruptcy Act, section 2 (5).— Power of courts of bankruptcy to authorize
marshal to conduct the business of the bankrupt.
Under the rule of 1867, similar to the one under consideration, it was held
that if the marshal did not furnish vouchers he should state in his report why
he failed to do so ; and that if the court found that it was impracticable for him
to obtain them at the time of his report, it might nevertheless pass and allow
GENERAL ORDERS IN BANKRUPTCY. 499
his accounts, although the failure to get them was primarily due to ignorance
of the rule requiring vouchers. In re Comstock, 9 N. B. R. 88.
XX. PAPERS FILED AFTER REFERENCE.
Proofs of claims and other papers filed subsequently to the
reference, except such as call for action by the judge, may be filed
either with the referee or with the clerk.
0
[New.]
Papers Piled with, the Eeferee.
Bankruptcy Act, section 30 a (7). — Duty of referee to safely keep, perfect
and transmit records to the clerk when the case is concluded.
Bankruptcy Act, section 39 a (8). — Duty of referee to transmit to clerk rec-
ords or copies, whenever needed, for proceedings in court ; and to secure their
return.
Bankruptcy Act, section 39 a (10).— Duty of referee residing in same place
as clerk to call and receive all papers filed.
Bankruptcy Act, section 51 (3). — Duty of clerk to deliver or transmit to
referees all papers in matters referred to them.
Bankruptcy Act, section 42 b. — The records of referees and the papers on
file constitute the records of the case.
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
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 became or
will become due ; and if it consists of items maturing at different
dates the average due date shall be stated, in default of which it
shall not be necessary to compute interest upon it. All such de-
positions shall contain an averment that no note has been received
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.
5oo GENERAL ORDERS IN BANKRUPTCY.
2. Any creditor may file with the referee a request that all no-
tices 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 designation
shall be made by such creditor, all notices shall be so addressed;
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 owner 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 pro 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
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-exam-
GENERAL ORDERS IN BANKRUPTCY. 501
ination 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 witnesses 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.
[Rule XXXIV, 1874, with slight changes.]
Proof of Debts.
Bankruptcy Act, section 63. — Debts which may be proved. Compare pages
379-416, various titles.
Bankruptcy Act, section 57 a. — Proof and allowance of claims; of what is
proof to consist.
Bankruptcy Act, section 57 b. — Proof of claims founded on instruments in
writing.
Bankruptcy, Act, section 57 c-1. — Allowance of claims.
Bankruptcy Act, section 57 m. — Proof of claim of one bankrupt estate
against another bankrupt estate.
Bankruptcy Act, section 57 n. — Proof when to be made. Page 305 et seq.
Forms : Nos. 31-37.
Notice.
Bankruptcy Act, section 58. — Creditors to have notice by mail of various
proceedings.
Assigned Claims.
Bankruptcy Act, section 68. — When a claim against a bankrupt purchased
by or transferred to a debtor of the bankrupt, is not a proper set-off or coun-
ter-claim.
It should be borne in mind that this rule requires that proof of a claim which
has been assigned before proof shall be supported by a deposition of the owner
of the same at the time of the commencement of the proceedings. The phrase
"commencement of the proceedings" by section 1 (10) of the bankruptcy act,
refers to the time of the filing of the petition.
Claims of One Contingently Liable for the Bankrupt.
Bankruptcy Act, section 57 i. — Right of a surety of a bankrupt to prove a
claim of the creditor when the creditor fails to make proof. Compare page
321, title, Subrogation.
Xetters of Attorney.
The express terms of this rule (paragraph 5) seem to require not only an
acknowledgment of the execution of powers of attorney, but also in the cases
502 GENERAL ORDERS IN BANKRUPTCY.
of corporations and partnerships an oath as to the position therein or the con-
nection therewith of the person executing the instrument. It is to be noted
that any officer of a corporation may by the rule make this oath, while para-
graph i limits proof by a corporation so that it can be made only by the treas-
urer thereof. There is some doubt whether the mode of acknowledging the
execution of a power of attorney as outlined in this rule is compulsory or not ;
that is, whether it is exclusive of other modes or not. Under the authorities
under Rule XXXIV of 1874 which, as to this point, provided that a letter of
attorney might be acknowledged before a register in bankruptcy or a United
States circuit court commissioner, but which did not provide that the execu-
tion might be before a notary public, it was held by the court in re Butterfield,
u N. B. R. 195, that the mode of execution provided for by that rule was not
exclusive and that an acknowledgment could be taken before a notary public.
By the present rule, it is expressly provided that the acknowledgment may be
before a notary public ; but whether the reasoning in re Butterfield may be ap-
plied and it be held that a letter of attorney may be acknowledged before a
judge of a state court or any other person by law of the state authorized to take
acknowledgments, is perhaps open to question. Contra to in re Butterfield was
in re Christley, 10 N. B. R. 268, decided by the United States District Court
for Indiana, which held that a power of attorney was insufficient to authorize
an agent to act for a creditor in proving a claim, unless acknowledged before
the officers mentioned in Rule XXXIV of 1874. The fact that under the pres-
ent rule certain State officers are mentioned as being authorized to take ac-
knowledgments to powers of attorney furnishes a strong presumption that all
others are without authority to take such acknowledgments. The principle of
expressio unius, exclusio alius would seem applicable.
Forms : Nos. 20, 21.
Ke-examination of Claims.
Bankruptcy Act, section 57 k.— Claims which have been allowed may be
reconsidered and re-allowed or rejected.
Bankruptcy Act, section 57 l—U dividends have been paid upon claims
which are afterwards rejected, they may be recovered.
Bankruptcy Act, section 2 (2) .-Jurisdiction of Courts of Bankruptcy to
reconsider allowed or disallowed claims. Compare, page 323, title, Recon-
sideration.
Forms: Nos. 38, 39.
XXII. TAKING OF TESTIMONY.
The examination of witnesses before the referee may be con-
ducted 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. 503
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.
[Rule 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.]
Referee's Power on Examinations.
Bankruptcy Act, section 38 a. — Jurisdiction of referees to exercise powers
vested in courts of bankruptcy for administering oaths, examining witnesses
and requiring production of documents.
Bankruptcy Act, section 21 a, b, c. — Evidence in bankruptcy cases, how ad-
duced; power to order persons to appear to be examined; manner of taking
depositions. Compare, pages 228-231, title, To be Examined.
One of the most important respects in which referees have been given powers
in excess of those formerly conferred on registers is in the right now given
them to determine objections raised upon examinations, as to the materiality,
competency, and relevancy of questions. Their powers upon the examination
of witnesses are co-extensive with the powers of the court, except that they do
not have the power of commitment. By section 39 a (5), in all contested
matters they may be required to make up a record embodying the evidence and
to transmit the same with their findings thereof to the judge. By section 41
refusal to appear, to be sworn, or to testify, is a contempt and upon certification
of the facts to the court it may be punished by the judge as if it had occurred
in the presence of the court.
Costs.
Bankruptcy Act, section 2 (18). — Power of courts of bankruptcy to tax
costs.
Equity Rule, No. 67.— Power of courts of equity to deal with the costs of
incompetent, immaterial or irrelevant depositions.
XXIII. ORDERS OF REFEREE.
In all orders made by a referee, it shall be recited, according as
the fact may be, that notice was given and the manner thereof ; or
that the order was made by consent; or that no adverse interest
was represented at the hearing; or that the order was made after
hearing adverse interests.
[Rule VIII, 1867, with verbal changes.]
So4 GENERAL ORDERS IN BANKRUPTCY.
Notice.
As has been observed in the comments upon an earlier rule the only stati
provision of the bankruptcy system as to notice to creditors is that contj
in section 58, providing that notice by mail shall be given in certain cases t<
creditors by the referee. It is not a general provision as to notice of mo-
or applications for orders or other relief.
XXIV. TRANSMISSION OF PROVED CLAIMS TO CLERK.
The referee shall forthwith transmit to the clerk a list of
claims proved against an estate, with the names and addresse;
the proving creditors.
[Compare Rule XI, 1867.]
Under the old system of bankruptcy, by Rule XI, the register was requ
to forward to the clerk a memorandum of every official act not later than
next day after it occurred.
XXV. SPECIAL MEETING OF CREDITORS.
Whenever, by reason of a vacancy in the office of trustee, or
any other cause, it becomes necessary to call a special meeting
the creditors in order to carry out the purposes of the act, the cc
may call such a meeting, specifying in the notice the purpose
which it is called.
[New.]
Choice of a New Trustee.
Bankruptcy Act, section 44. — Creditors to choose a new trustee at the
meeting after a vacancy has occurred and in certain other cases.
Sleeting of Creditors.
Bankruptcy Act, section 55 a-c. — Meeting of creditors.
Bankruptcy Act, section 55 d — Subsequent meetings held by consent of
creditors.
Bankruptcy Act, section 55e— Subsequent meetings when called by the cc
Bankruptcy Act, section 55 f.— Final meeting of creditors.
XXVI. ACCOUNTS OF REFEREE.
Every referee shall keep an accurate account of his traveling ;
incidental expenses, and of those of any clerk or any officer atte
ing him in the performance of his duties in any case which ma}
referred to him ; and shall make return of the same under oatl
GENERAL ORDERS IN BANKRUPTCY. 505
the judge, with proper vouchers when vouchers can be procured,
on the first Tuesday in each month.
[First part of Rule XII, 1867, with substantial change.]
Expenses of Referee.
Bankruptcy Rule, No. X. — Right of referee and other officers to demand in-
demnity before incurring expense.
Bankruptcy Rule, No. XXXV (2). — Compensation of referees as provided
for in bankruptcy act does not cover all expenses.
The language of the rule under consideration seems to imply that the ref-
eree as such may employ a clerk. The statute makes no provision for this
assistance, the necessity of which will be conceded by those familiar with the
amount of business done by referees in large cities. While the rule does not
expressly authorize the employment of a clerk and in fact goes no farther than
to provide for payment of the expenses incurred by the clerk, yet the existence
of the right of a referee to have a clerk being admitted, it must follow that
in some way the clerk is to be paid. Although neither the statutes nor the
rules provide for his compensation and although it may be difficult to ap-
portion the expense among the estates administered, yet the payment of the
clerk of the referee from the funds of administered estates would seem to be a
difficulty of administration rather than something beyond the power of the
court and the referee.
XXVII. REVIEW BY JUDGE.
When a bankrupt, creditor, trustee, or other person shall desire
a review by the judge of any order made by the referee, he shall
file with the referee, his petition therefor, setting out the error
complained of ; and the referee shall forthwith certify to the judge
the question presented, a summary of the evidence relating thereto,
and the finding and order of the referee thereon.
[Rule VIII as amended, 1874, with changes.]
Review by the Judge.
Bankruptcy Act, section 38 a. — All proceedings by the referee subject to re-
view by the judge.
Bankruptcy Act, section 39 a (5). — Referee to make up records embodying
the evidence in contested matters, together with findings.
Although the referee is a subordinate judicial officer and although his pro-
ceedings are subject to review, none of his acts need confirmation in order to
make them valid or final adjudications. If the parties do not petition for a
review the acts of the referee are binding and conclusive as much as are the
acts of any subordinate or inferior court.
Form : No. 56
(64)
506 GENERAL ORDERS IN BANKRUPTCY.
It is to be noted that neither the bankruptcy act nor the rules fix a time
within which a petition for review of proceedings by the referee must be filed,
Rule VIII under the old system did provide a time limit.
XXVHI. 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
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.
[Rule XVII, 1867, with slight changes.]
Redemption of Property from. Liens.
Bankruptcy Act, section 2 (7). — Jurisdiction of bankruptcy courts to cause
estates of bankrupts to be collected, reduced to money and distributed and to
determine controversies in relation thereto.
Bankruptcy Act, section 67 d. — Liens given in good faith, not in fraud of the
bankruptcy act, for a present consideration, and duly recorded, not to be
affected by the bankruptcy act.
Form: No. 43.
Compounding Claims.
Bankruptcy Act, section 27. — Trustee's power, with approval of the court, to
compromise debts or claims. Compare, page 255, title, Approval of Court is
Necessary in Each case.
Bankruptcy Act, section 58.— Notice by mail to be given to each creditor of
all proposed compromises.
Bankruptcy Rule, No. XXXIII.— Petition for authority to compound claims,
what to state.
XXIX. PAYMENT OF MONEYS DEPOSITED.
No moneys deposited as required by the act shall be drawn from
the depository unless by check or warrant, signed by the clerk of
GENERAL ORDERS IN BANKRUPTCY. 507
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 furnished
to the depository, and also the name of any referee or clerk au-
thorized to countersign said checks.
[Latter half of Rule XXVII, 1867, without material change.]
Deposits.
Bankruptcy Act, section 61. — Depositories of money to be designated by the
court.
Bankruptcy Act, section 47 a (3). — Trustees to deposit all moneys in one of
the designated depositories.
Bankruptcy Act, section 47 a (4). — Trustees to disburse moneys only by
check or draft on the depository.
XXX. IMPRISONED 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 matter 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 ap-
plication, 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 habeas corpus
to bring him before the court to ascertain whether such process has
been issued for the collection of any claim provable in bankruptcy,
and if so provable he shall be discharged ; if not, he shall be re-
manded to the custody in which he may lawfully be. Before
granting the order for discharge the court shall cause notice to be
5o8 GENERAL ORDERS IN BANKRUPTCY.
served upon the creditor or his attorney, so as to give him an op-
portunity of appearing and being heard before the granting of the
order.
[Rule XXVII, 1867, without substantial change.]
Release from Arrest.
Bankruptcy Act, section 9 a (1) and (2). — Cases in which bankrupt is ex-
empt from arrest. Compare titles, Protection from Arrest Not a release, Pur-
pose and Character of the Protection, When the Right of Protection Begins,
How is the Right of Protection Enforced, Determination Whether the Debt is
Dischargeable, In What Actions is One Exempt from Arrest.
Bankruptcy Rule, No. XII (1). — Power of the referee to furnish protection
to the bankrupt.
As to apparent conflict betwen this rule and section 9a, see discussion on
pages 1 10- 1 13 ante.
XXXI. PETITION FOR DISCHARGE.
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.
[New.]
Form : No. 57.
Discharges, when Granted.
Bankruptcy Act, section 14 a. — Applications for discharge. Compare pages
159 et seq.
XXXII. OPPOSITION TO DISCHARGE OR COMPOSITION.
A creditor opposing the application of a bankrupt for his dis-
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.
[Rule XXIV, 1867, in part.]
Form: No. 58.
Opposition to Discharge or Composition.
Bankruptcy Act, section 12 c— A date and place for the hearing of applica-
tions for the confirmation of the composition to be fixed by the court. Com-
pare page 148, Specific Grounds for Refusing to Confirm, etc.
GENERAL ORDERS IN BANKRUPTCY. 509
Bankruptcy Act, section 14 b. — The judge to hear applications for a dis-
charge and proofs and pleas made in opposition thereto at such time as will give
parties in interest a reasonable opportunity to be fully heard. Compare, pages
162 et seq.
Bankruptcy Act, section 58 a (2). — Creditors to have ten days' notice, by mail
of all hearings upon applications for the confirmation of compositions or the
discharge of bankrupts.
Appearances.
Bankruptcy Rule, No. IV. — Appearances may be in person or by attorney.
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 de-
termination of arbitrators, or for authority to compound and settle
such controversy by agreement with the other party, the applica-
tion 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 Rule XX, 1867.]
Arbitration and Compromise.
Bankruptcy Act, section 26. — Arbitration of controversies.
Bankruptcy Act, section 27. — Compromise of controversies.
Bankruptcy Rule, No. XXVIII. — Redemption of property and compounding
of claims.
Bankruptcy Act, section 58. — Creditors entitled to ten days' notice by mail of
every proposed compromise.
The old bankruptcy Rule No. XX, 1867, did not require that notice should
be given in every case of a proposed compromise, as is now required by section
58 of the bankruptcy act.
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 Rule XXXI, 1867, without change.]
5io GENERAL ORDERS IN BANKRUPTCY.
Costs.
Bankruptcy Act, section 2 (18).— Power of courts of bankruptcy to tax
costs and render judgment therefor against the parties or the estate.
Bankruptcy Act, section 3 e-f— Allowance to debtor, if the petition against
him is dismissed, of all costs and expenses occasioned by the seizing of his
property under a warrant issued from the court.
XXXV. COMPENSATION OF CLERKS, REFEREES AND TRUSTEES.
1. The fees allowed by the act to clerks shall be in full com-
pensation 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 refer-
ees or other officers, or in receiving or paying out money ; but shall
not include copies furnished to other persons, or expenses neces-
sarily 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 publishing 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 ac-
counts.
4. In any case in which the fees of the clerk, referee and trustee
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 proceedings in bankruptcy, may order those
fees to be paid out of the estate ; or may, after notice to the bank-
rupt, 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.
[New.]
GENERAL ORDERS IN BANKRUPTCY. 511
Expenses.
Bankruptcy Rule, No. X. — Right of officers to demand indemnity for ex-
penses.
Clerks, Fees and Services.
bankruptcy Act, section 52 a. — Compensation of clerks.
Bankruptcy Act, section 51 a (3). — Duty of clerk to deliver or transmit to
referees all papers referred to them.
Bankruptcy Act, section 51 a (1).— Duty of clerk to account for fees re-
ceived by him including fees received for certified copies of records furnished
for persons other than officers.
Referee' 3 Compensation.
Bankruptcy Act, section 40. — Compensation of referees. Compare, page 273,
title, On Dividends and Commissions.
Trustee's Compensation.
Bankruptcy Act, section 48. — Compensation of trustee, Compare, page 293,
title, After Services are Rendered.
Non-payment of Filing Fees.
Bankruptcy Act, section 51 a (2). — Circumstances and conditions which ex-
cuse a bankrupt from depositing the official fees when filing his petition.
Three facts are to be borne in mind by those seeking to take advantage of the
provisions of the statute which in certain cases permit the institution and
prosecution of proceedings in bankruptcy without depositing the fees for the
officers at the time of filing the petition. One of these facts is that an affidavit
must be taken to the effect that the petitioner is not only without the moneys
to pay the fees, but that he cannot obtain them ; another is that the making of a
false oath in or in relation to any proceeding in bankruptcy is not only made
a criminal offense (section 29 b [2]) punishable by imprisonment for a period
not to exceed two years, but that the commission of any offense punishable by
tfie terms of the bankruptcy act by imprisonment, is a ground for refusing a
discharge in bankruptcy. A third fact to be borne in mind by a debtor who
would prosecute a bankruptcy proceeding in forma pauperis is that he can
be compelledto submit to an examination under oath as to his affairs, his con-
duct of his business, his dealings with his creditors and other persons, and the
amount, kind and whereabouts of his property; and such examination can be
held at such time or times as the court may order.
XXXVI. APPEALS.
1. Appeals from a court of bankruptcy to a circuit court of ap-
peals, or to the supreme court of a Territory, shall be allowed by a
juclge 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.
Si;2 GENERAL ORDERS IN BANKRUPTCY.
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 Colum-
bia, or from any court of bankruptcy whatever, shall be taken
within thirty days after the judgment or decree, and shall be al-
lowed by a judge of the court appealed from, or by a justice of the
Supreme Court of the United States.
3. In every case in which either party is entitled by the act to
take an appeal to the Supreme Court of the United States, the
court from which the appeal lies shall, at or before the time of
entering its judgment or decree, make and file a finding of the
facts, 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 judgment
or decree, the finding of facts, and the conclusions of law.
[Practically New. Compare, however, Rule XXVI, 1867.]
Appeals.
Bankruptcy Act, section 24 a. — Jurisdiction of appellate courts.
Bankruptcy Act, section 24 b. — Revisory powers of circuit courts of appeal.
Compare, pages 244-246, titles, Revisory Powers of the Circuit Court, etc.
Bankruptcy Act, section 25 a. — Appeals from courts of bankruptcy to circuit
courts of appeal.
Bankruptcy Act, section 25 b. — Appeals from circuit courts of appeal to the
Supreme Court of the United States. Compare, pages 247-253.
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 followed as
nearly as may be. But the judge may, by special order in any
case, vary the time allowed for return of process, for appearance
and pleading, and for taking testimony and publication, and may
otherwise modify the rules for the preparation of any particular
case so as to facilitate a speedy hearing.
[Last half of Rule XXXII, 1867, without material change.]
GENERAL ORDERS IN BANKRUPTCY. 513
Equity Rules.
See rules and index to the same, post.
Compare notes to Preamble to General Orders.
XXXVIII. FORMS.
The several forms annexed to these general orders shall be ob-
served and used, with such alterations as may be necessary to suit
the circumstances of any particular case.
(65)
INDEX TO GENERAL ORDERS IN BANKRUPTCY.
[The figures refer to the number of the rules.]
Abbreviations.
when permitted, 5.
Account. (Open account.)
proof of claim existing in, 21 (1).
Accounts.
of trustees to be audited by referee, unless, 17.
Aet of bankruptcy.
inserting allegations of earlier acts, in petition, by amendment, 6.
Agent.
proof of debt by, what to contain, 21 (1).
Amendments.
by inserting allegation of earlier act of bankruptcy, in case of two petitions, 6.
when allowed in petition and schedule, II.
how made, signed and verified, 11.
application for, to state the cause of error, II.
Appeals.
to Circuit Court of Appeals, how allowed and regulated, 36 (1).
to Supreme Court, when to be taken, how allowed, 36 (2).
findings of fact and law to be filed by court from which appeal is taken to
Supreme Court, 36 (3).
record on appeal to Supreme Court, what to consist of, 36 (3).
Arbitration.
petition for leave for, 33.
Arrest.
Referee to give bankrupt protection from, 12 (1).
bankrupt under, to be produced on habeas corpus, to testify, 30,
release of debtor from, when, 30.
SIS
5i6 INDEX TO GENERAL ORDERS IN BANKRUPTCY.
[The figures refer to the number of the rules.]
Assets.
no trustee, if no assets, 15.
Assignment.
of claims after allowance, notice to original claimant, 21 (3).
order of subrogation, when made, 21 (3).
of claims before proof, 21 (3).
of claims, before whom proved, 21 (5).
how executed by partnerships or corporations, 21(5).
Attachments.
to enforce bankrupt to file schedule, 9.
Attorneys.
in bankruptcy must be admitted to District or Circuit Court, 4.
name and place of business to be entered on docket, 4.
to indorse papers, 4.
name of, when to appear in order, 4.
notice upon, is sufficient when, 4.
Bankrupt.
may conduct proceedings in person, or by attorney, 4.
when to attend before referee, 12 (1).
when subject to orders of court, 12 (1).
entitled to protection from arrest, 12 (1).
may petition for sale of perishable property, 18 (3).
petition by, for review, 27.
petition by, for compounding debts or redeeming property, 28.
production of, on habeas corpus, if imprisoned, 30.
release of imprisoned, 30.
petition of, for a discharge, 31.
when allowed costs, 34.
may be required subsequently to pay fees of officials, 35 (4).
Circuit Court of Appeals.
appeals to. {See Appeals.)
Claims. {See Creditors, Proof op Claims.)
Clerk.
of referee, expense of, 26.
Clerk (of Court).
to keep docket, 1.
to endorse on papers time of filing, and statement of character, 3.
process to be tested by, 3.
INDEX TO GENERAL ORDERS IN BANKRUPTCY. 517
[The figures refer to the number of the rules.]
ClBPk (Of Court) — (Continued).
to furnish blank process with seal and signature to referees, 3.
may require indemnity for expenses, 10.
to forward or deliver to referee order of reference, 12 (1).
to sign checks, when, 29.
compensation of, 35 (1), 35 (4).
when entitled to extra fees for copies of papers, 35 (1).
Compensation. (See Fees.)
of officials, 35.
fees prescribed by act not to cover expenses, 35.
Composition. (Between bankrupt and his creditors).
what questions referable to referee on applications to approve, 12 (3)1
opposition to confirmation, specifications, 32.
Compounding Debts.
petition for authority in, ^8
what to state, 33.
Conditional Contract.
redeeming property from, 28.
Corporation.
prrvif of claim of, by whom made, 21 (l)u
Costs.
for irrelevant, etc., depositions, 22.
in contested adjudications, 34.
when allowed to bankrupt, 34.
Creditor.
may conduct proceeding in bankruptcy, 4.
can manage only his individual interest, 4.
when petitioning creditor to file schedule for bankrupt, 9.
choice of trustee by, subject to approval, 13.
may petition for sale of perishable property, 18 (3).
proof of claim by, —
(See Agent, Corporation, Partnership, Proof of Claims.)
notices to, where to be addressed, 21 (2).
when assignee subrogated to original claimant, 21 (3).
proof of claims of persons contingently liable, to be made in the name of,
21 (4).
power of attorney to represent, how proved, 21 (5).
in case of partnership, or corporation, 21 (5).
notice to, if claim is re-examined, 21 (6).
5l8 INDEX TO GENERAL ORDERS IN BANKRUPTCY.
[The figures refer to the number of the rules.]
Creditor — (Continued).
may petition to have any claim re-examined, 21 (6).
names and addresses of those proving claims to be transmitted to clerk, 24.
meetings of, 15
(See Meetings of Creditors.)
petition by, to redeem property, 28.
to compound debts, 28.
for review of order, 27.
opposing discharge, to file specification in writing, 32.
costs awarded to petitioning, 34,
Debtor. (See Bankrupt).
Depositions.
how taken down, 22.
referee to note determination of objections to questions, 23.
costs for irrelevant, incompetent or immaterial, 22.
Depositories.
how moneys to be withdrawn from, 29.
to be furnished with a copy of rule, 29, 29.
Discharge.
what questions, on application for, may be referred to referee, 12 (3/.
petition for, what to state, 31.
opposing, entry of appearance, 32.
specification when, to be filed, 32.
District.
in what district, petition to be heard, 6.
Dividend.
when not to be paid on claims of persons contingently liable for bankrupt,
21 (4).
Docket.
to be kept by clerk, 1.
what to contain, 1.
open to public inspection, I.
Domicil.
when hearing to be in district of, 6,
Equity Proceedings.
Equity rules to be followed, 37.
tower of court to modify application of equity rules, 37.
INDEX TO GENERAL ORDERS IN BANKRUPTCY. 519
[The figures refer to the number of the rules.]
Exemptions.
trustee to report as to, 17.
exceptions to, 17.
where argued, 17.
where determined, 17.
Expenses.
officers may require indemnity for, 10.
to be repaid to person advancing moneys for, 10.
of marshal, account of, 19.
of referee, account of, 26.
of clerk of referee, account of, 26.
Fees. (See Compensation).
when clerk to receive extra for copies, 35 (1).
not to include expenses, 35.
when bankrupt not required to deposit, how paid, 35 (4).
subsequent payment by bankrupt, 35 (4).
Filing.
time of to be endorsed on papers, 2.
of papers after reference, where, 20.
Forms.
official to be used, 38.
Imprisonment. (See Arrest).
Indemnity.
for expenses, when to be furnished to officers, 10.
Injunctions.
against courts or officers, to be granted only by judge, 12 (3).
on application for, what matters referable to referee, 12 (3).
Interest.
when computation of, unnecessary, 21 (1).
Inventory.
to be taken bv trustee, 17.
Judge.
to fix time and place for referees to act, 12 (2).
may refer to referees to ascertain and report facts on applications for dis-
charge, 12 (3).
on application to approve compositions, 12 (3).
on application to enjoin officers, 12 (3).
power of approval of choice of trustee, 13.
520 INDEX TO GENERAL ORDERS IN BANKRUPTCY.
[The figures refer to the number of the rules.]
Jurisdiction.
in what district, when several petitions filed, 6.
Letter of Attorney.
how execution proved, 21 (5).
by whom executed, 21 (5).
Lien.
redeeming property from, 28.
Marshal.
may require indemnity for expenses, 10.
accounts of, 19.
meetings of Creditors.
when may be dispensed with, 15.
special, when called, 25.
Moneys on Deposit.
how withdrawn, 29.
Mortgage.
redeeming property from, 28.
Notice.
when service of on attorney is sufficient, 4.
to bankrupt to file schedule, 9.
expense of publishing or mailing, indemnity, to.
of appointment of trustee, contents, 16.
to creditors, where to be addressed, 21 (2).
to original claimant, if assignment is filed, 21 (3).
of re-examination of claim, how and when given, 21 (6/.
mode in which given, to be recited in the order, 23.
of petition for authority to redeem property, 28.
to compound debts, 28.
to creditor, of bankrupt's application for release from arrest, 30.
Orders.
when to contain attorney's name, 4.
service of on attorney, when sufficient, 4.
bankrupt subject to orders of court, 12 (1).
of referee, what to recite, 23.
Papers.
time of filing to be indorsed, 2.
to be indorsed, 4.
after reference, where filed, 2C
INDEX TO GENERAL ORDERS IN BANKRUPTCY. 521
[The figures refer to the number of the rules.]
Parties. (See Attorney, Bankrupt, Creditor.)
may appear by attorr.ey, 4.
may examine witnesses in person, or by counsel, 22.
Partnership.
proceedings where two or more petitions filed against same, 6.
by same, 6.
right of any one member to resist a petition filed by his copartners, 8.
duty of members of, to file schedule and inventory, if adjudged bankrupt, 8,
proof of debts by, what to state, 21 (1).
powers of attorney to represent, what to state, 2t (5).
assignments by, what to state, 21 (6).
Payment of Moneys on Deposit.
only by check or warrant properly countersigned, 29.
Petition,
docket to show date of filing, 1.
frame of, 4.
abbreviations or interlineations in, 5.
when two or more are filed against same individual, hearing to be in district
of domicil of bankrupt, 6.
amending by alleging earlier act of bankruptcy, 6.
when two or more filed against same partnership, which first heard, 6.
proceedings upon, when stayed, 6.
when two or more filed by members of same partnership, 6.
priority of petition alleging earliest act of bankruptcy, 7.
proceedings upon, several, when consolidated, J.
when subsequent petitions to have no hearing, 7.
right of any partner to resist petition of copartners, 8.
amendment of, n.
for review, where filed, 27.
for authority to redeem property or compound debts, 28.
for discharge, 31.
Pledge.
redeeming, 28.
Power of Attorney. (See Letter of Attorney.)
Proceedings.
what memorandum of to be in docket, I.
conducted in person or by attorney, 4.
in equity, governed by equity rules, 37.
at law, how governed, 37.
(66)
Sa a INDEX TO GENERAL ORPERS IN BANKRUPTCY.
[The figures refer to the number of the rules.]
Process. (See Summons, Subpcenas.)
whence to issue, 3.
to be sealed and tested, 3.
blanks with seal and signature to be furnished to referees, 3.
time of return of, specified in equity rules may be modified, 37.
Proof of Claims.
after reference, where filed, 20.
to be entitled, 21 (1).
contents of, 21 (1).
by member of partnership, what to state, 21 (1).
by agent, what to state. 21 (1).
of corporation, by what officer, 21 (1).
existing in open account, what to state, 21 (1).
omissions which prevent claim of interest, 21 (1).
averments as to notes and judgments, 21 (1).
received by trustee to be delivered to referee, 21 (1).
address of creditors who have made, 21 (2).
which have been assigned, before proof, 21 (3).
proof of assignment of proved claims, notice, 21 (3).
of persons contingently liable for bankrupt, 21 (4).
re-examination of, 21 (6).
expunging on re-examination, 21 (6).
names of creditors who have made, to be transmitted to clerk, 24.
Receiver.
may petition for sale of perishable property, 18.
Redemption of Property.
petition for, 28.
Referee.
transmission of certified copy of records, 1.
to endorse on papers time of filing and statement of character, 2.
may apply to clerks for blank process signed and under seal, 3.
may require indemnity for expenses, 10.
duties of, 12.
protection of bankrupt by, 12 (1).
all proceedings to be before, except, 12 (1).
place and time for performing duties, 12 (2).
limited powers of, with reference to applications for discharge, approval of
compositions, etc., 12 (3).
power of approval of choice of trustee, 13.
to give to trustee notice of appointment, 16.
may hear argument of exceptions to exemptions set off by trustees, 17.
INDEX TO GENERAL ORDERS IN BANKRUPTCY. 523
[The figures refer to the number of the rules.]
Referee — (Continued).
may require trustee to show cause why he should not be removed, 17.
to audit trustee's accounts, 17.
to give notice if assignment of proved claimed is filed, 21 (3).
testimony before, how taken, 22.
power to determine objections to questions asked on examination of wit-
ness, 22.
orders of, what to recite, 23.
to transmit to clerk list of proved claims, 24.
expenses of, to be accounted for, 26.
clerk of, expenses of, 26,
orders of, how reviewed, 27.
duties of, when application for review is made, 27.
when to countersign checks, 29,
compensation of, 35 (2), 35 (4).
(See Compensation, Fees.)
imprisoned debtor to be produced before, 30.
Review.
of orders of referee, how, 27.
Rules.
to take effect January 2, 1899. Preamble.
proceedings before that date, pursuant to bankruptcy act or rales of 1867,
or local rules, validated. Preamble.
how made, 18.
when private sale allowed, 18 (2).
how conducted, 18 (2).
of perishable property, 18 (3).
Schedules.
to be printed or written, 5.
abbreviations or interlineations in, 5.
when petitioning creditor to file, 9.
how enforced from bankrupt, 9.
amendment of, 11.
Specifications.
against allowance of discharge or approval of composition, 33.
Stay.
of proceedings on petitions, when more than one is filed, 6.
524 INDEX TO GENERAL ORDERS IN BANKRUPTCY.
[The figures refer to the number of the rules.]
Subpoena. (See Process, Summons.)
to be under seal, to be tested by clerk, 3.
blanks signed and under seal to be furnished to referees, 3.
Summons. (See Process, Subpcena.)
seal to be affixed, to be tested by clerk, 3.
blanks signed and under seal, to be delivered to referees, 3.
Supreme Court of United States.
appeals to.
(See Appeals).
Testimony.
how taken, 22.
production of bankrupt under arrest, to give, 3a
Transfer.
of jurisdiction from one district to another, 6.
Travelling.
expenses of, indemnity, 10.
referee in, 26.
Trustee.
appointment of, subject to approval, 13.
removable only by judge, 13.
no official or general trustee to be appointed, 14.
when none to be appointed, 15.
notice of appointment of, contents, 16.
to notify referee of acceptance or rejection of trusts, 16.
duties of, 17.
to take inventory, 17.
to report to court exemptions, 17.
removable for failure to file reports, etc., 17.
accounts of, to be audited by referee, 17.
may petition for sale of perishable property, 18 (3).
to deliver to referee all proofs of debts, 21 (1).
choice of, to fill vacancy, 25.
petition by for review of order, 27.
petition by to compound debts, 28.
check of, to be countersigned, 29.
to keep separate book for entry of checks against deposits, 29.
application of to arbitrate or compound. 33.
compensation of, 35 (3), 35 (4).
Verification.
of amendments, 11.
Witnesses.
expense of procuring attendance, indemnity, lO.
PREFATORY NOTE
ANNOTATED EDITION OF THE OFFICIAL
FORMS IN BANKRUPTCY.
The purpose of the Annotations to the Official Forms which are
given in this edition, is to furnish to the practitioner a means of ready
reference to the sections of the Bankruptcy Act and to the Rules or
General Orders in Bankruptcy affecting the proceding for which the
form is prepared. As a rule no comment is made, the forms being
self-explanatory. The two abbreviations used are : B. A. for Bank-
ruptcy Act (July ist, 1898) and B. R. for Bankruptcy Rules (a popular
synonym for " The General Orders in Bankruptcy prescribed
November 28th, 1898.") By turning to any of the sections of the act
or to any of the rules to which reference is made, exhaustive discus-
sion of the questions arising will be found, besides numerous cross-
references.
5*5
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, § 20.]
[Form No. 1.]
Debtor's Petition.1
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 domicil] for the greater portion of six months next
immediately preceding the filing of this petition at , within said
judicial district;2 that he owes debts which he is unable to pay in
full; that he is willing to surrender all his property for the benefit of
his creditors except such as is exempt by law, and desires to obtain
the benefit of the acts of Congress relating to bankruptcy.
That the schedule3 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 :
■B. A. §§4, 59a;B. R. No. V.
*B.A. §2(1).
»B. A. §7«(8).
527
528 FORMS IN BANKRUPTCY.
That the schedule hereto annexed, marked B, and verified by your
petitioner's oath, contains an accurate inventory of all his property,
both real and personal, and such further statements concerning said
property as are required by the provisions of said acts : l
Wherefore your petitioner prays that he may be adjudged2 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 described
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.
18....
{Official character.)
>B. A. §7«(8>
'B. A. §1%.
FORMS IN BANKRUPTCY.
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FORMS IN BANKRUPTCY.
Schedule B. (6)1
539
BOOKS, PAPERS, DEEDS, AND WRITINGS RELATING TO BANKRUPT'S BUSINESS
AND ESTATE. (»)
The following is a true list of all books, papers, deeds, and writings relating to my trade,
business, dealings, estate, and effects, or any part thereof, which, at the date of this petition,
are in my possession or under my custody and control, or which are in the possession or cus-
tody of any person in trust for me, or for my use, benefit, or advantage; and also of all
others which have been heretofore, at any time, in my possession, or under my custody or
control and which are now held by the parties whose names are hereinafter set forth, with
the reason for their custody of the same.
Books.
, Petitioner.
Oath to Schedule B.
United States of America, District of , ss:
On this .... day of , A. D. 18 .., 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.
[Official character.]
•B. A., §70 (8); B. R. No. V.
•B. A, §700 (1).
540
FORMS IN BANKRUPTCY.
Summary of Debts and Assets.
[From the statements of the bankrupt in Schedule A and B.)
Schedule A
Schedule A...
Schedule A...
Schedule A...
Schedule A...
Schedule B..
Schedule B„
Schedule B..
Schedule B..
Schedule B..
Schedule B..
2-b
2-c
2-d
L-e
2-f
It
2-1
2-k
2-1
2-m
3-a
3-b
3-c
3-d
3-e
4
5
i Taxes and debts due United States.. ____
) Taxes due States, counties, districts and municipalities.,
i Wages...
1 Other debts preferred by law
Secured claims ,
Unsecured claims L
Notes and bills which ought to be paid by other parties
thereto
Accommodation paper.
Schedule A, total
Real estate
Cash on hand
Bills, promissory notes, and securities .
Stock in trade ,
Household goods, etc
Books, prints and pictures
Horses, cows, and other animals
Carriages and other vehicles
Farming stock and implements
Shipping and shares in vessels
Machinery, tools, etc
Patents, copyrights, and trade-marks
Other personal property
Debts due on open accounts
Stocks, negotiable bonds, etc „
Policies of insurance -
Unliquidated claims
Deposits of money in banks and elsewhere ...,
Property in reversion, remainder, trust, etc..
Property claimed to be excepted _
Books, deeds, and papers „ ........
Schedule B, total...™ M-
[FOFm No. 2.]
Partnership Petition.1
To the Honorable ,
Judge of the District2 Court of the United States
for the .... District of :
The petition of respectfully represents:
That your petitioners and have been partners under
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 immediately preceding
the filing of this petition;3 that the said partners 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
' B. A. §§ 5 and 59;
8 B. A. § se.
'B. A. §2(1).
B. R. Nos. VI and VIII.
FORMS IN BANKRUPTCY. 541
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,1 marked A, and verified by
oath, contains a full and true statement of all the debts of
said partners,2 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,2 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, 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.
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 concerning
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-
•B. A., §7<z(8).
'Compare B. A., § 5*, e, d, e and/.
542 FORMS IN BANKRUPTCY.
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 adjudged
by a decree of the court to be bankrupts within the purview of
said acts.1
Petitioners.
., Attorney.
, the petitioning debtors mentioned and described in
the foregoing petition, do hereby make solemn oath that the state-
ments 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. l8. ..
[Official character.]
[Schedules to be annexed corresponding with schedules under
Form No. i.]
1 B. R., Nos. VI, VII, VIII.
FORMS IN BANKRUPTCY. 543
[Form No, 3.]
Creditors' Petition.1
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 domicil]2 at ,
in the county of and State and district aforesaid, and owes
debts to the amount of $i,ooo.3
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:
And your petitioners further represent that said is
insolvent,5 and that within four months next preceding the date of
this petition the said committed an act of bankruptcy ,fl
in that he did heretofore, to wit, on the .... day of
Wherefore your petitioners pray that service of this petition, with
a subpoena,7 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.
Petitioners.
■ ■••••»
Attorney.
■B. A. § 59 ; compare §§ 3 and 4* ; B. R. Nos. VI. and VII.
'B. R.§2(i).
•B. A. §4*.
«B. A. § 59*.
•B. A. § 3*.
•B. A. § 3«.
'B. A. § 180 ; Equity Rules 7, ri-16.
544 FORMS IN BANKRUPTCY.
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 — .
»
(Official character?)
[Schedules to be annexed x corresponding with schedules under
Form No. 1.]
[Form No. 4.J
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,2 be served 3 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.
1 B. A. § ya (8); compare B. A. § 390 (2) and (6) ; and B. R. No. IX.
'B. A. §180.
* Equity Rules, 13-16.
«B. R. No. XXXVII.
FORMS IN BANKRUPTCY. 545
Witness the Honorable judge of the said court, and
the seal thereof, at , in said district, on the ....day of ..
, A. D. 18...
I Seal of I X
\ the court 1 ••....,......,
Clerk.
[FOPm NO. 5.]
Subpoena to Alleged Bankrupt.
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 per-
sonally appear before our said District Court to be holden at ,
in said district, on the ...,2 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 fur-
ther 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 . .
I Seal of 18
Ithe Court, f '
Clerk.
'B. R. No. III.
*B. A. § 180.
•B. R. No. III.
(69)
546 FORMS IN BANKRUPTCY.
[Form No. 6.]
Denial of Bankruptcy.
In the District Court of the United States for the District
of
In the matter of
► In Bankruptcy.
At , in said district, on the .... day of A. D. 18. . .
And now the said appears, and denies that he has
committed the act of bankruptcy 1 set forth in said petition, or that
he is insolvent,2 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].3
Subscribed and sworn to before me this .... day of A. D.
18...
[Official character^]
»B. A. §3*.
SB. A. %3b,e*aAd.
>B. A. %iga.
FORMS IN BANKRUPTCY.
[Form No. 7.]
Order for Jury Trial.
In the District Court of the United States for the
of
547
District
In the matter of
In Bankruptcy.
At , in said district, on the .... day of , 18. ..
Upon the demand in writing1 filed by , alleged to be
a bankrupt, that the fact of the commission by him of an act of bank-
ruptcy, and the fact of his insolvency may be inquired of by a jury,
it is ordered, that said issue be submitted to a jury.
I Seal of 12
I the Court. J
[Form No. 8.J
Special Warrant to Marshal.
In the District Court of the United States for the
of
Clerk.
District
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
county of and State of , in said district, and said peti-
'B. A. § iga.
•B. R. No. III.
548 FORMS IN BANKRUPTCY.
tion is still pending;1 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 deterio-
rate in value2], 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 further order
of the court.
Witness the Honorable , judge of the said court,
and the seal thereof, at , in said district, on the .... of ,
a. d. 189..
I Seal of 13 3
ItheCourt. f '
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 Marshal^
Fees and Expenses.1
I. Service of warrant
(. Necessary travel, at the rate of six cents a mile each way.
3. Actual expenses (6) in custody of property and other services, as follows., .
[Here state the particulars.]
Marshal [or Deputy Marshal].
•B. A. §2 (3) and (5).
SB. A.. § 69: compare B. A. § y.
»B. R. No. III.
* Equity Rule No. 15.
•B. A. §52;
•B. R. Nos. X and XIX.
FORMS IN BANKRUPTCY. 549
District of , A. D. 18 . .
Personally appeared before me tne saia , 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.J
Bond of Petitioning Creditor.2
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 , 3 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
has applied to that court for a warrant to the marshal of said
district directing him to seize and hold the property of said
, subject to the further orders of said district court.
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., 189..
District Judge.
1 There is nothing in the Bankruptcy Act nor in the rules (see Rule XIX) that
requires that this oath be taken only before the referee. Compare.B. A. § 20.
The marshal should obtain vouchers whenever obtainable.
SB. A. §§3* and 69.
•The name of the person against whom the involuntary petition has been
filed should be here inserted.
5 SO FORMS IN BANKRUPTCY.
[Form No. 10.]
Bond to Marshal.1
Know all men by these presents: That we, , as prin-
cipal, and as sureties, are held and firmly bound unto
, marshal of the United States for the district
of , in the full and just sum of dollars, to be paid to the
said , his executors, administrators, or assigns, to which
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 released1 accordingly
to the said , and the said , being adjudged
a bankrupt, shall turn over said property or pay the value thereof in
money to the trustee, then the above obligation to be void; other-
wise 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.
1 Compare B. A. § 69.
FORMS IN BANKRUPTCY. 55 r
[Form No. 11.]
Adjudication that Debtor Is not Bankrupt.1
In the District Court2 of the United States for the District
of
In matter of
In Bankruptcy.
At , in said district, on .... day of A. D. 18..,
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 opposition,
or, if opposed, state what proceedings were had].
And thereupon, and upon consideration of the proofs in said cause
[and the arguments of counsel* thereon, if any], it was found that the
facts set forth in said petition were not proved ; and it is therefore
adjudged that said was not a bankrupt, and that said petition
be dismissed, with costs.4
Witness the Honorable judge of said court, and the
seal thereof, at in said district, on the day of ,
A. D. 18..
I Seal of I
I the court. ) »
Clerk.
'B. A. §§ 3 and 4; B. A. § l&/, e, f,g\ compare B. A. § sg</.
»B. A § 2 (1); B. A. § 32; compare B. R. Nos. VI and VII.
•B. R. No. IV.
4B. A. § 2 (18); B. R. No. XXXIV.
55* FORMS IN BANKRUPTCY.
[Form No. 12.]
Adjudication of Bankruptcy.1
In the District2 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 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 con-
sidered, 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...
( Seal of I »
1 the court, f Clerk.
1 B. A. §§ 3 and 4; B. A. § i8rf, e, f, g; compare B. A. § 59*
»B. A. § 2 (1); B. A. § 32; compare B. R. Nos. VI and VII.
As to costs see B. R. No. XXXIV.
FORMS IN BANKRUPTCY. 553
[Form No. 13.]
Appointment, Oath, and Report of Appraisers.1
In the District Court of the United States for the District
of
In the matter of
Bankrupt .
In Bankruptcy.
It is ordered that t 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 severally
made oath3 that they will fully and fairly appraise the aforesaid 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. \
'B. A. § 70»; B. R. No. XVII.
*B. A. §ao.
(70)
SS4
FORMS IN BANKRUPTCY.
We, the undersigned, having been notified that we were appointed
to estimate and appraise the real and personal property aforesaid,
have attended to the duties assigned us, and after a strict examina-
tion and careful inquiry, we do estimate and appraise the same as
follows :
Dollars.
Cents.
In witness whereof we hereunto set our hands, at , this ....
day of , A. D. 18..
[Form No. 14.]
Order of Reference.1
In the District Court of the United States for the
of
District
In the matter of
Bankrupt,
In Bankruptcy.
Whereas , of , in the county of and
district aforesaid, on the day of , A. D. 18.., was duly
adjudged a bankrupt upon a petition filed in this court by [or,
against] him on the .... day of, A. D. 1 89-, according to
the provisions of the acts of Congress relating to bankruptcy.
1 B. A. § 22a.
FORMS IN BANKRUPTCY. 555
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. 1
Witness the Honorable , judge of the said court, and
the seal thereof, at in said district on the .... day of ,
A. D. 18...
I Seal of I . .
\ the Court, f ......
Clerk.
[Form No. 15.]
Order of Reference in Judge's Absence.3
In the District Court of the United States for the District
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 creditors], it is there-
upon ordered that the said matter be referred to , one
1 B. R. No. XII.
This order of reference is to be used only where an adjudication of bank-
ruptcy has been made by the judge.
"B. A. § i8/and*.
j56 FORMS IN BANKRUPTCY.
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.. .
( Seal of 1 '
1 the Court, f Clerk.
[Form No. 16.]
Referee's Oath of Office.2
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 Con-
stitution and laws of the United States. So help me God.
Subscribed and sworn to before me this .... day of . . .. . ., A. D.
18..
• •••«• .......
District Judge.
[Form No. 1 7.]
Bond of Referee.3
Know all men by these presents: That we, of
, as principal, and of and ......
of , as sureties, are held and firmly bound to the
United States of America in the sum of dollars, lawful money
of the United States, to be paid to the said United States, for the
payment of which, well and truly to be made, we bind ourselves, our
heirs, executors, and administrators, jointly and severally, by these
^presents.
Signed and sealed this day of A. D. 189. .
•B. R. No. XII.
»B. A. § 36.
'B. A. § 50.
FORMS IN BANKRUPTCY. 557-
The condition of this obligation is such that whereas the said
••» has been on the ...day of , A. D. 18..,
appointed by the Honorable , judge of the district
court of the United States for the district of , a referee
in bankruptcy in and fot 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. &]
[L. L.]
[L.S.]
Approved this day of A. D. 189. .
• • • • <
> • • • • a • • m *
District Judge.
[Form No. 1 8.]
Notice l of First Meeting of Creditors.2
In the District Court of the United States for the District
of In Bankruptcy.
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 the
first meeting of his creditors will be held at in on the
1 B. A. § 58*; B. R. No. XXI (2).
* B. A. § 55a, b and e.
55»
FORMS IN BANKRUPTCY.
day of , A. D. 18 . ., at . . . . o'clock in the noon,
at which time the said creditors may attend, prove their claims,1
appoint a trustee,2 examine the hankrupt,3 and transact such other
business as may properly come before said meeting.
., 18.
Referee in Bankruptcy.
[Form No. 19.]
List of Debts Proved at First Meeting.4
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:
Names of creditors.
Residence.
Debts proved.
Dolls.
Cts,
Referee in Bankruptcy.
« B. A. §§ 55*. 57-
»B. A. §§44. 2 (17); B. R. No. XIII.
*B. A. § 70 (i) and (9).
* Compare B. R. XXIV and B. A. § 42.
FORMS IN BANKRUPTCY. 559
[Form No. 20.J
General Letter of Attorney in Fact1 when Creditor is not
Represented by Attorney at Law.2
In the District Court of the United States for the District
of
In the matter of
Bankrupt
In Bankruptcy.
To
I , of , in the county of and State of
, do hereby authorize you, or any one of you, to attend the
meeting or meetings of creditors of the bankrupt aforesaid at a court
of bankruptcy, wherever advertised or directed to be holden, on the
day and at the hour appointed and notified by said court in said
matter, or at such other place and time as may be appointed by the
court for holding such meeting or meetings, or at which such meet-
ing 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 sit-
tings of the court, which may be held therein for any of the pur-
poses aforesaid; also to accept any composition proposed by said
bankrupt in satisfaction of his debts, and to receive payment of
dividends and of money due me under any composition, and for any
other purpose in my interest whatsoever, with full power of substi •
tution.
"B. A. § 1 (9) ; B. R. No. XXI (5).
•B. A. §1(9); B. R. No. IV.
i;6o FORMS IN BANKRUPTCY.
In witness whereof I have hereunto signed my name and affixed
my seal the day of A. D. 189. . .
[1- 1]
Signed, sealed, and delivered in presence of —
1
Acknowledged before me this .... day of A. D. 189
»
[Official character.]
[Form No. 21.]
Special Letter of Attorney in Fact.2
In the matter of
Bankrupt
•In Bankruptcy.
To
I hereby authorize you, o 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 or passed at such meeting or adjourned meeting, and
in the choice of trustee or trustees of the estate of the said bankrupt.
[*■•*•]
In witness 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. .
1
[Official character.^
1 B. A. § 20.
* B. A. § 1 (9); B. R. No. XXI (5).
S6i
FORMS IN BANKRUPTCY.
[Form No. 22.]
Appointment of Trustee by Creditors.1
In the District Court of the United States for the District
of
In the matter of
Bankrupt
' In Bankruptcy.
A. D. 18..
At , in said district, on the .... day of . . .
before , referee in bankruptcy.
This being the day appointed by the court for the first meeting 2
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 creditors of
the said bankrupt, whose claims have been allowed, and who are
present at this meeting,4 do hereby appoint , of
in the county of and State of ,s to be the trustee. . of
the said bankrupt's estate and effects.
Signatures of creditors.
Residence of the same.
Amount of debt.
Dolls.
Cts.
Ordered that the above appointment of trustee . . be, and the same
is hereby approved.6
Referee in Bankruptcy.
1 B. A. §§ 2 (17), 44; B. R. Nos. XIII, XIV and XV.
9B. A. g 55-
8 B. A. § 58*.
«B.A.§56.
•B.A.§45.
• B, R. No. XIII; B. A. § 2 (17).
(71)
562 FORMS IN BANKRUPTCY.
[Form No. 23.]
Appointment of Trustee by Referee.1
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 i.i
bankruptcy, sat at the time and place above mentioned, pursuant to
such notice, to take the proof of debts and for the choice of trustee
under the said bankruptcy; and I do hereby certify that the credit-
ors whose claims had been allowed and were present,2 or duly repre-
sented, failed to make choice of a trustee of said bankrupt's estate,
and therefore I do hereby appoint , of , in the
county of and State of as trustee of the same.
Referee in Bankruptcy.
' B. A. §§ 2 (17), 44-
• Compare B. R. No. XV.
FORMS IN BANKRUPTCY. 563
[Form No. 24.J
Notice to Trustee of His Appointment.1
In the District Court of the United States for the District
of
In the matter of
Bankrupt ,
In Bankruptcy.
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 appointment. The penal sum of your
bond as such trustee has been fixed at dollars.2 You are
required to notify me forthwith of your acceptance or rejection of
the trust.3
Dated at the .... day of , A. D. 18 . .
>
Referee in Bankruptcy.
[Form No. 25.]
Bond of Trustee.4
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
•B. R. No. XVI.
• Compare B. A. § 50*, e-m.
•See B. A. § 50*.
*B. A. § 50*, c-m.
Although no form of acknowledgment or justification appears annexed to this
form, the absence must be deemed an oversight. See the provisions of B. A. §
564 FORMS IN BANKRUPTCY.
United States, to be paid to the said United States, for which pay-
ment, 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 obligation to
be void ; otherwise, to remain in full force and virtue.
Signed and sealed in
presence of —
, [seal.]
, [seal.]
[seal.]
FORMS IN BANKRUPTCY. 565
[Form No. 26.]
Order Approving Trustee's Bond.1
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 faithful
performance of his official duties, in the amount fixed by the creditors
[or by order of the court], to wit, in the sum of dollars, it is
ordered that the said bond be, and the same is hereby, approved.
Referee in Bankruptcy.
[Form No. 27.]
Order that No Trustee be Appointed.2
In the District Court of the United States for the .... District
of
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 that the
»B. A.%5ot,e, d, e,/,g.
'B. R. No. XV.
5 66 FORMS IN BANKRUPTCY.
appointment of a trustee of the bankrupt's estate is not now desir-
able, it is hereby ordered that, until further order of the court, no
trustee be appointed and no other meeting of the creditors be called.
Referee in Bankruptcy.
[Form No. 28.]
Order for Examination of Bankrupt.1
In the District Court of the United States for the District
of
In 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 the referees in bankruptcy of
this court, at on the .... day of , at . . o'clock in the
....noon, to submit to examination under the acts of Congress
relating to bankruptcy, and that a copy of this order be delivered
to him, the said bankrupt, forthwith.
Referee in Bankruptcy.
' B. A. §§ 7a (i) and (g); 21a; compare 12a; B. R. No. XII (1).
FORMS IN BANKRUPTCY. 567
[Form No. 29.J
Examination of Bankrupt or Witness.1
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 , one of the referees in bankruptcy of said court.
of , in the county of , and State of
, being duly sworn and examined 2 at the time and place above
mentioned, upon his oath says: [Here insert substance 0/ examination
9fparty.\
Referee in Bankruptcy.
[Form No. 30.]
Summons to Witness. 3
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 referees
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.
1 B. A. §§ 70 (i) and (9), 21a; B. R. No. XXII; B. A. § Si.
' Compare B. A. § 410 (1) and (4).
• B. A. § 21a; B. R. No. III.
568 FORMS IN BANKRUPTCY.
Witness the Honorable judge of said court, and the seal
thereof at , this day of A. D. 189-.
Clerk*
Return of Summons 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 came
, 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 ,2 with a true copy of the summons
hereto annexed, by delivering the same to him; and he further
makes oath and says that he is not interested in the proceeding in
bankruptcy named in said summons.
Subscribed and sworn to before me this .... day of , A.
D. 18..
3
1 The summons should not only be signed by the clerk, but the seal of the
court should be affixed. See B. R. No. III.
' Compare page 232; title " Subpoena Runs into Other Districts."
•B. A. § 20.
FORMS IN BANKRUPTCY. 569
[Form No. 31.]
Proof of Unsecured Debt.1
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 ,
in said district of , and made oath, and says that ,
the person by [or against] whom a petition for adjudication of bank-
ruptcy 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
];
and that deponent has not, nor has any person by his order, or to
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..
a
• •••■ >
[Official character."]
'B. A. § 57a, *, e, etc.; B. R. No. XXI (i).
* B. A. § 20. If a claim is founded upon an instrument in writing, the original
should be filed with the proof. B. A. § $yi. Depositions to prove debts
existing in open account should contain an averment that no note has been
received for such account, nor any judgment rendered thereon. Rule XXI (i).
(72)
570 FORMS IN BANKRUPTCY.
[Form No. 32.]
Proof of Secured Debt.1
In the District Court of the United States for the District
of
In the matter of
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 ,
the person by [or against] whom a petition for adjudication of bank-
ruptcy has been filed, was at and before the filing of said petition,
and still is, justly and truly indebted to said deponent, in the sum
of dollars ; that the consideration of said debt is as follows
; that no part of said debt has been paid
[except ] ; that there are no set-offs or counterclaims
to the same [except ] ; and that the only securities
held by this deponent for said debt are the following:
Creditor.
Subscribed and sworn to before me this day of , A.
2
[Official character.]
" B. A. § 57; B. R. No. XXI (1).
* B. A. § 20. See notes to Form 31.
FORMS IN BANKRUPTCY. 571
[Form No. 33.]
Proof of Debt Due Corporation.1
In the District Court of the United States for the District
of
In the matter of
Bankrupt
■ In bankruptcy.
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 2
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 bank-
ruptcy has been filed, was at and before the filing of the said peti-
tion, and still is justly and truly indebted to said corporation in the
sum of dollars ; that the consideration of said debt is as
follows :
•••••••••••••••••••••••••«• •••.■•■..••....■••••,
that no part of said debt has been paid [except
] ; that there are no set-offs or counterclaims to
the same [except ] ; and that said
corporation 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. 18..
[Official character.]
' B. A. § 57; B. R. No. XXI (1).
' Rule XXI requires that proof of the claim of a corporation must be made by
the treasurer, or if there is no treasurer, then by the person whose duties most
nearly correspond to those of a treasurer.
1 B. A. § 20. See notes to Form 31.
572 FORMS IN BANKRUPTCY.
[Form No. 34.]
Proof of Debt by Partnership.1
In the District Court of the United States for the District
of
In the matter of
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 truly indebted to this
deponent's said firm in the sum of dollars; that the con-
sideration of said debt is as follows :
••• • 1
that no part of said debt has been paid [except ] ; that
there are no set-offs or counterclaims to the same [except
] ; and this deponent has not, nor has his said firm, nor has any
person by their order, or to this deponent's knowledge or belief, for
their use, had or recived any manner of security for said debt
whatever.
Creditor.
Subscribed and sworn to before me this .... day of , A.
D. 18..
2
'• •••!
[Official character^
>B. A. §57; B. R. No. XXI (1).
' B. A § 20. See notes to Form 31.
FORMS IN BANKRUPTCY. 573
[Form No. 85.]
Proof of Debt by Agent or Attorney.1
In the District Court of the United States for the District
of
In the matter of
Bankrupt
)
In Bankruptcy.
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 and says that
, the person by [or against] whom a petition for adjudi-
cation of bankruptcy has been filed, was at and before the filing of
said petition, and still is, justly and truly indebted to the said
, in the sum of dollars ; that the consideration of said
debt is as follows:,
that no part of said debt has been paid [except
; J»
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 received
any manner of security for said debt whatever. And this deponent
further says, that this deposition can not be made by the claimant
in person because
and that he is duly authorized by his principal to make this affidavit,
and that it is within his knowledge that the aforesaid debt was
incurred as and for the consideration above stated, and that such
debt, to the best of his knowledge and belief, still remains unpaid
and unsatisfied.
Subscribed and sworn to before me this .... day of , A.
D. 18..
2
• ••••••,
[Official character.]
1 B. A. § 57; B. R. No. XXI (1) and (5).
*B. A. § 20. See notes to Form 31.
574 FORMS IN BANKRUPTCY.
[Form No. 36.]
Proof of Secured Debt by Agent.1
la the District Court of the United States for the District
of
1
In the matter of
• In Bankruptcy.
Bankrupt
_J
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, 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 considera-
tion of said debt is as follows:
• ••.•••..••■•••• -••...... •••..••.•••...•.•••••...,
that no part of said debt has been paid [except
];
that there are no set-offs or counterclaims to the same [except. . . .
];
and that the only securities held by said for said debt are the
following
and this deponent further says that this deposition can not 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. 18..
[Official character. ]
> B. A. § 57! B. R. No. XXI (1) and (5). See notes to Form 31.
FORMS IN BANKRUPTCY.
[Form No. 37.]
Affidavit of Lost Bill, of Note.1
In the District Court of the United States for the .
of
575
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 particu-
lars whereof are underwritten, has been lost under the following
circumstances, to wit,
and that he, this deponent, has not been able to find the same; and
this deponent further says that he, has not, nor has the said
, or any person or persons to their use, to this deponent's
knowledge or belief, negotiated the said bill [or note], nor in any
manner parted with or assigned the legal or beneficial interest
therein, or any part thereof; and that he, this deponent, is the per-
son now legally and beneficially interested in the same.
Bill or note above referred to.
Date.
Drawer or maker.
Acceptor.
Sum.
Subscribed and sworn to before me this day of , A.
D. 18..
2
• »
[Official character. ]
_____
'B. A. §ao. See notes to Form 31.
576 FORMS IN BANKRUPTCY.
[Form No. 38.]
Order Reducing: Claim.1
la 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..
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..].
• • • a • o ••••••}
Referee in Bankruptcy.
» B. A. §§ 2 (a); 574 /. * *"»<* '• B. R. No. XXI. (6).
FORMS IN BANKRUPTCY.
[Form No. 39.]
Order Expunging Claim.1
In the District Court of the United States for the
of
577
District
In the matter of
■In Bankruptcy.
Bankrupt .
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.
[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
Bankrupt .
In Bankruptcy.
At in said district, on the .... day of , A. D. 18..
> B. A. §§ 2 (2); 57rf, /, k, and /; B. R. No. 21 (6).
(73)
578
FORMS IN BANKRUPTCY.
A list of debts proved and claimed under the bankruptcy of
with dividend at the rate of per cent this day declared thereon by
, a referee in bankruptcy.1
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.
Dollars.
Cents. Dollars.
Cents.
Referee in Bankruptcy.
■B. A. § 39a (1); compare § 65.
FORMS IN BANKRUPTCY. 579
[Form No. 41.]
Notice1 of Dividend.2
In the District Court of the United States for the District
of
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, between
the hours of . . . . , receive a warrant for the dividend due to
you out of the above estate. If you can not 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.
Creditor.
' B. A. § 58a (5).
'B. A. §§39" (I), 47 (9); 65-
580 FORMS IN BANKRUPTCY.
[Form No. 42.]
Petition and Order for Sale by Auetion of Real Estate.1
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 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 opposi-
tion thereto], it is ordered that the said trustee be authorized to
sell the portion of the bankrupt's real estate specified in the fore-
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.
• B. R. No. XVIII; compare B. A. §§ 70*/ 580 (4).
FORMS IN BANKRUPTCY. .58 r
[Form No. 43.]
Petition nd Order for Redemption of Property from Lien.1
In the District Court of the United States for the District
of
In the matter of
Bankrupt .
In Bankruptcy.
Respectfully represents , trustee 2 of the estate of
said bankrupt, that a certain portion of said bankrupt's estate, to
wit: [here describe the estate or property audits estimated value} is sub-
ject to a mortgage [describe the mortgage], or to a conditional con-
tract [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. Where-
fore 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 come on
for a hearing before me, of which hearing ten days' notice was given
by mail 3 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 trustee be
authorized to pay out of the assets of the bankrupt's estate specified
in the foregoing petition the sum of , being the amount of the
lien, in order to redeem the property therefrom.
Witness my hand this .... day of , A. D. i8g-
Referee in Bankruptcy.
1 B. R. No. XXVIII.
' A creditor or the bankrupt as well as the trustee may make this petition.
' Neither the statute nor the rules require that this notice shall be by mail, nor
that it shall be a ten days' notice.
582 FORMS IN BANKRUPTCY.
[Form No. 44.]
Petition and Order for Sale1 Subject to 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 sub-
ject to a mortgage [describe mortgage], or to a conditional contract
[describe it], or to a lien [describe the origin and nature of the Ken], 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 authorized to make sale of said
property, subject to the incumbrance 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 2 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.
1 B. R. No. XVIII, compare B. R. No. XXVIII.
* See notes to B. R. No. XVIII; compare B. A. § 70 b ; B. A. § 58a (4).
FORMS IN BANKRUPTCY. 583
[Form No. 45.J
Petition and Order for Private Sale.1
In the District Court of the United States for the District
of
In the matter of
Bankrupt
-In Bankruptcy.
Respectfully represents , duly appointed trustee of
the estate of the aforesaid bankrupt.
That for the following reasons, to wit
it is desirable and for the best interest of the estate to sell at private
sale a certain portion of the said estate, to wit: .
Wherefore he prays that he may be authorized to sell the said
property at private sale.
Dated this day of A. D. 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 2 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.
'B. R. XVIII (2).
•See notes to B. R. No. XVIII; compare B. A. § 70*; B. A. § 58a (4).
584 FORMS IN BANKRUPTCY.
[Form No. 46.J
Petition and Order for Sale of Perishable Property.1
la the District Court of the United States for the District
of
•1
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].
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 2 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. 1S9-.
»
Referee in Bankruptcy.
' B. R. No. XVIII (3^.
'Compare B. A. §§ 70* and 58a (4).
58S
FORMS IN BANKRUPTCY.
[Form No. 47.]
Trustee's Report of Exempted Property.1
In the District Court of the United States for the District
of
In the matter of
Bankrupt
In Bankruptcy.
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, under
the provisions of the acts of Congress relating to bankruptcy.
General head.
Particular description.
Value.
Military uniform, arms, and
Dolls.
Cts.
Property exempted by State
istee.
Tr
■ B. R. No. XVII; B. A. g 47 (11); Compare B. A. §§ 7a (8)j 2 (11); 70*; and
Form No. 13.
»B. A. §6.
(74)
586 FORMS IN BANKRUPTCY.
[Form No. 48.]
Trustee's Return of No Assets.1
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
. . • . • ., A. L). Io. .
•••■ »
Referee in Bankruptcy.
> B. A. § 70*; B. R. No. XVII 1 B. A. § 47« Uo). Compare B. R. No. XV.
FORMS IN BANKRUPTCY.
587
2
u
I
Q
a
1
o
o
O S
OS to g
o ** s
s ° ^
o
fa o §
o
2
T3
a
•a
a
Q
1
<
588
FORMS IN BANKRUPTCY.
[Form No. 50.]
Oath to Final Account of Trustee.1
In the District Court of the United States for the
of
District
In the matter of
► In Bankruptcy.
Bankrupt ,
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 filed 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.2
• »
Trustee.
Subscribed and sworn to before me at , in said .... district
of , this .... day of , A. D. 18. .
3
...... -•••«•,
[Official character,]
•B. A. 47" (i), (6), (7) and )8); 49.
»B. A. §§62> 64* (i).
* B. A. § ao. See note to Form No. 51.
5%
FORMS IN BANKRUPTCY.
[Form No. 51. J
Order Allowing Account1 and Discharging Trustee.
In the District Court of the United States for the District
of
In the matter of
Bankrupt ,
In Bankruptcy.
The foregoing account having been presented for allowance, and
having been examined and found correct, it is ordered, that the
same be allowed, and that the said trustee be discharged of his trust.
Referee in Bankruptcy?
[Form No. 52.]
Petition for Removal of Trustee.3
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 for the .... District of :
The petition of , one of the creditors of said bank-
1 B. A. § 470 (i), (6), (7) and (8).
'B. R. No. XVII, last sentence.
As to notice of filing of trustees' accounts and the date and place of examina-
tion of the same, see B. A. § 58a (6).
3 B. A. § 2 (17); compare B. R. No. XVII.
* B. R. No. XVII.
59°
FORMS IN BANKRUPTCY.
rupt, respectfully represents that it is for the interest of the estate
of said bankrupt that , heretofore appointed trustee of said
bankrupt's estate, should be removed from his trust, for the causes x
following to wit : [Here set forth the particular cause or causes for which
such removal is requested.']
Wherefore pray that notice may be served upon said
t 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.]
Notice of Petition for Removal of Trustee.2
In the District Court of the United States for the District
of
In the matter of
Bankrupt ,
In Bankruptcy.
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. i8..,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*
' See page 285 ante.
•B. R. No. XVII; compare B. A. § 2 (17).
•B. R. No. XIII, last clause.
FORMS IN BANKRUPTCY. 591
[Form No. 54.]
Order for Removal of Trustee.1
In the District Court of the United States for the District
of
In the matter 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 , bankrupt, might be removed :
Now, therefore, upon reading the said petition of the said
and the evidence submitted therewith, and upon hearing
counsel on behalf of said petitioner and counsel for the trustee, and
upon the 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 , sub-
ject to prior charges].2
Witness the Honorable , judge of the said court,
and the seal thereof, at , in said district, on the .... day of
, A. D. 18..
I Seal of I
1 the court, f '
Clerk?
•B. A. § 2 (17); compare B. R. No. XVII.
«B. A. §2(18).
•B.R. No. XIII, last clause.
59* FORMS IN BANKRUPTCY.
[Form No. 55.]
Order for Choice of New Trustee.1
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..
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 office 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 new trustee of said estate.
And it is further ordered that notice be given to said creditors of
the time, place, and purpose of said meeting, by letter to each, tc
be deposited in the mail at least ten days before that day.2
Referee in Bankruptcy}
>B. A. §§44 and 46.
'B. A. §58* (3).
•B. A. %58c.
FORMS IN BANKRUPTCY. 593
[Form No. 5 6. J
Certificate by Referee to Judge.1
In the District Court of the United States for the District
of
In the matter of
• In Bankruptcy.
Bankrupt .
I, , one of the referees of said court in bankruptcy,
do hereby certify that in the course of the proceedings in said cause
before me the following question arose pertinent to the said proceed-
ings : [Here state the question, a summary of the evidence relating thereto,
and the finding and order of the referee thereon.~\
And the said question is certified to the judge for his opinion
thereon.
Dated at the .... day of A. D. 18 . .
Referee in Bankruptcy.
'Compare B. R. No. XXVII; B. A. § 39a (5). It is to be noted that under
the present practice, when an issue arises before a referee he has power to
determine the question, though his determination is subject to a review by the
court. The certificate outlined in the above form is the means used for bring-
ing the question up for review. Under the old bankruptcy law the register had
no power to determine an issue, if one arose, but it was his duty to certify the
facts and the question to the court, though in practice he also stated his opinion
and what order he considered should be made.
(75)
594 FORMS IN BANKRUPTCY.
[Form No. 57.]
Bankrupt's Petition for Discharge.1
In the matter of
Bankrupt .
• In Bankruptcy.
To the Honorable ,
Judge 2 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 3 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
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.4
Dated this .... day of , A. D. 189-.
Bankrupt.
Order of Notice Thereon.5
District of , ss:
On this day of , A. D. 189-, on reading the foregoing
petition, it is —
Ordered by the court, that a hearing be had upon the same on
the day of A. D. 189-, before said court, at , in
1 B. A. § 14a ; B. R. No. XXXI.
* B. A. § 14* ; compare B. A. § 38a (4).
* B. A. § 140.
4 B. A. § 17.
* B. A. § 14*; 580 (2).
FORMS IN BANKRUPTCY. 595
said district, at .... o'clock in the noon ; and that notice
thereof be published in 1 , a newspaper printed in said
district, and that all known creditors and other persons in interest2
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 ia said district, on the .... day of
, A.D. 189-.
i Seal of » ••>
1 the court. J 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,
*
[Official character."]
I hereby certify that I have on this day of , A. D.
1 89-, sent by mail copies of the above order, as therein directed.
...... ..•*..,
Clerk.
1 B. A. § 58* ; compare B. A. § 38.
« B. A. § 14*.
»B. A. §20.
S96 FORMS IN BANKRUPTCY.
[Form No. 58.J
Specification of Grounds of Opposition to Bankrupt's
Discharge.1
In the District Court of the United States for the District
of
In the matter of
Bankrupt
In Bankruptcy.
, 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.2
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
adjudication was filed him; excepting such debts as are by
law excepted from the operation of a discharge in bankruptcy.3
1 B. R. No. XXXII; B. A. § 14*.
8 B. A. § 14*.
8B. A. § 17.
The discharge of the bankrupt, under the present law, is evidenced by the
FORMS IN BANKRUPTCY. 597
Witness the Honorable judge of said district court,
and the seal thereof this .... day of , A. D. 189-.
1 Seal of I ,
I the court, f Clerk.
[Form No. 60.]
Petition for Meeting to Consider Composition.1
District Court of the United States for the District of
Bankrupt ,
In Bankruptcy.
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.
order of discharge, not as under the former law by a certificate issued in
accordance with the order.
It is not proper to insert the itemized debts which it is supposed are released
by the discharge. The question of the effect of the discharge upon any particu-
lar debt is determined, in any suit which may thereafter be brought on that debt.
1 Compare B. A. § 12a and b. While the call of a meeting for the purpose of
considering whether creditors will accept an offer of composition will doubtless
greatly facilitate consideration of the question, such a meeting prior to the
acceptance of the composition by a majority in number and amount of all
creditors, is not required either by the statute or the rules. Query: Can it not
598 FORMS IN BANKRUPTCY.
[Form No. 61.]
Application for Confirmation of Composition.1
In the District Court of the United States for the District
of
In the matter of
- In Bankruptcy.
Bankrupt
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 required
by law, he offered terms of composition to his creditors, which
terms have been accepted in writing by a majority in number of all
creditors whose claims have been allowed, which number represents
a majority in amount of such claims; that the consideration to be
paid by the bankrupt to his creditors, the money necessary to pay
all debts which have priority, and the costs of the proceedings,
amounting in all to the sum of dollars, has been deposited,
subject to the order of the judge, in the National Bank, of
, a designated depository of money in bankruptcy cases.
Wherefore the said respectfully asks that the said
composition may be confirmed by the court.
Bankrupt.
be obtained, notwithstanding the implied rule in this form, by personal solicita-
tion of individual creditors ? Does not the notice thereafter given to creditors,
of the application for a confirmation of the composition, fully protect their
rights? Compare p. 141 ante.
1 B. A. § 12 a and b. As to Notice, compare B. A. § 58a (2). As to Opposi-
tion, compare B. A. § 12*, c, d ; and B. R. No. XXXII.
FORMS IN BANKRUPTCY. 599
[Form No. 62.]
Order Confirming Composition.1
In the District Court of the United States for the District
of
In the matter of
In Bankruptcy.
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 interests of the creditors ; and that the
bankrupt has not been guilty of any of the acts or failed to perform
any of the duties which would be a bar to his discharge, and that
the offer and its acceptance are in good faith and have not been
made or procured by any means, promises, or acts contrary to the
acts of Congress relating to bankruptcy: It is therefore hereby
ordered that the said composition be, and it hereby is, confirmed.
Witness the Honorable , judge of said court, and the
seal thereof, this day of , A. D. 189-.
J Seal of I ,
I the court. | „, ,
Clerk.
Query: Should not this order recite the giving of notice as required by B. A.
§ 58o (2) ?
1 B. A. § 12* and d.
600 FORMS IN BANKRUPTCY.
[Form No. 63.]
Order of Distribution on Composition.1
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 offered by the above-named bankrupt in this
case having been duly confirmed by the judge of said court, it is
hereby ordered and decreed that the distribution of the deposit
shall be made by the clerk of the court as follows, to wit: 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-.
I Seal of 1
I the court. ( »
Clerk.
1 B. A. § iar.
INDEX TO FORMS.
(References to the numbers of the forms.)
Account.
affidavit to, by trustee, f. 50;
of trustee, f. 49;
order approving, f. 51;
Adjudication.
that debtor is not a bankrupt, f. II;
of bankruptcy, f. 12;
subpoena of witness, after, f. 30;
Affidavit. (See Oath.)
to accout by trustee, f. 50;
of lost note or bill, f. 37;
Agent.
of creditors, proof of claim by, f. 35;
Answer. (See Denial of Bankruptcy.)
Application.
of bankrupt for discharge, f. 57;
order of hearing on, f. 57;
notice to creditors of, f. 57;
for confirmation of composition, f. 61;
Appraiser.
appointment, oath and report, f. 13;
inventory of, with oath and report, f. 13;
Assets.
trustee's return of no assets, f. 48 ;
Attorney in Fact.
of creditor, proof of claim by, f. 35 ;
authority of, to appear for creditor. (See Power OF Attorney.)
Bankrupt.
petition of, for discharge, f. 57 ;
examination of, f. 29 ;
order for hearing, on application of, for discharge, f. 57 j
notice to creditors of application of, for discharge, f. 57;
order granting discharge to, f. 57 ;
601
(76)
602 INDEX TO FORMS.
(References to the numbers of the forms.)
Bond.
of petitioning creditor, f. 9 ;
of trustee, f. 25 ;
of referee, f. 17 ;
to marshal, f. 10 ;
Certificate.
by referee to judge, t. 56 ;
Claims. (See Proof of Claims.)
order expunging, f. 39 ;
order reducing, f. 38 ;
list of allowed, and entitled to dividends, f. 40;
list of, proved at first meeting, f. ig ;
Composition.
petition for meeting to consider, f. 60;
application for confirmation of, f. 61;
order confirming, f. 62;
order of distribution on, f. 63;
Corporation.
proof of claim by, f. 33;
Creditors.
petition (involuntary) by, f. 3;
proof of claim by, ff. 31-36;
notice to, of first meeting, f. 18;
choice of trustee by, at first meeting, f. 22;
memorandum of, by referee, who have proved their debts, f. 19 {
order of notice to, of application for a discharge, f. 57;
powers of attorney by. (See Powers of Attorney.)
Debtor.
petition of, with schedules, f. 1;
Denial of Bankruptcy, f, 6;
Discharge.
petition of bankrupt for, f. 57;
order for hearing on application for, f. 57,
notice to creditors of application for, f. 57,
specifications in opposition to; f. 58;
order granting, f. 59;
Dividend.
list of claims entitled to, f. 40 ;
Examination.
of bankrupt or witness, f. 29;
Exemptions.
trustee's report, f. 47;
INDEX TO FORMS. 603
(References to the numbers of the forms.)
Inventory.
of appraisers, f. 13;
Jury.
order for jury trial, f. 7;
Letter of Attorney. (See Power of Attorney.)
Lien.
petition and order for redemption of property from, f. 43.
Meeting.
notice to creditors of first meeting, f. 18;
Memorandum.
by referee, of creditors who have proved their debts at first meeting;, f. 191
by referee, of choice of trustee, at first meeting, f. aaj
Note.
affidavit of lost, f. 37;
Notice.
to creditors of first meeting, f. 18;
of dividend, f. 41;
to trustee of his appointment, f. 24;
to creditors, of application for a discharge, order for, f. 571
Oath. (See Affidavit.)
of trustee, to final account, f. 50;
of appraisers, f. 13;
of office or referee, f. 16;
Order.
to show cause upon creditor's involuntary petition, L 4)
of reference by judge, f. 14;
by clerk in judge's absence, f. 151
that no trustee be appointed, f. 27;
appointing appraisers, f. 13;
trustee, f. 23;
for examination of bankrupt, f. 28;
expunging claim, f. 39;
discharging trustee, f. 51;
for hearing, on application of bankrupt for discharge, f. 57;
granting discharge, f. 59;
for jury trial, f. 7;
for sales. (See Petition.)
for removal of trustee, f. 54;
for choice of new trustee, f. 55;
of distribution on composition, f. 63;
Partners.
petition of, with schedule, f. 2;
604 INDEX TO FORMS.
(References to the numbers of the forms.)
Petition.
of debtor, with schedules, f . I ;
schedule A, f. I ;
schedule B, f. I.
summary of debts and assets, f. i;
of copartnership debtors, with schedule, f. 2;
of creditors to have debtor adjudged bankrupt, f. 3;
order to show cause upon creditor's petition, f. 4;
of bankrupt, for discharge, f. 57;
and order for sale by auction, f. 42;
and order for redemption of property from lien, f. 43;
and order for sale subject to lien, f. 44;
and order for private sale, f. 45;
and order for sale of perishable property, f. 46;
for removal of trustee, f. 52;
for meeting to consider composition, f. 60;
Power of Attorney. (See Attorney.)
special, f. 21;
general, f. 20;
Proof of Claim.
by creditor, without security, f. 31;
by creditor, with security, f. 32;
by corporation, f. 33;
by agent or attorney of creditor, f. 35;
by partnership creditor, f. 34;
of secured debt by agent, f. 36;
Referee.
adjudication of bankruptcy by, upon debtor's petition, f. I2|
notice by, to creditors, of first meeting, f. 18;
order of reference to, by judge, f. 14;
in judge's absence, f. 15;
certificate by, to judge, f. 56 ;
order by, appointing trustee, f. 23 ;
order by, appointing appraisers, f. 13;
order by, expunging claim, f. 39 ;
memorandum of, of creditors who have proved their debts, f. 19:
memorandum of, of choice of trustee, f. 22 ;
list of claims allowed and entitled to dividends by, f. 40 ;
order by, discharging trustee, f. 51 ;
notice by, to creditors, of application for a discharge, f. 57 j
bond of, f. 17 ;
oath of, f. 16 ;
Reference.
order of, by judge, f. 14 ;
in judge's absence, f. 15 ;
INDEX TO FORMS. 605
(References to the numbers of the forms.)
Removal.
of trustee. (See Trustee.)
Report.
of appraisers, f. 13 ;
of trustee, f. 49 ;
as to exemptions of bankrupt, f. 47 ;
Return.
of trustee, where there are no assets, f. 48't
Sales. (See Petition.)
Schedule. (See Petition.)
Specifications.
of opposition to discharge, I. 58)
Subpoena.
to alleged bankrupt, f. 5;
Summons.
to witness, f. 30;
Trial.
order for jury trial, f. 7;
Trustee.
appointment of, by creditors, f. 22j
by referee, f. 23;
notice to, of appointment, f. 24;
bond of, f. 25;
order approving, f. 26;
order that no trustee be appointed, f. 27;
return of, where there are no assets, I. 48)
notice of dividends, f. 41;
account of, f. 49;
oath to, f. 50;
order discharging, f. 51;
order for choice of new, f. 55;
petition of, to relieve property from liens, f. 43;
petition for removal of, f. 52;
notice of, f. 53;
Warrant.
special to marshal, f. 8;
Witness.
examination of, f. 29;
summons to, f. 30;
THE
UNITED STATES BANKRUPTCY LAW.
OK 1898.
An Act to Establish a Uniform System of Bankruptcy
Throughout the United States.
IApproved July i, 1898.]
Be it enacted by the Senate and House of Representatives of the
United States of America, in Congress assembled:
CHAPTER I.
DEFINITIONS.
Section i. 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, be con-
strued as follows: (1) "A person against whom a petition has
been filed" shall include a person who has filed a voluntary
petition; (2) "adjudication" shall mean the date of the entry of
a decree that the defendant, in a bankruptcy proceeding, is a
bankrupt, or if such decree is appealed from, then the date when
such decree is finally confirmed; (3) "appellate courts" shall
include the circuit courts of appeals of the United States, the
supreme courts of the Territories, and the Supreme Court of the
United States; (4) "bankrupt" shall include a person against
whom an involuntary petition or an application to set a com-
position 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
608 THE BANKRUPTCY ACT OF 1898. TSec. 1.
and privileges of private corporations not possessed by individuals
or partnerships, and shall include limited or other partnership
associations organized under laws making the capital subscribed
alone responsible for the debts of the association ; (7) "court"
shall mean the court of bankruptcy 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 Columbia, and
the United States court of the Indian Territory, and of Alaska ;
(9) "creditor" shall include anyone who owns a demand or claim
provable in bankruptcy, and may include his duly authorized
agent, attorney, or proxy; (10) "date of bankruptcy," or "time
of bankruptcy," or "commencement of proceedings," or "bank-
ruptcy," with reference to time, shall mean the date when the
petition was filed ; (1 1) "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 such as are excepted by this act; (13) "docu-
ment" 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 Presi-
dent 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 valua-
tion, be sufficient in amount to pay his debts ; (16) "judge" shall
mean a judge of a court of bankruptcy, not including the referee ;
(17) "oath" shall include affirmation; (18) "officer" shall include
clerk, marshal, receiver, referee, and trustee, and the imposing of
a duty upon or the forbidding of an act by any officer shall
include his successor and any person authorized by law to per-
form the duties of such officer; (19) "persons" 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 per-
sons 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"
Sec 2.] THE BANKRUPTCY ACT OF 1898. 609
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, falsify, 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 District of
Columbia; (25) "transfer" shall include the sale and every other
and different mode of disposing of or parting with property, or
the possession of property, absolutely or conditionally, as a pay-
ment, pledge, mortgage, gift, or security; (26) "trustee" shall
include all of the trustees of an estate; (27) "wage-earner" shall
mean an individual who works for wages, salary, or hire, at a rate
of compensation not exceeding one thousand five hundred dollars
per year; (28) words importing the masculine gender may be
applied to and 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.
CHAPTER II.
CREATION OF COURTS OF BANKRUPTCY AND THEIR
JURISDICTION.
SEC. 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
610 THE BANKRUPTCY ACT OF 1898. [Sec. 2
terms, as they are now or may be hereafter held, to (1) adjudge
persons bankrupt who have had their principal place of business,
resided, or had their domicile within their respective territorial
jurisdictions for the preceding six months, or the greater portion
thereof, or who do not have their principal place of business,
reside, or have their domicile within the United States, but have
property within their jurisdictions, or who have been adjudged
bankrupts by courts of competent jurisdiction without the United
States and have property within their jurisdictions; (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 preser-
vation of estates, to take charge of the property of bankrupts
after the filing of the petition and until it is dismissed or the
trustee is qualified ; (4) arraign, try, and punish bankrupts, offi-
cers, and other persons, and the agents, officers, members of the
board of directors or trustees, or other similar controlling bodies
of corporations for violations of this act, in accordance with the
laws of procedure of the United States now in force, or such as
may be hereafter enacted, regulating trials for the alleged viola-
tion of laws of the United States ; (5) authorizes the business of
bankrupts to be conducted for limited periods by receivers, the
marshals, or trustees, if necessary in the best i nterests of the
estates ; (6) bring in and substitute additional persons or parties in
proceedings in bankruptcy when necessary for the complete
determination of a matter in controversy ; (7) cause the estates of
bankrupts to be collected, reduced to money and distributed, and
determine controversies in relation thereto, except as herein other-
wise provided; (8) close estates, whenever it appears that they
have been fully administered, by approving the final accounts and
discharging the trustees, and reopen them whenever it appears
they were closed before being fully administered ; (9) confirm or
reject compositions between debtors and their creditors, and set
aside compositions and reinstate the cases; (10) consider and
confirm, modify or overrule, or return, with instructions for
further proceedings, records and findings certified to them by
referees; (11) determine all claims of bankrupts to their exemp-
tions ; (12) 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
Sec. 3-1 THE BANKRUPTCY ACT OF 1898. 611
or imprisonment or fine and imprisonment ; (14) extradite bank-
rupts from their respective districts to other districts ; (1 5) 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 per-
sons for contempts committed before referees; (17) pursuant to
the recommendation of creditors, or when they neglect to recom-
mend the appointment of trustees, appoint trustees, and upon com-
plaints 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;
and (19) transfer cases to other courts of bankruptcy.
Nothing in this section contained shall be construed to deprive
a court of bankruptcy of any power it would possess were certain
specific powers not herein enumerated.
CHAPTER III.
BANKRUPTS.
Sec. 3. Acts of Bankruptcy. — • a Acts of bankruptcy by a
person shall consist of his having (1) conveyed, transferred, con-
cealed, 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, while insolvent, any
portion of his property to one or more of his creditors with intent
to prefer such creditors over his other creditors ; or (3) 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 assignment for the benefit of his creditors ; or (5) admitted
in writing his inability to pay his debts and his willingness to be
adjudged a bankrupt on that ground.
b A petition may be filed against a person who is insolvent and
who has committed an act of bankruptcy within four months
after the commission of such act. Such time shall not expire
until four months after (1) the date of the recording or registering
of the transfer or assignment when the act consists in having
made a transfer of any of his property with intent to hinder,
6i2 THE BANKRUPTCY ACT OF 1898. [Sec. 3.
delay, or defraud his creditors or for the purpose of giving a pref-
erence 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 takes 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 bank-
ruptcy instituted under the first subdivision of this section to
allege and prove that the party proceeded against was not insolv-
ent 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
bankrupt the proceedings shall be dismissed, and under said sub-
division 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 takes 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 insolvency, and in case of his failure to so attend and
submit to examination the burden of proving his solvency shall
rest upon him.
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 any part of the same, prior to the adjudication and pending a
hearing on the petition, the petitioner or applicant shall file in the
same court a bond with at least two good and sufficient sureties
who shall reside within the jurisdiction of said court, to be
approved by the court or a judge thereof, in such sum as the
court shall direct, conditioned for the payment, in case such
petition is dismissed, to the respondent, his or her personal 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, expenses, and damages occasioned by such
seizure, taking, or d3tention of such property. Counsel fees,
Sec. 4.] THE BANKRUPTCY ACT OF 1898. 613
costs, expenses, and damages shall be fixed and allowed by the
court, and paid by the obligors in such bond.
Sec. 4. Who May Become Bankrupts. — a Any person who
owes debts, except a corporation, shall be entitled to the benefits
of this act as a voluntary bankrupt.
b Any natural person, except a wage-earner or a person engaged
chiefly in farming or the tillage of the soil, any unincorporated
company, and any corporation engaged principally in manufac-
turing, trading, printing, publishing, or mercantile pursuits, 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. Private bankers, but not national banks
or banks incorporated under State or Territorial laws, may be
adjudged involuntary bankrupts.
Sec. 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 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 pro-
ceeds 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
partnership property remain after paying the partnership debts,
such surplus shall be added to the assets of the individual partners
in the proportion of their respective interests in the partnership.
g The court may permit the proof of the claim of the partner-
ship estate against the individual estates, and vice versa, and may
6 14 THE BANKRUPTCY ACT OF 189S. [Sees. 6, 7.
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.
h 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
business as expeditiously as its nature will permit, and account
for the interest of the partner or partners adjudged bankrupt.
Sec. 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 pre-
ceding the filing of the petition.
Sec. 7. Duties of Bankrupts. — a The bankrupt shall (1) attend
the first meeting of his creditors, if directed by the court or a
judge thereof to do so, and the hearing upon his application for
a discharge, if filed ; (2) comply with all lawful orders of the court ;
(3) examine the correctness of all proofs of claims filed against his
estate ; (4) execute and deliver such papers as shall be ordered by
the court ; (5) execute to his trustee transfers of all his property
in foreign countries; (6) immediately inform his trustee of any
attempt, by his creditors or other persons,. to evade the provisions
of this act, coming to his knowledge; (7) in case of any person
having to his knowledge proved a false claim against his estate,
disclose that fact immediately to his trustee; (8) prepare, make
oath to, and file in court within ten days, unless further time is
granted, after the 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, show-
ing 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 concern-
ing the conducting of his business, the cause of his bankruptcy,
Sees. 8, p.] THE BANKRUPTCY ACT OF 1898. 615
his dealings with his creditors and other persons, the amount,
kind, and whereabouts of his property, and, in addition, all mat-
ters which may affect the administration and settlement of his
estate ; but no testimony given by him shall be offered in evidence
against him in any criminal proceeding.
Provided, however, That he shall not be required to attend a
meeting of his creditors, or at or for an examination at a place
more than one hundred and fifty miles distant from his home or
principal place of business, or to examine claims except when
presented to him, unless ordered by the court, or a judge thereof,
for cause shown, and the bankrupt shall be paid his actual expenses
from the estate when examined or required to attend at any place
other than the city, town, or village of his residence.
Sec. 8. Death or Insanity of Bankrupts. — a The death or
insanity of a bankrupt shall not abate the proceedings, but the
same shall be conducted and conclude in the same manner, so far
as possible, as though he had not died or become insane : Provided,
That in case of death the widow and children shall be entitled to
all rights of dower an allowance fixed by the laws of the State of
the bankrupt's residence.
Sec. 9. Protection and Detention of Bankrupts. — a Abank^
rupt 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 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 person, and before the expiration of one month after
the qualification of the trustee, upon satisfactory proof by the
affidavits of at least two persons that such bankrupt is about to
leave the district in which he resides or has his principal place of
business to avoid examination, and that his departure will defeat
the proceedings in bankruptcy, issue a warrant to the marshal,
directing him to bring such bankrupt forthwith before the court
for examination. If upon hearing the evidence of the parties it
shall appear to the court or a judge thereof that the allegations
are true and that it is necessary, he shall order such marshal to
keep such bankrupt in custody not exceeding ten days, but not
3i6 THE BANKRUPTCY ACT OF 1898. [Sees. 10-12.
imprison him, until he shall be examined and released or give bail
conditioned for his appearance for examination, from time to
time, not exceeding in all ten days, as required by the court,
and for his obedience to all lawful orders made in reference
thereto.
Sec. 10. Extradition of Bankrupts. — a Whenever a warrant
for the apprehension of a bankrupt shall have been issued, and
he shall have been found within the jurisdiction of a court other
than the one issuing the warrant, he may be extradited in the
same manner in which persons under indictment are now extra-
dited from one district within which a district court has jurisdic-
tion to another.
Sec. 11. Suits by and against Bankrupts. — a A suit which
is founded upon a claim from which a discharge would be a
release, and which is pending against a person at the time of the
filing of a petition against him, shall be stayed until after an
adjudication or the dismissal of the petition; if such person is
adjudged a bankrupt, such action may be further stayed until
twelve months after the date of such adjudication, or, if within
that time such person applies for a discharge, then until the ques-
tion 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 bank-
rupt estate subsequent to two years after the estate has been
closed.
Sec. 12. Compositions, when Confirmed. — a A bankrupt may
offer terms of composition to his creditors after, but not before,
he has been examined in open court or at a meeting of his credi-
tors, and filed in court the schedule of his property and list of his
creditors, required to be filed by bankrupts.
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 consideration to be
paid by the bankrupt to his creditors, and the money necessary
Sees. 13,14.] THE BANKRUPTCY ACT OF i8g8. 617
to pay all debts which have priority and the cost of the proceed-
ings, 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 appli-
cation for the coniirmation 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 bar 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 dis-
missed. Whenever a composition is not confirmed, the estate
shall be administered in bankruptcy as herein provided.
Sec. 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.
Sec. 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 applica-
tion for a discharge in the court of bankruptcy in which the pro-
ceedings 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 parties
in interest, at such time as will give parties in interest a reasona-
ble opportunity to be fully heard, and investigate the merits of
the application and discharge the applicant unless he has (1) com-
mitted an offense punishable by imprisonment as herein provided;
or (2) with fraudulent intent to conceal his true financial con-
dition and in contemplation of bankruptcy, destroyed, concealed,
(78)
618 THE BANKRUPTCY ACT OF 1898. [Sees. 15-18.
or failed to keep books of account or records from which his true
condition might be ascertained.
c The confirmation of a composition shall discharge the bank-
rupt from his debts, other than those agreed to be paid by the
terms of the composition and those not affected by a discharge.
Sec. 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.
Sec. 16. Co-DeMors of Bankrupts. — a The liability of a per-
son 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.
Sec. 17. Debts not Affected by a Discharge. — a A discharge
in bankruptcy shall release a bankrupt from all of his provable
debts, except such as (1) are due as a tax levied by the United .
States, the State, county, district, or municipality in which he
resides ; (2) are judgments in actions for fraud's, or obtaining prop-
erty by false pretenses or false representations1, 6x for willful and
malicious injuries to the person or property of another; (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, mis-
appropriation, or defalcation while acting as an officer or in any
fiduciary capacity.
CHAPTER IV.
COURTS AND PROCEDURE THEREIN.
Sec. 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 pro-
cess 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
Sec. 19.] THE BANKRUPTCY ACT OF 1898. &i9
shall be given by publication in the same manner and for the
same time as provided by law for notice by publication in suits in
equity in courts of the United States.
b The bankrupt, or any creditor, may appear and plead to the
petition within ten 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 jury trial is given by this act, and make the
adjudication or dismiss the petition.
e If on the last day within which pleadings may be filed none
are filed by the bankrupt or any of his creditors, the judge shall
on the next day, if present, or as soon thereafter as practicable,
make the adjudication or dismiss the petition.
f If the judge is absent from the district, or the division of the
district in which the petition is pending, on the next day after
the last day on which pleadings may be filed, and none have
been filed by the bankrupt or any of his creditors, the clerk shall
forthwith refer the case to the referee.
g Upon the filing of a voluntary petition the judge shall hear
the petition and make the adjudication or dismiss the petition.
If the judge is absent from the district, or the division of the dis-
trict in which the petition is filed at the time of the filing, the
clerk shall forthwith refer the case to the referee.
Sec. 19. Jury Trials. — « A person against whom an invol-
untary petition has been filed shall be entitled to have a trial by v'
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 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 fame place, or
620 THE BANKRUPTCY ACT OF 1898. [Sees. 20, 21.
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 m^y be hereafter enacted in relation
to trials by jury.
Sec. 20. Oaths, Affirmations. — a Oaths required by this act,
except upon hearings in court, may be administered by (1)
referees; (2) officers authorized to administer oaths in proceed-
ings 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.
Sec. 21. Evidence. — a A court of bankruptcy may, upon
application of any officer, bankrupt, or creditor, by order require
any designated person, including the bankrupt, who is a compe-
tent witness under the laws of the State in which the proceedings
are pending, to appear in court or before a referee or the judge
of any State court, to be examined concerning the acts, conduct,
or property of a bankrupt whose estate is in process of adminis-
tration under this act.
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 oppo-
sition 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 evi-
dence with like force and effect as certified copies of the records
of district courts of the United States are now or may hereafter
be admitted as evidence.
e A certified copy of the order approving the bond of a trustee
shall constitute conclusive evidence of the vesting in him of the
Sees. 22, 23.] THE BANKRUPTCY ACT OF 1898. 621
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.
f A certified copy of an order confirming or setting aside a
composition, or granting or setting aside a discharge, not revoked,
shall be evidence of the jurisdiction of the court, the regularity of
the proceedings, and of the fact that the order was made.
g A certified copy of an order confirming a composition shall
constitute evidence of the revesting of the title of his property in
the bankrupt, and if recorded shall impart the same notice that a
deed from the trustee to the bankrupt if recorded would impart.
Sec. 22. Reference of Gases after Adjudication. — a After a
person has been adjudged a bankrupt the judge may cause the
trustee to proceed with the administration of the estate, or refer
it (1) generally to the referee or specially with only limited
authority to act in the premises or to consider and report upon
specified issues ; or (2) to any referee within the territorial juris-
diction of the court, if the convenience of parties in interest will
be served thereby, or for cause, or if the bankrupt does not do
business, reside, or have his domicile in the district.
b The judge may, at any time, for the convenience of parties
or for cause, transfer a case from one referee to another.
Sec. 23. Jurisdiction of United States and State Courts. —
a The United States circuit courts shall have jurisdiction of all
controversies at law and in equity, as distinguished from proceed-
ings in bankruptcy, between trustees as such and adverse claim-
ants concerning the property acquired or claimed by the trustees,
in the same manner and to the same extent only as though bank-
ruptcy proceedings had not been instituted and such contro-
versies had been between the , bankrupts and such adverse
claimants. \
b Suits by the trustee shall only be brought or prosecuted in
the courts where the bankrupt, whose estate is being adminis-
tered by such trustee, might have brought or prosecuted them if
proceedings in bankruptcy had not been instituted, unless by con-
sent of the proposed defendant.
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.
622 THE BANKRUPTCY ACT OF 1898. [Sees. 24, 25-
Sec. 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 UTnited
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.
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.
Sec. 25. Appeals and Writs of Error. — a That appeals, as
in equity cases, may be taken in bankruptcy proceedings from
the courts of bankruptcy to the circuit court of appeals of the
United States, and to the supreme court of the Territories, in
the following cases, to wit, (1) from a judgment adjudging or re-
fusing to adjudge the defendant a bankrupt; (2) from a judgment
granting or denying a discharge; and (3) from a judgment allow-
ing 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 deter-
mined by the appellate court in term or vacation, as the case
may be.
b From any final decision of a court of appeals, allowing or re-
jecting a claim under this act, an appeal may be had under such
rules and within such time as may be prescribed by the Supreme
Court of the United States, in the following cases and no other :
1. Where the amount in controversy exceeds the sum of two
thousand dollars, and the question involved is one which might
have been taken on appeal or writ of error from the highest court
of a State to the Supreme Court of the United States ; or
2. Where some Justice of the Supreme Court of the United
States shall certify that in his opinion the determination of the
question or questions involved in the allowance or rejection of
such claim is essential to a uniform construction of this act
throughout the United States.
Sees. 26-29.] THE BANKRUPTCY ACT OF 1898. 623
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 issues writs of
certiorari pursuant to the provisions of the United States laws
now in force or such as may be hereafter enacted.
Sec. 26. Arbitration of Controversies. — a The trustee maj%
pursuant to the direction of the court, submit to arbitration any
controversy arising in the settlement of the estate.
b Three arbitrators shall be chosen by mutual consent, or one
b)' 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 court and shall have
like force and effect as the verdict of a jury.
Sec. 27. Compromises. — a The trustee may, with the ap-
proval of the court, compromise any controversy arising in the
administration of the estate upon such terms as he may deem for
the best interests of the estate.
Sec. 28. Designation of Newspapers. — a Courts of bank-
ruptcy 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 be inserted.
Any court may in a particular case, for the convenience of par-
ties in interest, designate some additional newspaper in which
notices and orders in such case shall be published.
SEC 29. Offenses. — a A person shall be punished, by impris-
onment 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.
b A person shall be punished, 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 belong.
6*4 THE BANKRUPTCY ACT OF 1898. [Sees. 30-32.
ing to his estate in bankruptcy; or (2) made a false oath or
account in, or in relation to, any proceeding in bankruptcy ; (3)
presented under oath any false claim for proof against the estate
of a bankrupt, or used any such claim in composition personally
or by agent, proxy, or attorney, or as agent, proxy, or attorney ;
or (4) received any material amount 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 which
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.
Sec. 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.
Sec. 31. Computation of Time. — a Whenever time is
enumerated by days in this act, or in any proceeding in bank-
ruptcy, the number of days shall be computed by excluding the
first and including the last, unless the last fall on a Sunday or
holiday, in which event the day last included shall be the next
day thereafter which is not a Sunday or a legal holiday.
Sec. 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.
Sees. 33 38.] THE BANKRUPTCY ACT OF 1898. 625;
CHAPTER V.
OFFICERS, THEIR DUTIES AND COMPENSATION.
Sec. 33. Creation of Two Officers. — a The offices of referee
and trustee are hereby created.
Sec. 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 are needed, may constitute at least one district.
Sec. 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 justices 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.
Sec. 36. Oaths of Office of Referees. — a Referees shall take
the same oath of office as that prescribed for judges of United
States courts.
Sec. 37. Number of Referees. — a Such number of referees
shall be appointed as may be necessary to assist in expeditiously
transacting the bankruptcy business pending in the various courts
of bankruptcy.
Sec. 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 administering of oaths to and the examination of persons
as witnesses and for requiring the production of documents in'
(79)
626
THE BANKRUPTCY ACT OF 1898. [Sec. 39-
proceedings before them, except the power of commitment ; (3)
exercise the powers of the judge for the taking possession and
releasing of the property of the bankrupt in the event of the
issuance by the clerk of a certificate showing the absence of a
judge from the judicial district, or the division of the district, or
his sickness, or inability to act ; (4) perform such part of the
duties, except as to questions arising out of the applications of
bankrupts for compositions or discharges, as are by this act con-
ferred 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 applica-
tion of the trustee during the examination of the bankrupts, or
other proceedings, authorize the employment of stenographers at
the expense of the estates at a compensation not to exceed ten
cents per folio for reporting and transcribing the proceedings.
Sec. 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) ex-
amine 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 pro-
vided ; (5) make up records embodying the evidence, or the sub-
stance thereof, as agreed upon by the parties in all contested
matters arising before them, whenever requested to do so by
cither of the parties thereto, together with their findings therein,
and transmit them to the judges ; (6) prepare and file the sched-
ules 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 certified
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
Sees. 40,41.] THE BANKRUPTCY ACT OF 1898. 627
in the same cities or towns where the courts of bankruptcy conr
vene, call upon and receive from the clerks all papers filed in
courts of bankruptcy which have been referred to them.
b Referees shall not (1) act in cases in which they are directly
or indirectly interested ; (2) practice as attorneys and counselors
at law in any bankruptcy proceedings; or (3) purchase, directly
or indirectly, any property of an estate in bankruptcy.
Sec. 40. Compensation of Referees. — a Referees shall receive
as full compensation for their services, payable after they are
rendered, a fee of ten 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 from estates which have been
administered before them one per centum commissions on sums
to be paid as dividends and commissions, or one-half of one per
centum on the amount to be paid to creditors upon the confirma-
tion 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.
tin the event of the reference of a case being revoked before
it is concluded, and when the case is specially referred, the judge
shall determine what part of the fee and commissions shall be paid
to the referee.
Sec. 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 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.
b The referee shall certify the facts to the judge, if any person
shall do any of the things forbidden in this section. The judge
shall thereupon, in a summary manner, hear 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
628 THE BANKRUPTCY ACT OF 1898. [Sees. 42-46.
extent as for a contempt committed before the court of bank-
ruptcy, 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.
Sec. 42. Records of Referees. — a The records of all proceed-
ings 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.
b A record of the proceedings in each case shall be kept in a
separate book or books, and shall, together with the papers on
file, constitute the records of the case.
c The book or books containing a record of the proceedings
shall, when the case is concluded before the referee, be certified
to by him, and, together with such papers as are on file before
him, be transmitted to the court of bankruptcy and shall there
remain as a part of the records of the court.
Sec. 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 appointment under the same court
may, by order of the judge, temporarily fill the vacancy.
Sec. 44. Appointment of Trustees. — a The creditors of a
bankrupt estate shall, at their first meeting after the adjudication
or after a vacancy has occurred in the office of trustee, or after an
estate has been reopened, or after a composition has been set
aside or a 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.
Sec. 45. Qualifications of Trustees. — a 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 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.
Sec. 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
Sees. 47, 48.] THE BANKRUPTCY ACT OF 1898. 629
been commenced or was being defended by such joint trustee
alone or by such successor.
Sec. 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 ; (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 show-
ing 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 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 there-
after, unless otherwise ordered by the courts; and (n) 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.
Sec. 48. Compensation of Trustees. — a Trustees shall receive,
as full compensation for their services, payable after they are ren-
dered, 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 from estates which they have
administered, such commissions on sums to be paid as dividends
and commissions as may be allowed by the courts not to exceed
three per centum on the first five thousand dollars or less, two
per centum on the second five thousand dollars or part thereof,
630 THE BANKRUPTCY ACT OF 1898. [Sees. 49, SO.
and one per centum on such sums in excess of ten thousand
dollars.
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 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.
Sec. 49. Accounts and Papers of Trustees. — a The accounts
and papers of trustees shall be open to the inspection of officers
and all parties in interest.
Sec. 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 pre-
scribe, 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 performance
of their official duties.
b Trustees, before entering upon the performance of their offi-
cial duties, and within ten days after their appointment, or within
such further time, not to exceed five days, as the court may per-
mit, shall respectively qualify by entering into bond to the United
States, with such sureties as shall be approved by the courts, con-
ditioned for the faithful performance of their official duties.
c The creditors of a bankrupt estate, 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 compo-
sition 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. If the creditors do not fix the amount of the bond of the
trustee as herein provided the court shall do so.
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.
Sees, si, 52] THE BANKRUPTCY ACT OF 1898. 631
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.
h 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 pro-
vided and within the time limited, he shall be deemed to have
declined his appointment, and such failure shall create a vacancy
in his office.
/ 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.
Sec. 51. Duties of Clerks. — a 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 certi-
fied 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 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 col-
lected for him at the time of filing the petition.
Sec. 52. Compensation of Clerks and Marshals. — a Clerks
shall respectively receive as full compensation for their services
632 THE BANKRUPTCY ACT OF 1898. [Sees. 53-55.
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 similar services in other cases in accordance with laws
now in force, or such as may be hereafter enacted, fixing the
compensation of marshals.
Sec. 53. Duties of Attorney-General. — a The Attorney-Gen-
eral shall annually lay before Congress statistical tables showing
for the whole country, and by States, the number of cases during
the year of voluntary 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.
Sec. 54. Statistics of Bankruptcy Proceedings. — a Officers
shall furnish 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 possession, to the Attorney-General, for sta-
tistical purposes, within ten days after being requested by him to
do so.
CHAPTER VI.
CREDITORS.
Sec. 55. Meetings of Creditors. — a The court shall cause the
first meeting 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, 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 held within such time, the court shall fix the
date, as soon as may be thereafter, when it shall be held.
b At the first meeting of creditors the judge or referee shall
preside, and, before proceeding with the other business, may
Sees. 56, S7-] THE BANKRUPTCY ACT OF 1898. 633
allow or disallow the claims of creditors there presented, and may
publicly 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 of the creditors who have
secured 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 majority
in amount of such claims, and contains a request for such meet-
ing 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.
f Whenever the affairs of the estate are ready to be closed a
final meeting of creditors shall be ordered.
Sec. 56. Voters at Meetings of Creditors. — a Creditors shall
pass upon matters submitted 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.
b 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.
Sec. 57. Proof and Allowance of Claims. — a Proof of claims
shall consist 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 owing from the bankrupt to
the creditor.
b Whenever a claim is founded upon an instrument of writing,
such instrument, unless lost or destroyed, shall be filed with the
proof of claim. If such instrument is lost or destroyed, a state*
(80)
634 THE BANKRUPTCY ACT OF 1898. fSec. 57.
ment of such fact and of the circumstances of such loss or destruc-
tion 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 claimants 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 con-
sideration be continued for cause by the court upon its own
motion.
e Claims of secured creditors and those who have priority may
be allowed to enable such creditors to participate in the proceed-
ings at creditors' meetings held prior to the determination of the
value of their securities 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.
f Objections to claims shall be heard and determined as soon
as the convenience of the court and the best interests of the estates
and the claimants will permit.
g The claims of creditors who have received preferences shall
not be allowed unless such creditors shall surrender their
preferences.
h The value of securities held by secured creditors shall be
determined by converting the same into money according to the
terms of the agreement 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 dis-
trict, or a municipality as a penalty or forfeiture shall not be
allowed, except for the amount of the pecuniary loss sustained by
Secs8J THE BANKRUPTCY ACT OF 1898. 635
the act, transaction, or proceeding 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.
/ 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 bank-
ruptcy 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 subse-
quent 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.
Sec. 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 compo-
sitions or the discharge of bankrupts ; (3) all meetings of creditors ;
(4) all proposed sales of property ; (5) the declaration and time of
payment of dividends ; (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, and (8) the proposed dismissal of the proceedings.
b 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.
636 THE BANKRUPTCY ACT OF 1898. f Sees. 59, 6a
c All notices shall be given by the referee, unless otherwise
ordered by the judge.
Sec. 59. Who may File and Dismiss Petitions. — a Any quali-
fied person may file a petition to be adjudged a voluntary bank-
rupt.
b 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.
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 bank-
rupt are less than twelve in number, and less than three creditors
have joined as petitioners therein, and the answer avers the exist-
ence 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 delay the hearing upon
such petition for a reasonable time, to the end that parties in
interest shall have an opportunity to be heard ; if upon such hear-
ing it shall appear that a sufficient number have joined in such
petition, 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 dismissed.
e In computing the number of creditors of a bankrupt for the
purpose of determining how many creditors must join in the
petition, such creditors as were employed by him at the time of
the filing of the petition or are related to him by consanguinity
or affinity within the third degree, as determined by the common
law, and have not joined in the petition, shall not be counted.
f Creditors other than original petitioners may at any time
enter their appearance and join in the petition, or file an answer
and be heard in opposition to the prayer of the petition.
g A voluntary or involuntary petition shall not be dismissed
by the petitioner or petitioners or for want of prosecution or by
consent of parties until after notice to the creditors.
Sec. 60. Preferred Creditors. — a A person shall be deemed
to have given a preference if, being insolvent, he has procured or
suffered a judgment to be entered against himself in favor of any
Sees. 6i, 62.] THE BANKRUPTCY ACT OF 1898. 637
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.
b If a bankrupt shall have given a preference within four
months before the filing of a petition, or after the filing of the
petition and before the adjudication, and the person receiving it,
or to be benefited thereby, or his agent acting therein, shall have
had reasonable cause to believe that it was intended thereby to
give a preference, it shall be voidable by the trustee, and he may
recover the property or its value from such person.
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 remaining unpaid at the time of the adjudica-
tion in bankruptcy may be set 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 transac-
tion shall be reexamined 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.
CHAPTER VII.
ESTATES.
Sec. 61. Depositories for Money. — a Courts of bankruptcy
shall designate, by order, banking institutions as depositories for
the money of bankrupt 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
of any bond or change such depositories.
Sec. 62. Expenses of Administering Estates. — a The actual
and necessary expenses incurred by officers in the administration
of estates shall, except where other provisions are made for their
payment, be reported in det":l, under oath, and examined and
638 THE BANKRUPTCY ACT OF 1898. [Sees. 63, 64.
approved or disapproved by the court. If approved, they shall
be paid or allowed out of the estates in which they were incurred.
Sec. 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 peti-
tion against him, whether then payable or not, with any interest
thereon which would have been recoverable at that date or with
a rebate of interest upon such as were not then payable and did
not bear interest ; (2) due as costs taxable against an involuntary
bankrupt who was at the time of the filing of the petition against
him plaintiff in a cause of action which would pass to the trustee
and which the trustee declines to prosecute after notice; (3)
founded upon a claim for taxable costs incurred in good faith by
a creditor before the filing of the petition in an action to recover
a provable debt; (4) founded upon an open account, or upon a
contract express or implied ; and (5) founded upon provable debts
reduced to judgments after the filing of the petition and before
the consideration of the bankrupt's application for a discharge,
less costs incurred and interests accrued after the filing of the
petition and up to the time of the entry of such judgments.
b 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.
Sec. 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 ques-
tion arises as to the amount or legality of any such tax the same
shall be heard and determined by the court.
b 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 credit-
ors in involuntary cases ; (3) the cost of administration, including
the fees and mileage payable to witnesses as now or hereafter pro-
vided by the laws of the United States, and one reasonable
attorney's fee, for the professional services actually rendered,
Sec. 65.] THE BANKRUPTCY ACT OF 1898. 639
irrespective of the number of attorneys employed, to the petition-
ing creditors 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, 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 claim-
ant ; 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-
rupt in addition to his estate at the time the composition was con-
firmed or the adjudication was made shall be applied to the pay-
ment 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.
Sec. 65. Declaration and Payment of Dividends. — a Divi-
dends of an equal per centum shall be declared and paid on all
allowed claims, except such as have priority or are secured.
b 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 subse-
quent 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.
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 credit-
ors 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
640 THE BANKRUPTCY ACT OF 1898. [Sees. 66, 67.
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.
Sec. 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.
b Dividends remaining unclaimed for one year shall, under the
direction of the court, be distributed to the creditors whose claims
have been allowed but not paid in full, and after such claims have
been paid in full the balance shall be paid to the bankrupt : Pro-
vided, That in case unclaimed dividends belong to minors such
minors may have one year after arriving at majority to claim
such dividends.
Sec. 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 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 lien was obtained and permitted while the defendant was
insolvent and that its existence and enforcement will work a pref-
erence, 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 dissolu-
tion 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
Sec. 67.] THE BANKRUPTCY ACT OF 1898. 641
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 contempla-
tion 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 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
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 proceed-
ings or otherwise for the benefit of the creditors. And all convey-
ances, transfers, or incum brances 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.
/ That all levies, judgments, attachments, or other liens,
obtained through legal proceedings against a person who is insol-
vent, 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
(81)
642 THE BANKRUPTCY ACT OF 1898. [Sees. 68-70.
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 : Pro-
vided, 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.
Sec. 68. Set-offs and Counterclaims. — a In all cases of
mutual debts or mutual credits between the estate of a bankrupt
and a creditor the account shall be stated and one debt shall be
set off against the other, and the balance only shall be allowed or
paid.
b 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 purchased 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.
Sec. 69. Possession of Property. — a A judge may, upon
satisfactory proof, by affidavit, that a bankrupt against whom an
involuntary petition has been filed and is pending has committed
an act of 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 fur-
ther orders. Before such warrant is issued the petitioners apply-
ing therefor shall enter into a bond in such an amount as the
judge shall fix, with such sureties as he shall approve, conditioned
to indemnify such bankrupt for such damages as he shall sustain
in the event such seizure shall prove to have been wrongfully
obtained. Such property shall be released, if such bankrupt shall
give bond in a sum which shall be fixed by the judge, with such
sureties as he shall approve, conditioned to turn over such prop-
erty, or pay the value thereof in money to the trustee, in the
event he is adjudged a bankrupt pursuant to such petition.
Sec. 70. Title to Property. — a The trustee of the estate of a
bankrupt, upon his appointment and qualification, and his suc-
cessor or successors, if he shall have one or more, upon his or their
appointment and qualification shall in turn be vested by opera-
Sec. 70.] THE BANKRUPTCY ACT OF 1898. 643
tion 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) inter-
ests 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) prop-
erty 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 sur-
render value payable to himself, his estate, or personal representa-
tives, 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 ascer-
tained 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.
b 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 prop-
erty 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 then seventy-five per centum of its
appraised value.
c The title to property of a bankrupt estate which has been
sold, as herein provided, shall be conveyed to the purchaser by
the trustee.
d Whenever a composition shall be set aside, or discharge
revoked, the trustee shall, upon his appointment and qualification,
be vested as herein provided with the title to all of the property
of the bankrupt as of the date of the final decree setting aside the
composition or revoking the discharge.
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
644 THE BANKRUPTCY ACT OF 1898. [Sec. 70.
property may be recovered or its value collected from whoever
may have received it, except a bona fide holder for value.
f Upon the confirmation of a composition offered by a bank-
rupt, the title to his property shall thereupon revest in him.
THE TIME WHEN THIS ACT SHALL GO INTO EFFECT.
a This act shall go into full force and effect upon its passage :
Provided, however, That no petition for voluntary bankruptcy
shall be filed within one month of the passage thereof, and no
petition for involuntary bankruptcy shall be filed within four
months of the passage thereof.
b Proceedings commenced under State insolvency laws before
the passage of this act shall not be affected by it.
i isr id e> :x: .
A.
PAGE
Abatement of bankruptcy proceedings i 614
Absence of referee, Effect of 628
Acceptance of composition by creditors, when necessary 617
Accounts by clerks in bankruptcy proceedings 631
of insolvent partnership 613
trustees 629
notice to creditors of filing 635
Acts of bankruptcy, in what to consist 611
Additional parties in bankruptcy proceeding 609
property of bankrupt, Application of 638
Adjudication in bankruptcy, Definition of , 607
Provisions as to 618
on default of pleadings 618
Administration of oaths and affirmations 620
Admission of insolvency, Effect of 611
Affidavits for arrest of bankrupt 615
Affirmation, when taken instead of oath 621
Who may take 620
Allowance, etc., of claims against bankrupts 609
of secured creditor. . . ., 635
Provision as to 633
preferred claims 634
set-offs and counterclaims , 642
State, county, etc., debts , 634
Amount of dividend to be collected 639
referee's bond 630
trustee's bond 630
Answer, Averments in, as to number of creditors 636
in bankruptcy proceedings, Provisions as to 618
Appeal, Bond of trustee not required on 622
in bankruptcy proceedings, when allowed 622
Time for taking 622
Appearance of creditors after filing of petition 636
Appellate Courts, Definition of 607
Jurisdiction of 622
645
646 INDEX FOR ACT OF 1898.
PAGE
Application for confirmation of composition, Filing, etc., of 616
discharge, Filing, etc., of 617
of additional property of bankrupt 638
Appointment of receivers of bankrupt estates 608
referees 625
trustees 610, 628
Apportionment of compensation among referees 627
of several trustees 629
Appraisal of bankrupt's property ^ 643
Appropriation of proceeds of insolvent partnership property 613
Approval by court of compromise 623
of expenses in administering bankrupt estates 637
Arbitration of controversies 623
Arrest of bankrupts 615
Attendance of witnesses 619
Attorney, etc., Transfers in contemplation of insolvency to 636
General, Duties of 632
to receive statistical information, etc 632
Averments in petition as to number of creditors 636
Avoidance of bankrupt's acts by trustee 623
B.
Bail of bankrupt, about to depart 615
Banking institutions as depositories for moneys, etc 637
Bankrupt, Death or insanity of 608
Definition of 607
Duties of 614
Effect of discharge on co-debtors of 618
Exemption of under State law 610
Extradition of 611, 616
Protection and detention of 615
Suits by and against 616
Trial, etc., of 609
Who may become 613
estate, Allowance of claims against 610
Collection of 608
Proof, etc., of claims of 633
Bankruptcy, Definition of commencement of 608
of certain members of a partnership 613
What acts to constitute 611
Banks not to be adjudged bankrupt 613
Bond of banking institutions, acting as depositories 637
in insolvency proceedings 612
of referees 63°
on release of bankrupt's property 641
Suits on, when to be brought 631
INDEX FOR ACT OF 1898. 647
PAGE
Bond by trustees, Provisions as to 631
not required on appeal 622
on warrant for seizure of bankrupt's property 642
Books, etc., in insolvency proceedings 612
Burden of proof in bankruptcy proceedings 612
C.
Cash surrender value of policy, Payment of 643
Charge of bankrupt estate 610, 612
Certification of controversies to perfect appeal, etc 623
facts, constituting contempt 627
records, kept by referees 628
Certified copies of proceedings, to be evidence, etc 620
Certiorari in bankruptcy proceedings 623
Children of bankrupts, Rights of 615
Circuit courts, Jurisdiction of 621
Appellate jurisdiction of 622
Claims against bankrupts, Allowance of 609
of bankrupt estates, Presentation, etc., of 635
Proof and allowance of 634
of secured creditors 634
subsequent to declaration of dividends 639
Time for presentation of 635
Clerks, Compensation of, etc 631
Duties of 631
Definition of 608
may order reference 619
closing bankrupt estates 610
Co-debtors of bankrupt 618
Collection of bankrupt estates 610
fees for clerks 631
moneys by trustees 629
Commencement of proceedings, Definition of 608
Compensation of clerks 631
marshals 631
officers 625
referees 627
stenographers employed by referees 625
trustees 629
Composition, Confirmation and rejection of 610, 617
Compromise of controversies by trustees 623
Notice to creditors of 63s
Computation of time 624
Computing number of creditors 636
time for filing petition 612
Conceal, Definition of 609
648 INDEX FOR ACT OF 1898.
PAGE
Conceal, of property by bankrupt, Punishment for 623
Concurrent jurisdiction of circuit courts 621
Confirmation of composition 610, 617, 618
Consent for selecting arbitrators 623
when not to cause dismissal of petition 636
Consolidation of cases in bankruptcy 624
Construction of court powers 611
words and phrases 607, 608, 609
Contempt, Arrest of bankrupt for 615
Manner of punishment for 627
Summary bearing on 627
before referee, What to constitute 627
Contents of records kept by referees 628
schedules of property 614
statement in' proof of claim 633
statistical tables furnished by Attorney-General 632
Continuance of bankrupt's business 610
Controversies, Arbitration of 623
Compromise by trustees of 623
in law and equity, Jurisdiction over 621
Consular officers, may administer oaths, etc 620
Conveyance of bankrupt's property, Trustee to execute 642
with intent to defraud 611
Corporations, Definition of 607
not to benefit by voluntary bankruptcy 612
may act as sureties on bonds 630
when to be adjudged bankrupt 613
may act as trustees 628
Costs allowed against bankrupt estate 638
in insolvency proceedings 612
of administration 635
preserving estate 638
Taxation of 6u
Counterclaims, Allowance of 642
Courts, Definition of 507
of bankruptcy, Definition of 607
Creation of 609
to designate newspapers, etc 623
may call meetings of creditors 632
Credit given by preferred creditor 637
Creditors, Definition of go8
meetings of, Provisions as to 632
Notice to, when given 635
of foreign bankrupt 639
related to bankrupts fog
when may file petitions fog
Custody of bankrupt about to depart 61s
INDEX FOR ACT OF 1898. 649
D.
PAGE
Damages for seizure, etc., in bankruptcy , 612, 641
Date of bankruptcy, Definition of 608
creditors' meetings 632
Death of bankrupt, Effect of 615
trustees, Effect of 628
Debts allowed against estate of bankrupt 638
Definition of 608
created by fraud 618
not scheduled, Effect of 618
of United States, etc., Allowance of 634
when not affected by discharge 618
having priority, Enumeration of 638
Declaration of dividends on claims 639
Defense to bankruptcy proceedings 612
by trustee of actions against bankrupts 616
Definitions 607, 608, 6og
Denial of insolvency allegations, Effect of 612
Departure of bankrupt, as cause for detention 615
Deposit of moneys by trustees 629
Depositions, Determination of right to take 620
Depositories of moneys for bankrupt estates 637
Designation of depositories for estates, etc 637
districts of referees 625
newspapers for publication of notices 623
Detention of bankrupts 615
Determination of issues in bankruptcy 618
right to trial by jury 619
securities held by creditors 634
Diplomatic officers may administer oaths, etc 620
Disability of referees, Effect of 628
Disbursement of moneys by trustees 629
Discharge of bankrupts, Provisions as to 610, 617
Definition of 608
When debts not affected by 618
to release bankrupt from debts 618
Refusal or revocation of 618
Dismissal of bankruptcy proceedings .' 610
of petition, Provisions as to 636
Notice to creditors of 63s
Disobedience to orders of referees, Effect of 627
Dissolution of liens against bankrupt's property 641
Distribution of bankrupt estates 610
consideration of composition 617
unclaimed dividends 64P
Districts of referees, Designation of 62s
(82)
650 INDEX FOR ACT OF 1898.
PAGE
Dividend to creditors of foreign bankrupt 639
Disposition of unclaimed 639
not affected by subsequent claims 639
Payment of, by trustees 629
Provisions as to declaration and payment of 639
on reconsidered claims, Recovery of 635
Document, Definition of 608
Dower right of bankrupt's widow 615
Duties of Attorney-General 632
bankrupts 614
clerks in bankruptcy proceedings 631
creditors at meetings 632
officers 625
referees, Enumeration of 626
trustees 629
E.
Effect of certified copies of proceedings as evidence 620
confirmation of composition 616
discharge on co-debtors of bankrupt 618
Time when provisions of bankruptcy act to go into 644
Enforcing provisions of bankruptcy law 611
Equity suits, Process, etc., in, to apply to bankruptcy proceedings 618
Evidence of certified copies of proceedings 620
debt, to be filed with proof of claim 633
jurisdiction, What to constitute 621
order approving bond of trustee, Effect of 620
prepared by referees 626
Examination of bankrupt 611, 614
Notice of 635
expenses in administering bankrupt estates 637
proof of claims by bankrupt 614
Execution of papers, etc., by bankrupt 614
Exemption from arrest of bankrupt 615
Exemptions of bankrupt, Determination of 610, 61 1
under state laws 614
Expenses of administering bankrupt estates 637
insolvent partnership, how paid 613
Extortion, Punishment for 623
Extradition of bankrupt, when made 611, 616
F.
Failure to give bond by trustee or referee 631
prove claim, Effect of 633
False claims, Information by bankrupt as to 614
INDEX FOR ACT OF 1898. 651
PAGE
False claims, Punishment for presentation of 623
oath, Punishment for making 623
Farmers not to be adjudged involuntary bankrupts 613
Fees, Priority in payment of 638
in bankruptcy proceedings 632
of bankrupt attending examination, etc 614
Filing findings of arbitrators 623
notice to take depositions 620
petitions, Who entitled to 636
proof of claim 634
Final meeting of creditors, when held 632
Finding of arbitrators, Effect, etc., of 623
etc., of referees 610
Foreign countries, Property of bankrupt in 614
Forms of procedure, Supreme Court to prescribe 624
Fraud, Debts created by, not affected by discharge 618
in obtaining discharge, Effect of 618
to vitiate composition 617
General assignment, etc., Effect of 611
reference, when ordered 621
Granting of discharge 617
Hearing on application to confirm composition 617
discharge, Provisions as to 618
Bankrupt to attend 614
filing voluntary petition 618
notice to creditors 635
of objections to allowance of claims 633
Holiday, Definition of 608
Indictment for offenses, Limitation of time, as to 624
Infant's claims, Time for presentation of 63s
Information to be given by bankrupt 614
of offenses, Limitation of time for 624
Insane persons, Time for presentation of claims of 635
Insanity of bankrupts, Effect of 615
Insolvency proceedings under State laws not affected, etc 644
Question of, when tried by jury 619
Insolvent person, Definition of 608
Insurance policies, Title to 643
652
INDEX FOR ACT OF 18
PAGE
Interest in patents, etc., to vest in trustees 643
Involuntary petition, Jury trial on filing of 619
J.
Joining creditors after filing petition 636
Joint trustees, Bonds of 631
Judges, Definition of 608
duties at creditors' meeting 632
Judgments, when not effected by discharge 618
when deemed preference 636
Jurisdiction of appellate courts 622
courts of bankruptcy 609
evidence of, What constitutes 621
of referees 625
Supreme Court 622
over insolvent partners, etc 613
of State courts 621
United States courts 621
Jury trials, Who entitled to 619
L.
Liability of trustees on bonds 631
Liens against bankrupt's property, Provisions as to 640, 641, 642
to defraud creditors, Validity of 641
through legal proceedings 641
recorded, not affected by bankruptcy 640
Limitation of actions on bonds 631
against trustees 6j6
bankrupt's examination 6x4
indictment for offenses, etc 624
time for presentation of claims 635
List of creditors, when filed 636
M.
Manner of bankrupt's extradition 6tg
voting at creditors' meeting g,2
Marshaling assets of insolvent partnership 6r,
Marshals of bankrupt's estates, Appointment of 6ia
Compensation of 63!
Masculine gender, Construction of goo
Meaning of words and phrases 607, 608, 600
Meeting of creditors, Bankrupt to attend 614
Notice of 632
Provisions as to §«
INDEX FOR ACT OF 1898. 653
PAGE
Meeting of creditors, Voters at 633
Minors, Unclaimed dividends of 640
Misbehavior on hearing before referees 627
N.
Newspapers, Designation of, for publication of notices 623
Notices to creditors, when given 635
Notice, to creditors by referees 626, 636
Publication of 635
Designation of newspapers for publication of 623
of pendency of petition 626
taking depositions 620
on failure of personal service of petition 618
Number of creditors who may file petition 636
referees 625
O.
Oath, Definition of 608
of office of referees 625
Who may administer 620
Objections to allowance of claim 633
Offenses, Concurrent jurisdiction of circuit courts over 621
Enumeration and punishment of 623
Offer of composition, when made 617
Officers authorized to administer oaths, etc 620
Definition of 608
in bankruptcy, Duties, etc., of 625
of the United States, not to act as referees 625
Orders approving bond of trustee, as evidence, etc 620
confirming, etc., composition 621
of court, Bankrupt to comply with 614
as to procedure, Supreme Court to prescribe 624
transferring cases in bankruptcy 624
P.
Partners, when to be adjudged bankrupt 613
Payment in contemplation of insolvency, Validity of 637
of dividends on claims 639
Notice to creditors of 635
of taxes, Priority of 638
unclaimed dividends '. 640
Pendency of petition, Notice to creditors of 636
Persons, Definition of 608
Petition, Definition of 608
654 INDEX FOR ACT OF 1898.
PAGE
Petition to be filed in duplicate 636
Who may file, etc 636
against insolvent persons. Filing of 611
Place of creditors' meetings 632
Pleadings in bankruptcy proceedings 618
Plural number, Construction of 609
Possession of bankrupt's property 642
Preference, Permission of 611
What deemed 636
Preferred claims, Allowance of 634
creditors giving further credit 637
Provisions as to 636
Presentation of claims, Time for 635
false claims, Punishment for 623
Procedure in courts of bankruptcy 618
Process in bankruptcy proceedings 618
Production of documents before referees 627
Proof of claim in insolvent partnerships 613
of what to consist 634
insolvency, Burden of 611
Property of bankrupt 610
Prosecution of actions by trustees 616
Want of,' not to cause dismissal, etc 636
Protection of bankrupts 615
Publication of notices to creditors 635
Provisions as to 618
Designation of newspapers for 623
Punishment of bankrupts 609
for contempt, Manner of 627
offenses, period and enumeration 623
Q.
Qualifications of referees 625
trustees 628
Question of insolvency, when tried by jury 619
B.
Receivers of bankrupt estates, Appointment of , 610
Reconsideration of allowed claims 63s
Records of referees, Contents of 628
Duties as to 626
Recovery of dividends on reconsidered claims 635
property given to attorneys, etc 637
transferred with intent of preference 637
Re-examination of transfers to attorneys, etc 637
INDEX FOR ACT OF 1898. 655
PAGE
Referees, Absence or disability of 628
Administration of oaths by 620
Appointment, etc., of 625
Bonds of 630
Compensation of 627
Contempts, before 627
Definition of 609
Duties of 626
at creditors' meeting 632
interested in bankrupt's estate 632
Jurisdiction of 625
Notices to creditors by 626, 636
Number of 625
Oath of office by 625
offenses, Punishment of 623
Payment of fees to 622, 632
not to practice as attorneys, etc 626
Qualifications of 625
Records, contents, etc., of 628
not to be related to judges, etc 625
Residence of 625
Reference of cases, after adjudication 621
when may be rendered 618
Refusal of discharge in bankruptcy 618
Regularity of proceedings, Evidence of 621
Rejection of composition 610, 617
Release from seizure of bankrupt's property 641
Removal of referees 625
trustees 628
Reports of expenses in administering bankrupt's estates 637
by trustees 629
Request for call of creditors' meeting 632
Residence, etc., of persons adjudged bankrupt 610
referees 625
Return of petition 618
Revesting of title in bankrupt 642
Revocation of discharge of bankrupt 618
Right to jury trial, Determination of 619
of action to vest in trustees 642
Rules of procedure, Supreme Court to prescribe 624
Sale of bankrupt's property 642
Notice of , 641
Schedule of bankrupt's property 614
Duty of referee as to 626
6s 6 INDEX FOR ACT OF 1898.
PAGE
Secured creditors, Definition of 609
Securities held by creditors, Determination of 633
Seizure of bankrupt property under warrant 612, 641
Selection of arbitrators in controversies 623
Service of notice to take depositions 620
petition for involuntary bankruptcy 618
Set-offs, when allowed 642
of credit given by preferred creditors 636
Singular number, Construction of 609
Special reference, when ordered 621
State, Definition of 609
court, Arrest under order of 615
Jurisdiction of 621
debts, Payment of 634
law, Insolvency proceedings under 644
Exemptions under 614
Statement of administration by trustees 629
in proof of claim, Contents of 634
Statistics of bankruptcy proceedings by officers, etc 632
Statistical tables furnished by Attorney-General 632
Stay of action by or against bankrupts 616
Stenographers employed by referees 625
Submission of controversies for arbitration 623
Subpoena to be served with petition 618
Subrogation of trustee to rights of lienor 640
Suits by and against bankrupts 616
trustees 616, 621
on referee's bond 630
trustee's bond 630
Summary hearing for contempts 627
Summoning of special jury 619
Supreme Court, Jurisdiction of 622
to prescribe rules of procedure 624
Sureties on referee's or trustee's bonds 630
Corporations may act as 630
Number of 630
Surplus of insolvent partnership, Application of fa^
T.
Taxation of costs gn
Taxes not to be affected by discharge of bankrupt 6x8
Priority in payment of g,g
Terms of referee's office g2,
in declaring dividends g,„
Time for bringing actions on bonds g,0
taking appeals, etc g22
INDEX FOR ACT OF 1898. 657
PAGE
Time of bankruptcy, Definition of 609
Computation of 624
of creditors' meetings 632
declaration of dividends 639
for filing accounts by trustees 629
Time for filing petition in insolvency proceedings 611
referee's bond 630
trustee's bond 630
making reports by trustees 629
giving notice to creditors 635
paying dividends 629
unclaimed dividends 639
to plead 618
for presentation of claims 633
provisions of bankruptcy act taking effect 644
publication of notices to creditors 635
return of petition 618
Title to bankrupt's property 642
Revesting of 621
Evidence of 620
Transfer, Definition of 609
in contemplation of insolvency 637
of cases 611, 624
from referees 621
to be executed by bankrupts 614
when deemed preference 611, 636
voidable 637
Trial, etc., of bankrupts 610
Trustees, Appointment of 611, 628
Bonds of 631
Compensation of 629
Compromise of controversies of 623
Death or removal of 628
Definition of 609
Defense by, of actions against bankrupts 616
Duties of, enumerated 629
Offenses by, punishment of 623
Prosecution of bankrupt's actions by 616
of insolvent partnership 613
Qualifications of 633
to have title to bankrupt property 642
Validity of acts of 629
TT.
Umpire in arbitration of controversies 623
Unclaimed dividends, Disposition of 639
(83''
6s 8 INDEX FOR ACT OF 1898.
V.
PAGE
Vacancy by failure to give bonds 630
in office of referees, Filling of 628
Validity of transfers, etc., in contemplation of insolvency 641
Value of sureties' property 630
Verification of pleadings 618
Voidable transfers with intent of preference 637
Void, Liens to defraud creditors to be 640
Voters at creditors' meetings 633
W.
Wage-earner, Definition of 609, 638
not to be adjudged involuntary bankrupt 613
Wages, Priority in payment of 638
Waiver of jury trial, what to constitute 619
Warrant for seizure of bankrupt's property 641
on departure of bankrupt 610
Widows of bankrupts, Rights of 615
Writs of error, when allowed 622
THE BANKRUPTCY ACT OF 1867. 659
THE BANKRUPTCY ACT OF 1867.
(with amendments.)
COURTS OF BANKRUPTCY.
Be it enacted by the Senate and House of Representatives of the United States
of 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 bankruptcy, 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, and 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 court, they shall have
given notice, as well as at the places designated by law for holding such courts.
§ 2. 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 22 June, 1874, ch. 390, § a, z8 Stat. 178.
660 THE BANKRUPTCY ACT OF 1867.
and questions arising under this Act; and, except when special provision is
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 also have concurrent jurisdiction 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: Provided, That noth-
ing herein contained shall revive a. right of action barred at- the time such
assignee is appointed.
OF THE ADMINISTRATION OF THE LAW IN COURTS OF BANK-
RUPTCY.
§ 3. And be 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 will
not during his continuance in office be, directly or indirectly, interested in, or
•As amended by act of June 22, 1874, this Darasrraph appears in R. S., § 4979.
THE BANKRUPTCY ACT OF 1867. 661
benefited by the fees or emoluments arising from any suit or matter pending in
bankruptcy in either the District or Circuit Court in his district.
§ 4. And be it further enacted. That every register in bankruptcy, so
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 wilh a certified copy of such orders, and of the schedules
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
or 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
direct;
And he shall also make short memoranda of his proceedings in each case in
which 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
in 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-
tion 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, guardian, 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 of
counsel, solicitor, 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, or in
*So amended by act of 22 June, 1874, ch. 390, sec. 18, 18 Stat. 184.
66z THE BANKRUPTCY ACT OF 1867.
an appeal therefrom. Nor shall they, or either of them, be executor, adminis-
trator, guardian, commissioner, appraiser, divider, or assignee of or upon any
estate within the jurisdiction of either of said courts of bankruptcy; 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.
§ 5. And be it further enacted, 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 ques-
THE BANKRUPTCY ACT OF 1867. 663
tions raised by such special case being finally decided, a sum of money, fixed
by the parties, or to be ascertained by the court, or in such manner as the 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,
either with or without costs.
§ 7. And be 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 $5,000.00.
664 THE BANKRUPTCY ACT OF 1867.
§ 10. And be it further enacted, That the Justices of the Supreme Court of the
United States, subject to the provisions of this Act, shall frame general orders
for the following purposes:
For regulating the practice and procedure of the District Courts in bank-
ruptcy, 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
the 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.
(•(■ And said justices shall have power under said sections, by general regula-
tions, to 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.
§ 11. 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. 39°, sec. 18, 18 Stat. 184, to read as in
the following paragraph.
fSo added by act of 22 June, 1874, ch. 390, sec. 18, 18 Stat. 184.
THE BANKRUPTCY ACT OF 1867. 665
itor, if known to the debtor, and, if not known, the fact to be so stated, and the
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 for the 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.
Second. 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 amounts, 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.
t So amended by act of 22 June, 1874, ch. 390, sec. 5, 18 Stat. 179.
(84)
666 THE BANKRUPTCY ACT OF 1867.
OF ASSIGNMENTS AND ASSIGNEES.
§ 12. And be 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 time 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.
§ 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. 667
the bankrupt, but altogether not to exceed in value, in any case, the sum of
five hundred dollars;
And also the wearing apparel of such bankrupt, and that of his wife and chil-
dren;
And the uniform, arms, and equipments of any person who is or has been a
soldier in the militia or in the service of the United States;
And such other 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 had 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 him as
assignee, shall be conclusive evidence of his title as such assignee to take, hold,
668 THE BANKRUPTCY ACT OF 1867.
sue for, and recover the property of the bankrupt, as hereinbefore mentioned;
but no property held by the bankrupt in trust shall pass by such assignment.
No person shall be entitled to maintain an action against an assignee in
bankruptcy for anything done by him as such assignee, without previously giv-
ing him twenty days' notice of such action, specifying the cause thereof, to the
end that such assignee may have an opportunity of tendering amends, should
he see fit to do so.
No person shall be entitled, as 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 othei 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 (22 June, 1874, ch. 390, sec. 1, 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 * bankrupt. Provided, That
such 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 cause shown, the court
THE BANKRUPTCY ACT OF 1867. 669
may make such order concerning the time, place, and manner of sale, as will,
in its 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, unless
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 so 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
670 THE BANKRUPTCY ACT OF 1867.
receive, directly or indirectly, any interest, benefit, or advantage from the use
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 affidavit 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.)
§ 16. And be it further enacted, That the assignee shall have the like remedy
to recover all said estate, debts, and effects in his 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 an
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 requires 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 pending 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 lo the contro-
versy, and may, under such direction, compound and settle any such contro-
THE BANKRUPTCY ACT OF 1867. 671
versy by agreement with the other party, as he thinks proper and most for 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 any
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 office of assignee maybe 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 secure
the 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 this
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 of
the court in the premises, may be punished as for a contempt of court.
OF DEBTS AND PROOF OF CLAIMS.
§ 19. And be it further ena:trd. 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 estate
of the bankrupt.
All demands against the bankrupt for or on account of any goods or chattels
672 THE BANKRUPTCY ACT OF 1867.
wrongfully taken, converted, or withheld by him, may be proved and allowed
as 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
upon 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.
§ 20. And be it further enacted. That in all cases of mutual debts or mutual
credits between the parties Ihe 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 cases of compulsory bankruptcy, after the act of bankruptcy upon or
* So added by act of 22 June, 1874, ch. 390, sec. 6, 18 Stat. 179.
THE BANKRUPTCY ACT OF 1867. 673
In respect of which the adjudication shall be made, and with a view of making
such set-off.)
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 » 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 as 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 22 June, 1874, ch. 390, sec. 7, 18 Stat. 139.)
(85)
674 THE BANKRUPTCY ACT OF 1867.
of such distinct contracts against the estates respectively liable upon such con-
tracts.
§ 22. And be it further enacted. That all proofs of debts against the estate of the
bankrupt, by or in behalf of creditors residing within the judicial district where
the proceedings in bankruptcy are pending, shall be made before one of the
registers of the court in said district, and by or in behalf of non-resident debtors
before any register in bankruptcy in the judicial districts where such creditors,
or either of them, reside, or before any commissioner of the Circuit Court
authorized to administer oaths in any district.
(Sec. 5076 a (22 June 1874, ch. 390, sec. 20, 18 Stat. 186). — That in addition to
the officers now authorized to take proof of debts against the estate of a bank-
rupt, notaries public are hereby authorized to take such proof, in the manner
and under the regulations provided by law; such proof to be certified by the
notary and attested by his signature and official seal.)
(Sec. 5076 b (Act of August 15, 1876, ch. 304, 19 Stat. 206). — Be it enacted by
the Senate and House of Representatives of the United States of America in Congress
assembled. That notaries public of the several States, Territories, and the Dis-
trict of Columbia be, and they are hereby, authorized to take depositions, and
do all other acts in relation to taking testimony to be used in the courts of the
United States, take acknowledgments and affidavits, in the same manner and
with the same effect as commissioners of the United States Circuit Court may
now lawfully take or do.)
To entitle a claimant against the estate of a bankrupt to have his demand
allowed, it must be verified by a deposition in writing on oath, or solemn
affirmation, before the proper register or commissioner, setting forth —
The demand;
The consideration thereof;
Whether any and what securities are held therefor
And whether any and what payments have been made thereon;
That the sum claimed is justly due from the bankrupt to the claimant;
That the claimant has not, nor has any other person for his use, received any
security or satisfaction whatever other than that by him set forth;
That the claim was not procured for the purpose of influencing the proceed-
ings under this act;
And that no bargain or agreement, express or implied, has been made or
entered into, by or on behalf of such creditor, to sell, transfer, or dispose of the
said claim, or any part thereof, against such bankrupt, or take or receive,
directly or indirectly, any money, property, or consideration whatever, whereby
the vote of such creditor for assignee, or any action on the part of such creditor
or any other person in the proceedings under this act, is or shall be in any way
affected, influenced, or controlled;
And no claim shall be allowed unless all the statements set forth in such
deposition shall appear to be true.
Such oath, or solemn affirmation shall be made by the claimant testifying of
his own knowledge, unless he is absent from the United States, or prevented by
some other good cause from testifying, in which cases the demand may be veri-
fied in like manner by the attorney or authorized agent of the claimant testify-
NAT. BANKRUPTCY LAW — 2g
THE BANKRUPTCY ACT OF 1867. 675
ing to the best of his knowledge, information, and belief, and setting forth his
means of knowledge, or, if in a foreign country, the oath of the creditor may be
taken before any minister, consul, or vice-consul of the United States; and the
court may, if it shall see fit, require or receive further pertinent evidence, either
for or against the admission of the claim.
Corporations may verify their claims by the oath or solemn affirmation of
their president, cashier, or treasurer.
If the proof is satisfactory to the register or commissioner, it shall be signed
by the deponent, and delivered or sent by mail to the assignee, who shall
examine the same and compare it with the books and accounts of the bankrupt,
and shall register, in a book to be kept by him for that purpose, the names of
creditors who have proved their claims, in the order in which such proof is
received, stating the time and receipt of such proof, and the amount and nature
of the debts, which books shall be open 10 the inspection of all the creditors.
The court may, on the application of the assignee, or of the bankrupt, or
without any application, examine upon oath the bankrupt, or any person ten-
dering or who has made proof of claims, and may summon any person capable
of giving evidence concerning such proof, or concerning the debt sought to be
proved, and shall reject all claims not duly proved, or where the proof shows
the claim to be founded in fraud, illegality, or mistake.
§ 23. And be it further enacted, That when a claim is presented for proof
before the election of the assignee, and the judge entertains doubts of its valid-
ity, or of the right of the creditor to prove it, and is of opinion that such valid-
ity or right ought to be investigated by the assignee, he may postpone the proof
of the claim until the assignee is chosen.
Any person who, after the approval of this Act, shall have accepted any
preference, having reasonable cause to believe that the same was made or
given by the debtor contrary to any provision of this Act, shall not prove the
debt or claim on account of which the preference was made or given, nor shall
he receive any dividend therefrom until he shall first have surrendered to the
assignee all property, money, benefit, or advantage received by him under such
preference.
The court shall allow all debts duly proved, and shall cause a list thereof to
be made and certified by one of the registers;
And any creditor may act at all meetings by his duly constituted attorney the
same as though personally present.
§ 24. And be it further enacted. That a supposed creditor who takes an appeal
to the Circuit Court from the decision of the District Court rejecting his claim,
in whole or in part, shall, upon entering his appeal in the Circuit Court, file in
the clerk's office thereof a statement in writing of his claim, setting forth the
same substantially, as in a declaration for the same cause of action at law, and
the assignee shall plead or answer thereto in like manner, and like proceedings
shall thereupon be had in the pleadings, trial, and determination of the cause, as
in an action at law commenced and prosecuted, in the usual manner, in the courts
of the United States, except that no execution shall be awarded against the
assignee for the amount of a debt found due to the creditor. The final judg-
ment of the court shall be conclusive, and the list of debts shall, if necessary,
676 THE BANKRUPTCY ACT OF 1867.
be 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.
§ 25. 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. 677
time and place and in such manner as the court may deem proper, and with like
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 fro
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-
ors 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
vouchers shall be required by any rule of the court;
678 THE BANKRUPTCY ACT OF 1867.
He 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 of
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 sum 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 enacted. That the like proceedings shall be had at the
expiration of the next three months, or earlier if practicable, and a third meet-
ing of creditors shall then be called by the court, and a final dividend then
declared, unless any action at law or suit in equity be pending, or unless some
other estate or effects of the debtor afterwards come to the hands of the
assignee, in which case the assignee shall, as soon as may be, convert such
estate or effects into money, and within two months after the same shall be so
converted the same shall be divided in manner aforesaid.
Further dividends shall be made in like manner as often as occasion requires;
And after the third meeting of creditors no further meeting shall be called,
unless ordered by the court.
If at any time there shall be in the hands of the assignee any outstanding
debts or other property, due or belonging to the estate, which cannot be collected
and received by the assignee without unreasonable or inconvenient delay or
expense, the assignee may, under the direction of the court, sell and assign
such debts or other property in such manner as the court shall order.
No dividend already declared shall be disturbed by reason of debts being
subsequently proved, but the creditors proving such debts shall be entitled to a
dividend equal to those already received by the other creditors before any fur-
ther payment is made to the latter.
Preparatory to the final dividend, the assignee shall submit his account to the
court, and file the same, and give notice to the creditors of such filing, and shall
also give notice that he will apply for a settlement of his account, and for a
discharge from all liability as assignee, at a time to be specified in such notice,
and at such time the court shall audit and pass the accounts of the assignee,
and such assignee shall, if required by the court, be examined as to the truth
THE BANKRUPTCY ACT OF 1867. 679
of such account, and, if found correct, he shall thereby be discharged from all
liability as assignee to any creditor of the bankrupt.
The court shall thereupon order a dividend of the estate and effects, or of
such part thereof as it sees fit, among such of the creditors as have proved their
claims, in proportion to the respective amount of their said debts.
In addition to all expenses necessarily incurred by him in the execution of
his trust, in any case, the assignee shall be entitled to an allowance for his
services in such case, on all moneys received and paid out by him therein, for
any sum not exceeding one thousand dollars, five per centum thereon; for any
larger sum, not exceeding five thousand dollars, two and a half per centum on
the excess over one thousand dollars; and for any larger sum, one per centum
on the excess over five thousand dollars; and if, at any time, there shall not be
in his hands a sufficient amount of money to defray the necessary expenses
required for the further execution of his trust, he shall not be obliged to pro-
ceed therein until the necessary funds are advanced or satisfactorily secured to
him.
If, by accident, mistake, or other cause, without fault of the assignee, either
or both of the said second and third meetings should not be held within the
times limited, the court may, upon motion of an interested party, order such
meetings, with like effect as to the validity of the proceedings as if the meeting
had been duly held.
In the order for a dividend, under this section, the following claims shall be
entitled to priority or preference, and to be first paid in full in the following
order: —
First. The fees, costs, and expenses of suits, and the several proceedings in
bankruptcy under this act, and for the custody of property, as herein provided.
Second. All debts due to the United States, and all taxes and assessments
under the laws thereof.
Third. All debts due to the State in which the proceedings in bankruptcy are
pending, and all taxes and assessments made under the laws of such State.
Fourth. Wages due to any operative, clerk, or house servant, to an amount
not exceeding fifty dollars, for labor performed within six months next preced-
ing the first publication of the notice of proceedings in bankruptcy.
Fifth. All debts due to any persons who, by the laws of the United States,
are or may be entitled to a priority or preference, in like manner as if this act
had not been passed: Always provided, That nothing contained in this act shall
interfere with the assessment and collection of taxes by the authority of the
United States or any State.
OF THE BANKRUPT'S DISCHARGE AND ITS EFFECT.
§ 29. And be it further enacted, That at any time after the expiration of six
months from the adjudication of bankruptcy, or if no debts have been proven
against the bankrupt, or if no assets have come to the hands of the assignee,
at any time after the expiration of sixty days,* and within one year from the
* Amended so as to read "and before the final disposition of the cause."
(Act of Julv 26, 1876, ch. 234, sec. 1.)
680 THE BANKRUPTCY ACT OF 1867.
adjudication of bankruptcy, the bankrupt may apply to the court for a dis-
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 creditor
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, directly
or indirectly, absolutely or conditionally, for the purpose of preferring any
THE BANKRUPTCY ACT OF 1867. 681
creditor or person having a claim against him, or who is or may be under lia-
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 satisfaction
of his debts;
Or if he has been convicted of any misdemeanor under this Act, or has been
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 is
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 Con-
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 enacted. That no debt created by the fraud or embezzle-
ment of the bankrupt or by his defalcation as a public officer, or while acting in
any fiduciary character, shall be discharged under this Act; but the debt may
(86)
682 THE BANKRUPTCY ACT OF 1867.
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 person 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
27, 1868, ch. 258, sec. 1), 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 of application for discharge.
(R. S., sec. 5112 a (22 June, 1874, ch. 390, sec. 9, 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 be it further enacted. That a discharge duly granted under this Act
shall, with the exceptions aforesaid, release 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
hcec 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
corn 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 be 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. 683
bankrupt, and order him to appear and answer the same, within such time as
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 against
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 be 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 * 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 be
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 on
the occasion of the making of such loan." — Act of June 22, 1874. R. S. § 5128.
t(The word " knowing " inserted by act of June 22, 1874, ch. 390, sec. 11.)
684 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 a (22 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 sepa-
THE BANKRUPTCY ACT OF 1867. 685
rate estates of the several partners, according to their respective right and
interest 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 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 companies,
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 in
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
filed, kept, and numbered in the office of the clerk of the court, and a docket
686 THE BANKRUPTCY ACT OF 1867.
only, or short 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 be 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 * 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, \ (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 defeat
or delay the operation of this Act ;
*(Amended to " twenty." R. S., sec. 5021; Act of June 22, 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. 687
* (Or who, being a banker, merchant, or trader, has stopped or suspended and
not resumed payment of his commercial paper, within a period of fourteen
days);
Shall be deemed to have committed an act of bankruptcy, and, subject to the
conditions hereinafter prescribed, shall be adjudged a bankrupt, on the petition
of one or more of his creditors,! (the aggregate of whose debts provable under
this Act amount to at least two hundred and fifty dollars, provided such petition
is brought within six months after the act of bankruptcy shall have been com-
mitted.)
J 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 (1) 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-
sion was made in good faith), shall so adjudge, which judgment shall be final,
and the matter proceed without further steps .on that subject. And if it shall
appear that such number and amount have not so petitioned, the court shall
grant reasonable time, not exceeding in cases heretofore commenced, twenty
days, and in cases hereafter commenced ten days, within which other creditors
may join in such petition. And if, at the expiration of such time so limited,
688 THE BANKRUPTCY ACT OF 1867.
g 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, why the
prayer of the petition should not be granted;
And may also, by its injunction, restrain the debtor, and any other person,
in the meantime, from making any transfer or disposition of any of the debtor's
property not excepted by this Act from the operation thereof, and from any
interference therewith;
And if it shall appear that there is probable cause for believing that the
debtor is about to leave the district, or to remove or conceal his goods and
chattels or his evidence of property, or make any fraudulent conveyance or 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 be 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 (m) 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 a fraud on this act was intended; and such person, if a
creditor, shall not, in cases of actual fraud on his part, be allowed to prove for
more than a moiety of his debt; and this limitation on the proof of debts shall
apply to cases of voluntary as well as involuntary bankruptcy. And the 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
act of July 26, 1876, ch. 234, sec. 1, 19 Stat. 102.
THE BANKRUPTCY ACT OF 1867. 689
be had until proof shall have been given, to the satisfaction of the court, 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;
f (Or, at the election of the debtor, the court may, in its discretion, award a
venire facias to the marshal of the district returnable within ten days before
him, for the trial of the facts set forth in the petition, at which time the trial
shall be had, unless 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 pelitioning 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."
t So amended by act of 22 June, 1874, ch. 390, sec. 14, 18 Stat. 182.)
m
690
THE BANKRUPTCY ACT OF 1867.
deliver, or transmit by mail, post-paid, to the messenger, a schedule* of 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. 691
ceed to wind up and settle the estate under the direction and inspection of such
committee of the creditors, for the equal benefit of all such creditors;
And the winding up and settlement of any estate under the provisions of this
section shall be deemed to be proceedings in bankruptcy under this Act; and
the said trustees shall have all the rights and powers of assignees in bankruptcy.
The court, on the application of such trustees, shall have power to summon
and examine, on oath or otherwise, the bankrupt and any creditor, and any
person indebted to the estate, or known or suspected of having any of the estate
in his possession, or any other person whose examination may be material or
necessary to aid the trustees in the 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 be
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
692 THE BANKRUPTCY ACT OF 1867.
his behalf, shall produce to the meeting a statement showing the whole value
of his assets and debts, and the names and addresses of the creditors to whom
such 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 statement 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 a. pro 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. 693
If it shall at any time appear to the court, on notice, satisfactory evidence,
and hearing, that ii composition under this section cannot, in consequence of
legal difficulties, or for any sufficient cause, proceed without injustice or undue
delay to the creditors or to the debtor, the court may refuse to accept and 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 time during which
such composition shall have been in force shall not, in such case be computed
in calculating periods of time prescribed by said act.)
PENALTIES AGAINST BANKRUPTS.
§ 44. And be it further enacted, That from and after the passage of this act, if
any debtor or bankrupt shall, after the commencement of proceedings in 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
694 THE BANKRUPTCY ACT OF 1867.
shall, for anything done or pretended to be done under this Act, or under color
of doing anything thereunder, wilfully demand or take, or appoint or allow any
person whatever to take for him or on his account, or for or on account of any
other person, or in trust for him or for any other person, any fee, emolument,
gratuity, sum of money, or anything of value whatever, other than is allowed
by this act, or which shall be allowed under the authority thereof, such person,
when convicted thereof, shall forfeit and pay the sum of not less than three
hundred dollars, and not exceeding five hundred dollars, and be imprisoned not
exceeding three years.
§ 46. And be it further enacted. That if any person shall forge the signature of
a. judge, register, or other officer of the court, or knowingly concur in using any
such forged or counterfeit signature or seal for the purpose of authenticating
any proceeding or document;
Or shall tender in evidence any such proceeding or document with a false or
counterferit signature of any such judge, register, or other officer, or a false or.
counterfeit seal of the court, 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 the court.
FEES AND COSTS.
§47. And be it further enacted. That in each case there shall be allowed and
paid, in addition to the fees of the clerk of 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. 695
Before any dividend is ordered the assignee shall pay out of the estate to the
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, and 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 the 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 of
Cases to be named in their rules and orders.
(R. S., sec. 5127 u (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 * (22 June, 1874, ch. 390, sec. 19, 18 Stat. 184). — That it shall be the
duty of the marshal of each district, in the month of July of each year, to report
to the clerk of the district court of such district, in a tabular form, to be 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 such,
year;
Fifthly, a summarized statement of all actual disbursements in such cases
for such year.
696 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 him during
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 such
bankrupts;
Seventhly, the disposition of all such cases;
Eighthly, the amounts and rate per centum of all dividends declared in such
cases;
Ninthly, the total amount of fees, charges, costs, and emoluments of every
sort, 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 proceedings
and counsel fees;
Seventhly, the disposition of the cases respectively;
Eighthly, a summarized statement of both classes as aforesaid;
And in like manner, the clerk of said court, in the month of August in each
year, shall make up a statement for such year, ending June thirtieth, of.
First, all classes in bankruptcy pending at the beginning of the said year;
Secondly, all of such cases disposed of;
Thirdly, all dividends declared therein ;
Fourthly, the number of reports made from each assignee therein;
Fifthly, the disposition of all such cases;
Sixthly, the number of assignees' accounts filed and settled;
Seventhly, whether any marshal, register, or assignee has failed to make
and file with such clerk the reports by this act required, and if any have failed
to make such report, their respective names and residences.
And such clerk shall report in respect of all cases begun during said year.
And he shall make a classified statement, in tabular form, of all his fees,
THE BANKRUPTCY ACT OF 1867. 697
charges, costs, and emoluments, respectively, earned or accrued during said
year, giving each head under which the same accrued, and also the sum of all
moneys paid into and disbursed out of court in bankruptcy, and the balance in
hand or on deposit.
And all the statements and reports herein required shall be under oath, and
signed by the persons respectively making the same.
And said clerk shall in said month of August, transmit every such statement
and report so filed with him, together with his own statement and report as
aforesaid, to the attorney-general of the United States.
Any person who shall violate the provisions of this section shall on motion
made, under the direction of the attorney-general, be by the district court dis-
missed from his office, 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 " affirmation."
And in all cases in which any particular number of days is prescribed by this
Act, or shall be mentioned in any rule or order of court, or general order which
shall at any time be made under this Act, for the doing of any act, or for any
other purpose, the same shall be reckoned, in the absence of any expression to
the contrary, exclusive of the first and inclusive of the last day, unless the last
day shall fall on a Sunday, Christmas day, or on any day appointed by the
President of the United States as 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 enacted. That this act shall commence and take effect,
as to the appointment of the officers created hereby and the promulgation of
rules and general orders, from and after the date of its approval: Provided,
That no petition or other proceeding under this act shall be filed, received, or
commenced before the first day of June, Anno Domini eighteen hundred and
•ixty-seven.
(88)
fi98 THE BANKRUPTCY ACT OF 1841.
THE BANKRUPTCY ACT OF 1841.
An Act to establish a uniform System of Bankruptcy throughout the United
States.
(Passed August 19th, 1841, repealed March 3rd, 1843.)
Section 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 699
ner and under such directions as the court may prescribe and give; and all
such decrees passed by such court, and not so re-examined, shall be deemed
final and conclusive as to the subject-matter thereof.
Sec. 2. And be it further enacted, that all future payments, securities, 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, noj
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 equity
7oo 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. 701
nipt 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 his
solemn affirmation, in all matters relating to such bankruptcy, and his acts
and doings, and his property and rights of property, which, in the judgment
of such court, are necessary and proper for the purposes of justice; and if, in
any such examination, he shall wilfully and 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
rights 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 such
bankrupt, or if, upon such hearing, a discharge shall not be decreed to him,
the bankrupt may demand a trial by jury upon a proper issue to be directed
by the court, at such time and place and in such manner as the court may
order; or he may appeal from that decision at any time within ten days 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 directions thereof, the court shall make a decree
of discharge, and grant a certificate, as provided in this act.
Sec. 5. And be it further enacted. That all creditors coming and proving
their debts under such bankruptcy, in the manner hereinafter prescribed, the
same being bona-fide debts, shall be entitled to share in the bankrupt's property
and effects, pro rata, 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-
?02 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 permitted 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
purposej 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. 703
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 regulations, 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 the officers of the court or other
persons for services under this act, or any other on the subject of bankruptcy;
which fees shall be as low as practicable, with reference to the nature and
character of such services.
Sec. 7. And be it further enacted, That all petitions by any bankrupt for
the benefit of this act, and all petitions by a creditor against any bankrupt
under this act, and all proceedings in the case to the close thereof, shall be
had in the district court within and for the district in which the person 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 for
other cases.
704 THE BANKRUPTCY ACT OF 1841.
Sec. 8. And be it further enacted, That the circuit court within and for the
district where the decree of bankruptcy is passed shall have concurrent juris-
diction with the district court of the same district of all suits at law and in
equity which may and shall be brought by any assignee of the bankrupt
against any person or persons claiming an adverse interest, or by such person
against such assignee, touching any property or rights of property of said
bankrupt 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. 11. 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. 705
ruptcy, to redeem and discharge any mortgage or other pledge, or deposit, or
lien upon any property, real or personal, whether payable in presenti 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-
(89)
706 THE BANKRUPTCY ACT OF 1841.
terests 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.
Sec. 12. And be it further enacted, That this act shall take effect from and
after the first day of February next.
THE BANKRUPTCY ACT OF 1800. 707
THE BANKRUPTCY ACT OF 1800.
An Act to establish a uniform System of Bankruptcy throughout the
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 m 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
bail, 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
she shall be arrested, at or before the return-day of the same, to be approved
by the judge of the district, or some judge of the court out of which the 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. 2. 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
under his hand and seal, to appoint such good and substantial persons, being
citizens of the United States, and resident in such district, as such judge shall
7o8 THE BANKRUPTCY ACT OF 1800.
deem proper, not exceeding three, to be commissioners of the said bankrupt,
and 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 the application of the party thereby charged as a bankrupt, or of
THE BANKRUPTCY ACT OF 1800.
709
any creditor of such person, unless the delay shall have been unavoidable or
upon a just occasion.
Sec. 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, and 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. 5- 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 commissioners 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 assignees of such bankrupt's estate and
effects in the place and stead of such creditor: and the said commissioners
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 one 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-
710 THE BANKRUPTCY ACT OF 1800.
ors, entitled to vote as aforesaid, or the major part 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 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 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. g. 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. ?I1
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. 11. 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
assignee 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
?I2 THE BANKRUPTCY ACT OF 1800.
had 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 assignees.
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 examination, 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 collusively 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.
7*3
persons' names, with intent to defraud his or her creditors, the commissioners
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 issued, upon which commission
such person or persons shall be declared bankrupt, shall not, within forty-two
days after notice thereof, in writing, to be left 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 some gazette, that such commission hath
been issued, and of the time and place of meeting of the commissioners, sur-
render him 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
(90)
7M 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 commissioners 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
imprisonment 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. 715
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-
rupt 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 creditors of the said bankrupt,
in proportion to their respective debts.
7i6 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
assignee 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 assignee
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.
717
make 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
whollv 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. 31. 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
718 THE BANKRUPTCY ACT OF i&kx
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 become 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 due 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 appear 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, sufficient 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
jointly held or bound with such bankrupt for the same debt or debts from
which such bankrupt was discharged as aforesaid.
Sec. 35. 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 be
naid by the assignees so much money as the commissioners shall think fit to
allow, not more than three hundred dollars, nor exceeding three per centum
on the net proceeds of the said bankrupt's estate.
THE BANKRUPTCY ACT OF 1800. 7,I9
Sec. 36. Provided also, and be it further enacted, That no person becoming
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
same was not a full discovery of the said bankrupt's estate and effects; or
unless 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 affidavit 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
such certificates by the commissioners or judge.
Sec. 37. 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 creditors 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 of 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
iudgment 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, on
720 THE BANKRUPTCY ACT OF 1800.
such bankrupt producing his certificate so as aforesaid allowed, to order any
sheriff 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
his 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.
Sec. 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
such set off, and no more, shall be claimed or paid on either side respectively.
Sec. 43. And be it further enacted, That it shall and may be lawful to and
THE BANKRUPTCY ACT OF 1800. 72I
for 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.
Sec. 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-
sonal, 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 affirmation
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
against any commissioner, or assignee or other person, having authority under
(9i)
7?2 THE BANKRUPTCY ACT OF 1S00.
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. 50. 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 commissions, 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-
termine 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. 53. 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.
Sec. 54. And be it further enacted, That it shall be lawful for the major
THE BANKRUPTCY ACT OF 1800. 723
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 of, 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 commission 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 the 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 petition
724 THE BANKRUPTCY ACT OF 1800.
the commissioners to liberate him or her, and thereupon, if in the opinion of the
commissioners 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 manner 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 taken 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 organization of the Courts of the
United States.
(February 13, 1801.)
Sec. 12. 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
said act upon a judge of a district court: and the proceedings under a com-
THE BANKRUPTCY ACT OP 1800. 725
mission of bankruptcy which shall issue from a circuit judge shall, in all 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. 11. 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-
mission of bankruptcy had been issued by his order.
RULES OF PEAOTIOE.
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 remedies
given by it, the rules of equity practice established by the Supreme Court of the,
United States shall be followed as nearly as may be." ....
See General Order in Bankruptcy, No. XXXVII., November, 1898.
737
?28 U. S. EQUITY RULES. '
application therefor being first given to the adverse party, or his
solicitor, 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
pro 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. 729
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.
PROCESS.
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
entitled to a writ of assistance from the clerk of the court.
* See Rule XCII.
(92)
73o U. S. EQUITY RULES.
Rule X. — Every person, not being a party in any 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
ti 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.
SEETICE OF PROCESS.
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
plaintiff, 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 guoties, 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. 731
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.
APPEARANCE.
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 confesso, the court may
proceed to a decree at any time after the expiration of thirty days
SAT. BANKRUPTCY LAW. — 32
732 U. S. EQUITY RULES.
from and after the entry of the order to take the bill pro confesso,
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.
FRAME OP 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 special 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 ne exeat regno, or any other special order
pending the suit is required, it shall also be specially asked for.
U. S. EQUITY RULES. 733
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-
tion 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 htzc
verba, or any other impertinent matter, or any scandalous matter
not relevant to the suit. If it does, it may on exceptions be referred
734 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 or 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. fa$
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 judge
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 after 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
an" 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
shall avail him, as far as in law and' equity they ought to avail him.
736 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.
ANSWERS.
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 being
matters of abatement, or to the character of the parties, or matters
U. S. EQUITY RULES. 737
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 1, 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 1, 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,
(93)
8 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 2, 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. 739
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
74o 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 LII. — 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
allowed, 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. 74I
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 part)7, 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 OP REVIVOR 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.
742 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.
ANSWEKS.
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 the
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. 743 ,
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 shall 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 shall 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 his
744 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 ex parte. 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. 745
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 solicitors or parties of the time and place of the
(94)
y4$ 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. 747
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.
POEM OF THE LAST INTERROGATORY.
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."
CROSS-BILL.
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
748 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 LXXIH. — 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- 749
so 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 specified, who shall be allowed for attendance the same com-
pensation as for attendance in court; and if any witness shall refuse
to appear, or give evidence, it shall be deemed a contempt of the
court, which being certified to the clerk's office by the commissioner,
master, or examiner, an attachment may issue thereupon, by order
of the court or 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
75q 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. 75,
hearing before the court if the court is then in session; or if 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.
DECREES.
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 their 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,
shall be signed by counsel, and the facts therein stated, if not appar-
752 U. S. EQUITY RULES.
ent on the record, shall be verified by the oath of the party, or by some
other person. No rehearing shall be granted after the term at which
the final decree of the court shall have been entered and recorded,
if an appeal lies to the 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 be taken, the party may, if conscientiously scrupulous of
taking an oath, in lieu thereof, make solemn affirmation to the truth
of the facts stated by him.
Rule XCII. — Ordered (December Term, 1863), That in suits in
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 the 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. 753
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 lien 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
(95)
754 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 the rules.
A.
Account.
of decedent's estate, decree to contain what, 73.
form of, on reference to master, 79.
Affirmation.
permissible instead of oath, 91.
Amendments.
when applications for filing, grantable of course, 5.
to bills, as of course, when, 28.
before answer, 28.
after answer, 29, 46.
after replication, 29.
when to be filed, after leave granted, 3a
when deemed abandoned, 30.
supplemental answer, when necessary, 46.
when not allowable, of course, for defect of parties, 53.
to answer, as of course, when, 60.
by leave, when, 60.
if exceptions for insufficiency allowed, 63.
Answer. (See Pleadings.)
courts always open for filing, when, 1.
when applications for filing, grantable of course, 5.
when to be filed, 18.
how compelled, 18.
costs upon, 25.
when necessary to fortify plea, 32.
answer to part, demurrer or plea to part, 32.
may insist on defenses available by plea, 39.
what it need not contain, 39.
what interrogatories need not be answered, 44.
when supplemental answer to be filed, 46.
(See Supplemental Pleadings.)
by nominal parties, when necessary, 54.
755
756 INDEX TO EQUITY RULES.
The figures refer to the numbers of the rule*.
Answer — {Continued).
before whom to be sworn to, 59.
when amendable, 60.
exceptions to, when to be filed, 61.
when deemed sufficient, 61.
separate answers, costs when allowed, 62.
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 exceptions to, 64.
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, 54.
Applications. (See Motions.)
Attachment — writ of.
proper process to compel obedience to order or decree, 7.
when proper final process, 8.
when grantable to compel answer, 18.
to compel full answer, after allowance of exceptions, 64.
B.
Bills. (See Pleadings, Revivor, Supplemental Pleadings.)
courts always open for filing, preliminary, 1.
applications for filing, when grantable of course, 5.
when taken pro confesso, 18, Ig.
frame and form of, 20.
introductory part of, 20.
what may be omitted from, 21.
common confederacy clause, 21.
charging clause, 21.
jurisdiction clause, 21.
prayer of, contents, 21, 23.
when necessary and proper parties may be omitted, 22.
to be signed by counsel, 24.
costs, 25.
to contain no unnecessary recitals, 26, 85.
INDEX TO EQUITY RULES. 7„
The figures refer to the numbers of the rules.
Bills —(Continued).
impertinence in. (See Impertinent Matter.)
scandalous. (See Scandalous Matter.)
when amendable, of course, 28.
(See Amendments.)
when copy to be furnished, 28.
when copy of whole amended bill to be furnished, 28.
when amendable on motion, but without notice, 29.
when amendable only on notice, 29.
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, 38.
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.)
supplemental bills, 57.
when allowed, 57.
need not repeat original statements, 58.
(See Supplemental Pleadings.)
to what extent may be taken pro confesso, if no answer filed, after excep-
tions allowed, 64.
not to be recited in decree, 86.
by stockholders against corporation, 94.
what to contain, 94.
to be verified, 94.
c.
Cestuls Que Trust.
when unnecessary but proper parties, 49.
Chambers.
motions, rules and orders at, 3, 4.
Clerk.
when to be in attendance, 2.
when office of, open, 2.
motions grantable by, as of course, 5.
Commissions.
court always open for issuing, I.
to take testimony, when issuable ex parte, 67.
commissioners, how chosen, 67.
notice to file cross-interrogatories, 67.
(See Interrogatories.)
758 INDEX TO EQUITY RULES.
The figures refer to the numbers of the rules.
Commissions — (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 commissioner, 67, 78.
Costs.
of bills and answers, 25.
on determination of exceptions to scandalous or impertinent matter, 26.
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, 72.
D.
Decree.
when to be entered on default, 18, 19.
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, 92.
Default.
practice on default in appearing, 18.
Defendants.
(See Cestuis que Trust, Incompetent Persons, Infants, Parties.)
to be named in introductory part of bill, 20.
in prayer for subpoena, 21.
nominal defendants, — .
(See Nominal Parties.)
service upon by publication, act of June 1, 1872, sec. 13.
omitted from bill when jurisdiction over not obtainable, 22, 47.
omitted when too numerous, 48.
INDEX TO EQUITY RULES. 7S9
The figures refer to the numbers of the rules.
Defendants — (continued).
heirs-at-law as, 50.
joint and several obligees as, 51.
Deficiency.
on foreclosure, decree to provide for, 92.
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, 32.
costs, if overruled, 34.
if sustained, 35.
for what not to be 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.
E.
Examiners.
testimony before, how taken, 67.
stenographers employed by, expenses of, 67.
no power as to relevancy or competency of questions, 67.
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.
Exceptions.
to scandalous and impertinent matter, 26, 27.
must be specific, 27.
to be determined, 26, 27.
to answers, for insufficiency, 61, 62, 63, 64, 65.
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 confesso, 64.
plaintiff may require full answer, 64.
costs upon determination, 65.
760 INDEX TO EQUITY RULES.
The figures refer to the numbers of the rules
Exceptions — (Continued).
to master's report, 83, 84.
when to be filed, 83.
failure to file, 83.
costs, upon determination, 84.
Execution.
to collect deficiency on foreclosure, 92.
Estate.
of decedent, accounting, 73.
F.
Foreclosure.
decree for deficiency, execution to issue, 92,
G.
Guardian ad Litem. (See Incompetent Persons, Infants.)
when to be appointed, 87.
H.
Heir at Law.
when unnecessary, though proper party, 50.
High Court of Chancery in England.
practice of to regulate, when, go.
L
Impertinent Matter.
may be expunged, 26.
Incompetent Persons.
need of guardianship to be stated in prayer for process, 23.
guardians ad litem for, 87.
(See Prochein Ami.)
Infancy.
of defendants to be stated in prayer for process, 33.
guardians ad litem for, 87.
(See Prochein Ami.)
Injunction. (See Restraining Order.)
to be specially asked for in bill, 21.
not necessary to repeat request in prayer for process, 23.
when granted, 55.
how long it continues, 55.
suspending or modifying on appeal, 93.
by what judge allowed, act of June 1, 1872, section 7,
INDEX TO EQUITY RULES. 761
The figures refer to the numbers of the rules.
Interlocutory Orders.
when and where made by judge, 3.
Interrogatories.
to be divided and numbered, 41.
foot note to specify which to be answered, 41.
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 file, to be given, 67.
form of last interrogatory, 71.
master at liberty to examine upon, 81.
Issue.
joined by filing of replication, 66.
J.
Joint and Several Obligees.
not all necessary parties, 51.
Judge.
orders by, at chambers, in vacation, 3.
Jurisdiction.
parties not within may be omitted, 22, 47.
to what extent obtained by service by publication, act of June 1," 1873, sec-
tion 13.
M.
Masters in Chancery. (See References, Reports.)
references to, 73, 74, 75, 76, 77, 78, 79, 80, 81, 82, 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, 82.
compensation of, how enforced, 82.
Motions. (See Interlocutory Orders, Orders, Rules.)
courts always open for making interlocutory, I.
gran table of course, when entertained by clerk, 2.
to be entered in order book, 4.
what are grantable of course, 5.
power of judge to rescind or suspend, 5.
not grantable of course, where made and heard, 6.
He Exeat Regno, writ of.
to be specially asked for, 21.
(96)
76a INDEX TO EQUITY RULES.
The figures refer to the numbers of the rules.
Nominal Parties.
Need not answer, when, 54.
Notice. (See Amendments, Motion, Order.)
of interlocutory orders, etc., before judge, 3.
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, 52.
Orders.
court always open for making interlocutory, 7
gran table of course, when entertained by clerk. 2.
to-be entered in order book, 3,
entry of, is notice, 3.
P.
Parties.
persons not parties, rights and duties of, how enforced, IO.
necessary and proper, when omitted from bill, 22, 47, 48.
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 13.
Pleadings. (See Amendments, Answer, Bill, Demurrer, Plea.)
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 course, 5.
INDEX TO EQUITY RULES. 763
The figures refer to the numbers of the rules.
Pleas — {Continued).
when to be filed, 18.
certificate of counsel to accompany, 31.
affidavit of defendant to accompany, 31.
plea to part, answer or demurrer to part, 3*.
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, 39.
Praetiee. (See Rules.)
Process. (See Attachment, Execution, Subpcena.)
preparatory to hearing on merits, courts always open for issuing, I.
what applications for, grantable of course, 5.
writ of subpcena, in first instance, 7.
writ of attachment to compel obedience to decree, 7, 8.
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 Service of Process.)
Prochein Ami.
infant or incompetent person may sue by, 87.
Publication.
service by, when'; act of June 1, 1872, section 13.
of testimony taken by commission, 69.
R.
References. (See Masters in Chancery, Reports.) -
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, 75.
when to proceed ex parte, 75.
report upon. (See Report.)
powers of master on, 77.
accountings, form of, 79.
7 64 INDEX TO EQUITY RULES.
The figures refer to the numbers of the rules.
References — (Continued).
what documents may be used on, 80.
examination of claimant upon, 81.
exceptions to report upon. (See Exceptions, Report.)
Rehearing.
petition for, what to contain, 88.
when granted, 88.
Rejoinder.
not necessary, 66.
Replication.
withdrawing, and amending bill, 29.
no special replication allowed, 45.
general, when to be filed, 66.
filing joins issue, 66.
failure to file, effect, 66.
Report of Master. (See Exceptions, Master in Chancery, References.)
what not to contain, 76.
what to refer to, 76.
not to be retained as security for compensation, 82.
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, 1872, sec. 7.
Revivor. (See Bill.)
when bill of, to be filed, 56, 57, 58.
Rule Days.
motions and orders on, 3.
Rules. (And Orders.) (See Motions, Orders.)
courts always open for directing interlocutory, I.
grantable of course, when entertained by clerk, 2.
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 regulate, 90.
S.
Scandalous Matter.
expunged if exceptions are taken, 26, 27.
INDEX TO EQUITY RULES. 765
The figures refer to the numbers of the rules.
Service of Process,
how made, 13.
by whom made, 15.
how proved, 15.
when by publication, act of June, 1, 1872, section 13.
Stenographers.
may take oral testimony before examiners, 67.
how chosen, 67.
expense of, 67.
Stockholders.
bills by, against the corporation, 04.
Subpoena. (See Process.)
when proper process, 7, 8.
when to issue, 11, 12, 14.
when returnable, 12.
memorandum at bottom, 12.
in case of more than one defendant 12.
how served, 13.
by whom served, 15.
prayer for, to contain what names, 23.
infancy of defendants to be stated in, 23.
issuable of course, by clerk on bill of revivor, 56.
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 June 1, 1S72, section 13.
Supplemental Pleadings.
supplemental answer, after amendment of bill, 46.
when to be filed, 46.
default in filing, 46.
supplemental bill, when allowed, 57.
unnecessary to repeat original statements, 58.
T.
Testimony. (See Commissions, Examiners, Interrogatories, Stenographers,
Witnesses.)
how taken, 67, 68, 6g, 70, 78.
by commission, 67.
notice to file cross-interrogatories, 67.
how commissioners chosen, 67.
766 INDEX TO EQUITY RULES.
The figures refer to the numbers of the rules.
Testimony — {Continued).
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 court, 67.
by deposition pursuant to acts of congress, 68.
publication of, if taken by commission, 69.
may be taken de bene esse, 70.
form of last interrogatory, 71.
Trustees.
when as parties they represent cestuis que trust, 49.
Typewriter.
may be employed by examiner, 67.
how chosen, expenses of, 67.
V.
Vacation.
powers of judge during, 3.
Verification.
answer sworn to, before whom, 59.
of petition for rehearing, 88.
of bill by stockholders against corporation, 94.
w.
Witnesses. (See Commission, Examiners, Testimony.)
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 EXEMPTION LAWS. 767
THE EXEMPTION LAWS.
Note. — The author takes this occasion to extend his thanks publicly to the
Mercantile Agency of Messrs. R. G. Dunn & Co., of New York City, for their
kind permission given him to use the abstracts of the exemption laws of the
several states and territories of the Union, which appear in their Reference
Book of July i, 1900.
ALABAMA.
Homestead and Exemptions. — Homestead of house and lot in city, town,
etc., or one hundred and sixty acres in country, in either case not to exceed two
thousand dollars in value. Personal property of one thousand dollars in value,
and certain specified articles, and wages to the amount of twenty-five dollars
per month. Waiver of exemptions of personalty may be included in any instru-
ment of writing but intention to waive must be clearly expressed. Waiver of
homestead must be by separate instrument, attested by one witness ; if by a
married man, waiver not valid without the voluntary signature and assent of the
wife shown by separate acknowledgment. If by a married woman, executed by
the husband, joining in the alienation, but separate acknowledgment of wife not
necessary. Form of certificate of separate acknowledgment is as follows :
State of Alabama, 1
County of fss"
I (name and style of officer) do hereby certify that on the day of
19 came before me the within named known (or made known) to
me to be the wife of the within named , who being examined sep-
arate and apart from the husband touching her signature to the within ,
acknowledged that she signed the same of her own free will and accord, and
without fear, constraints or threats on the part of the husband.
In witness hereof I hereunto set my hand, this day of , 19 .
A. B.
Judge (or as the case may be).
An unmarried person is entitled to the same exemptions as if married.
ARIZONA.
Exemptions. — The following property is exempt from execution: (1) There
shall be reserved to every family exempt from attachment and execution, and
every species of forced sale for the payment of debts, personal property not to
exceed in value the sum of five hundred dollars. (2) Every person who is the
head of a family, and whose family resides within the Territory, may hold as a
homestead, exempt from attachment, execution and forced sale, real property
to be selected by him or her, which said homestead shall be in one compact body,
not to exceed in value the sum of $2,500. (3) It shall not be necessary for any
person entitled to any exemption to claim such exemption until requested by an
officer holding an attachment or execution against the property of such person,
and upon being requested by the officer to designate the property claimed under
this act, the person entitled shall designate the property claimed or exempt; if
• the person fails or refuses to claim when requested, the officer holding attachment
or execution shall proceed to designate and set aside real estate not to exceed
in value the sum of $2,500. (4) Property herein declared exempt shall not be
768 THE EXEMPTION LAWS.
exempt from seizure and forced sale on attachment and execution, when the debt
owing is for the purchase price or part of purchase price thereof, so long as such
property or any part thereof shall be in the hands of the vendee. The earnings
of the debtor for his personal services for thirty days next preceding the day of
the levy, when it shall be made to appear by the debtor's affidavit or otherwise
that such earnings are necessary for the use of a family, supported wholly or
partly by his labor, shall be exempt. The property of counties, cities and towns
owned and held only for public purposes, such as public buildings and sites there-
for, fire engines and the furniture thereof, and all property used or intended
for extinguishing fires, public grounds and other property devoted exclusively to
the use and benefits of the public, shall also be exempted from forced sale, also
all public libraries.
ARKANSAS.
Exemptions. — For single person, personal property, in addition to wearing
apparel, $200. For head of a family, personal property to the value of $500.
This, however, is only applicable to actions ex contractu. As to torts and frauds
there are no personal exemptions.
Homestead. — For a head of a family outside of any town or city, 160 acres
of land not to exceed $2,500 in value, or not less than 80 acres without regard
to value. In city or town, not exceeding one acre of the value of $2,500, or not
less than one-fourth of an acre without regard to value. — (Const. Art. ix Sees
1 to 5.)
CAUFOBNIA.
Exemptions. — The homestead, not exceeding $5,000 in value, if declaration of
homestead is properly filed in the recorder's office of the county where situate,
by a husband or wife, or other head of a family, is exempt from execution except
in the following cases : first, where the judgment was obtained before the declara-
tion of homestead; second, on judgment for liens of mechanics, laborers, or
vendors of the land; third, on debts secured by mortgage on the land executed
by husband and wife or an unmarried claimant ; fourth, on debts secured by mort-
gage on the land before the declaration of homestead. The other exemptions are
— except for the purchase price or a judgment of foreclosure of mortgage thereon ;
chairs, tables, desks and books, to the value of $200, necessary household, table
and kitchen furniture — including one sewing machine, stoves, stovepipes and stove
furniture, wearing apparel, beds, bedding, and bedsteads, hanging pictures, oil
paintings and drawings drawn or painted by any member of the family, and family
portraits and their necessary frames, and provisions actually provided for in-
dividual or family use, sufficient for three months, and three cows and their
sucking calves, four hogs with their sucking pigs, and food for such cows and
hogs for one month; also one piano, one shot gun and one rifle, the farming
utensils or implements of husbandry of the judgment debtor not exceeding the
value of $1,000 ; also two oxen, or two horses, or two mules, and their harness,
one cart or wagon, and food for such oxen, horses, or mules, for one month • also'
all seed grain, or vegetables actually provided, reserved, or on hand for the pur-
pose of planting or sowing at any time within the ensuing six months not ex-
ceeding in value the sum of $200, and seventy-five beehives, and one horse and
vehicle belonging to any person who is maimed or crippled, and tne same is
necessary in his business; the tools and implements of a mechanic or artisan
necessary to carry on trade; the notarial seal, records and office furniture of a
notary public, the instruments and chests of a surgeon, physician, surveyor or
dentist, necessary to the exercise of their profession, with their professional
libraries and necessary office furniture; the professional libraries of attorneys,
THE EXEMPTION LAWS. 769
judges, ministers of the gospel, editors, school teachers and music teachers, and
their necessary office furniture ; also, the musical instruments of music teachers
actually used by them in giving instructions, and all the indexes, abstracts.
books, papers, maps, and office furniture of a searcher of records, necessary to be
used in his profession ; also the typewriters or other mechanical contrivances em-
ployed for writing in type, actually used by the owner thereof for making his
living; also one bicycle, when the same is used by its owner for the purpose of
carrying on his regular business or when the same is used for the purpose of
transporting the owner to and from his place of business ; the cabin or dwelling
of a miner, not exceeding in value the sum of $500 ; also his sluices, pipes, hose,
windlass, derrick, cars, pumps, tools, implements, and appliances necessary for
carrying on any mining operations, not exceeding in value the aggregate sum of
$500 ; and two horses, mules or oxen, with their harness, and food for such
horses, mules, or oxen, for one month, when necessary to be used in any whim,
windlass, derrick, car, pump, or hoisting gear ; and also his mining claim actually
worked by him, not exceeding in value the sum of $1,000; two horses, two oxen,
or two mules, and their harness and one cart or wagon, one dray or
truck, one coupe, one hack or carriage, for one or two horses, by
the use of which a cartman, drayman, truckman, huckster, peddler,
hackman, teamster, or other laborer habitually earns his living ; and one horse,
with vehicle and harness or other equipments, used by a physician, surgeon, con-
stable, or minister of the gospel, in the legitimate practice of his profession or
business, with food for such oxen, horses, or mules for one month ; one fishing
boat and net not exceeding total value $500, the property of any fisherman by the
lawful use of which he earns a living ; poultry not exceeding in value $25 ; sea-
man and sea-going fisherman's wages and earnings not exceeding $100 ; the earn-
ings of the judgment debtor for his personal services, rendered at any time
within thirty days next preceding the levy of execution or levy of attachment,
when it appears by the debtor's affidavit, or otherwise, that such earnings are
necessary for the use of his family, residing in this state, supported in whole or in
part by his labor ; but where the debts are incurred by any such person or
his wife or family for the common necessaries of life, or having been incurred at
a time when the debtor had no family residing in this state, supported in whole
or in part by his labor, the one-half of such earnings above mentioned are, never-
theless, subject to execution, garnishment, or attachment, to satisfy debts so
incurred ; the shares held by a member of a homestead association duly incor-
porated, not exceeding in value $1,000, if the person holding the shares is not
the owner of a homestead under the laws of this state ; all the nautical instruments
and wearing apparel of any master, officer, or seaman of any steamer or other
vessel ; all moneys, benefits, privileges, or immunities accruing, or in any manner
growing out of any life insurance on the life of the debtor, if the annual premiums
paid do not exceed $500 ; all fire engines, hooks and ladders, with the carts,
trucks, and carriages, hose, buckets, implements, and apparatus thereto appertain-
ing, and all furniture and uniforms of any fire company or department organized
under any law of this state ; all arms, uniforms, and accoutrements required by
law to be kept by any person, and also one gun to be selected by the debtor ; all
courthouses, jails, public offices and buildings, lots, grounds, and personal prop-
erty, the fixtures, furniture, books, papers, and appurtenances belonging and per-
taining to the courthouse, jail and public offices belonging to any county, or to any
city and county of this state ; and all cemeteries, public squares, parks, and places,
public buildings, town halls, markets, buildings for the use of fire departments
and military organizations, and the lots and grounds thereto belonging and ap-
pertaining, owned or held by any town or incorporated city, or dedicated by such
(97)
77°
THE EXEMPTION LAWS.
town or city to health, ornament or public use, or for the use of any fire or
military company organized under the laws of this state; all material purchased
in good faith for use in the construction, alteration or repair of any building,
mining claim or other improvement, as long as in good faith the same is about
to be applied to the construction, alteration or repair of such building, mining
claim or other improvement.
COLORADO.
Exemptions. — The following property, when owned by any person being the
head of = family and residing with the same, is exempt from levy and sale upon
any execution of writ of attachment, and such articles continue exempt while the
family of such person are removing from one place of residence to another within
the state, namely; (i) family pictures, school books and library; (2) a seat or
pew in any place of worship; (3) the sites of burial of the dead; (4) all wearing
apparel of the debtor and his family ; all beds, bedsteads and bedding, kept and
used by the debtor and his family ; all stoves and appendages, kept for the use
of the debtor and his family ; all cooking utensils and all household furniture not
herein enumerated, not exceeding $100 in value; (5) provisions for the debtor
and his family, necessary for six months, and fuel necessary for six months ;
(6) tools and implements or stock in trade of any mechanic, miner or other
person, used and kept for the purpose of carrying on his trade or business, not
exceeding $200 in value; (7) the library and implements of any professional man,
not exceeding $300 ; (8) working animals of the value of $200 ; (9) one cow and
calf, ten sheep and the necessary food for all the animals herein mentioned for
six months, one farm wagon, cart or dray, one plow, one harrow, and other farm-
ing implements, including harness and tackle for team, not exceeding $50 in value ;
(10) tools, implements, working animals and stock in trade, not exceeding $300
in value, of any mechanic, miner, or other person not being the head of a family
used and kept for the purpose of carrying on his trade and business while such
person is a bona fide resident of this state. Sixty dollars of the amount due for
wages or earnings of any debtor at the time of the levy are also exempt ; pro-
vided such debtor is at the time of the levy the head of a family or the wife of
the head of a. family, and such family is dependent in whole or in part upon
such earnings for support. All money received by any person, resident of this
state, as a pension from the United States government, whether the same be in
his actual possession, or deposited or loaned, is also exempt from execution or
attachment, whether such pensioner be the head of a family or not ; when the
debtor dies or absconds, and leaves his family, the money thus exempted is exempt
to his wife and children, or either of them.
CONETECTICTTT.
Exemptions. — Necessary apparel and bedding, household furniture necessary
for supporting life, arms, military equipments, implements of the debtor's trade,
one cow, ten sheep (not exceeding $150) are protected, and certain specified
amounts of family stores, one stove, the horse, saddle and bridle, buggy and
harness (not exceeding in value $250) of any practicing physician or surgeon,
one sewing machine in use, one pew in church in use, and a library (not exceeding
in value $500), one boat used in fishing, not exceeding $200 in value. A dwelling
house and the land used in connection therewith while actually occupied by the
owner to the extent of one thousand dollars in value, provided the purpose to use
the same as a homestead appears either in a declaration to that effect made by the
owner, and executed and recorded like a deed, or in the conveyance of such
property. Such right of exemption may be released by the husband and wife
THE EXEMPTION LAWS. 77l
joining in a declaration of release, and the value of such property over the
exemption can be reached by creditors.
DELAWARE.
Exemptions.— New Castle County— No real estate exemption; $75 worth of
personal property, consisting of the tools and fixtures is exempted, and the de-
fendant being the head of a family shall have exempt in addition $200. The above
exemption does not affect a debt or contract incurred or made prior to July 4,
1873; wages are also exempt. Kent County— Same as New Castle County ex-
cept $50 worth of personalty and $150 for heads of families is exemot. Sussex
County — There is no exemption in this county except $75 worth of personal
property consisting of tools and fixtures. No exemption applicable to goods and
chattels of a merchantable character bought to be sold and trafficked in.
DISTRICT OE COLUMBIA.
Exemptions. — The following property of a householder is exempt from dis-
traint, attachment, or sale on execution, except for servants' or laborers' wages
due : Wearing apparel ; household furniture to the amount of $300 ; provisions
and fuel for three months ; mechanics' tools or implements of any trade to the
value of $200, with stock to the same amount; the library and implements of a
professional man or artist to the value of $300 ; a farmer's team and other utensils
to the value of $100 ; family pictures and library, in value $400.
ELORIDA.
Exemptions. — Homestead of one hundred and sixty acres of land and im-
provements if in the country, and which cannot be reduced in area without
owner's consent, by reason of its being subsequently included in a city or town ;
one-half acre of ground if in an incorporated city or town, with improvements
thereon, limited however to owner's residence and place of business, together
with $1,000 worth of personal property.
GEORGIA.
Exemptions. — Each head of a family, every aged or infirm person, or persons
having care and support of dependent females of any age, who is not head of
a family, or guardian, or trustee of a family of minor children, is entitled to a
homestead of realty or personalty, or both, to the value in the aggregate of
sixteen hundred dollars. The exemption may be waived in writing, except as to
$300 of wearing apparel and furniture, to be selected by the debtor and his wife,
if he has a wife. The homestead cannot be claimed as against debts for ( 1 ) taxes,
(2) purchase money, (3) labor done upon or material furnished for the property,
(4) for removal of incumbrances thereon. — (Constitution of 1877.)
IDAHO.
Exemptions. — The following property belonging to an actual resident of the
state is exempt from attachment or levy and sale on execution ; first, chairs, tables,
desks and books, to the value of two hundred dollars, belonging to the judgment
debtor ; second, necessary household, table and kitchen furniture belonging to
judgment debtor, including one sewing machine in actual use in a
family or belonging to a woman, stove, stovepipe and furniture, beds,
bedding and bedsteads, not exceeding $300 in value, wearing apparel,
772 THE EXEMPTION LAWS.
hanging pictures, oil paintings and drawings, drawn or painted by any
member of the family, and family portraits and their necessary frames, provisions
actually provided for individual or family use sufficient for six months, two
cows, with their sucking calves and two hogs with their sucking pigs; third, the
farming utensils or implements of husbandry of a farmer not exceeding in value
$300, four oxen, or four horses, or four mules, to be selected by claimants, and
their harness, one cart or wagon, and food for such oxen, horses or mules for six
months, also a water right not to exceed 160 inches, used for the irrigation of
land actually cultivated by him; also the crop or crops growing or grown on
fifty acres of land, leased, owned or possessed by the person cultivating the
same ; fourth, tools or implements of a mechanic or artisan necessary to carry on
his trade, not exceeding in value $500 ; the notarial seal and records of a notary
public ; the instruments and chests of a surgeon, physician, surveyor and dentist,
necessary to the exercise of their profession with their scientific and professional
libraries ; the law professional libraries and office furniture of attorneys, coun-
sellors and judges and the libraries of ministers of the gospel ; fifth, the cabin or
dwelling of a miner, not exceeding in value $500, also his sluices, pipehose, wind-
lass, derrick, cars, pumps and tools, not exceeding in value $200 ; also one saddle
animal and one pack animal, together with their saddles and equipments belonging
to a miner actually engaged in prospecting, not exceeding in value $250 ; sixth,
two oxen, two horses or two mules, and their harness, and one cart, wagon, dray
or truck, by the use of which a cartman, drayman, truckman, huckster, peddler,
hackman, teamster, or other laborer habitually earns his living; and one horse
with vehicle and harness or other equipments used by a physician, surgeon or
minister of the gospel in making his professional visits, with food for such oxen,
horses or mules for six months ; seventh, all fire engines, with carts, buckets, hose,
and apparatus thereto appertaining, of any fire company or department organized
under any law of this state ; eighth, all arms, uniforms and accoutrements re-
quired by law to be kept by any person ; ninth, all courthouses, jails, public
offices and buildings, lots, ground and personal property, the fixtures, furniture,
books, papers, and appurtenances, belonging to any county in this state, and all
cemeteries, public squares, parks and public buildings, town halls, markets, build-
ings appertaining to the fire departments, and the lots and grounds thereto be-
longing and appertaining, owned or held by any town or incorporated city, or
dedicated by such town or city to health, ornament, or public use ; tenth, the
homestead, consisting of a. quantity of land, together with the dwelling house
thereon and its appurtenances, not exceeding in value the sum of five thousand
dollars, to be selected by the husband and wife, or either of them, or other head
of family ; eleventh, earnings of judgment debtor, for personal services rendered
at any time within thirty days next preceding the levy of execution or levy of
judgment, when it appears by the debtor's affidavit or otherwise, that such earn-
ings are necessary for the use of his family residing in the state, supported wholly
or in part by his labor. The usual declarations must be made, acknowledged, and
recorded by person or persons claiming homestead. No article above mentioned
shall be exempt from execution issued upon a judgment recovered for its price,
or upon a mortgage thereon. A single person not the head of a family may
claim a homestead, not to exceed $1,000 in value.
ILLINOIS.
Exemptions. — Lot of ground and buildings thereon occupied as a residence
by the debtor, and held by him by lease or otherwise, being a householder and
having a family, to the value $1,000. Exemption continues after the death of the
THE EXEMPTION LAWS. 773
householder for the benefit of surviving wife or husband so long as she or he
continues to occupy the homestead, and for the benefit of the children until
youngest child shall become twenty-one years of age. No release or waiver of
exemption is valid, unless in writing and subscribed by such householder and wife
or husband (if he or she have one) and acknowledged as conveyances of real
estate are required to be acknowledged or possession is abandoned or given pur-
suant to the conveyance, or if the exemption is continued to a child or children
without an order of court directing a release thereof. The following articles
of personal property owned by the debtor are exempt from execution, writ of
attachment, and distress for rent, the necessary wearing apparel, bibles, school
books and family pictures of every person, $100 worth of other property to be
selected by the debtor; and in addition, when the debtor is the head of a family
and resides with the same, $300 worth of other property, also to be selected by
the debtor. To avail himself of exemptions, the debtor must present a sworn
schedule of his personal property to the officer having the execution, attachment,
writ, or distress warrant, within ten days after the officer notifies him in writing
so to do. Provided, such selection shall not be made from money, salary, or
wages due the debtor. Provided, however, that money due debtor from sale of
personal property which was exempt at the time of such sale, shall be exempt to
the same extent as the property would be if not sold. Except the wages of a
defendant, the head of a family and residing with the same, to the amount of
$8 per week shall be exempt from garnishment.
INDIANA.
Exemptions. — Any resident householder has an exemption from levy and sale
under execution or attachment of real or personal property, or both, as he may
select, to the value of $600, on demands on contracts. The law further provides
that no property shall be sold by virtue of an execution for less than two-thirds
of its appraised cash value. The provisions of this law as to valuation or ap-
praisement can be waived in contracts. To do this the note or contract should
read, " Payable without relief from valuation or appraisement laws." But the
right to exemption cannot be waived by contract.
INDIAN TEBRITOBT.
Exemptions. — Every unmarried person living in the Indian Territory, not the
head of a family, is entitled to exemptions, in addition to his or her wearing
apparel, to be selected by himself, to the value of $200. Every married person,
or the head of a family, is entitled to exemptions, to be selected by himself, in
addition to the wearing apparel of himself and family, to the amount of $500.
This, however, is only applicable to actions ex contractu. As to frauds and torts
there are no exemptions. There is no title to real estate, except in towns that
have been platted and appraised under the Act of Congress, known as the Curtis
Bill. The country is yet held by the Indian tribes in common. As to the towns
where titles have been obtained, the exemptions are the same as in Arkansas, i. e.,
not exceeding one acre of the value of $2,300, or not less than one-quarter of an
acre without regard to value. There are no exemptions from execution for
purchase money as long as the property remains in the hands of the original
vendee.
IOWA.
Exemptions. — The homestead must embrace the house used as a home by the
•owner thereof, and if he has two or more houses thus used by him at different
774 THE EXEMPTION LAWS.
times and places, he may select which he will retain as his homestead. If within
a city or town, it must not exceed one-half acre in extent; and if not in a city
or town, it must not embrace in the aggregate more than forty acres. But if,
when thus limited in either case, its value is less than $500, it may be enlarged
till its value reaches that amount. If the debtor is a resident of the state and
head of a family, all wearing apparel kept for actual use, and suitable to the
condition of the debtor and family, and trunks and other receptacles to contain
the same; one musket or rifle and a shot gun; all private libraries,
family bible, portraits, pictures, musical instruments, and paintings —
not kept for sale; seat or pew in church, and interest in public or pri-
vate burial grounds — not exceeding one acre ; the proper tools, instruments,
or books of any farmer, mechanic, surveyor, clergyman, lawyer, physician,
teacher or professor; the horse, or the team — consisting of not more than two
horses or mules — or two yoke of cattle, and the wagon or other vehicle with the
proper harness or tackle, by use of which any physician, public officer, farmer,
teamster, or other laborer, habitually earns his living ; two cows, two calves, one
horse (unless a horse has been exempted under the preceding section), fifty sheep
and the wool therefrom, five hogs and all pigs under six months, the necessary
food for all animals exempt from execution for six months, one bedstead and
the necessary bedding for every two in the family, all cloth manufactured by the
defendant — not exceeding one hundred yards in quantity — household and kitchen
furniture not exceeding $200 in value, all spinning wheels and looms, one
sewing machine, and other instruments of domestic labor kept for actual use,
and the necessary provisions and fuel for the use of the family for six months,
and to the debtor, if a printer, there shall also be exempt a printing press and
the types, furniture, and material necessary for the use of such printing press
and a newspaper office connected therewith, not to exceed in all the value of
twelve hundred dollars ; six stands of bees ; poultry to the value of $50, and the
same to any woman, whether head of a family or not; and to a seamstress one
sewing machine. The word family does not include strangers or boarders lodging
with the family. The earnings of such debtor for the personal service or those
of his family, at any time within ninety days next preceding the levy, are also
exempt from attachment and execution. None of the foregoing exemptions are
for the benefit of a single man not the head of a family, nor of nonresidents, nor
of those who have started to leave this state ; but their property is liable to
execution, with the exemption in the two former cases of ordinary wearing ap-
parel and trunks to contain the same, and in the latter case of such wearing ap-
parel and such other property in addition as the defendant may select — not to
exceed $75 — to be selected by the debtor and appraised ; but any person coming
to this state with the intention of remaining, is a resident. Pensions and invest-
ments of funds therefrom are also exempt. Property may still be exempt as a
homestead, although the owner resides in other property or in some other locality,
provided it is his intention in good faith not to abandon the homestead, but to
return to it, or to sell it and invest the proceeds in another homestead. A
policy of insurance on the life of an individual, in the absence of an
agreement or assignment to the contrary, shall inure to the separate use of a
husband or wife and children of said individual independently of his creditors.
The proceeds of an endowment policy payable to the assured on attaining a
certain age shall be exempt from liability for any of his debts. Any benefit or
indemnity paid under an accident policy shall be exempt to the assured, or in case
of his death to the husband or wife and children of the assured from his debts.
The avails of all life or accident insurance payable to the surviving widow shall
be exempt from liability of all debts of such beneficiary contracted prior to the
THE EXEMPTION LAWS. 775
death of the assured ; but the amount thus exempt shall not exceed five thousand
dollars.
KANSAS.
Exemptions. — A homestead to the extent of one hundred and sixty acres of
farming land, or of one acre within the limits of an incorporated town or city,
occupied as a residence by the family of the owner, together with all the im-
provements on the same, shall be exempt from forced sale under any process of
law, and shall not be alienated except by joint consent of husband and wife when
that relation exists. Not exempt, however, for taxes or purchase money obli-
gations or liens for improvements. No value is affixed to the homestead. It
may be worth a million dollars. No personal property is exempt from execution
for the wages of a servant, mechanic, laborer, or clerk. Every person residing
in this state, and being the head of a family, shall have exempt from seizure upon
attachment or execution or other process issued from any court in this state :
Family bible, school books, and family library ; family pictures and musical in-
struments used by the family ; a seat or pew in any church or place of public wor-
ship, and a lot in any burial ground ; all wearing apparel of the family, all beds, bed-
steads, and bedding used by the debtor and his family, one cooking stove and
appendages, and all other cooking utensils, and all other stoves and appendages
necessary for the use of the debtor and his family, one sewing machine, spinning
wheels and looms, and all other implements of industry, and all other household
furniture not herein enumerated, not exceeding in value $500, two cows, ten hogs,
one yoke of oxen, and one horse or mule, or in lieu of one yoke of oxen and one
horse or mule, a span of horses or mules ; and twenty sheep and their wool, either
in raw material or manufactured into cloth ; necessary food for the support of the
stock for one year, one wagon, cart, or dray, two plows, drag, and other farming
utensils, not exceeding in value $300 ; grain, meat, vegetables, groceries, etc., and
fuel on hand necessary for the family for one year, the tools and implements of
any mechanic, miner, or other person, kept and used for the purpose of carrying
on his business, and in addition thereto stock in trade not exceeding $400 in
value, library, implements, and office furniture of any professional man. Any
person not the head of a family may have exempt : The wearing apparel of the
debtor, a seat or pew in any church or place of public worship, and a lot in any
burial ground, the necessary tools and instruments of any mechanic, miner, or
other person used and kept for the purpose of carrying on his trade or business,
and in addition thereto stock in trade not exceeding $400 in value, and the
library, implements, and office furniture of any professional man. The earnings
of a debtor, who is a resident of the state, for his personal services at any
time within three months preceding the issuing of the execution, or attachment,
or garnishment process, must be released from such process when it appears,
from the debtor's affidavit or otherwise, that such earnings are necessary for the
maintenance of a family supported wholly or partly by such debtor's labor. The
claim of this exemption presents a question of fact which may be contested. So
also the money received by any debtor as pensioner of the United States within
three months preceding the issuing of execution, attachment, or garnishment
process, must be released when it is shown in like manner that said money is
necessary for the maintenance of a family supported wholly or in part by such
pension.
KENTUCKY.
Exemptions. — The following personal property of persons with a family resi-
dent in this commonwealth is exempt from execution, attachment, distress, or
fee bill: Two work beasts or one work beast, and one yoke of oxen; two plows
776 THE EXEMPTION LAWS.
and gear, one wagon and set of gear or cart or dray, two axes, three hoes, one
spade and one shovel, two cows and calves, beds, bedding and furniture sufficient
for family use, one loom and spinning wheel and pair of cards, all the spun yarn
and manufactured cloth manufactured by the family necessary for family use,
carpeting for all family rooms in use, one table, all books not to exceed $50 in
value, two saddles and their appendages, two bridles, six chairs or so many as
shall not exceed $10 in value, one cradle, all the poultry on hand, ten head of
sheep not to exceed $25 in value, all wearing apparel, sufficient provisions, in-
cluding bread stuff and animal food, to sustain the family for one year, if not on
hand other personal property, wages, money, or growing crop not to exceed $40
in value for each member of the family ; provender suitable for live stock, if
there be any such stock, not to exceed $70 in value, and if such provender be
not on hand such other property as shall not exceed such sum in value ; all wash-
ing apparatus not to exceed $50 in value, one sewing machine, all family portraits
and pictures, one cooking stove and appendages, and other cooking utensils not to
exceed in value $25. The tools of mechanics not exceeding $100 in value,
libraries of ministers of the gospel and professional libraries of attorneys, and
of physicians and surgeons and their instruments not exceeding $500 in value.
Ministers, lawyers, physicians and surgeons are entitled to only one work beast
and to no wagon, cart or dray. Wages not to exceed $50 of all persons who
work for wages except for food, raiment, fuel, medicine or house rent for the
family. To an actual bona fide resident housekeeper with a family against debts
incurred or created after June 1st, 1866, there is also a homestead exemption
of $1,000, but not if the liability existed prior to the purchase of the land or the
erection of improvements thereon.
LOUISIANA.
Exemptions. — The sheriff or constable cannot seize the linen or clothing be-
longing to the debtor or his wife ; nor his bed, bedding, or bedstead, nor those
of his family, or sewing machines ; nor his arms and military accoutrements ; nor
the tools and instruments, and books necessary for the exercise of his or her
calling, trade or profession, by which he or she makes a living; nor shall he in
any case seize the rights of personal servitude, of use and habitation, of usufruct
to the estate of a minor child, nor the income of dotal property; nor money due
for the salary of an officer ; nor laborers' wages ; nor recompense for personal
services, nor the cooking stove and utensils of said stove, nor the plates, dishes,
knives and forks, and spoons, nor the dining table and dining chairs, nor wash
tubs, nor smoothing irons and ironing furnaces, nor family portraits belonging
to the debtor, nor the musical instruments played or practised on by any member
of the family.
Homestead Exemptions. — There shall be exempt from January 1, 1899, from
seizure by any process whatever, the homestead bona fide owned by the debtor
and occupied by him, consisting of land not exceeding one hundred and sixty
acres, buildings and appurtenances, rural or urban, of every head of a family,
or person having a mother or father, or a. person or persons dependent on him
or her for support ; also two work horses, one wagon or cart, one yoke of oxen,
two cows and calves, twenty-five head of hogs, or one thousand pounds of bacon,
or its equivalent in pork, whether these be attached to a homestead or not ; and on
a farm the necessary farming implements, to the value of $2,000. The husband
does not have the benefit of the exemption if his wife owns and is in actual en-
joyment of property to the amount of $2,000. The exemption does not apply
to the following debts : For purchase price of any part thereof ; to labor, money
THE EXEMPTION LAWS. 777
and material furnished for improving homestead ; to liability of any public officer,
or fiduciary, or attorney-at-law, for money collected, or received, on deposit ; to
taxes or assessments ; to rent which bears a privilege on the property. The
owner may sell the property exempt as homestead, but not to the prejudice of
creditors ; and may waive his right by signing with his wife, not separated from
bed and board, and registering in the office of the recorder of mortgages, a
written waiver, in whole or in part, which may be general or special, and shall
have effect from time of registering. The homestead must be registered in the
Parish of Orleans, but need not be elsewhere.
MAINE.
Exemptions. — By complying with certain statutory provisions (not often taken
advantage of), there is exempted a lot of land, dwelling house, etc., not exceeding
$500 in value. Necessary apparel ; a bed, bedstead, and bedding for every two
members of a family ; a cooking stove, all stoves used for warming buildings, and
other necessary furniture to the value of $100 ; one sewing machine for use not
exceeding $100 in value ; all tools necessary for the debtor's occupation ; and
materials and stock necessary to be used in his business to the value of $50 ; all
bibles and school books for use of the family, one copy of the statutes of the
state, and a library not exceeding $150 in value; one cow and one heifer, two
swine, ten sheep and the wool and lambs from them, one pair of working cattle,
or instead thereof one pair of mules or two horses, not exceeding $300 in value ;
all produce of farms until harvested, corn and grain for use of debtor and family,
not exceeding thirty bushels, all potatoes raised or purchased for use in family ;
one barrel of flour ; a sufficient quantity of hay to winter all exempted stock ;
all flax raised for use on one half acre of land; lumber to the amount of $10,
twelve cords of fire wood, five tons of anthracite coal, fifty bushels of bituminous
coal, and all charcoal for use in the family ; one pew in meeting house where
debtor worships; one horse sled or ox sled $20 in value; one harness worth $20,
for each horse or mule; one cart or truck, or express wagon, one harrow, one
plow, one yoke, two chains, and one mowing machine; for fisherman, one boat
not exceeding two tons burthen, a lot in a cemetery.
MARYLAND.
Exemptions. — The constitution of the state directs the legislature to pass laws
exempting from judicial sales, a reasonable amount of prgperty not exceeding
$500. One hundred dollars is the amount fixed and exempted in pursuance of this
constitutional requirement, and in addition thereto, " all wearing apparel, books,
and the tools of mechanics, except books or tools kept for sale."
MASSACHUSETTS.
Exemptions. — Every householder, having a family, is entitled to an estate of
homestead, to the extent in value of $800, in the farm or lot of land and buildings
thereon owned, or rightly possessed by lease or otherwise, and occupied by him
as a residence. To constitute a homestead and entitle it to exemption, it must be
set forth in the deed of conveyance by which the property is acquired, that it is
designed to be held as a homestead; or after the title is acquired, such design
must be declared in writing, and recorded in the registry of deeds for the county
or district where the property is situated. The homestead estate may be conveyed
or released by a deed duly acknowledged and recorded, in which the wife joins
for the purpose of releasing the right of homestead. The estate or right of home-
(98)
778 THE EXEMPTION LAWS.
stead of any householder existing at his death, continues for the benefit of his
widow and minor children, and may be held and enjoyed by them, if some one
of them occupies the premises, until the youngest child is twenty-one years of
age, and until the death or marriage of the widow. All chattels, real or personal,
and all other goods which by the common law are liable to be taken on execution
may be taken and sold thereon, except the following articles of the debtor which
are exempt : The necessary wearing apparel of himself and of his wife and child-
ren ; one bedstead, bed, and the necessary bedding for every two persons of the
family; one iron stove used for warming the dwelling house, and fuel not ex-
ceeding the value of $20, procured and designed for the use of the family; one
sewing machine, of a value not exceeding $100, in actual use by each debtor, or
the family of the debtor ; other household furniture necessary for him and his
family, not exceeding $300 in value ; the bibles, school books, and library used by
him or his family, not exceeding $50 in value ; one cow, six sheep, one swine,
and two tons of hay ; the tools, implements, and fixtures, necessary for carrying
on his trade or business, not exceeding $100 in value; materials and stock de-
signed and procured by him, and necessary for carrying on his trade or business,
and intended to be used or wrought therein, not exceeding $100 in value ; pro-
visions necessary and procured and intended for the use of the family, not exceed-
ing $50 in value ; the boat, fishing tackle, and nets of fishermen, actually used by
them in the prosecution of their business, to the value of $100; the uniform of
an officer or soldier in the militia, and the arms and accoutrements required by
law to be kept by him ; shares in certain co-operative associations to an amount
not exceeding $20.
MICHIGAN.
Exemptions. — Any quantity of land not exceeding forty acres, and the dwelling
house thereon, with its appurtenances, to be selected by the owner thereof, and
not included in any recorded town plat, city, or village, or instead thereof, at
the option of the owner, a quantity of land not exceeding in amount one lot,
being within a recorded town plat, or city, or village, and the dwelling house
thereon and its appurtenances, owned and occupied by any resident of the state,
not exceeding in value $1,500, is exempt from levy and sale on execution. House-
hold furniture to the amount of $250 ; stock in trade, a team or other things
which may be necessary to carry on the pursuit of particular business, up to
$250 ; library and school books not exceeding $150 ; to a householder, ten sheep,
two cows, five swine, are also exempt from levy and sale on execution.
MINNESOTA.
Exemptions. — No property hereinafter mentioned or represented shall be liable
to attachment or sale on any final process, issued from any court in this state :
(1) the family bible (2) family pictures, school books or library, and musical
instruments, for use of family ; (3) a seat or pew in any house or place of public
worship; (4) a lot in any burial ground; (5) all wearing apparel of the debtor
and his family ; all beds, bedsteads and bedding, kept and used by the debtor and
his family ; all stoves and appendages put up or kept for the use of the debtor and
his family ; all cooking utensils, and all other household furniture not herein
enumerated, not exceeding $500 in value ; also all moneys arising from insurance
of any property exempted from sale on execution, when such property has been
destroyed by fire ; (6) three cows, ten swine, one yoke of oxen and a horse, a
span of horses or mules, twenty sheep and the wool from the same, either in the
raw material or manufactured into yarn or cloth ; the necessary food for all the
THE EXEMPTION LAWS. 779
stock mentioned in this section for one year's support, either provided or growing,
or both, as the debtor may choose ; also one wagon, cart or dray, one sleigh, two
plows, one drag, and other farming utensils, including tackle for teams, not ex-
ceeding $300 in value; (7) the provisions for the debtor and his family necessary
for one year's support, either provided or growing, or both, and fuel necessary
for one year ; (8) one watch, the tools and instruments of any mechanic, miner or
other person, used and kept for the purpose of carrying on his trade, and, in ad-
dition thereto, stock in trade, including articles of goods manufactured in whole
or in part by him, not exceeding $400 in value ; the library and implements of any
professional man ; all of which articles hereinbefore intended to be exempt shall
be chosen by the debtor, his agent, clerk, or legal representative, as the case may
be. In addition to the articles enumerated in this section, all the presses, stones,
type, cases, and other tools and implements used by any copartnership, or by
any such printer, publisher or editor, or by any persons hired by him to use them,
not to exceed in value the sum of $2,000, together with stock in trade not exceed-
ing $400 in value, shall be exempt from attachment, or sale, on any final process
issued from any court in this state; (9) one sewing machine, one bicycle, one
typewriting machine; (10) necessary seed grain for the actual personal use of
debtor, for one season, to be selected by him ; not, however, in any case to exceed
the following kinds and amounts, respectively, viz : one hundred bushels of wheat,
fifty bushels of oats, one hundred bushels of potatoes, ten bushels of corn, and one
hundred bushels of barley, and binding material sufficient for use in harvesting
the crop raised from the seed grain above specified ; (11) the wages of any per-
son, or of his or her minor children, in any sum not exceeding $25, due for
services rendered by him or them, for any person, for and during thirty days
preceding the issue of process of attachment, garnishment, or execution in any
action against such person. (12a) all moneys derived or received by any sur-
viving wife or child from any form of life insurance upon the life of any de-
ceased husband or father not exceeding ten thousand dollars. (12b) the library,
philosophical and chemical or other apparatus used in instruction belonging to and
in use in any university, college, seminary of learning, or school for the instruc-
tion of youth open to the public. Whenever any proceedings are commenced in
any court of this state to subject the wages due to any non-resident debtor to
garnishment, if it shall appear that the wages earned by him were earned outside
of this state, such debtor is allowed the same exemption as is at the time allowed
to him by the law of the state in which he so resides. The exemptions provided
for and embraced in subdivisions six, seven, eight, nine, ten and eleven, extend
only to debtors having an actual residence in this state. The property enumerated
is not exempt from process issued in an action for the purchase money of the same
property. In addition to the above it is provided that when any benevolent
association or fraternal co-operative society shall set apart or appropriate a bene-
ficiary fund to be paid over to the families of deceased members, any such fund,
not exceeding five thousand dollars shall be exempt from seizure for any debt of
the deceased or beneficiary.
MISSISSIPPI.
Exemptions. — The following property is exempt from seizure under the execu-
tion or attachment, to wit : First— The tools of a mechanic necessary for carrying
on his trade. Second— The agricultural implements of a farmer necessary for
two male laborers. Third— The books of a student required for the completion
of his education. Fourth— The wearing apparel of every person. Fifth— The
libraries of all persons not exceeding two hundred and fifty dollars in value ; also
the instruments of surgeons and dentists used in their profession, not exceeding
78o THE EXEMPTION LAWS.
two hundred and fifty dollars in value. Sixth— The arms and accoutrements of
each person of the militia of the state. Seventh— All globes and maps used by the
teachers of schools, academies and colleges. Eighth— The following property of
each head of a family, to be selected by the debtor, to wit : (a) Two work horses
or mules, and one yoke oxen ; (b) two cows and calves ; (c) twenty head of hogs ;
(d) twenty sheep or goats; (e) all poultry; (f) all colts under three years old
raised in this state by the debtor; (g) two hundred and fifty bushels of corn;
(h) ten bushels of wheat or rice ; (i) five hundred pounds of pork, bacon or
other meat; (j) one hundred bushels of cotton seed; (k) one wagon, and one
buggy or cart, and one set of harness ; (1) five hundred bundles of fodder, and
one thousand pounds of hay ; (m) forty gallons of sorghum or molasses ; (n) one
thousand stalks of sugar cane; (o) one sugar mill and equipments, not exceeding
one hundred and fifty dollars in value ; (p) one bridle and saddle and one side
saddle ; (q) one sewing machine ; (r) household and kitchen furniture not ex-
ceeding in value two hundred dollars. Ninth — And all the following property
shall be exempt from garnishment or other legal process, to wit : (a) The wages
of every laborer or person working for wages, being the head of a family, one
hundred dollars ; every other person to the amount of twenty dollars ; (b) the pro-
ceeds of insurance on property, real and personal, exempt from execution or at-
tachment, and the proceeeds of the sale of such property.
Homestead Exemption. — Every citizen of this state, being a house-
holder and having a family, shall be entitled to hold as exempt
from execution or attachment the land and buildings owned and
occupied as a residence by him or her, not to exceed one hundred and sixty acres
in quantity or two thousand dollars in value. The exemptionist may, however,
increase the value of his exemption to three thousand dollars by making what
is called a " homestead declaration," which declaration is recorded in the office of
the clerk of the chancery court of the county where he lives. The proceeds of a
life insurance policy, to an amount not exceeding ten thousand dollars upon any
one life, is exempt to the beneficiaries named therein against the debts of the in-
sured, and the proceeds of a policy not exceeding five thousand dollars, payable
to the executor or administrator, inures to the heirs or legatees free from liability
for debts ; but if life is insured for the benefit of heirs or legatees otherwise, and
they collect the same, the sum collected can be deducted from the five thousand
dollars, and the excess of the latter only is exempt. No property is exempt as
against the purchase money, or for labor performed on it or material furnished
therefor.
MISSOURI.
Exemptions. — Resident married men and heads of families are allowed a
homestead of one hundred and sixty acres of land to the value of $1,500. In cities
of forty thousand inhabitants or over, homestead shall not include more than
eighteen square rods of ground nor exceed in value $3,000. In cities of less than
forty thousand and over ten thousand, homestead shall not include over thirty
square rods nor exceed $1,500 in value. In cities and towns less than ten thou-
sand, not more than five acres not exceeding $1,500 in value. Personal property
or real estate to the amount of not less than $300, in addition to wearing apparel,
beds, bedding, household and kitchen furniture of the value of $100, and other
specific articles are allowed to the heads of families. Wages for last thirty days'
service are exempt to heads of families. When judgment is obtained for the
purchase money of personal property, that specific property is not exempt, if
property is found in hands of debtor. A debtor who is a married woman may
invoke all exemption and homestead laws for the protection of the head of a
THE EXEMPTION LAWS. 781
family except where the husband has claimed such exemption and homestead
rights for the protection of his own property. Those not the head of * family
are entitled to hold as exempt all wearing apparel and the necessary tools and
implements of his trade, if a mechanic.
MONTANA.
Exemptions. — All clothing of the debtor and family, and chairs, tables, desks
and books, to the value of two hundred dollars ; also all necessary household,
table and kitchen furniture, and provisions and fuel actually provided for in-
dividual or family use, sufficient for three months ; also one horse, two cows and
their calves, four swine, and fifty domestic fowls. In addition to the above
there is exempt to the farmer his farming utensils, not exceeding six hundred
dollars in value, two oxen, or two horses or mules, and their harness, one cart or
wagon, and food for such stock for three months ; two hundred dollars' worth of
seed, grain, or vegetables actually provided for the purpose of sowing or planting.
The proper tools, books or instruments, of any mechanic, physician, lawyer,
dentist, or clergyman. To a miner, his dwelling, and all his tools and machinery
necessary for carrying on his avocation, not to exceed in value one thousand
dollars, and one horse, mule, or two oxen, vehicle and harness, by which the
debtor habitually earns his living. One horse, with vehicle or harness, of physi-
cian or clergyman, used in making his professional visits, with food for such
stock for three months. All arms, uniforms, etc., required by law to be kept by
any person. All property generally held by the county or town for the benefit of
the county or the public, except as against a vendor's lien or a mortgage. The
wages of a debtor earned at any time within thirty days next preceding the levy,
provided they are necessary for the use of his family residing in the state, sup-
ported wholly or in part by his labor. None but bona fide residents can claim the
benefits of this law. A homestead not to exceed in value twenty-five hundred
dollars ; if agricultural land, it is not to exceed one hundred and sixty acres of
land ; if within the limits of a town plat, city or village, not to exceed one-fourth
of an acre. The debtor has his option of the two and may select either, with all
improvements thereon, which are included in the valuation. Such exemptions
does not affect the lien of any mechanic or laborer, or extend to any mortgage
lawfully obtained. The exemptions above specified apply only to married men or
the head of a family, and none of the personal property is exempt from attach-
ment or execution for the wages of any clerk, mechanic, laborer, or servant. In
order to secure the homestead the claimant must execute and record in the county
clerk's office * declaration of homestead. Failure to do this renders the property
subject to execution.
NEBRASKA.
Exemptions. — A homestead consisting of any quantity of land, not ex-
ceeding one hundred and sixty acres, and the dwelling house thereon and its
appurtenances, to be selected by the owner thereof, and not included in any in-
corporated city or village; or, instead thereof, at the option of the owner, a
quantity of ccrtiguous land, not exceeding one-half an acre with buildings
thereon and appurtenances, all not over $2,000 in value, being within an in-
corporated town, city or village or, in lieu of the above, a lot or parcel of
contiguous land, not exceeding twenty acres, being within the limits of an in-
corporated town, city or village, the said parcel or lot of land not being laid
off into streets, blocks and lots, owned and occupied by any resident of the
state, being the head of a family, shall not be subject to attachment, levy or
sale, upon execution or other process issuing out of any court in this state, so
782 THE EXEMPTION LAWS.
long as the same shall be occupied by the debtor as a homestead, provided,
however, that such farm lands, lots, etc., do not exceed in value $2,000. All
heads of families who have neither lands, town lots, nor houses subject to ex-
emption as a homestead, under the laws of this state, shall have exempt from
forced sale on execution the sum of $500 in personal property. No property
hereinafter mentioned shall be liable to attachment, execution or sale, or any
final process issued from any court of this state, against any person being a
resident of this state and the head of a family: The family bible; family
pictures, school books and library for use of the family ; all necessary wearing
apparel of the debtor and his famiiy; all beds, bedsteads and bedding necessary
for the use of such family; all stoves and appendages put up or kept for the
use of debtor's family, not to exceed four; all cooking utensils and all other
household furniture not herein enumerated, to be selected by the debtor, not
exceeding in value $100; one cow, three hogs, and all pigs under six months old;
and if the debtor be at the time actually engaged in the business of agriculture,
in addition to the above, one yoke of oxen, or a pair of horses in lieu thereof,
ten sheep, and the wool therefrom, either in the raw material or manufactured
into yarn or cloth ; the necessary food for the stock mentioned in this section for
the period of three months ; one wagon, cart or dray, two plows and one drag ;
the necessary gearing for the team herein exempted, and other farming im-
plements not exceeding $50 in value ; the provisions for the debtor and his
family necessary for six months' support either provided or growing, or both,
and fuel necessary for six months ; the tools and instruments of any mechanic,
miner or other person, used and kept for the purpose of carrying on his trade
or business ; the library and implements of any professional man. Unmarried
child residing on homestead, is allowed it exempt if parents both dead. The
widow or widower, together or either one without the other, and with or with-
out a child living with them, or if all children are dead, are entitled to home-
stead, provided the person claiming homestead has some relative living with
him or her, dependent upon him or her for support. A conveyance or encum-
brance of homestead by the owner is of no validity unless the husband and wife,
if the owner is married, concur in and sign the same joint instrument. The
homestead is subject to execution on forced sale in satisfaction of judgments
obtained : First, on debts secured by mechanics', laborers' or venders' liens
upon premises. Second, on debts secured by mortgage upon the premises, exe-
cuted and acknowledged by both husband and wife, or an unmarried claim-
ant. Homestead descends discharged from debts.
BTEVADA.
Exemptions. — The following property of the judgment debtor is exempt from
execution. Chairs, tables, desks, and books to the value of $100. Necessary
household furniture, wearing apparel, beds, bedding, provisions, and firewood
sufficient for one month. Farming utensils ; also two oxen or two horses, or
two mules and their harness ; two cows, and one cart or wagon ; and food for
such oxen, horses, cows or mules, for one month ; also all seed grain or vege-
tables actually provided, reserved, or on hand for the purpose of planting or
sowing, at any time within the ensuing six months, not exceeding in value $400.
The tools and implements of a mechanic or artisan necessary to carry on his
trade ; the instruments and chests of a surgeon, physician, surveyor, and dentist,
necessary to the exercise of their profession, with their scientific and profes-
sional libraries, and the libraries of an attorney or counselor, and the libraries
of ministers of the gospel. The cabin or dwelling of a miner, not exceeding in
THE EXEMPTION LAWS. 783
value $500; also all tools and implements necessary for carrying on any mining
operation not exceeding in value $500 ; and two horses, mules, or oxen, with
their harness, and food for the same for one month, when necessary to be
used in such mining operations. Two oxen, two horses, or two mules, and their
harness, and one cart or wagon, by the use of which a cartman, huckster,
peddler, teamster, or other laborer, habitually earns his living; and one horse,
with vehicle and harness, or other equipments, used by a physician or surgeon
or minister of the gospel in making his professional visits, and food for such
oxen, mules, or horses, for one month. One sewing machine, not exceeding
in value $150,- in actual use by the debtor or his family. All fire engines, hooks
and ladders, and all apparatus and furniture belonging to any fire company or
department. All arms, uniforms, and accoutrements required by law to be kept
by any person. All court houses, jails, public offices and buildings, lots, grounds,
and personal property; the fixtures, furniture, books, papers, and appurtenances
belonging and pertaining to the court house, jail, and public offices belonging
to any county in this state, and all cemeteries, public squares, parks and places,
public buildings, town halls, public markets, buildings for the use of the fire
departments and military organizations, and the lots and grounds thereto be-
longing and appertaining, owned or held by any town or incorporated city, or
dedicated by such town or city to health, ornament, or public use, or for the
use of any fire or military company organized under the laws of this state. None
of the above articles or species of property are exempt from execution issued
upon a judgment recovered for its price, or upon a mortgage thereon. The
earnings of a judgment debtor arising from his personal services for the calendar
month during which process has been issued (in supplemental proceeoings), not
exceeding fifty dollars, are exempt, when it shall be made to appear by the
debtor's affidavit, or otherwise, that such earnings are necessary for the use
of a family supported wholly or partially by his labor. Homestead not exceed-
ing $5,000 in value, to be selected by husband or wife, or other head of a. family.
2TEW HAMPSHIRE.
Exemptions. — Homestead to the value of $500 ; necessary apparel and bed-
ding, and household furniture to the value of $100; bibles and school books in
use in the family library to the value of $200 ; one cow, one hog, and one pig,
and pork of same when slaughtered; tools of occupation to the value of $100;
six sheep and their fleeces, one cooking stove and its furniture; provisions and
fuel to the value of $50, and one sewing machine ; beasts of the plow not ex-
ceeding one yoke of oxen, or a horse, when required for farming or teaming
purposes or other actual use, hay not exceeding four tons, and domestic fowl
to value of $50.
NEW JERSEY.
Exemptions. — Every resident head of a family has or is entitled to an exemp-
tion of property (exclusive of wearing apparel) of the value of $200 as against
creditors in all cases where such property has not been pledged or mortgaged
to secure indebtedness. The family of a decedent may claim the same exemp-
tion and have set apart for their use property of the decedent of said appraised
value. Household goods and furniture of every kind, not exceeding in value
$200, of any absconding debtor having a family residing in this state, are re-
served for the use of the family, and are not liable to seizure under any writ of
attachment or other civil process, unless the debt or demand sued on be one
for which such property was sold and delivered.
784 THE EXEMPTION LAWS.
NEW YORK.
Exemptions and Homestead. — If the judgment debtor is a householder, or has
a family for which he provides, necessary household furniture, working tools
or team, professional instruments, furniture and library, not exceeding $250 in
value, and food for the team for ninety days, are exempt, except in actions for
the purchase price thereof, or the purchase price of various household exempt
articles specified in the statute. Even in supplementary proceedings the judg-
ment debtor cannot be ordered to apply upon the judgment his earnings for his
personal services within sixty days preceding the order if such earnings are
necessary for the support of a family wholly or partly supported by his labor.
The lot and buildings not exceeding in value $1,000, owned and occupied as a
residence by a householder, having a. family, and recorded as homestead prop-
erty, are exempt as against all debts but debts for purchase price thereof, and
those contracted before the property was recorded as exempt.
NORTH CAROLINA.
Exemptions. — Every homestead, and dwelling and buildings used therewith,
not exceeding in value $1,000, to be selected by the owner thereof; or in lieu
thereof, at the option of the owner, any lot in any city, town or village, with
the dwellings used thereon, owned and occupied by any resident of the state,
and not exceeding the value of $1,000. Personal property of the value of $500.
NORTH DAKOTA.
Exemptions. — The following property is absolutely exempt to a head of
family as defined in homestead from attacnment on mesne process and from levy
and sale on execution : All family pictures, a pew or any other sitting in any
house of worship ; a lot or lots in any burial ground ; the family bible and all
school books used by the family and all other books not exceeding in value
one hundred dollars ; all wearing apparel and clothing of the debtor and his
family ; provisions for the debtor and his family necessary for one year's supply,
and also fuel necessary for one year, and the homestead as created, denned
and limited by law. Aside from these absolute exemptions, the debtor may select
from all other of his personal property, goods, chattels, merchandise, or money
not to exceed in the aggregate fifteen hundred dollars ; or in lieu thereof he
may select books and musical instruments of the value of five hundred dollars ;
kitchen and household furniture and bedding of the value of five hundred dollars ;
three cows, ten swine, one yoke of cattle, two horses or mules, one hundred
sheep and their lambs under six months old, and all wool therefrom, and all cloth
or yarn manufactured from such wool and the food necessary to keep such ani-
mals for one year ; also one wagon, one sleigh, two plows, one harrow and farm-
ing utensils, including tackle for teams, not exceeding three hundred dollars in
value, the tools of any mechanic used and kept for the purpose of carrying on
his trade, and, in addition thereto, stock in trade of the value of two hundred
dollars ; the library and instruments of any professional person not exceeding
six hundred dollars in value. None but the absolute exemptions above specified
are allowed to either a corporation for profit, a non-resident, a debtor who is in
the act of removing from the state with his family, a debtor who has absconded,
taking his family with him, or any person against whom an execution or other
process issues upon a debt incurred for property obtained under false pretenses,
or as against an execution issued for the recovery of laborers' or mechanics'
wages or physicians' bills. No exemption exists as against execution issued for
THE EXEMPTION LAWS. 78s
the purchase money of property, real or personal. A partnership firm can claim
but one exemption of fifteen hundred dollars, or the alternative property, and-
not a several exemption for each partner.
OHIO.
Exemptions. — The family homestead of each head of a family is exempt
from sale on execution on any decree or judgment rendered in any cause of
action, provided that such homestead does not exceed one thousand dollars in
value. When the homestead consists of a house and lot of land that will not
bear a division, the plaintiff in execution shall receive, in lieu of the proceeds
of a sale of the homestead, the amount over and above $100 annually, which
shall be adjudged by appraisers as a fair and reasonable rent for the same, until
the debt, interest, and costs are paid, the same being payable quarterly. In de-
fault of rent being paid quarterly, or within ten days after each payment shall
become due, it is the duty of the sheriff to proceed and sell said homestead.
It cannot be sold for less than its appraised value. The wearing apparel of such
family, beds, bedsteads, bedding necessary for the use of the family; one stove
and pipe, fuel sufficient for sixty days, tools necessary for carrying on his or her
trade or business, not exceeding $100 in value; the personal earnings of the
debtor and his or her minor child or children for three months when necessary
to the support of debtor. In case the debtor is not the owner of a. homestead,
he is entitled to hold exempt from levy and sale personal property not exceed-
ing $500 in addition to the amount of chattel property aforesaid. The de-
fendant may hold exempt from execution ninety per cent, only of his personal
earnings as provided above, when the debt, demand or claim is for necessaries
furnished to the defendant, his wife or family after April 26th, 1898.
OKLAHOMA.
Exemptions. — To head of a family, outside of city or town, not to exceed
one hundred and sixty acres, which must be in one tract, with the improvements
thereon, and in a city or town, not more than one acre; all household and
kitchen furniture ; lot in cemetery ; all implements of husbandry, tools, apparatus
and books used in trade or profession ; family library, portraits and wearing
apparel ; five milch cows and their calves, one yoke of oxen, with yokes and
chains ; two horses or mules, and wagon, or cart, or dray, carriage or buggy ;
gun ; ten hogs, twenty sheep ; saddles, bridles and harness for use of family ;
provisions, forage on hand or growing for home consumption and for the use
of exempt stock for one year ; current wages and earnings for personal and pro-
fessional services within last ninety days. These exemptions do not apply to
corporation for profit ; to a non-resident ; to a debtor who is in the act of re-
moving his family from the Territory, or who has absconded, taking with him
his family. To a single person : lot or lots in cemetery held for sepulchre ; all
wearing apparel ; tools, apparatus, and books belonging to any trade or profes-
sion ; one horse, bridle and saddle or one yoke of oxen ; current wages for per-
sonal services. Exemption of homestead shall not apply where debt is due for
purchase money, or part of same ; taxes due thereon ; work and material used
in constructing improvements thereon ; lien given by the owner. Exemption of
personal property shall not apply when debt is due for rents and advances of
landlord to tenant, or to debts secured by lien. No personal property is exempt
from execution or attachment for wages of clerk, mechanic, laborer or servant.
All pension money is exempt, and judgment debtor has right to select $600
worth of property, exempt from any levy.
(99)
y86 THE EXEMPTION LAWS,
OREGON.
Exemptions. — Books, pictures, and musical instruments, to the value of $75;
wearing apparel to the value of $100, anl if a householder, to the value of $50
for each member of the famiW; tools, implements, apparatus, team, vehicle, har-
ness, or library, when necessary in the occupation or profession of a judgment
to the debtor, amount of $400 ; also sufficient quantity of food to support such
team, if any, for sixty days; if the judgment debtor be a householder, ten sheep
with one year's fleece, two cows, five swine, household goods, furniture, and
utensils, to the value of $300. No article of property is exempt from execution
issued upon a judgment for the purchase price. Earnings of judgment debtor
for personal services for the thirty days next preceding garnishment or attach-
ment cannot be included in the judgment.
PENNSYLVANIA.
Exemptions. — In executions issued on judgments " obtained upon contract
and distress for rent," property, real or personal, to the value of $300. The
exemption may be waived in note or contract. Under assignments for the benefit
of creditors, household furniture and things of domestic use to the amount of
$300. The widow or children of a deceased resident of the state can retain as
against creditors $300 in money, lands or personalty.
RHODE ISLAND.
Exemptions. — The following property is exempt from attachment : The neces-
sary wearing apparel of a debtor or his family, if he have a family ; the working
tools of a debtor necessary to his or her usual occupation, not exceeding in value
the sum of $200, and the professional library of any professional man in actual
practice ; the household furniture and family stores of a housekeeper, not ex-
ceeding in value the sum of $300 ; one cow and one and a half tons of hay of a
housekeeper ; one hog, and one pig of a housekeeper, and pork of such hog and
pig when slaughtered ; debts secured by bills of exchange or negotiable promis-
sory notes ; the salary or wages due or payable to any debtor, not exceeding the
sum of $10, except when the cause of action is for necessaries furnished the de-
fendant. For certain other exemptions see Chapter 255 of the General Laws of
1896. There is no homestead exemption.
SOUTH DAKOTA.
Exemptions. — Absolute exemptions are : All family pictures ; a pew or other
sitting in any house of worship ; lot or lots in burial ground ; family bible and
all school books used by family, all other books used as part of family library,
not exceeding $200 ; all wearing apparel and clothing of debtor and family,
provisions and fuel necessary for one year's supply for himself and family ; and
the homestead. In addition, debtor, if head of family, may select $750 worth
of other personal property ; and, if single person, $300. Any debtor wishing to
avail himself of this last exemption must prepare a verified schedule of all his
personal property and deliver it to the officer having the execution or other writ
within three days from the date of the levy. Any property owned by the debtor
and not included in this schedule shall not be exempt. The appraisement of
the personal property must be at the actual value of the articles at the place
where situated. The appraisement is made by three disinterested persons, one
chosen by each of the parties, and they selecting the third. If they cannot agree
THE EXEMPTION LAWS. 787
upon the third, the sheriff or officer having the writ selects him. Instead of the
$7SO exemption the debtor may select property as follows: books and musical
instruments for use of family, not exceeding $200 in value; household and
kitchen furniture, not exceeding $200 ; two cows, five swine, two yoke of oxen
or one span of horses or mules, twenty-five sheep and their lambs under six
months old, all wool of the same, and all cloth or yarn manufactured therefrom,
necessary food for the animals mentioned for one year; also one wagon, one
sleigh, two ploughs, one harrow, and farming utensils, including tackle for
teams, not exceeding $1,250 in value; the necessary tools and implements of
a mechanic, and in addition stock in trade not exceeding $200 in value ; the
library and instruments of a professional man, not exceeding $300 in value. But
no exemptions except the absolute ones are allowed against an execution or other
process issued upon a debt incurred for property obtained under false pretenses.
The same is true as to a judgment for laborers' or mechanics' wages ; and also
for physicians' bills, with certain restrictions ; and no exemptions are allowed
against an execution levied on property for the purchase money of such property.
A corporation for profit, a non-resident, a debtor who is in the act of removing
with his family from the state, or who has absconded, taking with him his
family, cannot claim any but absolute exemptions. A partnership firm can claim
but one exemption of $750, and not several exemptions for each partner.
TENNESSEE.
Exemptions. — A homestead to the value of $1,000 is exempt. Debtor has the
right to elect what property shall be set apart for the purpose. It is not neces-
sary that he should reside upon it. Also two beds, bedsteads and necessary
clothing for each, and for each three children an additional bed, bedstead, and
clothing, such bedstead not exceeding $25 in value ; one cow and calf, and if
family consists of six persons, two cows and calves ; one dozen knives and forks,
one dozen plates, half dozen dishes, one set tablespoons, one set teaspoons, one
bread tray, two pitchers, one waiter, one coffeepot, one teapot, one canister, one
cream jug, one dozen cups and saucers, one dining table and two table cloths,
one dozen chairs, one bureau not exceeding $40 in value, one safe or press, one
wash basin, one bowl and pitcher, one washing kettle, two washing tubs, one
churn, one looking glass, one chopping axe, one spinning wheel, one loom and
gear, one pair cotton cards, one pair wool cards, one cooking stove and utensils
not exceeding $25 in value, one cradle, one bible and hymn book, all school
books, two horses or mules, or one of each, or one yoke of oxen, one ox cart,
ring, staple, and log chain, one two-horse or one-horse wagon not exceeding
$75 in value, and harness, one man's saddle, one woman's saddle, two riding
bridles, twenty-five barrels of corn, twenty bushels of wheat, five hundred bundles
of oats, five b.uhdred bundles of fodder, one stack of hay not exceeding $20 in
value, and in family of less than six persons one thousand pounds of pork,
slaughtered or on foot, or six hundred pounds of bacon, and if the family con-
sists of more than six persons, twelve hundred pounds of pork or nine hundred
pounds of bacon, all the poultry on land and fowls up to $25, a home-made car-
pet, and six cords of wood or one hundred bushel of coal, and if the head of
the family be engaged in agriculture, two plows, two hoes, one grubbing hoe,
one cutting knife, one harvest cradle, one set plow gears, one pitchfork, one rake,
one iron wedge, five head of sheep, and ten head of stock hogs ; also, in hands
of a mechanic, one set of mechanics' tools, such as are usual and necessary in
pursuit of his trade ; also, in hands of every male citizen, or female if head of
family, one gun; also, in hands of head of family, or single female using in
788 THE EXEMPTION LAWS.
earning a livelihood, one sewing machine ; and in hands of heads of families,
fifty pounds of picked cotton, twenty-five pounds of wool, and enough upper and
sole leather to provide shoes for family ; one hundred gallons of sorghum molasses,
five bee hives and the products of the same, one hundred pounds of soap, fifty
pounds of lard, one hundred pounds of flour, fifty pounds of salt, one hundred
pounds of beef or mutton, one pound of black pepper, one pound of spice, one
pound of ginger, twenty pounds of coffee, fifty pounds of sugar, three bushels
of meal, one bushel of dried beans, one bushel of dried peas, fifty bushels of
Irish potatoes, fifty bushels of sweet potatoes (provided they be kept for family
use, and not for sale or merchandise), ten bushels of turnips, one pair of and-
irons, one clock, all the canned fruits put up for the use of the family, not to
exceed twenty dollars in value, and twenty bushels of peanuts, three strings of
red pepper, and two gourds, two punger gourds, a carpet in actual use by the
family, not exceeding in value twenty-five dollars ; fifty head of sheep and the
fleece that may be shorn from the same, twenty-five stand of bees and the prod-
uct of the same. In the hands of each mechanic who is the head of a famliy,
two hundred dollars' worth of lumber, or material or products of his labor, in a
finished or unfinished state.
TEXAS.
Exemptions. — The homestead of a family is exempted and protected from
forced sale for the payment of all debts, except the purchase money thereof,
or a. part of such purchase money, the taxes due thereon, or for work and
material used in constructing improvements thereon ; nor shall the owner, if a
married man, sell the homestead without the consent of the wife, given in such
manner as may be prescribed by law. No mortgage, trust deed, or other lien on
the homestead shall ever be valid, except for the purchase money therefor, or
improvements thereon, as herein before provided, whether such mortgage or
trust deed or other lien shall have been created by the husband alone, or together
with his wife, and all pretended sales of the homestead involving any condi-
tions of defeasance shall be void. The homestead not in a town or city shall
consist of not more than two hundred acres of land, with the improvements
thereon. The homestead in a city, town or village shall consist of lot or lots
not exceeding in value $5,000 at the time of their designation as the homestead,
without reference to the value of any improvements thereon ; provided that the
same shall be used for the purposes of a home, or as a place to exercise the
calling or business of the head of a family. There is also exempt to every family
all household and kitchen furniture ; all implements of husbandry ; any lot or
lots in a cemetery ; all tools, apparatus and books belonging to any trade or pro-
fession ; the family library and all family portraits and pictures ; five milch cows
and their calves ; two yoke of work oxen, with necessary yokes and chains ; two
horses and one wagon ; one carriage or buggy ; one gun ; twenty hogs ; twenty
head of sheep ; all saddles, bridles and harness necessary for the use of family ;
all provisions and forage on hand for home consumption, and all current wages
for personal services. The following property shall be exempt to persons who
are not constituents of a family : A lot or lots in a cemetery ; all wearing ap-
parel ; all tools, apparatus and books belonging to any trade or profession ; one
horse, saddle and bridle, and current wages for personal services.
UTAH.
Exemptions.— Chairs, tables, desks, and books amounting to $200; necessary
household and kitchen furniture amounting to $300, also one sewing machine
and family pictures, provisions and fuel for three months. Farming implements
THE EXEMPTION LAWS. 789
not exceeding $300 of a farmer : also two oxen, two mules or two horses and
their harness, two cows with sucking calves,, two hogs and all sucking pigs,
all wearing apparel, also all beds and bedding, cart or wagon, food for such
horses, mules, oxen, and cow for sixty days, also seeds, etc., for planting amount-
ing to $200, and crops of same amount. Tools of mechanics not exceeding $500,
instruments of physicians, surgeons or dentists with professional library, law
library of attorney, cabin of miner not exceeding $500, tools, derricks etc., $200,
two oxen, horses or mules, carts and harness by which drayman, etc., habitually
earns his living, a horse, harness and vehicle, etc., used by physician, surgeon
or minister in making professional calls, with hay and grain sufficient for three
months, all earnings of the debtor if he be a married man or with a family de-
pendent upon him for support, within sixty days next preceding the levy. If the
debtor is head of family there is exempt homestead valued $1,000, $500 additional
valuation allowed for wife and $250 for each other member of family. Court
houses, public buildings, property of fire companies, cemeteries, parks and
churches. No property is exempt owned by non-residents or for purchase price
of the thing sold. Redemption — Leasehold estate, less than two years unexpired,
sale shall be absolute. In all other cases real property shall be subject to re-
demption : First, the judgment debtor, or his successor in interest in the whole
or any part of the property ; second, a creditor having a lien by judgment or
mortgage on the property sold, or on some part thereof, subsequent to that on
which the property was sold, within six months after sale of the property, by
paying the purchase money in kind as rpecified in the judgment (gold or cur-
rency) with six per cent, thereon added, together with any assessment or tax
which the purchaser may have paid since the purchase, and if the purchaser be
also a creditor, having a lien prior to that of a redemption other than the judg-
ment under which the purchase was made the amount of such lien with in-
terest. If the oroperty be so redeemed by a redemptioner, either the judgment
debtor or another redemptioner may, within sixty days of the last redemption,
again redeem it from the last redemptioner on paying the sum paid on such last
redemption, with three per cent, thereon in addition, and the amount of any as-
sessment or tax which the last redemptioner may have paid thereon after the
redemption made by him, with interest on such amount, and in addition, the
amount of any liens held by said last redemptioner prior to his own with inter-
est, provided that the judgment under which the property was sold need not be
paid as a lien. The property may be again redeemed as often as a debtor or re-
demptioner is so disposed, from any previous redemptioner, within sixty days
after the last redemption, with three per cent, thereon in addition, and amount
of any assessment or tax which the last redemptioner paid after the redemp-
tion by him, with interest thereon and the amount of any liens other than the
judgment under which the property was sold, held by the said last redemptioner
previous to his own with interest. Sale under deed of trust of real property
may be redeemed by the grantor or assigns, or any legal redemptioner within
six months after sale on payment of debt and interest and legal charges and
costs.
VERMONT.
Exemptions.— Homestead to the value of $500, and products, such suitable
apparel, bedding, tools, arms, and articles of furniture as may be necessary for
upholding life; one sewing machine kept for use, one cow, not exceeding $100
in value, the best swine, or the meat of one swine, ten sheep, not exceeding $100
in value for the ten, and one year's product of said sheep in wool, yarn, or
cloth ; forage sufficient for keeping not exceeding ten sheep and one cow through
7 go THE EXEMPTION LAWS.
one winter ; ten cords of firewood, twenty bushels of potatoes, such military
arms and accoutrements as the debtor is required by law to furnish ; all growing
crops, ten bushels of grain, one barrel of flour, three swarms of bees and hives,
together with their produce in honey ; two hundred pounds of sugar, and all
lettered gravestones ; the bibles and other books used in a family ; one pew or
slip in a meeting house or place of religious worship ; live poultry not exceeding
in amount or value the sum of $10; the professional books and instruments of
physicians, and the professional books of clergymen and attorneys at law, to the
value of $200, and also one yoke of oxen or steers as the debtor may select, or
two horses kept in use for team work, and such as the debtor may select, in lieu
of oxen or steers, but not exceeding in value the sum of $200, with sufficient
forage for the keeping of the same through the winter ; also one two-horse
wagon with whiffletrees, and one neckyoke, or one ox-cart as the debtor may
choose, one sled or one set of tram-sleds, either for horses or oxen, as the
debtor may select, two harnesses, two halters, two chains, one plow and one ox-
yoke, which with the oxen, or steers, or horses, which the debtor may select for
team work, shall not exceed in value $250 ; provided that the exemption of said
one two-horse wagon with whiffletrees and one neckyoke, or one ox-cart as the
debtor may choose, one sled or set of tramsleds, harnesses, halters, plow and
ox-yoke are not to extend to or affect any attachment in any suit founded on
any contract made on or before the 1st day of December, A. D. 1878, or to any
execution issued on a judgment founded on any such contract ; provided, how-
ever, the exemption, as to one yoke of oxsn or steers and the forage therefor,
is not to extend to any attachment issued on any contract made on or before
the twenty-first day of November, 1839, or the exemption as to two horses and
the forage therefor, on or before the 1st day of December, 1866, or any execu-
tion issued on a judgment founded on any such contract. But property is not
exempt in a suit brought for the purchase price thereof.
VIRGINIA.
Exemptions. — Every householder or head of a family shall be entitled, in
addition to the articles mentioned below, to hold exempt from levy his real and
personal property, or eitner, including money or debts due him, to a. value not
exceeding $2,000, to be selected by him In case of husband, parent, or other
person, who is a housekeeper and head of a family, there are also exempt, family
bible, family pictures, books, etc., not exceeding $100 in value; a pew in a
church, lot in a burial ground, necessary wearing apparel of debtor and family,
necessary beds, bedding, etc., stoves for necessary use of family, not exceeding
three ; one cow, one horse, six chairs, one table, six knives, six forks, six plates,
one dozen spoons, two dishes, two basins, one pot, one oven, six pieces of wood
or earthenware, one loom, one safe or press, spinning-wheel, pair of cards,
one axe, two hoes, five barrels of corn, five bushels of wheat or one barrel of
flour, two hundred pounds of bacon, three hogs, $10 worth of forage; one cook-
ing stove and utensils for cooking ; one sewing machine ; and in cas of a me-
chanic, the tools of his trade to the value of $100 ; if debtor at the time is
actually engaged in agricultural pursuits, there are exempt, whilst so engaged,
one yoke of oxen, or a pair of horses or mules in lieu thereof, one wagon, two
plows, one drag, one harvest cradle, one pitchfork, one rake, two iron wedges
The foregoing list of exemptions, except the item of $2,000, applies to debts con-
tracted since February 20, 1867 ; the exemption, affecting debts contracted before
that time, embraces but a small proportion of the above described articles. The
benefit of a homestead ($2,000) can only be secured by deed duly recorded in
THE EXEMPTION LAWS.
791
the county where the property, or the greater part thereof, is situated, declaring
an intention to claim such homestead, with a description of the property so
claimed as such homestead. The homestead continues after death of the house-
holder or head of a family for the benefit of the widow and children of the
deceased until her death or marriage, and after her death or marriage for the
exclusive benefit of the minor children until the youngest child becomes twenty-
one years of age ; after which period it shall pass, according to the law of descent,
as other real estate, or as may be devised by said householder, not being subject
to dower, yet subject to all the debts of the said householder or head of a family.
The Court of Appeals of Virginia has decided that the provision of the State
Constitution and the act of the General Assembly passed in pursuance thereof,
known as the " Homestead Exemption Laws," so far as they apply to contracts
entered into or debts contracted before their adoption, are in violation of the
Constitution of the United States, and therefore void.
WASHINGTON.
Exemptions. — The homestead consists of the dwelling house in which the
claimant resides, and the land on which the same is situated, selected as provided
by law. The homestead is exempt from execution or forced sale, except on
debts secured by mechanic's lien, labor liens, vendors' liens, debts secured by
mortgage on the premises, executed and acknowledged by the husband and wife,,
or by an unmarried claimant. The homestead of a married person cannot be
conveyed or incumbered, except by instrument signed by both husband and wife.
A homestead can be abandoned only by a declaration of abandonment, or a grant
therefor executed and acknowledged by the husband and wife, if claimant is
married, or by claimant if unmarried, and a. declaration of abandonment is ef-
fectual only from the date it is filec1. for 1 :cord. Whenever property, which is
exempt by the laws of the state, i j destroyed by fire, then the insurance money
coming to or belonging to the person thi— , insured to an amount equal to the
property thus destroyed shall be exempt from execution an.1 attachment. The
following property shall be exempt from execution and attachment (1) all wear-
ing apparel of every person and family; (2) all private libraries, not to exceed
$500 in value, and all family pictures and keepsakes; (3) to each householder one
bed and bedding, and one additional bed and bedding for each additional mem-
ber of the family, and other household goods and utensils and furniture, not
exceeding $500 coin in value; (4) to <?ach householder two cows, with their
calves five swine, two stands of bees, thirty-six domestic fowls, and provisions
and fuel for the comfortable maintenance of such household and family for
six months, also feed for such animals for six months (provided that in case
such householder shall not possess, or shall not desire to retain the animals
above named, he may select from his property and retain other property not to
exceed $250 coin in value) ; (5) to a farmer, one span of horses or mules with
harness, or two yoke of oxen with yokes and chains, and one wagon ; also farm-
ing utensils actually used about the farm, not exceeding in value $500 in coin;
also one hundred and fifty bushels of wheat, one hundred and fifty bushels of
oats or barley, fifty bushels of potatoes, ten bushels of corn, ten bushels of peas,
and ten bushels of onions for seeding purposes ; (6) to a mechanic, the tools
and instruments used to carry on his trade for the support of himself and family,
also material used in his trade not exceeding in value $500 in coin ; (7) to a
physician, his library, not to exceed in value $500 in coin, also one horse with
harness and buggy, the instruments used in his practice, and medicines not ex-
ceeding in value $200 in coin; (8) to attorneys, clergymen and other profes-
792
THE EXEMPTION LAWS.
sional men, their libraries, not exceeding $ 1,000 in coin value, also office fur-
niture, fuel and stationery, not exceeding in value $200 In coin; (9) all firearms
kept for the use of any person or family; (10) to any person, a canoe, skiff, or
small boat, with its oars, sails and rigging, not exceeding in value $250 ; (n) to
a person engaged in lightering for his support or that of his family, one or more
lighters barges or scows, and a small boat with oars sails and rigging, not ex-
ceeding in the aggregate $250 in coin value; (12) to a teamster or drayman en-
gaged in that business, for the support of himself or his family, his team, con-
sisting of one span of horses or mules, or two yoke of oxen, or » horse and
mule with harness, yokes, one wagon, truck, cart or dray; (13) to a person
engaged in the business of logging for his support or that of his family, three
yoke of work cattle and their yokes, and axes, chains, implements for the busi-
ness, and camp equipments, not exceeding $300 coin in value; (14) a sufficient
quantity of hay, grain, or feed to keep the animals mentioned in the several
subdivisions of this chapter, for six weeks. But no property shall be exempt
from an execution issued upon a judgment for the price thereof, or any part of
the price thereof, or for any tax levied thereon or for clerk's laborer's or me-
chanic's wages earned within this state, nor shall any property be exempt from
execution issued upon a judgment against an attorney on account of any liability
incurred by such attorney to his client on account of any moneys, or other prop-
erty coming into his hands, from or belonging to his client. Each person shall
be entitled to select the property which he is entitled to claim as exempt. Any
money received by any citizen of the state as a pension from the Government
of the United States, whether the same be in the actual possession of such person
or be deposited or loaned by him, shall be exempt from execution, attachment
or seizure by or under any legal process whatever. When any debtor dies or
absconds, and leaves his family any money exempted by this act, the same shall
be exempt to his family. The proceeds or avails of all life insurance is exempt
from all liability for debt. In addition to the above exemption, the law of 1897
exempts to every householder in the state, personal property to the amount and
value of $1,000, and defines a householder as designated in all statutes relating
to exemptions to be: (1) the husband and wife, or either; (2) every person who
has residing with him or her, and under his or her care and maintenance, either :
(a) his or her minor child, or the minor child of his or her deceased wife or
husband; (b) a minor brother or sister, or the minor child of a deceased brother
or sister ; (c) a father, mother, grandfather or grandmother ; (d) the father,
mother, grandfather, or grandmother of deceased husband or wife ; (e) an un-
married sister, or any other of the relatives mentioned in this section who have
attained the age of majority, and are unable to take care of or support them-
selves.
WEST VIRGINIA.
Exemptions. — Homestead to the value of $1,000 is exempt, where the debtor,
being a husband or parent, and resident in the state, previously to contracting the
debt or liability, has placed a declaration of his intention to keep the property
as a homestead on the land records of the county in which the real estate is
situate. Personal property to the value of $200 is also exempted, provided debtor
is a resident, and husband or parent, or a married woman. Also $50 worth of
tools of a mechanic, artisan or laborer, whether he is a husband or parent or not.
WISCONSIN.
Exemptions. — A homestead consisting of any quantity of land not exceeding
forty acres, used for agricultural purposes, and the dwelling house thereon and
THE EXEMPTION LAWS. 793
its appurtenances, to be selected by the owner thereof, and not included in any
city or village ; or instead thereof, at the option of the owner, a quantity of land
not exceeding in amount one-fourth of an acre, being within a city or village,
and the dwelling house thereon and its appurtenances, owned and occupied by
any resident of the state, shall not be subject to forced sale on execution, or
any other final process from a court, for any debt or liability except mechanics'
liens, mortgages and taxes ; but if testator leave no widow or minor children
the homestead is liable for expense of last sickness, funeral and administration,
and if he leave no widow, children, or grandchildren, it is liable for all debts after
other property is exhausted. Family bible, family pictures and school books,
library of debtor, and every part thereof, but not circulating libraries, wearing
apparel of debtor and family, all beds, bedsteads and beddings kept and used
for the debtor and his family, all stoves put up and kept for use, all cooking
utensils, and all other household furniture not herein enumerated, not exceeding
$200 in value ; two cows, ten swine, one yoke of oxen and one horse or mule,
or instead of oxen two horses or two mules ; ten sheep and the wool from same,
either raw or manufactured ; the necessary food for above stock for a year's sup-
port ; one wagon, cart, or dray, one sleigh, one plow, one drag, and other farming
utensils, including tackle for teams, not exceeding $200 in value, provisions and
fuel for one year ; tools and implements or stock in trade of a mechanic, miner,
merchant, trader, or other person, not exceeding $200 in value, all moneys from
insurance of exempt property ; all sewing machines kept for use ; any swords,
plate, books, or other articles presented by Congress or any legislature ; print-
ing materials and press, or presses, used in the business of any printer or pub-
lisher, not exceeding $1,500 in value; but not more than $400 shall be exempt
as against employees ; fire engines and equipments, and everything connected
with fire departments, including houses and lots, etc. ; abstract books, and pat-
ents. All private property shall be exempt from seizure and sale upon any execu-
tion, issued to enforce any judgment or decree of any court, which shall have been
rendered against any county, town, village, city, or school district. The earnings
of any person and persons having a family to support, for three months prior
to issue of process, to the amount of $60 per month, are also exempt. Said earn-
ings shall not exceed $180 for the three months, including such parts or share
thereof paid the debtor during said time.
WYOMING.
Exemptions. — The necessary wearing apparel of every person not exceeding in
value $150. Household property when owned by any person being the head of a
family to the amount of $500. Tools, teams, implements, or stock in trade of any
mechanic, miner or other person, used and kept for the purpose of carrying on his
trade or business, not exceeding in value $300, and homestead occupied by the
owner or his or her family not exceeding in value $1,500, and the earnings of
a debtor for his personal services not exceeding $50, when it is shown that the
earnings are needed for the support of a family supported wholly or partly by his
labor. No article of personal property is exempt from attachment or sale on
execution 'for the purchase money of said article. Persons claiming exemption
must be bona fide residents of this state. No property of any person about to
remove or abscond from the state is exempt,
(100)
JUDGES, CLERKS, DISTRICTS, TERMS.
795
List of Judges of Circuit, District and Territorial Courts and
Circuit Courts of Appeals of the United States and of the
Clerks of the Circuit and District Courts with their Official
Addresses; of the times and places of holding Courts, and the
Geographical limits of Districts and Circuits, compiled from
Official Sources and Corrected to October i, 1900.
Districts.
District Judges.
Circuit Judges.
Justices.
Maine
New Hampshire..
Massachusetts
Rhode Island . . .
Vermont
Connecticut
New York, N'th'n
New York, S'th'n.
New York, East'n
New York, West'n
New Jersey .....
Pennsylvania
East'n
Pennsylvania,
West'n
Delaware
North Carolina,
East'n
North Carolina,
West'n
South Carolina. . .
Maryland
Virginia, East'n..
Virginia, West'n..
West Virginia....
Georgia, North'n
Georgia, South'n.
Florida, North'n. .
Florida, South'n..
Alabama, North'n
and Middle
Alabama, South'n
Mississippi, N'th'n
and South'n . . .
Louisiana, East'n
Louisiana, W'st'n
Texas, North'n
Texas, East'n..
Texas, West'n.
Nathan Webb
Edgar Aldrich
Francis C. Lowell..
Arthur L. Brown . .
HoytH. Wheeler...
Wm. K. Townsend.
A. C. Coxe...
Addison Brown ....
Edward B. Thomas
John R. Hazel. . .
And'w Kirkpatrick.
John B. McPherson
Joseph Buffington. .
Edw'd G. Bradford.
Thomas R. Purnell.
Jas. Edmund Boyd.
Wm. H- Brawley . .
Thomas J. Morris..
Edm'd Waddill, Jr..
John Paul
John J. Jackson. . . .
Wm. T. Newman. .
Emory Speer
Charles Swayne
James W. Locke —
John Bruce
Henry T. Toulmin
Henry C. Niles. . . .
Charles Parlange. .
Aleck Boarman...
Edward R. Meek. .
David E. Bryant. .
Thomas S Maxey.
Le Baron B.
Colt.
"Wm. L. Put-
nam.
W. J.Wallace
E. Henry La-
combe.
Nath'n'l Ship-
man.
M. W. Ache-
son.
"G. M. Dallas.
George Gray.
Nathan Goff.
■ Chas. H.Sim
onton.
• Horace Gray.
RufusW. Peck-
ham.
J- Geo. Shirasjr.
\Melv.
j ler.
W. Ful-
D. A. Pardee,
And'w P. Mc-
Cormick.
D. D. Shelby,
► E. D. White.
796
JUDGES, CLERKS, DISTRICTS, TERMS.
Districts.
District Judges.
Circuit Judges.
Justices.
Ohio, North'n . . .
Ohio, South'n
Michigan, East'n.
Michigan, West'n
Kentucky
Tennessee, East'n
and Middle. . .
Tennessee.West'n
Augustus J. Ricks.
Albert C. Thompson
Henry H. Swan. .
George P. Wanty.
Walter Evans. . . .
Indiana
Illinois, North'n..
Illinois, South'n. .
Wisconsin, East'n
Wisconsin, West'n
Minnesota ,
Iowa, North'n
Iowa, South'n. . . ,
Missouri, East'n..
Missouri, West'n.
Arkansas, East'n.
Arkansas, West'n,
Nebraska
Colorado
Kansas
Wyoming
North Dakota ....
South Dakota
Utah
New Mexico
Oklahoma ,
Indian Territory,
North'n
Indian Territory,
Central
Indian Territory ',
South'n
California, N'th'n.
California, S'th'n,
Oregon
Nevada
Washintgon
Idaho
Montana .
A laska . .
Alaska.
Alaska.
Arizona.
Charles D. Clark. . .
Eli S. Hammond. .
John H. Baker
Christian C. Kohl
William J. Allen...
William H. Seaman
Romanzo Bunn .
William Lochren.
Oliver P. Shiras. .
Smith McPherson
Elmer B. Adams.
John F. Philips. .
Jacob Trieber
John H. Rogers
William H. Munger
Moses Hallett
William C. Hook..
John A. Riner ....
Charles F. Amidon.
John E. Carland
John A Marshall. . .
Joseph A. Gill.,
Wm. H. H. Clayton
Hosea Townsend. ..
John J. De Haven..
Olin Wellborn
Charles B. Bellinger
Thomas P. Hawley .
Cornelius H. Han-
ford.
James H. Beatty. . .
Hiram Knowles ....
Melville C. Brown,
Div, No. i.
Arthur H. Noyes,
Div. No. 2.
James Wickersham,
Div. No. 3.
H. H. Lurton,
Wm. R. Day.
> Henry F. Sev-
W. A. Woods.
James G. Jen-
kins.
Peter S. Gross
cup.
-John M.Harlan
Henry C.Cald
well.
Walter H.San-
born.
A. M. Thayer,
William W.
Morrow.
William B.Gil-
bert.
E. M. Ross.
H. B. Brown.
- D. J. Brewer.
J. McKenna.
JUDGES, CLERKS, DISTRICTS, TERMS. 797
Clerks, United States Circuit Courts of Appeals.
Name and office.
Official address.
Name and office.
Official address.
First Circuit.
Sixth Circuit.
Clerk.
Clerk.
John G. Stetson. . .
Boston, Mass.
Frank O. Love-
Cincinnati, Ohio.
Second Circuit.
Clerk.
William Parkins. .
New York, N. Y.
Seventh Circuit.
Clerk.
Third Circuit.
Edward M. Hoi-
Chicago, 111.
Clerk.
Wm.V. Williamson.
Philadelphia, Pa.
Eighth Circuit.
Fourth Circuit.
Clerk.
Clerk,
John D. Jordan. . .
St. Louis, Mo
Henry T. Meloney.
Richmond, Va.
Fifth Circuit.
Ninth Circuit.
Clerk.
Clerk.
James M. McKee. .
New Orleans, La.
F. D. Monckton. .
San Francisco.Cal.
=1=1
798 JUDGES, CLERKS, DISTRICTS, TERMS.
ALABAMA (5th Circuit).
NORTHERN DISTRICT.
Counties in the district. — Northern division : Colbert, Cullman, Franklin,
Jackson, Lauderdale, Lawrence, Limestone, Mladison, Marion, Marshall, Mor-
gan, and Winston.
Southern division : Bibb, Blount, Calhoun, Cherokee, Cleburne, Dekalb, Eto-
wah, Fayette, Greene, Hale, Jefferson, Lamar, Pickens, St. Clair, Shelby, Sum-
ter, Talladega, Tuscaloosa, and Walker.
Time and place of holding courts. — Circuit and district courts for northern
division : First Monday in April and second Monday in October, at Huntsville.
Circuit and district courts for southern division: First Mondays in March
and September, at Birmingham.
District Judge, John Bruce.
Clerk Circuit and District Courts, Charles J. Allison, Birmingham.
MIDDLE DISTRICT.
Counties in the district. — Autauga, Barbour, Bullock, Butler, Chilton, Cham-
bers, Clay, Coffee, Coosa, Covington, Crenshaw, Dale, Dallas, Elmore, Geneva,
Henry, Lee, Lowndes, Macon, Montgomery, Perry, Pike, Randolph, Russell,
and Tallapoosa.
Time and place of holding courts. — Circuit court: First Mondays in May
and November, at Montgomery.
District court: First Mondays in May and November, at Montgomery. A
session of this court is also held on the first Monday of each month, under
rules adopted.
District Judge, John Bruce.
Clerk Circuit and District Courts, Joseph W. Dimmick, Montgomery.
. SOUTHERN DISTRICT.
Counties in the district. — Baldwin, Choctaw, Clarke, Conecuh, Escambia,
Marengo, Mobile, Monroe, Washington, and Wilcox.
Time and place of holding courts. — Circuit and district courts : Fourth Mon-
day in November and first Monday in May, at Mobile.
District Judge, Harry T. Toulmin.
Clerk Circuit and District Courts. — Richard Jones, Mobile.
ALASKA (9th Circuit).
DIVISION No. i.
Time and place of holding courts. — At leastfour terms of court in the district
each year — two at Juneau and two at Skagway — and the judge shall, as near
January I as practicable, designate the time of holding the terms during the
current year.
JUDGES, CLERKS, DISTRICTS, TERMS. 799
Recording districts: Wrangel, No. 1; Juneau, No. 2; Skagway, No. 3 J
Sitka, No. 4; Kodiak, No. 5; Valdes, No. 6.
District Judge, Melville C. Brown.
Clerk District Court, Joseph J. Rogers, Juneau.
DIVISION No. 2.
Time and place of holding court. — At least one term of court each year at
St. Michaels, in the district, beginning the third Monday in June.
District Judge, Arthur H. Noyes.
Clerk District Court, Geo. V. Borchsenius, St. Michaels.
DIVISION No. 3.
Time and place of holding court. — At least one term of court each year at
Eagle City, in the district, beginning on the first Monday in July. Special
terms at times and places as the Judge or Attorney-General may direct. Re-
cording districts : Eagle City, Circle City, and Rampart City.
District Judge, James Wickersham.
Clerk District Court, Albert Heilig, Eagle City.
ARIZONA (9th Circuit).
Counties in the different judicial districts. — First judicial district: Cochise,
Pima, and Santa Cruz.
Second judicial district: Gila, Graham, and Pinal.
Third judicial district: Maricopa and Yuma.
Fourth judicial district: Apache, Coconino, Mohave, Navajo, and Yavapai.
Time and place of holding courts. — Supreme court Second Monday in Jan-
uary each year, at Phoenix.
First judicial district :. First Mondays in April and October, at Tucson.
Second judicial district: First Mondays in May and November, at Florence.
Third judicial district : Second Mondays in April and October, at Phoenix.
Fourth judicial district: First Mondays in June and November, at Prescott.
Chief Justice, Webster Street, third district.
Associate Justices, George R. Davis, first district ; Fletcher M. Doan, second
district ; Richard E. Sloan, fourth district.
Clerk Supreme Court, Thomas Grindell, Phoenix.
Clerks District Courts, Clinton D. Hoover, first district, Tucson ; Daniel C.
Stevens, second district, Florence; W. C. Foster, third district, Phcenix; J.
M. Watts, fourth district, Prescott.
ARKANSAS (8th Circuit).
EASTERN DISTRICT.
Counties in the district.— Eastern division (returnable to Helena) : Missis-
sippi, Crittenden, Lee, Philips, Clay, Craighead, Pointsett, Greene, Cross, St.
Francis, and Monroe.
800 JUDGES, CLERKS, DISTRICTS, TERMS.
Northern division (returnable to Batesville) : Independence, Cleburne, Stone,
Izard, Baxter, Searcy, Marion, Sharp, Fulton, Randolph, Lawrence, and
Jackson.
Western division (returnable to Little Rock) : Arkansas, Ashley, Bradley,
Chicot, Clark, Cleveland, Conway, Dallas, Desha, Drew, Faulkner, Garland,
Grant, Hot Spring, Jefferson, Lincoln, Lonoke, Montgomery, Perry, Pope,
Prairie, Pulaski, Saline, Van Buren, White, and Woodruff.
Time and place of holding courts. — Circuit and district courts : Fourth Mon-
day in May and second Monday- in December, at Batesville. Second Mondays
in March and October, at Helena.
District court : First Mondays in April and October, at Little Rock.
Circuit court: Second Monday in April and fourth Monday in October, at
Little Rock.
District fudge, Jacob Trieber.
Clerks Circuit Court, W. P. Field, Little Rock ; Joseph W. Parse, Batesville ;
Emerson R. Crum, Helena.
Clerks District Court, O. M. Spelman, Little Rock; Joseph W. Parse, Bates-
ville; Emerson R. Crum, Helena.
WESTERN DISTRICT.
Counties in the district. — Fort Smith division : Polk, Scott, Yell, Logan,
Sebastian, Franklin, Crawford, Washington, Benton, Madison, Carroll, New-
ton, Johnson, and Boone.
Texarkana division: Sevier, Howard, Little River, Pike, Hempstead, Miller,
Lafayette, Columbia, Nevada, Ouachita, Union, and Calhoun.
Time and place of holding courts. — Fort Smith division, Fort Smith : Second
Mondays in January and June. Texarkana division, Texarkana : Second Mon-
days in November and May.
District Judge, John H. Rogers.
Clerks Circuit Court, Thomas Boles, Fort Smith; John M. Somervell, Tex-
arkana.
Clerks District Court, H. B. Armistead, Fort Smith; John M. Somervell,
Texarkana.
CALIFORNIA (9th. Circuit).
NORTHERN DISTRICT.
Counties in the district. — Alameda, Alpine, Amador, Butte, Calaveras,
Colusa, Contra, Costa, Del Norte, Eldorado, Glenn, Humboldt, Lake, Lassen,
Marin, Mendocino, Modoc, Mono, Monterey, Napa, Nevada, Placer, Plumas,
Sacramento, San Benito, San Francisco, San Joaquin, San Mateo, Santa Clara,
Santa Cruz, Shasta, Sierra, Siskiyou, Solano, Sonoma, Stanislaus, Sutter, Te-
hama, Trinity, Toulumne, Yolo, and Yuba.
Time and place of holding courts. — Circuit court, San Francisco: First
Monday in March, second Monday in July, and first Monday in November.
District court, San Francisco : First Monday in March, second Monday in July,
and first Monday in November.
JUDGES, CLERKS, DISTRICTS, TERMS. 8oi
District Judge, John J. De Haven.
Clerk Circuit Court, Southard Hoffman, San Francisco.
Clerk District Court, George E. Morse, San Francisco.
SOUTHERN DISTRICT.
Counties in the district. — Northern division : Fresno, Inyo, Kern, Kings,
Madera, Mariposa, Merced, and Tulare.
Southern division : Los Angeles, Orange, Riverside, San Bernardino, San
Diego, San Luis Obispo, Santa Barbara, and Ventura.
Time and place of holding courts. — Circuit and district courts: Northern
division : First Monday in May and second Monday in November, at Fresno.
Southern division: Second Mondays in January and July, at Los Angeles.
District Judge, Olin Wellborn.
Clerk Circuit Court, William M. Van Dyke, Los Angeles.
Clerk District Court, Edward H. Owen, Los Angeles.
COLORADO (8th Circuit).
Time and place of holding courts. — Circuit and district courts: At Denver,
first Tuesdays in May and November; at Pueblo, first Tuesday in April; at
Del Norte, first Tuesday in August.
District comprises the entire State.
District Judge, Moses Hallett.
Clerk Circuit Court, Robert Bailey, Denver.
Clerk District Court, Charles W. Bishop, Denver.
CONNECTICUT (2nd Circuit).
Time and place of holding courts. — Circuit court : Fourth Tuesday in April,
at New Haven; second Tuesday in October, at Hartford.
District court: At New Haven, fourth Tuesdays in February and August;
at Hartford, fourth Tuesday in May, first Tuesday in December.
District comprises the entire State.
Circuit Judges, William J. Wallace, Emile Henry Lacombe, Nathaniel Ship-
man.
District Judge, William K. Townsend.
Clerk Circuit and District Courts, Elwin E. Marvin, Hartford.
DELAWARE (3rd Circuit).
Time and place of holding courts. — Circuit court : Third Tuesdays in June
and October, at Wilmington.
District court: Second Tuesdays in January, April, June, and September,
at Wilmington.
District comprises the entire State.
District Judge, Edward G. Bradford.
Clerk Circuit and District Courts, S. Rodman Smith, Wilmington.
(IOI)
802 JUDGES, CLERKS, DISTRICTS, TERMS.
DISTRICT OP COLUMBIA.
Time and place of holding courts. — Court of Appeals : First Monday in Jan-
uary, April, and October.
Supreme court, general term : First Mondays in January, April, and October.
Circuit and criminal courts : First Tuesdays in January, April, and October.
Equity courts : First Tuesday in every month.
District court : First Mondays in January and July.
District comprises all the District of Columbia.
COURT OF APPEALS.
Chief Justice, Richard H. Alvey.
Associate Justices, Martin F. Morris, Seth Shepard.
Clerk Court of Appeals, Robert Willett, Washington.
SUPREME COURT.
Chief Justice, Edward F. Bingham.
Associate Justices, Alexander B. Hagner, Andrew C. Bradley, Charles C.
Cole, Harry M. Clabaugh, Job Barnard.
■ Clerk Supreme Court, John R. Young, Washington.
FLORIDA (5th Circuit).
NORTHERN DISTRICT.
Counties in the district. — Calhoun, Escambia, Franklin, Gadsden, Holmes,
Jackson, Jefferson, Lafayette, Leon, Levy, Liberty, Santa Rosa, Taylor, Wa-
kulla, Walton, and Washington.
Time and place of holding courts. — Circuit and district courts : First Monday
in February at Tallahassee; first Monday in March, at Pensacola.
District Judge, Charles Swayne.
Clerk Circuit and District Courts, Frederick W. Marsh, Pensacola.
SOUTHERN DISTRICT.
Counties in the district. — Alachua, Baker, Bradford, Brevard, Citrus, Clay,
Columbia, Dado, De Soto, Duval, Hamilton, Hernando, Hillsboro, Lake, Lee,
Madison, Manatee, Marion, Monroe, Nassau, Orange, Osceola, Pasco, Polk,
Putnam, St. Johns, Sumter, Suwanee, and Volusia.
- Time\and place of holding courts. — Circuit and district courts: Second Mon-
day in February, at Tampa; first Mondays in May and November, at Key
West; first Monday in December, at Jacksonville; third Monday in January,
at Ocala.
District court open at all times in admiralty.
District Judge, James W. Locke.
Clerk Circuit and District Courts, Eugene 0. Locke, Jacksonville.
JUDGES, CLERKS, DISTRICTS, TERMS. 803
GEORGIA (5th Circuit).
NORTHERN DISTRICT.
Counties in the district. — Eastern division: Coweta, Spalding, Henry, New-
ton, Morgan, Greene, Oglethorpe, Elbert, Oconee, Walton, Rockdale, Fayette,
Campbell, Clayton, Dekalb, Fulton, Gwinnett, Milton, Forsyth, Cobb, Cherokee,
Pickens, Gilmer, Fannin, Union, Lumpkin, Dawson, Jackson, Clarke, Madison,
Hart, Franklin, Hall, Banks, Habersham, White, Towns, Rabun, Douglas.
Western division : Heard, Troup, Meriwether, Harris, Talbot, Taylor, Mus-
cogee, Marion, Schley, Webster, Stewart, Terrel, Randolph, Quitman, Clay,
Early, Miller.
Northwestern division : Carroll, Haralson, Paulding, Polk, Bartow, Floyd,
Chattooga, Gordon, Walker, Dade, Catoosa, Whitfield, Murray.
Time and place of holding courts. — Eastern division, circuit and district
courts : At Atlanta, first Mondays in October and second Mondays in March.
Western division, circuit and district courts : At Columbus, first Mondays in
May and December.
Northwestern division circuit and district courts: At Rome, third Mondays
in May and November.
District Judge, William T. Newman.
Clerk Circuit Court, Olin C. Fuller, Atlanta.
Clerk District Court, Walter Colquitt Carter, Atlanta.
SOUTHERN DISTRICT.
Counties in the district. — Eastern division, Savannah : Appling, Bullock, Ber-
rien, Bryan, Brooks, Clinch, Camden, Coffee, Charlton, Colquitt, Chatham,
Decatur, Echol Emanuel, Effingham, Glynn, Irwin, Lowndes, Liberty, Mont-
gomery, Mcintosh, Pierce, Screven, Tatnall, Thomas, Ware, Wayne, and
Worth.
Western division, Macon: Baker, Baldwin, Bibb, Butts, Calhoun, Crawford,
Dodge, Dooly, Dougherty, Hancock, Houston, Jasper, Jones, Laurens, Lee,
Macon, Mitchell, Monroe, Pike, Pulaski, Putnam, Sumter, Telfair, Twiggs,
Upson, Webster, Wilcox, and Wilkinson.
Northeastern division, Augusta : Burke, Columbia, Glascock, Jefferson, John-
son, Lincoln, McDuffie, Richmond, Taliaferro, Washington, Wilkes, and
Warren.
Time and place of holding courts.— Circuit court : First Mondays in May and
October, at Macon ; second Monday in April and Thursday after first Monday
in November, at Savannah ; first Monday in April and third Monday in Novem-
ber, at Augusta.
District court : First Mondays in May and October, at Macon ; second Tues-
days in February, May, August, and November, at Savannah; first Monday in
April and third Monday in November, at Augusta.
District Judge, Emory Speer.
Clerks Circuit Court, H. H. King, Savannah; Cecil Morgan (deputy),
Macon.
804 JUDGES, CLERKS, DISTRICTS, TERMS.
Clerks District Court, H. H. King, Savannah; Lenoir M. Erwin (deputy),
Macon; S. F. B. Gillespie (deputy), Savannah; George K Calvin (deputy),
Augusta.
HAWAII.
SUPREME COURT.
Chief Justice, W. F. Frear.
Associate Justices, Clinton A. Galbraith, Antonio Perry.
Clerk of the Supreme Court, Henry Smith, Honolulu.
IDAHO (9th Circuit).
Counties in the district. — Northern division : Idaho, Kootenai, Latah, Nez
Perces, and Shoshone.
Central division: Ada, Boise, Blaine, Canyon, Cassia, Lincoln, Elmore,
Owyhee, and Washington.
Southern division: Bannock, Bear Lake, Bingham, Custer, Fremont, Lemhi,
and Oneida.
Time and place of holding courts. — Circuit and district courts: Northern
division — At Moscow, second Monday in May and fourth Monday in October.
Central division : At Boise, second Mondays in March and September.
Southern division : At Pocatello, second Monday in April and first Monday in
October.
District Judge, James H. Beatty.
Clerk Circuit and District Courts, Alonzo L. Richardson, Boise.
t ILLINOIS (7th Circuit).
NORTHERN DISTRICT.
Counties in the district. — Northern division: Boone, Bureau, Carroll, Cook,
Dekalb, Dupage, Grundy, Jo Davies, Kane, Kendall, Kankakee, Lasalle, Lee,
Lake, McHenry, Ogle, Stephenson, Will, Whiteside, and Winnebago.
Southern division : Fulton, Henderson, Henry, Iroquois, Knox, Livingston,
Marshall, McDonough, Mercer, Peoria, Putnam, Rock Island, Stark, Tazewell,
Warren, and Woodford.
Time and place of holding courts. — Statutory terms: Chicago, first Monday
in July, third Monday in December ; Peoria, third Monday in April, third Mon-
day in October. " Adjourned terms " (created by rule of court) : Chicago,
first Monday in March, first Monday in May, first Monday in October.
District Judge, Christian C. Kohlsaat.
Clerk Circuit Court, S. W. Burnham, Chicago.
Clerk District Court, Thomas C. MacMillan, Chicago.
SOUTHERN DISTRICT.
Counties in the district.— Adams, Alexander, Bond, Brown, Calhoun, Cass,
Campaign, Christian, Clark, Clay, Clinton, Coles, Crawford, Cumberland,
JUDGES, CLERKS, DISTRICTS, TERMS. 805
Dewitt, Douglas, Edgar, Edwards, Effingham, Fayette, Ford, Franklin, Gallatin,
Greene, Hamilton, Hancock, Hardin, Jackson, Jasper, Jefferson, Jersey, John-
son, Lawrence, Logan, Moultrie, Macon, Macoupin, Madison, Marion, Mason,
Massac, McLean, Menard, Monroe, Montgomery, Morgan, Perry, Piatt Pike
Pope, Pulaski, Randolph, Richland, St. Clair, Saline, Sangamon, Schuyler!
Scott, Shelby, Union, Vermilion, Wabash, Washington, Wayne, White, and
Williamson.
Time and place of holding courts.— Circuit and district courts : First Mon-
days in January and June, at Springfield ; first Monday in May, at Danville, and
first Monday in September, at Quincy.
District court First Mondays in March and October, at Cairo.
District Judge, William J. Allen.
Clerk Circuit Court, James T. Jones, Springfield.
Clerk District Court, Mervin B. Converse, Springfield.
INDIANA (7th Circuit).
Time and place of holding courts.— Circuit and District courts : First Tues-
days in May and November, at Indianapolis; first Mondays in January and
July, at New Albany ; first Mondays in April and October, at Evansville ; sec-
ond Tuesdays in June and December, at Fort Wayne ; third Tuesdays in April
and October, at Hammond.
District comprises the entire State.
Circuit fudges, William A. Woods, James G. Jenkins, Peter S. Grosscup.
District Judge, John H. Baker.
Clerk Circuit and District Courts, Noble C. Butler, Indianapolis.
INDIAN TERBITOBT (8th Circuit).
NORTHERN DISTRICT.
Counties in the district.— The northern district is composed of the Cherokee,
Creek, and Seminole nations and the Quapaw Agency, being all of the Indian
Territory north of the South Canadian and the Arkansas rivers.
Time and place of holding courts.— At Muscogee : First Monday in Septem-
ber, fourth Monday in January. At Miami : First Monday after the first Tues-
day in October ; third Monday in January. At Talequah : First Monday after
the second Tuesday in October, fourth Monday in April. At Wewoka: First
Monday in November, first Monday after the first Tuesday in April. At
Wagoner : Second Monday in November, first Monday in March. At Vinita :
First Monday in December, second Monday in May.
Judge Gill and the judges for the central and southern districts compose the
court of appeals, which meets the first Mondays in January and June.
Judges, Joseph A. Gill, John R. Thomas \
Clerk District Court, Charles A. Davidson, Muscogee.
Deputy Clerks District Court, Robert C. Hunter, Wagoner; Herbert C.
Smith, Tahlequah.
Clerk of the Court of Appeals, W. P. Freeman, South M'cAlester.
1 Appointment comprises whole Territory.
806 JUDGES, CLERKS, DISTRICTS, TERMS.
CENTRAL DISTRICT.
Time and place of holding courts. — South McAlester: First Mondays in
December and May. Atoka: First Mondays in September and February. Po-
teau: First Mondays in October and March. Antlers: First Mondays in No-
vember and April.
Judge Clayton and the judges of the northern and southern districts compose
the court of appeals, which meets the first Mondays in January and June.
District comprises the Choctaw Nation.
Judges H. H. Clayton, John R. Thomas '
Clerk District Court, E: J. Fannin, South McAlester.
Deputy Clerks District Court, D. J. Folsom, Atoka ; T. B. Latham, Antlers ;
T. T. Varnar, Cameron ; J. M. Dodge, South McAlester.
Clerk Court of Appeals, W. P. Freeman, South McAlester.
SOUTHERN DISTRICT.
Time and place of holding courts. — At Chickasha: Beginning on Monday,
October 15, 1900, and on Monday, February 18, and on Monday, October 14,
1901. At Ryan : Beginning on Monday, October 29, 1900, and on Monday,
March 4, and Monday, October 28, 1901. At Purcell : Beginning on Monday,
November 12, 1900, and on Monday, March 18, and Monday, November 11,
1901. At Pauls Valley: Beginning on Monday, November 26, igoo, and on
Monday, April 15, and Monday, November 25, 1901. At Ardmore : Beginning
on Monday, December 17, 1900, and on Monday, May 6, and on Monday De-
cember 16, 1901.
Judge Townsend and the judges for the northern and central districts com-
pose the court of appeals, which meets the first Mondays in January and June.
District comprises all of the Chickasaw Nation.
Judges, Hosea Townsend, John R. Thomas1.
Clerk District Court, C. M. Campbell, Ardmore.
Deputy, Clerks District Court, N. H. McCoy, Ardmore ; J. F. Fleming, Pauls
Valley ; T. G. Green, Purcell ; J. W. Speake, Chickasha ; S. H. Woctton, Ryan,
Clerk of the Court of Appeals, W. P. Freeman, South McAlester.
IOWA (8th. Circuit).
NORTHERN DISTRICT.
Counties in the district. — Eastern division : Allamakee, Dubuque, Buchanan,
Clayton, Jackson, Delaware, Fayette, Winneshiek, Howard, Chickasaw, Bremer,
Black Hawk, Floyd, and Mitchell
Cedar Rapids division: Jones, Cedar, Linn, Johnson, Iowa, Benton, Tama,
Grundy, Hardin, and Clinton.
Central division: Emmet, Palo Alto, Pochahontas, Calhoun, Kossuth, Hum-
boldt, Webster, Winnebago, Hancock, Wright, Hamilton, Worth, Cerro Gordo,
Franklin, and Butler.
1 Appointment comprises entire Territory.
JUDGES, CLERKS, DISTRICTS, TERMS. 807
Western division: Dickinson, Clay, Buena Vista, Sac, Osceola, O'Brien,
Cherokee, Ida, Lyon, Sioux, Plymouth, Woodbury, and Monona.
Time and place of holding courts. — Circuit and district courts, Cedar Rapids
division, Cedar Rapids: First Tuesday in April and second Tuesday in Sep-
tember.
Eastern division, Dubuque: Fourth Tuesday in April and first Tuesday in
December.
Western division, Sioux City : Fourth Tuesday in May and first Tuesday in
October.
Central division, Fort Dodge : Second Tuesdays in June and November.
District Judge, Oliver P. Shiras.
Clerk Circuit and District Courts, Alonzo J. Van Duzee, Dubuque.
SOUTHERN DISTRICT.
Counties in the district. — Western division : Carroll, Crawford, Harrison,
Shelby, Audubon, Cass, Pottawattamie, Mills, Montgomery.
Eastern division : Scott, Muscatine, Louisa, Washington, Keokuk, Wapello,
Jefferson, Henry, Des Moines, Lee, Van Buren, Davis.
Central division : Marshall, Story, Boone, Greene, Guthrie, Dallas, Polk,
Jasper, Poweshiek, Mahaska, Marion, Warren, Madison.
Southern division: Lucas, Clarke, Union, Adair, Adams, Fremont, Paige,
.Taylor, Ringgold, Decatur, Wayne, Appanoose.
• Time and place of holding courts. — Circuit and district courts, western di-
vision: At Council Bluffs, second Tuesday in March and third Tuesday in
September.
Eastern division : At Keokuk, second Tuesday in April and third Tuesday in
October.
Central division : At Des Moines, second Tuesday in May and third Tuesday
in November.
Southern division : At Creston, third Monday in May and fourth Monday in
September.
District Judge, Smith McPherson.
Clerk Circuit Court, Edward R. Mason, Des Moines.
Clerk District Court, John J. Steadman, Council Bluffs.
KANSAS (8th Circuit).
Counties in the district. — First division : Entire State except counties in sec-
ond and third divisions.
" Second division : Barber, Barton, Butler, Clark, Comanche, Cowles, Edwards,
Ellsworth, Finney, Ford, Garfield, Grant, Gray, Greeley, Hamilton, Harper,
Harvey, Hodgeman, Haskell, Kingman, Kiowa, Kearney, Lane, McPherson,
Morton, Meade, Ness, Pratt, Pawnee, Reno, Rice, Rush, Scott, Sedgwick,
Stafford, Stevens, Seward, Sumner, Stanton, and Wichita.
Third division : Allen Anderson, Bourbon, Cherokee, Coffey, Chautauqua,
Crawford, Elk, Greenwood, Labette, Linn, Miami, Montgomery, Neosho, Wil-
son, and Woodson.
808 JUDGES, CLERKS, DISTRICTS, TERMS.
Time and place of holding courts. — First division, circuit court : First Mon-
day in June, at Leavenworth ; fourth Monday in November, at Topeka.
District court: Second Monday in April, at Topeka; second Monday in
October, at Leavenworth ; second Monday in May, at Salina.
Second division, circuit and district courts : Second Mondays in March and
September, at Wichita.
Third division, circuit and district courts: First Monday in May and second
Monday in November, at Fort Scott.
District Judge, William C. Hook.
Clerk Circuit Court, George F. Sharitt, Topeka.
Clerk District Court, Frank L. Brown, Topeka.
KENTUCKY (6th Circuit).
Time and place of holding courts. — Circuit and district courts: Frankfort,
first Monday in January and second Monday in June; Louisville, third Monday
in February and first Monday in October; Paducah, first Monday in April and
third Monday in November ; Covington, second Monday in May and first Mon-
day in December; Owensboro, first Monday in June and fourth Monday in
January.
District comprises the entire State.
District Judge, Walter Evans.
Clerks Circuit and District Courts, Thomas Speed, Louisville; Joseph C.
Finnell, Covington; Walter G. Chapman, Frankfort; John R. Puryear, Pa-
ducah.
LOUISIANA (5th Circuit).
EASTERN DISTRICT.
Parishes in the district. — New Orleans division: Assumption, Iberia, Jef-
ferson, Lafourche, Orleans, Plaquemines, St. Bernard, St. Charles, St. James,
St. John the Baptist, St. Mary, St. Tammany, Tangipahoa, Terrebonne, and
Washington.
Baton Rouge division: Ascension, East Baton Rouge, East Feliciana, Iber-
ville, Livingston, Pointe Coupee, St. Helena, West Baton Rouge, and West
Feliciana.
Time and place of holding courts. — Circuit court : At New Orleans, fourth
Monday in April and first Monday in November. At Baton Rouge, second
Mondays in April and November.
District court : At New Orleans, third Mondays in February, May, and No-
vember. At Baton Rouge, second Mondays in April and November.
District Judge, Charles Parlange.
Clerk Circuit Court of Appeals, J. M. McKee, New Orleans.
Clerk Circuit Court, E. R. Hunt, New Orleans.
Deputy Clerk Circuit Court, H. J. Carter, New Orleans.
Clerk District Court, Frank H. Mortimer, New Orleans.
Deputy Clerk District Court, R. H. Carter, New Orleans.
JUDGES, CLERKS, DISTRICTS, TERMS. 809
WESTERN DISTRICT.
Parishes in the district. — Avoyelles, Acadia, Bienville, Bossier, Caddo, Cal-
casieu, Caldwell, Cameron, Catahoula, Claiborne, Concordia, De Soto, East Car-
roll, Franklin, Grant, Jackson, Lafayette, Lincoln, Madison, Morehouse, Natch-
itoches, Ouachita, Rapids, Red River, Richland, Sabine, St. Landry, St. Martin,
Tensas, Union, Vermilion, Vernon, Webster, West Carroll, and Winn.
Time and place of holding courts. — Circuit and district courts : First Mon-
days in January and June, at Opelousas; fourth Mondays in January and
June, at Alexandria; third Mondays in February and October, at Shreveport;
first Mondays in April and October, at Monroe.
District Judge. Aleck Boarman.
Clerk Circuit and District Courts, John B. Beattie, Shreveport.
MAINE (1st Circuit).
Time and place of holding courts. — Circuit court : 23d of April and Septem-
ber, or if 23rd falls on Sunday, the 24th, at Portland.
District court: First Tuesdays in February and December, at Portland; first
Tuesday in June, at Bangor; first Tuesday in September, at Bath.
District comprises the entire State.
District Judge, Nathan Webb.
Clerk Circuit and District Courts, A. H. Davis, Portland.
MAKYLABTD (4th Circuit).
.Time and place of holding courts. — Circuit court: First Mondays in April
and November, at Baltimore.
District court : First Tuesdays in March, June, September, and December, at
Baltimore.
District comprises the entire State.
District Judge, Thomas J. Morris.
Clerk Circuit and District Courts, James W. Chew, Baltimore.
MASSACHUSETTS (1st Circuit).
Time and place of holding courts. — Circuit court: May 15 and October 15,
at Boston.
District court: Third Tuesday in March, fourth Tuesday in June, second
Tuesday in September, and first Tuesday in December, at Boston.
District comprises the entire State.
District Judge, Francis C. Lowell.
Clerk Circuit Court, Alexander H. Trowbridge, Boston.
Clerk District Court, Frank H. Mason, Boston.
MICHIGAN (6th Circuit).
EASTERN DISTRICT.
Counties in the district. — Northern division: Alcona, Alpena, Arenac, Bay,
Cheboygan, Clare, Crawford, Genesee, Gladwin, Gratiot, Huron, Iosco, Isabella,
(102)
810 JUDGES, CLERKS, DISTRICTS, TERMS.
Midland, Montmorency, Ogemaw, Oscoda, Otsego, Presque lie, Roscommon,
Saginaw, Shiawassee, and Tuscola.
Southern division: Branch, Calhoun, Clinton, Hillsdale, Ingham, Jackson,
Lapeer, Lenawee, Livingston, Macomb, Monroe, Oakland, St. Clair, Sanilac,
Washtenaw, and Wayne.
Time and place of holding courts. — Circuit and district courts: Southern
division, at Detroit, first Tuesdays in March, June, and November.
Northern division, at Bay City, first Tuesdays in May and October.
Terms of court at Port Huron in the discretion of the judge.
District Judge, Henry H. Swan.
Clerk Circuit Court, Walter S. Harsha, Detroit.
Clerk District Court, Darius J. Davison, Detroit.
WESTERN DISTRICT.
Counties in the district. — Northern division : Alger, Baraga, Chippewa, Delta,
Dickinson, Gogebic, Houghton, Iron, Keweenaw, Luce, Mackinac, Marquette,
Menominee, Ontonagon, and Schoolcraft.
; Southern division : Allegan, Antrim, Barry, Benzie, Berrien, Cass, Charle-
voix, Eaton, Emmet, Grand, Traverse, Ionia, Kalamazoo, Kalkaska, Kent, Lake,
Leelanau, Manistee, Mason, Mecosta, Missaukee, Montcalm, Muskegon, M6-
waygo, Oceana, Osceola, Ottawa, St. Joseph, Van Buren, and Wexford.
Time and place of holding courts. — Circuit and district courts : Grand Rapids
(southern division), first Tuesdays in March and October; Marquette (north-
ern division), first Tuesdays in May and September.
District Judge, George P. Wanty.
Clerk Circuit Court, Charles L. Fitch, Grand Rapids.
Clerk District Court, John MtQuewan, Grand Rapids.
MINTSTESOTA (8th Circuit).
Counties in the district. — First division : Winona, Wabasha, Olmsted, Dodge,
Steele, Mower, Fillmore, and Houston.
Second division : Freeborn, Faribault, Martin, Jackson, Nobles, Rock, Pipe-
stone, Murray, Cottonwood, Watonwan, Blue Earth, Waseca, Leuseur, Nicollet,
Brown, Redwood, Lyon, Lincoln, Yellow Medicine, Sibley, and Lac qui Parle.
Third division: Chicago, Washington, Ramsey, Dakota, Goodhue, Rice, and
Scott.
Fourth division: Hennepin, Wright, Meeker, Kandiyohi, Swift, Chippewa,
Renville, McLeod, Carver, Anoka, Sherburne, and Isanti.
Fifth division : Cook, Lake, St. Louis, Itasca, Cass, Crow Wing, Aitkin, Carl-
ton, Pine, Kanabec, Millelacs, Morrison, and Benton.
Sixth division : Stearns, Pope, Stevens, Big Stone, Traverse, Grant, Douglas,
Todd, Ottertail, Wilkins, Clay, Becker, Wadena, Norman, Polk, Marshall,
Kittson, Beltrami, and Hubbard.
Time and place of holding courts. — Circuit and district courts, first division ;
First Tuesdays in June and December, at Winona.
Second division: Third Tuesday in April, first Tuesday in November, at
Mankato.
JUDGES, CLERKS, DISTRICTS, TERMS. 8n
Third division : Fourth Tuesday in June, second Tuesday in January, at St.
Paul.
Fourth division : First Tuesdays in March and September, at Minneapolis.
Filth division : Second Tuesdays in May and October, at Duluth.
Sixth division : Fourth Tuesdays in March and September, at Fergus Falls.
District fudge, William Lochren.
Clerk Circuit Court, Henry D. Lang, St. Paul.
Clerk District Court, Charles L. Spencer, St. Paul.
MISSISSIPPI (5th Circuit).
NORTHERN DISTRICT.
Counties in the district.— Alcorn, Pontotoc, Chickasaw, Choctaw, Attala,
Tishomingo, Lee, Monroe, Oktibbeha, Winston, Prentiss, Itawamba, Clay,
Lowndes, De Soto, Yalobusha, Carroll, Union, Tippah, Coahoma, Lafayette,
Calhoun, Montgomery, Marshall, Tunica, Quitman, Tallahatchie, Grenada,
Webster, Benton, Tate, and Panola.
Time and place of holding courts. — Circuit and district courts : At Oxford,
first Mondays in June and December; at Aberdeen, first Mondays in October
and April.
District Judge, Henry C. Niles.
Clerk Circuit Court, G. R. Hill, Oxford.
Clerk District Court, J. S. Burton, Oxford.
SOUTHERN DISTRICT.
Counties in the district. — Jackson division : Adams, Amite, Copiah, Coving-
ton, Franklin, Hinds, Holmes, Jefferson, Lawrence, Lincoln, Leflore, Madison,
Pike, Rankin, Simpson, Smith, Scott, Wilkinson and Yazoo,
Vicksburg division: Bolivar, Claiborne, Issaquena, Sharkey, Sunflower,
Warren, and Washington.
Meridian division : Clarke, Jones, Jasper, Kemper, Lauderdale, Leake,
Neshoba, Newton, Noxubee, and Wayne.
Mississippi City division: Greene, Hancock, Harrison, Jackson, Marion,
Perry, and Pearl River.
Time and place of holding courts. — Circuit and district courts : At Jackson,
first Mondays in May and November; at Vicksburg, first Mondays in July
and January ; at Biloxi, third Mondays in February and August ; at Meridian,
second Mondays in March and September.
District Judge, Henry C. Niles.
■, Clerk Circuit and District Courts, L. B. Moseley, Jackson.
MISSOURI (8th Circuit).
EASTERN DISTRICT.
Counties in the district. — Eastern division. Audrain, Bollinger, Butler, Cape
Girardeau, Carter, Crawford, Dent, Dunklin, Franklin, Gasconade, Iron, Jef-
812 JUDGES, CLERKS, DISTRICTS, TERMS.
ferson, Lincoln, Madison, Mississippi, Montgomery, New Madrid, Oregon,
Pemiscot, Perry, Reynolds, Ripley, St. Charles, St. Francois, Ste. Genevieve,
St. Louis, Scott, Shannon, Stoddard, Warren, Washington, Wayne, and St.
Louis City.
Northern division: Macon, Marion, Monroe, Randolph, Lewis, Adair, Scot-
land, Schuyler, Pike, Ralls, Knox, Clark, and Shelby.
Time and place of holding courts. — Eastern division : Circuit court, at St.
Louis, third Mondays in March and September. District court, at St. Louis,
first Mondays in May and November.
Northern division : Circuit and district courts, at Hannibal, fourth Monday in
May and first Monday in December.
District Judge, Elmer B. Adams.
Clerks Circuit Court, Thomas Lester Crawford, St. Louis ; George C. Moore,
Hannibal.
Clerks District Court, William Morgan, St. Louis ; George C. Moore, Han-
nibal.
WESTERN DISTRICT.
Counties in the district. — Western division : Barton, Bates, Caldwell, Carroll,
Cass, Chariton, Clay, Grundy, Henry, Jackson, Jasper, Johnson, Lafayette,
Linn, Livingston, Mercer, Putnam, Ray, St. Clair, Saline, Sullivan, and Ver-
non.
St. Joseph division: Andrew, Atchison, Buchanan, Clinton, Daviess, Dekalb,
Gentry, Holt, Harrison, Nodaway, Platte, and Worth. -
Central division : Benton, Boone, Callaway, Cooper, Camden, Cole, Hickory,
Howard, Maries, Miller, Moniteau, Morgan, Osage, Pettis, and Phelps.
Southern division: Barry, Christian, Cedar, Dade, Dallas, Douglas, Greene,
Howell, Laclede, Lawrence, McDonald, Newton, Ozark, Polk, Pulaski, Stone,
Taney, Texas, Webster, and Wright.
Time and place of holding courts. — Kansas City, fourth Monday in April,
first Monday in November ; St. Joseph, first Monday in March, third Monday in
September; Springfield, first Mondays in April and October; Jefferson City,
third Mondays in March and October.
District Judge, John F. Philips.
Clerks Circuit Court, Adelaide Utter (Miss), Kansas City; Charles A. Pol-
lock, St. Joseph; Henry C. Geisberg, Jefferson City; Sarah A. Lathim (Miss),
Springfield.
Clerks District Court, John M. Nuckols, Kansas City; Charles A. Pollock,
St. Joseph; Henry C. Geisberg, Jefferson City; Sarah A. Lathim (Miss),
Springfield.
MONTANA (9th Circuit).
Counties in the district. — Broadwater, Cascade, Choteau, Carbon, Custer,
Dawson, Deerlodge, Flathead, Fergus, Granite, Gallatin, Jefferson, Lewis and
Clarke, Meagher, Missoula, Park, Ravalli, Sweet Grass, Teton, Yellowstone,
and Valley.
Southern division: Beaverhead, Madison, and Silverbow.
JUDGES, CLERKS, DISTRICTS, TERMS. 813
Time and place of holding courts. — First Mondays in April and November,
at Helena; first Tuesdays in February and September, at Butte.
District fudge, Hiram Knowles.
Clerk Circuit and District Courts, George W. Sproule, Helena.
NEBRASKA (Sth Circuit).
Time and place of holding courts. — Omaha, first Monday in May and second
Monday in November; Lincoln, third Monday in January and first Monday in
October; Hastings, third Monday in April; Norfolk, fourth Monday in April.
District comprises the entire State.
District fudge, William H. Munger.
Clerk Circuit Court, George H. Thummel, Omaha.
Clerk District Court, R. C. Hoyt, Omaha.
NEVADA (9th Circuit).
Time and place of holding courts. — Circuit court: At Carson City, third
Monday in March and first Monday in November.
District court: At Carson City, first Mondays in February, May, and Oc-
tober.
District comprises the entire State.
District fudge, Thomas P. Hawley.
Clerk Circuit and District Courts, T. J. Edwards, Carson City.
NEW HAMPSHIRE (1st Circuit).
Time and place of holding courts.— Circuit court: Portsmouth, May 8; Little-
ton, last Tuesday of August ; Concord, October 8.
District court: Portsmouth, third Tuesdays in March and September; Con-
cord, third Tuesdays in June and December ; Littleton, last Tuesday in August.
District comprises the entire State.
District fudge, Edgar Aldrich.
Clerk Circuit and District Courts, Fremont E. Shurtleff, Concord.
NEW JERSEY (3rd Circuit).
Time and place of holding courts.— Circuit court: Fourth Tuesdays in March
and September, at Trenton.
District court: Third Tuesdays in January, April, June, and September, at
Trenton.
District comprises the entire State.
District fudge, Andrew Kirkpatrick.
Clerk Circuit Court, S. D. Oliphant, Trenton.
Deputy Clerk Circuit Court, H. D. Oliphant, Trenton.
Clerk District Court, George T. Cranmer, Trenton.
Deputy Clerk District Court, Frank R. Brandt, Trenton.
8i4 JUDGES, CLERKS, DISTRICTS, TERMS.
TSTEW MEXICO (8th Circuit).
Counties in the district.— First district : Santa Fe, San Juan, Rio Arriba, and
Taos.
Second district : Besnalillo and Valencia.
Third district: Grant, Donna Ana, and Sierra.
Fourth district: San Miguel, Colfax, Mora, Union, and Guadaloupe.
Fifth district : Socorro, Lincoln, Chaves, and Eddy.
Time and place of holding courts. — First district : First Mondays in March
.and September, at Santa Fe.
Second district: Third Mondays in March and September, at Albuquerque.
Third district: First Mondays in April and October, at Las Cruces.
Fourth district : Second Mondays in May and November, at Las Vegas.
Fifth district : Last Monday in April and second Monday in May, at Socorro.
Chief Justice, William J. Mills, fourth district. :>
Associate Justices, John R. McFie, first district; Jonathan W. Crumpacker,
second district; Frank W. Parker, third district; Charles A. Leland, fifth dis-
trict.
Clerks District Court, Alfred M. Bergere, first district, Santa Fe ; Harry P.
Owen, second district, Albuquerque; James P. Mitchell, third district, Las
Cruces; Secundino Romero, fourth district, Las Vegas; John E. Griffith, fifth
district, Socorro.
NEW YORK (2nd Circuit).
NORTHERN DISTRICT.
Counties in the district— Albany, Broome, Cayuga, Chenango, Clinton, Cort-
land, Delaware, Essex, Franklin, Fulton, Hamilton, Herkimer, Jefferson, Lewis,
Madison, Montgomery, Oneida, Onondaga, Oswego, Otsego, Rensselaer, St.
Lawrence, Saratoga, Schenectady, Schoharie, Tioga, Tompkins, Warren, and
Washington, with the waters thereof.
Time and place of holding courts. — Circuit court : First Tuesday in Aprin at
Syracuse; second Tuesday in February, at Albany; first Tuesday in December,
at Utica. District court: Second Tuesday in February, at Albany; first Tues-
day in December, at Utica ; second Tuesday in June, at Binghamton ; first' Tues-
day in October, at Auburn; first Tuesday in April, at Syracuse; and, in the
discretion of the judge of the court, one term annually at such time and place
within the counties of Saratoga, Onondaga, St. Lawrence, Clinton, Jefferson,
Oswego, and Franklin as he may from time to time appoint.
District Judge, Alfred C. Coxe.
Clerk Circuit and District Courts, William S. Doolittle, Utica.
SOUTHERN DISTRICT.
Counties in the district. — Columbia, Dutchess, Greene, New York, Orange,
Putnam, Rockland, Sullivan, Ulster, and Westchester.
Time and place of holding courts. — Circuit court : Last Monday in February,
first Monday in April, and third Monday in October; and (criminal only)
JUDGES, CLERKS, DISTRICTS, TERMS. 815
second Wednesdays in January, March, May, October, and December, and
third Wednesday in June, at New York City.
District court: First Tuesday in each month, at New York City.
District Judge, Addison Brown.
Clerk Circuit Court, John A. Shields, New York.
Clerk District Court, Samuel H. Lyman, New York.
EASTERN DISTRICT.
Counties in the district. — Kings, Queens, Richmond, Suffolk, and Nassau,
with the waters thereof.
Time and place of holding courts. — Circuit and district courts : First Wed-
nesday in every month, at Brooklyn.
District Judge, Edward B. Thomas.
Clerk Circuit Court, Benjamin Lincoln Benedict, Brooklyn.
Clerk District Court, Richard P. Morle, Brooklyn.
WESTERN DISTRICT.
Counties m the district. — Alleghany, Cattaraugus, Chautauqua, Chemung,
Erie, Genesee, Livingston, Monroe, Niagara, Ontario, Orleans, Schuyler,
Seneca, Steuben, Wayne, Wyoming, and Yates, with the waters thereof.
Time and place of holding courts. — Circuit court : Second Tuesday in May, at
Rochester ; second Tuesday in September, at Canandaigua ; second Tuesday in
November, at Buffalo.
District court : Second Tuesday in January, at Elmira ; second Tuesdays in
March and November, at Buffalo ; second Tuesday in July, at Jamestown ; sec-
ond Tuesday in October, at Lockport.
District Judge, John R. Hazel.
Clerk Circuit Court, Harris S. Williams, Buffalo.
Clerk District Court, George P. Keating, Buffalo.
NORTH CAROLINA (4th Circuit).
EASTERN DISTRICT.
Counties in the district. — Beaufort, Bertie, Bladen, Brunswick, Camden.
Chatham, Cumberland, Currituck, Craven, Columbus, Chowan, Carteret, Dare,
Duplin, Durham, Edgecombe, Franklin!, Gates, Granville, Greene, Halifax,
Hartnett, Hertford, Hyde, Johnston, Jones, Lenoir, Martin, Moore, Nash, New
Hanover, Northampton, Onslow, Pamlico, Pasquotank, Pender, Perquimans,
Person, Pitt, Robeson, Richmond, Sampson, Tyrrell, Vance, Wake, Warren,
Washington, Wayne, and Wilson.
Time and place of holding courts. — Circuit courts at Wilmington same dates
as district court ; circuit courts at Raleigh same dates as district court ; circuit
courts at Newbern same dates as district court; circuit courts at Elizabeth
City same dates as district court.
District courts Raleigh, fourth Monday in May and first Monday in Decern-)
ber; Elizabeth City, third Mondays in April and October; Newbern, fourth
816 JUDGES, CLERKS, DISTRICTS, TERMS.
Mondays in April and October; Wilmington, first Monday after the fourth
Monday in April and October.
District Judge, Thomas R. Purnell.
Clerks Circuit Court, N. J. Riddick, Raleigh ; William H. Shaw, deputy, Wil-
mington; George Greene, deputy, Newbern; J. P. Overman, deputy, Elizabeth
City.
Clerks District Court, Hiram L. Grant, Raleigh ; Geo. L. Tonnoff ski, deputy,
Raleigh; William H. Shaw, deputy, Wilmington; George Greene, deputy, New-
bern; J. P. Overman, deputy, Elizabeth City.
WESTERN DISTRICT.
Counties in the district. — Alamance, Alexander, Ashe, Alleghany, Anson,
Buncombe, Burke, Caswell, Cabarrus, Catawba, Cleveland, Caldwell, Clay,
Cherokee, Davidson, Davie, Forsyth, Guilford, Gaston, Graham, Henderson,
Haywood, Iredell, Jackson, Lincoln, Montgomery, Mecklenburg, Mitchell, Mc-
Dowell, Madison, Macon, Orange, Polk, Randolph, Rockingham, Rowan,
Rutherford, Stanley, Stokes, Surry, Swain, Transylvania, Union, Wilkes,
Watauga, Yadkin, and Yancey.
Time and place of holding courts. — Greensboro, first Mondays in April and
October; Statesville, third Mondays in April and October; Asheville, first
Mondays in May and November; Charlotte, first Mondays in June and De-
cember.
District fudge, James Edmund Boyd, recess appointment.
Clerks Circuit and District Courts, Henry C. Cowles, Statesville; Cary B.
Moore, Asheville; Samuel L. Trogdon, Greensboro.
NORTH DAKOTA (8th Circuit).
Time and place of holding courts. — Circuit and district courts : First Tuesday
in July, at Devils Lake; first Tuesday in March, at Bismarck; third Tuesday
in May, at Fargo ; second Tuesday in November, at Grand Forks.
District comprises the entire State.
District Judge, Charles F. Amidon.
Clerk Circuit and District Courts, J. A. Montgomery, Fargo.
OHIO (6th Circuit).
NORTHERN DISTRICT.
Counties in the district. — Eastern district: Ashland, Ashtabula, Cuyahoga,
Carroll, Columbiana, Crawford, Geauga, Holmes, Lake, Lorain, Medina, Ma-
honing, Portage. Richland, Summit, Stark, Tuscarawas, Trumbull, and Wayne.
Western division: Auglaize, Allen, Defiance, Erie, Fulton, Henry, Hancock,
Hardin, Huron, Lucas, Mercer, Marion, Ottawa, Paulding, Putnam, Seneca,
Sandusky, Van Wert, Williams, Wood, and Wyandot
Time and place of holding courts. — Circuit and district courts: On the first
Tuesdays in February, April, and October, at Cleveland, for the eastern division,
JUDGES, CLERKS, DISTRICTS, TERMS. 817
and the first Tuesdays in June and December, at Toledo, for the western
division of the district.
District Judge, Augustus J. Ricks.
Clerk Circuit Court, Irvin Belford, Cleveland.
Clerk District Court, H. F. Carleton, Cleveland.
SOUTHERN DISTRICT.
Counties in the district. — Western division: Adams, Brown, Butler, Cham-
paign, Clark, Clermont, Clinton, Darke, Greene, Hamilton, Highland, Law-
rence, Miami, Montgomery, Preble, Scioto, Shelby, and Warren.
Eastern division : Athens, Belmont, Coshocton, Delaware, Fairfield, Fayette,
Franklin, Gallia, Guernsey, Harrison, Hocking, Jackson, Jefferson, Knox, Lick-
ing, Logan, Madison, Meigs, Monroe, Morgan, Morrow, Muskingum, Noble,
Perry, Pickaway, Pike, Ross, Union, Vinton, and Washington.
Time and place of holding courts. — Circuit and district courts: Western
division, first Tuesdays in February, April and October, at Cincinnati.
Eastern division, first Tuesdays in June and December, at Columbus.
District Judge, Albert C. Thompson.
Clerk Circuit and District Courts, Benjamin Rush Cowen, Cincinnati.
OKLAHOMA (8th Circuit).
Counties in the district. — First district: Logan, Lincoln, Payne, and Wood-
ward.
Second district : Canadian, Blaine, " D," Day, Roger Mills, Custer, and
Washita.
Third district: Oklahoma, Pottawatomie, Cleveland, and Greer.
Fourth district : Beaver, " P," Noble, and Osage Nation.
Fifth district : Garfield, Kingfisher, Grant, and Woods.
Time and place of holding courts (between July 1, 1900, and January 1,
1901, subject to change upon order of supreme court of Oklahoma). — First ju-
dicial district: September 10, at Stillwater, in Payne County; October I, at
Chandler, in Lincoln County ; October 23, at Woodward, in Woodward County;
November 8, at Guthrie, in Logan County.
Second judicial district: September 19, at Cloud Chief, Washita County;
October 3, at Arapahoe, in Custer County; October 15, at Norman, in Cleve-
land County; November 5, at Kingfisher, in Kingfisher County; November 26,
at El Reno, in Canadian County.
Third judicial district: July 7, at Oklahoma City, in Oklahoma County;
September 11, at Mangum, in Greer County; October 9, at Tecumseh, in
Pottawatomie County.
Fourth judicial district: September n,at Beaver, in Beaver County; Septem-
ber 24, at Newkirk, in Kay County; October 29, at Pawhuska, in Osage Nation;
November 7, at Pawnee, in Pawnee County; December 3, at Perry, in Noble
County.
Fifth judicial district: November 19, at Enid, in Garfield County; September
10, at Pond Creek, in Grant County; September 19, at Taloga, in Dewey
(103)
8i8 JUDGES, CLERKS, DISTRICTS, TERMS.
County; October 22, at Grand, in Day County; October 4, at Watonga, in
Blaine County; November 1, at Alva, in Woods County.
Chief Justice, John H. Burford, first district.
Associate Justices, Clinton F. Irwin, second district, El Reno; B. F. Bur-
well, third district, Oklahoma City; Bayard T. Hainer, fourth district, Perry;
John L. McAtee, fifth district, Kingfisher.
Clerks Circuit and District Courts, M. C. Hart, first district, Guthrie ; E. M.
Hegler, second district, El Reno; D. B. Shear, third district, Oklahoma City;
Jay E. Pickard, fourth district, Perry ; J. P. Renshaw, fifth district, Enid.
OREGON (9th Circuit).
Time and place of holding courts. — United States circuit court : At Portland,
second Monday in April and first Monday in October.
United States district court : At Portland, first Mondays in March, July, and
November.
District comprises the entire State.
District Judge, Charles B. Bellinger.
Clerks Circuit Court, Joseph A. Sladen, Portland; G. H. Marsh, deputy,
Portland.
Clerks District Courts Edward D. McKee, Portland ; G. H. Marsh, deputy,
Portland.
PENNSYLVANIA (3rd Circuit).
EASTERN DISTRICT.
Counties in the district. — Adams, Berks, Bucks, Carbon, Chester, Cumber-
land, Dauphin, Delaware, Franklin, Lancaster, Lebanon, Lehigh, Monroe,
Montgomery, Northampton, Perry, Philadelphia, Pike, Schuylkill, Wayne, and
York.
Time and place of holding courts. — Circuit court: First Mondays in April
and October, at Philadelphia.
Diitrict court: Third Mondays in February, May, August, and November,
at Philadelphia.
District Judge, John B. McPherson.
Clerk Circuit Court, Samuel Bell, Philadelphia.
Clerk District Court, Charles S. Lincoln, Philadelphia.
WESTERN DISTRICT.
Counties in the district. — Alleghany, Armstrong, Beaver, Bedford, Blair,
Bradford, Butler, Cambria, Cameron, Center, Clarion, Clearfield, Clinton,
Columbia, Crawford, Elk, Erie, Fayette, Forest, Fulton, Greene, Huntingdon,
Indiana, Jefferson, Juanita, Lackawanna, Lawrence, Luzerne, Lycoming, "Mc-
Kean, Mercer, Mifflin, Montour, Northumberland, Potter, Snyder, Somerset,
Sullivan, Susquehanna, Tioga, Union, Venango, Warren, Washington, West-
moreland, and Wyoming.
JUDGES, CLERKS, DISTRICTS, TERMS. 819
Time and place of holding courts. — Pittsburg: District court, first Monday
of May and thrid Monday of October. Circuit court, second Mondays of May
and November.
Williamsport : District court, third Monday of June and first Monday of
October. Circuit court, third Mondays of June and September.
Scranton: District court, first Mondays of March and September. Circuit
court, first Mondays of March and September.
Erie: District court, third Monday of July and second Monday of January.
Circuit court, third Monday of July and second Monday of January.
District Judge, Joseph Buffingtom
Clerks Circuit Court, H. D. Gamble, Pittsburg ; Max Mitchell, Williamsport.
Clerks District Court, William T. Lindsley, Pittsburg ; F. C. Graham, deputy,
Pittsburg; W. A. Sherwood, deputy, Pittsburg; Frank W. Grant, deputy, Erie;
A. J. Colbum, deputy, Scranton.
PORTO RICO.
SUPREME COURT.
Chief Justice, Jose Severo Quinones.
Associate Justices, Louis Sulzbacher ; Jose C. Hernandez ; Jose M. Figueras ;
Rafael Nieto y Abeille.
Secretary of the Supreme Court, Eugenio de Jesus Lopez Gaztambide, San
Juan.
RHODE ISLAND (1st Circuit).
Time and place of holding courts. — Circuit court: At Providence, June is
and November 15.
District court: At Providence, first Tuesdays in February and August; at
Newport, second Tuesday in May and third Tuesday in October.
District comprises the entire State.
District Judge, Arthur L. Brown.
Clerks Circuit and District Courts, William P. Cross, Providence.
SOUTH CAROLINA (4th Circuit).
Time and place of holding courts. — Circuit court : First Tuesday in April, at
Charleston; third Tuesdays in April and October, at Greenville, fourth Tues-
day in November, at Columbia ; first Tuesday in March, at Florence.
District court: First Tuesdays in June and December, at Charleston; third
Tuesdays in April and October, at Greenville; fourth Tuesday in November,
at Columbia ; first Tuesday in March, at Florence.
District comprises the entire State.
District Judge, William H. Brawley.
Clerk Circuit Court, James E. Hagood, Charleston.
Clerk District Court, Charles J. C. Hutson, Charleston.
SOUTH DAKOTA (8th Circuit).
Counties in the district. — Northern division (court at Aberdeen) : Brookings,
Hamlin, Deuel, Grant, Roberts, Codington, Clark, Day, Marshall, Spink,
820 JUDGES, CLERKS, DISTRICTS, TERMS.
Brown, McPherson, Edmunds, Campbell, Walworth, and Sisseton and Wahpe-
ton Indian reservations.
Central division (court at Pierre) : Potter, Sully, Faulk, Hand, Hyde,
Hughes, Buffalo, Jerauld, Stanley, Nowlin, part of Pratt, Jackson, and Sterling,
and Standing Rock and Cheyenne Indian reservations.
Southern division (court at Sioux Falls) : Clay, Union, Yankton, Turner,
Lincoln, Bonhomme, Charles Mix, Douglas, Hutchinson, Brule, Aurora, David-
son, Hanson, McCook, Minnehaha, Moody, Lake, Sanborn, Lyman, Miner,
Gregory, Todd, Beadle, Kingsbury Crow Creek, and Lower Brule, and Yank-
ton Indian reservations.
Western division (court at Deadwood) : Butte, Custer, Fall River, Law-
rence, Meade, Pennington, and all the remaining portion of the State of South
Dakota lying west of the central and southern divisions, including the Rosebud
and Pine Ridge Indian reservations.
Time and place of holding courts. — Circuit and district courts: At Dead-
wood, first Tuesdays in February and September, at Pierre, first Tuesdays in
March and October, at Sioux Falls, first Tuesday in April and third Tuesday
in October, at Aberdeen, first Tuesday in May and third Tuesday in November.
District Judge, John E. Carland.
Clerk Circuit and District Courts, Oliver S. Pendar, Sioux Falls.
TENNESSEE (6th Circuit).
EASTERN DISTRICT.
Counties in the district. — Eastern division: Anderson, Bradley, Bledsoe,
Blount, Campbell, Claiborne, Cumberland, Fentress, Grainger, Hamilton, James,
Jefferson, Knox, Loudon, Marion, McMinn, Meigs, Monroe, Morgan, Polk,
Rhea, Roane, Sevier, Scott, Sequatchie, and Union. North-eastern division;
Johnson, Carter, Unicoi, Sullivan, Washington, Greene, Hawkins, Hancock,
Cocke, and Hamblen.
Time and place of holding courts. — Circuit and district courts: Second
Mondays in March and September, at Knoxville; first Mondays in April and
October, at Chattanooga ; fourth Mondays in February and August, at Greene-
ville.
District Judge, Charles D. Clark.
Clerks Circuit and District Courts, Henry O. Ewing, Chattanooga ; James T.
Carter, deputy, Knoxville; Richard M. Watkins, deputy, Chattanooga.
MIDDLE DISTRICT.
Counties in the district. — Bedford, Cannon, Cheatham, Clay, Coffee, David-
son, Dekalb, Davison, Franklin, Giles, Grundy, Hickman, Humphreys, Houston,
Jackson, Lawrence, Lewis, Lincoln, Macon, Marshall, Maury, Montgomery,
Moore, Overton, Pickett, Putnam, Robertson, Rutherford, Smith, Stewart,
Sumner, Trousdale, Van Buren, Warren, Wayne, White, Williamson, and
Wilson.
JUDGES, CLERKS, DISTRICTS, TERMS. 821
Time and place of holding courts. — Circuit and district courts at Nashville
third Mondays in April and October.
District Judge, Charles D. Clark.
Clerk Circuit and District Courts, Henry M. Doak, Nashville.
WESTERN DISTRICT.
Counties in the district. — Eastern division : Henry, Benton, Perry, Decatur,
Hardin, McNairy, Henderson, Madison, Carroll, Chester; Weakley, Lake, Gib-
son, Crockett, Obion, and Hardeman.
Western division : Dyer, Lauderdale, Tipton, Shelby, Fayette, and Haywood.
Time and place of holding courts. — Circuit and district courts: At Jackson,
fourth Mondays in April and October; at Memphis, fourth Mondays in May
and November.
District Judge, Eli S. Hammond.
Clerk Circuit and District Courts. — John B. Clough, Memphis.
TEXAS (5th Circuit).
NORTHERN DISTRICT.
Counties in the district. — Returnable to Dallas : Navarro, Johnson, Ellis,
Kaufman, Dallas, Rockwell, Hunt, Collin, Denton, Cooke, and Montague.
Returnable to Fort Worth : Comanche, Hood, Erath, Tarrant, Parker, Palo
Pinto, Wise, Clay, Jack, Young, Archer, Wichita, Wilbarger, Baylor, Harde-
man, Cottle, Motley, Briscoe, Hall, Childress, Hollingsworth, Donley, Arm-
strong, Randall, Deaf Smith, Oldham, Potter, Carson, Gray, Wheeler, Hemp-
hill, Lipscomb, Ochiltree, Roberts, Hutchinson, Hansford, Sherman, Moore,
Hartley, Dallam, and Foard.
Returnable to Waco: Brazos, Robertson, Leon, Limestone, Freestone, Mc-
Lennan, Falls, Bell, Coryell, Hamilton, Bosque, Somervell, and Hill.
Returnable to Abilene: Eastland, Stephens, Throckmorton, Shackleford,
Callahan, Taylor, Jones, Haskell, Knox, Noland, Fisher, Stonewall, Kent,
Dickens, King, Crosby, Garza, Lubbock, Gaines, Andrews, Mitchell, Scurry,
Borden, Howard, Martin, and Midland.
Returnable to San Angelo : Glasscock, Sterling, Coke, Tom Green, Crockett,
Schleicher, Sutton, Irion, Mills, Runnells, Coleman, Brown, Menard, and Concho.
Time and place of holding courts. — Circuit and district courts: At Dallas,
third Monday in January and fourth Monday in May ; at Waco, fourth Monday
in April and second Monday in October ; at Fort Worth, first Monday in March
and fourth Monday in November ; at Abilene, first Monday in April and fourth
Monday in September; at San Angelo, third Monday in. April and third Mon-
day in November.
District Judge, Edward R. Meek.
Clerk Circuit and District Courts, J. H. Finks, Waco.
EASTERN DISTRICT.
Counties in the district. — Returnable to Tyler : Anderson, Angelina, Chero-
kee, Gregg, Henderson, Houston, Nacogdoches, Panola, Rains, Rusk, Shelby.
Smith, Trinity. Van Zandt, and Wood.
82a JUDGES, CLERKS, DISTRICTS, TERMS.
Returnable to Jefferson; Bowie, Camp, Cass, Franklin, Harrison, Hopkins,
Marion, Morris, Titus, and Upshur.
Returnable to Galveston : Austin, Brazoria, Chambers, Colorado, Fort Bend,
Galveston, Grimes, Harris, Madison, Matagorda, Montgomery, Walker, Wal-
ler, Wharton, and Jackson.
Returnable to Paris: Delta, Fannin, Grayson, Lamar, and Red River.
Returnable to Beaumont: Hardin, Jasper, Jefferson, Liberty, Newton,
Orange, Polk, San Jacinto, Sabine, San Augustine, and Tyler.
Time and place of holding courts. — Circuit and district courts: Tyler, first
Mondays in January and September;/ Jefferson, fourth Mondays in January
and September; Galveston, third Mondays in February and October; Paris,
first Monday in April and third Monday in November; Beaumont, first Mon-
days in June and December.
District Judge, David E. Bryant.
Clerk Circuit Court, C. Dart, Galveston.
Clerks District Court, C. Dart, Galveston; D. W. Parish, Tyler; W. E. Sin-
gleton, Jefferson; C. Dart, Jr., Beaumont; John B. Dailey, Paris.
WESTERN DISTRICT.
Counties in the district. — Returnable to San Antonio: Aransas, Atacosa,
Bandera, Bevar, Bee, Comal, Calhoun, Dewitt, Dimmit, Edwards, Frio, Guada-
lupe, Gonzales, Goliad, Kerr, Kendall, Kinney, Karnes, Lavaca, Live Oak, Me-
dina, Maverick, Nueces, Refugio, San Patricio, Uvalde, Valverde, Victoria,
Wilson and Zavalla.
Returnable to El Paso: Brewster, Buchel, Bailey, Castro, Cochran, Crane,
Dawson, El Paso, Ector, Foley, Floyd, Hale, Hockley, Jeff Davis, Lamb, Lynn,
Loving, Presidio, Pecos, Parmer, Reeves, Swisher, Terry, Upton, Winkler,
Yoakum, and Ward.
Returnable to Brownsville : Cameron, Hidalgo, and Starr.
Returnable to Austin : Blanco, Bastrop, Burleson, Burnet, Caldwell, Fayette*
Gillespie, Hays, Kimble, Lee, Llano, Lampassas, Mason, McCullough, Milam,
San Saba, Travis, Washington, and Williamson.
Returnable to Laredo : Duval, Encinal, Lasalla, McMullen, Webb, and Zapata.
Time and place of holding courts. — Circuit and district courts: At San An-
tonio, first Mondays in May and November; at Austin, first Mondays in Febru-
ary and July; at Brownsville, first Monday in January and second Monday in
June ; at El Paso, first Mondays in April and October ; at Laredo third Monday
in March and first Monday in December.
District Judge, Thomas S. Maxey.
Clerks Circuit Court, D. H. Hart, Austin ; J. W. Hancock, deputy, Austin.
Clerks District Court, D. H. Hart, Austin ; A. Grosenbacher, deputy, San An-
tonio; Chas. F. Tilghman, deputy, Brownsville; J. T. Hodgson, deputy, El
Paso; Geo. B. Hufford. deputy, Laredo.
UTAH (8th. Circuit).
Time and place of holding courts. — Circuit and district courts: First Mon-
days in December and May, at Salt Lake ; first Mondays in March and Sep-
tember, at Ogden.
JUDGES, CLERKS, DISTRICTS, TERMS. 8*3
District comprises the entire State.
District Judge, John A. Marshall.
Clerks Circuit and District Courts, Jerrold R. Letcher, Salt Lake City ; Joh«
W. Christy, deputy, Salt Lake City.
VERMONT (2nd Circuit).
Time and place of holding courts. — Fourth Tuesday of February, at Burling-
ton; third Tuesday in May, at Windsor; first Tuesday in October, at Rut-
land.
District comprises the entire State.
District Judge, Hoyt H. Wheeler.
Clerk Circuit and District Courts, George E. Johnson, Burlington.
VIRGINIA (4th Circuit).
EASTERN DISTRICT.
Counties in the district. — Accomac, Albemarle, Alexandria, Amelia, Bruns-
wick, Caroline, Charles City, Chesterfield, Culpeper, Dinwiddie, Elizabeth,
City, Essex, Fairfax, Fauquier, Gloucester, Goochland, Greenesville, Hanover,
Henrico, Isle of Wight, James City, King and Queen, King George, King
William, Lancaster, Loudoun, Louisa, Lunenburg, Mathews, Mecklenburg,
Middlesex, Nansemond, New Kent, Norfolk, Northampton, Northumberland,
Nottoway, Orange, Powhatan, Prince Edward, Prince George, Prince William,
Princess Anne, Richmond, Southampton, Spottsylvania, Stafford, Surry, Sus-
sex, Warwick, Westmoreland, and York.
Time and place of holding courts. — Circuit court of appeals : fourth circuit :
First Tuesdays in February, May, and November, at Richmond.
Circuit and district courts: First Mondays in April and October, at Rich-
mond; first Mondays in May and November, at Norfolk; first Mondays in
January and July, at Alexandria.
District Judge, Edmund Waddill, Jr.
Clerk Circuit Court, Matthew F. Pleasants, Richmond.
Clerks District Court, Henry Flegenheimer, Richmond; H. S. Ackiss, Nor-
folk; John S. Fowler, Alexandria; George E. Bowden, Norfolk.
WESTERN DISTRICT.
Counties in the district. — Alleghany, Albemarle, Amherst, Appomattox, Au-
gusta, Bath, Bedford, Bland, Botetourt, Buchanan, Buckingham, Campbell,
Carroll, Charlotte, Clarke, Craig, Cumberland, Dickenson, Floyd, Fluvanna,
Franklin, Frederick, Giles, Grayson, Greene, Halifax, Henry, Highland, Lee,
Madison, Montgomery, Nelson, Page, Patrick, Pulaski, Pittsylvania, Rappa-
hannock, Roanoke, Rockbridge, Rockingham, Russell, Scott, Shenandoah,
Smyth, Tazewell, Warren, Washington, Wise, and Wythe.
Time and place of holding courts.— Circuit and district courts: At Lynch-
burg, Tuesdays after the second Mondays in March and September; at Dan-
ville, Tuesdays after the second Mondays in April and November ; at Abing-
824 JUDGES, CLERKS, DISTRICTS, TERMS.
don, Tuesdays after the first Mondays in May and October ; at Harrisonburg,
Tuesdays after the first Mondays in June and December. District court : Sec-
ond Monday in January, at Charlottesville.
District Judge, John Paul.
Clerks Circuit and District Courts, A. K. Fletcher, Harrisonburg; William
McCauley, Lynchburg; Stanley W. Martin, Danville; Isaac C. Fowler, Ab-
ingdon.
WASHINGTON (9th Circuit).
Counties in the district. — Northern division, King, Kitsap, Island, Whatcom,
Jefferson, Skagit, Clallam, San Juan, and Snohomish.
Southern division : Wallawalla, Columbia, Garfield, Asotin, Whitman, Frank-
lin, Yakima, and Klickitat.
Eastern division: Spokane, Stevens, Douglas, Okanogan, Kittitas, Lincoln,
Adams, Ferry, and Chelan.
Western division: Pierce, Thurston, Mason, Chehalis, Lewis, Pacific, Wah-
kiakum, Cowlitz, Clarke, and Skamania.
Time and place of holding courts. — Circuit and district courts : Northern di-
vision, at Seattle, first Tuesdays in June and December; southern division, at
Walla Walla, first Tuesdays in May and November; eastern division, at Spo-
kane, first Tuesdays in April and September ; western division, at Tacoma, first
Tuesdays in February and July.
District Judge, Cornelius H. Hanford.
Clerk Circuit Court, A. Reeves Ayres, Tacoma.
Clerk District Court, Robert M. Hopkins, Seattle.
WEST VIRGINIA (4th Circuit).
Time and place of holding courts. — Circuit court: Charleston, May i and
November 10; Parkersburg, January io and June io; Wheeling, April i and
September 20; Clarksburg, April 15 and October 15; Martinsburg, October 15.
District court: Charleston, May 1 and November 10; Wheeling. April 1 and
September 20 ; Clarksburg, April 15 and October 1 ; Martinsburg, October 15.
District comprises the entire State. '
District Judge, John J. Jackson.
Clerk Circuit Court, Lyman B. Dellicker Parkersburg.
Clerk District Court, Jasper Y. Moore, Clarksburg.
WISCONSIN (7th Circuit).
EASTERN DISTRICT.
Counties in the district.— Brown, Calumet, Dodge, Door, Florence, Fond du
Lac, Forest, Green Lake, Kenosha, Kewaunee, Langlade, (except townships 31,
32, 33. and 34 of ranges 9 and 10 east) Manitowoc, Marinette, Marquette, Mil-
waukee, Oconto, Oneida (towns 35, 36, 37, 38, and 39 of range 11 east).
Outagamie, Ozaukee, Racine, Shawano, Sheboygan, Vilas (towns 40, 41, and
42 of range 11 east), Walworth, Washington, Waukesha, Waupaca, Waushara,
and Winnebago.
JUDGES, CLERKS, DISTRICTS, TERMS. 825
Time and place of holding courts. — Circuit and district courts : First Mon-
days in January and October, at Milwaukee ; second Tuesday in June, at Osh-
kosh.
District fudge, William H. Seaman.
Clerk Circuit and District Courts. — Edward Kurtz, Milwaukee.
WESTERN DISTRICT.
Counties in the district. — Adams, Ashland, Barron, Bayfield, Buffalo, Bur-
nett, Chippewa, Clark, Columbia, Crawford, Dane, Douglas, Eau Claire, Grant,
Green, Iowa, Iron, Jackson, Jefferson, Juneau, La Crosse, Lafayette, Lincoln,
Marathon, Monroe, Pepin, Pierce, Polk, Portage, Price, Richland, Rock, St.
Croix, Sauk, Sawyer, Taylor, Trempealeau, Vernon, Vilas, Washburn, and
Wood.
Time and place of holding courts. — Circuit and district courts : First Tues-
day in December, at Madison; first Tuesday in June, at Eau Claire; third
Tuesday in September, at La Crosse ; third Tuesday in June, at Superior.
Special term : At Madison, third Tuesday in June and first Tuesday in Oc-
tober. The clerk residing at Madison shall attend all terms of said courts
at Eau Claire, as clerk thereof.
District Judge, Romanzo Bunn.
Clerks Circuit and District Courts, Franklin W. Oakley, Madison; Alfred
Harrison, La Crosse.
WYOMING (8th Circuit).
Time and place of holding court. — Circuit and district courts : At Cheyenne,
second Mondays in May and November ; at Evanston, first Monday in July, and
at Sheridan or in National Park, at such dates as the courts may order.
The district comprises the entire State; also Yellowstone National Park.
District Judge, John A. Riner.
Clerk Circuit and District Courts, Louis Kirk, Cheyenne.
(104)
OE^rSTESRAI^ ITSTDEXXI.
(See Special Indices to Forms, General Orders or Rules in Bankruptcy, and
Equity Rules.)
(References are to pages.)
A.
Abatement.
proceedings in bankruptcy not abated by death or insanity of bankrupt, 106.
suit or proceeding to which trustee is party not abated by his death, 285.
Abbreviations.
petition, etc., not to be abbreviated, 221.
Absconding Bankrupt. (See Detention.)
Absence.
of judge from district requires clerk to send case to referee, 219.
or disability of referee, effect of, 278.
Account.
when failure to keep, destruction or concealment of books of, by bankrupt
will bar discharge, 158, 168.
of referees, 272.
trustees' must be kept, 287.
open to inspection, 294.
power of court over, 7.
notice by referee of filing of, 324.
referee or trustee refusing inspection of, guilty of crime, 255, 256.
payment on, when preference, 316.
to be stated as set-off, 439.
(See Audit, Books.)
Acknowledgment.
of letter of attorney to prove claim, etc., 308. *
Act of
1898, 607-658.
1867, 659-670.
1841, 698-706.
1800, 707-725.
827
828 GENERAL INDEX.
(References are to pages.)
Action.
rights of, except those purely personal, pass to trustee, 471.
liens obtained in, when dissolved, 430.
(See Jurisdiction, Provable Debts, Suits By and Against Bankrupt,
Trustee.)
Acts of Bankruptcy. 22-45.
construction of section 3, act of 1898, 23.
what is insolvency under this section, 25
fraudulent transfers, what are, 25.
voluntary transfers, when fraudulent, 27.
delay with intent to defraud, 27.
what creditors may take advantage of fraudulent transfer, 27.
concealment of property, 28.
transfer with intent to prefer, 28.
how distinguished from preference, 29.
intent must be proved, what is evidence of, 30.
intent tp be distinguished from motive, 33.
intent of agent imputed to principal, 35.
even exchange not fraudulent, 35.
manner of transfer immaterial, 36.
transfer or payment of debt by third party not, 36.
suffering or permitting preferences through legal proceedings, 37.
assignment for benefit of creditors, what is, 41.
admission of willingness to be adjudged bankrupt in case of corporations, 34.
allegation of insolvency in proceedings to declare bankrupt, 44.
solvency as defense, 45.
burden of proving solvency, 45.
bond required in involuntary bankruptcy proceedings, 45.
Adjudication,
defined, 1.
how made, 219.
by referee, when, 219.
appeal from, 246.
of partnership, after dissolution, 62.
(See Process, Pleading and Adjudication ; Bankrupts, Who May be ;
Title of Trustee, Etc. ; Transfer. )
Administration of Bankrupt's Estate,
trustee appointed, 279.
his duties, 286.
collection of assets, 288.
suits with reference to estate, 290, 435, 471.
proof of claims, 305.
declaration and payment of dividends, 418.
settlement of estate, 287, 300, 324.
(See Arbitration, Compromise, Expenses of Administering Estates,
Trustees, Priority and titles referring to various steps in bankruptcy
proceedings.)
GENERAL INDEX. 839
(References are to pages.)
Admission of Inability to Pay Debts.
as act of bankruptcy, 22, 43.
Adverse Claimant.
who is, 235.
(See Jurisdiction.)
Affirmation. (See Oath.)
After Acquired Property.
does not pass to trustee, what is, 454, et seq.
Agent.
included in term " creditor," 1.
not generally in fiduciary relation to principal within meaning of act, 206.
knowledge of imputed to principal in case of transfers, 35, 348.
voting at creditors' meetings, proper execution of letters of attorney, 304.
ratification of acts of in receiving a preference, 362.
Alien.
may be adjudged bankrupt, 18.
discharge of debt to, effect of foreign discharge, 189, 190.
Alimony.
not generally provable or dischargeable debt, 387.
Allowance.
to widow or children of deceased bankrupt under state statute, 107, 108.
(See Proof and Allowance of Claims.)
Amendments.
when allowed to pleadings, 223.
Amount.
of claims to sustain involuntary proceedings, 327.
(See Petitions in Bankruptcy.)
of claims voted on at meetings of creditors, 303.
Appeals and Writs of Error. 246-263.
appeals to Circuit Court of Appeals, 247.
who may take such appeal, 249.
time for taking such appeal, 250.
effect of application for rehearing upon time, 251.
appeals to and writs of error from U. S. Supreme Court, 251.
review on certiorari by Supreme Court, 252.
appeal to Supreme Court of territory, 253.
no appeal or right of revision from refusal to confirm composition, 253.
(See Jurisdiction of Appellate Courts.)
Appearance.
upon return of petition, 219.
by attorney or agent, 221, 304.
Appellate Courts,
defined. 1.
83o GENERAL INDEX.
(References are to pages.)
Appraisal.
of exemptions, 80.
of bankrupt's property, 454.
Approval of Court, When Necessary.
compromises, 138, 254.
expenses of estate, 375.
sale by trustee, 474.
suits by trustee, 290.
Arbitration of Controversies. 253-254.
trustee may submit to, 253.
arbitrators chosen how, 254.
finding to have force and effect of verdict, 254.
reviewable by court, 254.
application for, to state clearly subject-matter and reasons for, 254.
Arrest. (See Protection and Detention of Bankrupt, Contempt.)
Assets.
what are partnership and individual (See Partners), 69.
passing to trustee as bankrupt's estate, 465.
(See Title of Trustee to Bankrupt's Property.)
Assignee.
of claim may prove, 308.
for benefit of creditors, when allowed expenses, 378.
Assignment.
general, for benefit of creditors (See Acts of Bankruptcy), 41.
when creditors are estopped from relying upon an act of bankruptcy, 336.
Attachment.
when dissolved, 430.
as to whether attaching creditors can be counted in number of creditors,
333.
(See Secured Creditors, 314.)
Attendance.
of bankrupt or witness. (See Protection and Detention.)
Attorney.
included in term creditor, 1.
offenses by, 255, 256.
creditor may petition appear and vote by, 221, 303.
execution of letter of, 304.
fees of, prior payment allowed, 373.
re-examination of, 373.
reasonable fee entitled to priority, 408.
what is reasonable, review of, 412.
Attorney-General.
duties of as to statistics, 299.
GENERAL INDEX. 831
(References are to pages.)
Auctioneer.
not fiduciary debtor, 208.
Audit.
of account of trustee, 288.
of account of referee, 272.
Avoidance.
by trustee of preferences, 366.
of liens and encumbrances, 421 et seq.
of fraudulent conveyances, 454, 464.
Award. (See Arbitration.)
B.
Bail.
of bankrupt conditioned for his appearance, etc., 108.
(See Sureties.)
Bank.
national or state may not, but private banker may become bankrupt, 46.
(See Depositories for Money, Etc.)
Bankrupts, Who May or May Not Be. 45-55.
" bankrupt " defined, 1.
infants, 46.
insane persons, 48.
married women, 48.
aliens, 49.
wage earners, 49.
farmers, 49.
executors, 49.
corporations, 50.
manufacturing corporations, 51.
trading corporations, 52.
(See Partners, Bank, Acts of Bankruptcy, Protection and Detention
of Bankrupt, Arrest, Bail, Duties of Bankrupt, Death or Insanity
of Bankrupt, Exemptions, Composition, Discharge, Extradition,
Jurisdiction, Offenses against Bankruptcy Act, Process Pleading
etc.. Petitioners, Suits by and against Bankrupts, Title of Trus-
tee, ETC. )
Bankruptcy.
" in contemplation of," 168, 169.
date of, 2.
(See Bankrupts and Special Titles.)
Bankruptcy Law of
1800, 707-725-
1841, 698-706.
1867, 659-697.
1898, 607-658.
832 GENERAL INDEX.
(References are to pages.)
Bankruptcy Act of 1808 and Index. 607-656.
when it went into effect, 477.
suspend operation of state insolvency laws, 477, 478.
construction of, 23.
constitutionality of, 79, 139.
Bona Fide Purchaser,
protected, when, 369.
Bond.
petitioner to give, when, 23, 45.
on arrest of bankrupt, 109.
certified copy of order approving trustee as evidence, 228.
on appeals, 250.
trustee not required to give on appeal, etc., 247.
of referees and trustees, 294, 296.
on seizure of bankrupt's property, 452.
(See Sureties.)
Books.
of account, when failure to keep, destruction or concealment bars dis-
charge, 158, 168.
(See Account, Bankruptcy.)
Bribery.
of creditor, an offense, 256.
Burden of Proof.
of insolvency, 29 et seq.
in opposing a discharge, 162.
Business.
" principal place of," as conferring jurisdiction to adjudge one bankrupt,
6, 17.
temporary conduct of bankrupt's business by receiver, etc., 6, 18.
C.
Certification.
of case for jury trial to Circuit or District Court, 224, 226.
of controversies to Supreme Court, 247, 251.
of case to referee in absence of judge, 265.
of facts by referee on contempt proceedings, 276.
of records of referee, 278.
Certified Copies.
of proceedings, etc., as evidence, 228.
Certiorari.
to Supreme Court, 247, 252.
Children,
of bankrupt, allowance to under state statutes, 107.
GENERAL INDEX. 833
(References are to pages.)
Circuit Courts.
no original jurisdiction in bankruptcy proceedings proper under act of
1898, 10, 238.
what jurisdiction of is, 234, 238.
jurisdiction concurrent as to offenses enumerated by act, 234, 241.
jury trial in, 224, 225.
Circuit Courts of Appeals.
supervisory jurisdiction of, 241, 244.
appellate jurisdiction of. 246, 247.
(See Appeals and Writs of Error, and Jurisdiction of Appellate
Courts.)
Citation.
to appellee on appeal to C. C. A., 250.
Claimant.
adverse, who is, 235.
Claims.
jurisdiction to allow, 6.
duty of bankrupt to examine, and disclose false, 89, 90.
not scheduled not released, 187, 197.
created by fraud, not released, 187, 198.
presenting false, an offense, 256.
proof and allowance of, what may be allowed and when, of what proof is
to consist, (see this title), 305, 327.
amount of on involuntary petition, 327.
unliquidated, how proven, 384.
(See Dividends, Priority, Debts, etc., Provable Debts.)
Clerk.
definition of, " an officer,'' I, 2.
certification of case by, to referee, 265.
duties of, 296.
compensation of, 297.
list of in federal courts, 795-825.
wages of entitled to priority, 409.
who are, 413.
Close of Estate, 137, 297.
Co-Debtors of Bankrupt. 178-187.
discharge does not affect liability of others jointly liable with bankrupt, 179.
nor does creditor's failure to prove his claim, 180.
effect of discharge on liability of sureties on bonds, 180-186.
effect of discharge of one partner or endorser, 186.
joint debtors should be made parties in actions, even though discharged,
186.
discharge of co-surety releases from duty to contribute, 186.
(105)
834 GENERAL INDEX.
(References are to pages.)
Coercion.
does not excuse preferential transfer, 351.
Commencement of Bankruptcy Proceedings.
defined, 2.
as affecting jurisdiction, 261.
Commissions. (See Compensation, Referee, Trustee.)
Commitment. (See Contempt.)
Compensation,
of clerk, 297.
marshal, 19, 297.
receiver, 19.
referee, 272.
trustee, 292.
stenographer, 266.
Compositions — When Confirmed. 137-157.
history and construction of composition in bankruptcy proceedings, 138
constitutionality of compositions in bankruptcy proceedings, 139.
provisions as to composition strictly construed, 140.
all classes of bankrupts may make compositions, 141.
when composition may be made, 141.
how consent of creditors is to be obtained, 141.
what is sufficient consent, 142.
proceedings preliminary to application and confirmation, 143.
amount of consideration to be paid upon composition, 144.
deposit of money to pay debts having priority, 145.
practice on application, 146.
notice to creditors, 324.
specific grounds for refusing to confirm, 148-153.
not for the interest of creditors, 148.
the doing of acts or failure to perform duties which would bar a dis-
charge, 149.
improper influences, 150.
good faith required of creditors in composition, 153.
effect of confirmation of the composition, 154.
composition to be pleaded in action on discharged debt, 155.
conclusiveness of decree of confirmation, 155.
conclusiveness of refusal to confirm, 156.
Compositions — When Set Aside. 157-158.
fraud, sole ground, 157.
Compromise.
application for leave to, 254.
trustee may with approval of court, 254.
notice to creditors of proposed, 255, 324.
GENERAL INDEX. 835
(References are to pages.)
Computation of Time. 259-260.
time by months and years, 259.
Concealment.
definition of " conceal," 2.
of books, etc., when bar to discharge, 158, 168.
of property from trustee bar to discharge, 164-166.
when an offense, 255.
Confession of Judgment. (See Preferences, Liens.)
Congress.
power to enact bankruptcy laws, 79, 139,
Conspiracy.
to defeat purpose of act, 256.
Consideration.
in application for composition, 143.
proof of claim to state, 305.
preference arises only from antecedent, 335.
liens, etc., in good faith and for present, 438.
Construction,
of act, 23.
exemptions, 82.
transfers out of usual course of business as evidence of fraud, 345.
Consular Officers.
oaths, etc,, before, 226.
Contemplation of Bankruptcy.
meaning of phrase, 168.
Contempt.
power to punish for, and practice, 19.
no power in referee to punish for; certification of facts to judge; what is
contempt before referee, 276, 277.
Contingent Interests.
of bankrupts do not generally pass to trustee, 465.
Contingent Liabilities,
are they provable, 381.
Contract.
debts founded upon express or implied provable, 396.
tort abandoned and gMoji-contract relied upon, 399.
causes of action on pass to trustee, 471.
bankrupt's liability on continuing, 397.
836 GENERAL INDEX.
(References are to pages.)
Controversies.
" at law or in equity," 238.
{See Arbitration, Compromise, Jurisdiction.)
Conversion.
not fraud barring discharge from debt created by, 203.
proof of claims for, 401.
Conveyance.
when act of bankruptcy, 22, 25.
duty of bankrupt to make to trustee of property in other countries, 89.
as preference, 339.
effect of failure to record on running of time in case of preference, 357.
when void for want of record, 421, 429.
made with intent to hinder, delay, etc., 422, 438.
trustee to make, 454.
{See Liens, Transfers.)
Copy. {See Certified Copies.)
Copyright.
passes to trustee, 453.
Corporation.
denned, included in " persons," 1, 2.
jurisdiction to punish agents, officers, etc., of, for violation of act, 6.
when adjudged bankrupt, 46, 50, 55.
{See Bankrupts, etc.)
may act as trustee, when, 283.
may become surety on bond, when, 295.
Costs.
jurisdiction to tax, 7.
security for on involuntary petition, 23.
on dismissal of petition, 23.
when proved as incident to debt, 306, 379, 394.
Cost of Administering and Preserving Estate.
what is allowed as, 377.
priority, 408, 412.
Counselor-at-law. {See Attorney.)
Counter-claims. {See Set-off.)
Courts.
definition of; includes referees, 1.
{See titles of different courts.)
Courts of Bankruptcy.
what are, and powers of, 1, 6, 8.
(See Appeals, Discharge, Jurisdiction, etc.)
GENERAL INDEX. 837
(References are to pages.)
Credit.
new credit given in good faith, without security, etc., set off against pref-
erence, 340, 373.
Creditor.
what term includes, 1.
(See Amount, Arbitration, Claims, Adverse Claimant, Compositions,
Debts, Etc., Dividends, Jurisdiction, Liens, Meetings of Creditors,
Offenses, Petitions in Bankruptcy, Proof and Allowance of
Claims, Provable Debts, Preferences, Set-offs, Etc., Suits By and
Against Bankrupts, Trustees, Titles, Etc.)
Crimes. (See Offenses.)
Criminating- Questions.
may not be asked of bankrupt, 101.
D.
Damages.
on dismissal of proceedings, 23, 45.
unliquidated, how proved, 384.
measure of, in actions to set aside preference, 371.
" Date of Bankruptcy," 2.
Death or Insanity of Bankrupt. 106-108.
no abatement on death of bankrupt, 107.
discharge may be granted after, 107.
right of dower and statutory allowances to wife and children of bank-
rupt, 108.
Death of Trustee.
no abatement after, 285.
Debt.
defined, 2.
(See Debts of Bankrupt and Cross-References.)
Deficiency.
on mortgage sale, a provable debt, 392.
Debts of Bankrupt — How far Affected by Discharge. 187-218.
what debts may be proved, what dischargeable, 187.
discharge not extinguishment of debt, 188.
no release unless there is a discharge, 188.
discharge operates only on personal liability, 189.
provable debts released even if not proved, 189.
discharge affects debts due to aliens, 189.
effect of foreign discharge, 190.
debts of married women, 190.
838 GENERAL INDEX.
(References are to pages.)
Debts of Bankrupt — How far Affected by Discharge — Continued.
effect of discharge to be determined by court in which subsequent action is
brought. 191.
debts to the U. S. etc., not affected, 191.
effect of discharge upon judgment against bankrupt, 194.
character of debt to be determined by record, 197.
effect of discharge upon omitted claims, 197.
effect of discharge upon debts created by bankrupt's fraud, embezzlement,
misappropriation or defalcation while acting in an official or fiduciary
capacity, 198.
what are debts created by fraud, 199.
must be actual fraud, 200.
fraud must exist at inception of debt, 200.
effect of discharge upon partnership debts created by fraud of one
member, 201.
actions in assumpsit for debts created by fraud, 201.
burden of proof that debt was created by fraud rests upon plaintiff, 202.
when a judgment for a debt created by fraud is affected, 202.
conversion is not a fraud; what is fiduciary capacity, 203.
the character of the debt is not determined by state law, 205.
course of dealing as determining fiduciary capacity, 206.
agents in general are not to be regarded as fiduciary debtors, 206.
nor auctioneers, 208.
an attorney acts in a fiduciary capacity, 208.
meaning of the term " officers " with reference to fiduciary capacity,
208.
testamentary trustee, guardian, etc., act in fiduciary capacity, 209.
necessity of pleading discharge as bar, 209.
when a discharge granted pendente lite may be pleaded, 210.
how a discharge is pleaded and evidenced, 211.
effect of granting discharge upon proceedings in an appellate court, 213.
revival of a discharged debt by a new promise, 214.
new promise must be express and show more than an intention to pay,
215-
subsequent payments do not revive debt, 216.
must action be on original debt or new promise, 216.
parol promise sufficient in absence of statute contra, 217.
date of promise immaterial, 218.
effect of new promise to pay discharged judgment, 218.
(See also Claims, Proof and Allowance of Claims, Provable Debts,
Preferences, Set-off.)
Debtor. (See Bankrupt.)
Deeds. (See Conveyance.)
Default.
no objections to discharge, effect of, 170.
adjudication upon, 219.
GENERAL INDEX. 839
(References are to pages.)
Defenses.
solvency, when a defense, 22, 45.
when trustee ordered to put in, 119, 234.
(See Acts op Bankruptcy, Bankrupts, Who May Be, Etc., Prefm-
ences, Suits By and Against Bankrupts.)
Definitions of Words and Phrases used in the Bankruptcy Act.
person against whom a petition has been filed, 1, 3,
adjudication, 1.
appellate courts, 1.
bankrupt, 1.
clerk, 1.
corporations, 1.
courts, 1.
courts of bankruptcy, 1.
creditor, 1, 4.
commencement of proceedings, 2.
date of bankruptcy, 2, 3.
time of bankruptcy, 2.
debt, 2, 4.
discharge, 2.
document, 2.
holiday, 2.
insolvency, 2, 4, 25.
judge, 2.
oath, 2.
officer, 2.
persons, 2, 56.
referee, 2.
conceal, 2.
secured creditor, 2.
petition, 2.
states, 2.
transfer, 3, 4.
trustee, 3.
wage earner, 3, 49.
construction of words importing masculine gender or singular or plural
number, 3.
Deposit.
of money upon application for composition, 137, 143.
of fees with clerk, 296.
(See General Order X.)
Depositories.
for money of bankrupt estate, 375.
Depositions.
notice of, right of taking and effect of, 227, 228.
Detention. (See Protection and Detention of Bankrupt.)
840 GENERAL INDEX.
(References are to pages.)
Designation of Newspapers for Publication of Orders and Notices
Required by Act, 255.
Disability.
judge, 219, 265.
referee, 278.
Discharges — When Granted. 158-172.
when application for discharge must be made, 159.
proceedings upon such application, 159.
requisites for specifications of objections, 160.
discretion to allow extension of time to file specifications and amend-
ments, 161.
other creditors may prove objections, 161.
pleadings on part of bankrupt, 161.
general grounds for refusing a discharge, 162.
only where the general objection goes to the jurisdiction of the court
over subject-matter, 162.
specific grounds for refusing discharge, 163.
commission of offenses barring discharge must be made " fraudulently
and knowingly," 164.
concealment of property, 165.
false oath, 166.
must be taken in proceeding to discharge. 167.
failure to keep books of account, 168.
what is " contemplation of bankruptcy," 168.
effect of no objections upon discharge, 170.
discharge in partnership cases; in cases of corporations, 171.
{See also Debts of Bankrupts, Etc., Provable Debts.)
Discharges — Wben Revoked. 172-178.
history of proceedings for revocation of discharge, 172.
fraud only ground for revocation, 173.
discharge cannot be collaterally attacked, 174.
impeaching discharge by one creditor, 175.
effect of revocation of discharge, 178.
Dismissal.
of petition, costs upon, 23.
of case upon composition confirmed, 154.
of petitions by referee, 265.
of proceedings and notice to creditors, 324.
not by consent or for want of prosecution until after notice, 328, 335.
Distribution.
of estates by court, 7.
upon confirmation of composition, 138.
District Courts. {See Courts of Bankruptcy.)
GENERAL INDEX. 841
(References are to pages.)
Districts.
of referees, 263.
Diversity of Citizenship.
as bearing upon jurisdiction of U. S. Circuit Court, 238.
Dividends — Declaration and Payment of. 418-420.
defined, 273.
referee to declare, 268.
has commissions on, 272, 276.
trustee pays, 287.
payment on secured claims; recovery of, when paid on rejected claim, 306.
notice to creditors of declaration of, 324.
Dividends Unclaimed. 420-421.
not subject to attachment, 420.
not property but a right to secure property, 421.
Document,
defined, 2.
destruction, etc., of, a crime, 255.
production of, compelled by referee, 265.
relating to bankrupt estate passes to trustee, 453.
Domicil.
of bankrupt as determining jurisdiction, 6, 16.
Dower.
of bankrupt's widow, 106, 108.
Duties. (See Clerk, Referee, Trustee.)
Duties of Bankrupt. 89-106.
to attend meetings, 90.
to obey orders of court, 90.
to examine claims, 90.
to execute all necessary papers, 90.
to execute transfers, 91.
to inform trustee of evasion of Bankruptcy Act or proof of false claims,
91-
to file schedules, 91.
effect of omission of creditors from schedules, 93.
what the schedules should contain, inventory of property, 93.
verification and amendment of schedules, 94.
examination of bankrupt, when it may be had, 95.
bankrupt entitled to reasonable time to prepare for, 97.
bankrupt may be examined before appointment of trustee to enable referee
to prepare schedules, 97.
examination after discharge to ascertain whether property has been con-
cealed from trustee, 97.
subject-matter of examination, 97.
(106)
842 GENERAL INDEX.
(References are to pages.)
Duties of Bankrupt. — Continued.
power of referee upon examination, 98.
effect of refusal to answer or to give satisfactory answer on part of bank-
rupt, 99.
punishment for contempt, 100.
bankrupt not bound to answer criminating questions, 101.
(See Bankrupts, Composition, Evidence, Offenses, Examination, etc.)
E.
Election.
of trustee. (See Trustee.)
to accept burdensome assets, 465.
of secured creditor to prove as unsecured, 315.
Eligibility. (See Referee, Trustee.)
Embezzlement.
of property of bankrupt estate, 255.
Employee.
of bankrupt, not counted in computing number of creditors, 328, 335.
when entitled to priority, 409, 413.
Encumbrances. (See Liens, Sale.)
Endorser.
not affected by discharge of maker, 186.
Equity.
U. S. practice in, 484.
rules of and Index, 727-766.
jurisdiction of circuit and state courts in, 238.
appeals in, 24s, 246.
bankruptcy proceedings are in, 225.
(See Jurisdiction.)
Equity of Redemption.
sale by trustee, 475.
Error.
writ of. (See Appeals, Etc.)
Estates. (See Administration of Estates, Bankrupts, and Cross-Refer-
ences. )
Estoppel.
of creditor to petition, etc., 336.
Evidence. 227-233.
construction of provisions for examination of third persons in bank-
ruptcy proceedings, 228.
power of referee on examination, 229.
privilege of witnesses, 231.
GENERAL INDEX. 843
(References are to pages.)
Evidence — Continued.
subpcena runs into other districts, 232.
depositions, 232.
copies of proceedings as evidence, 232.
certified copy of order granting discharge, 233.
(See Depositions.)
Examination of Bankrupt. (See Duties of Bankrupt, Criminating Ques-
tions.)
Exemptions of Bankrupts. 78-88.
constitutionality of exemption provisions, 79.
waiver of exemptions, 81.
trustee's rights in exempt property, 79.
jurisdiction of bankruptcy court over exempt property, 82.
liens on exempt property, 83.
exemption from partnership assets, 84.
is there exemption in property fraudulently conveyed, 85.
effect of purchasing exempt property on eve of bankruptcy, 86.
exemption in property after a dissolution of lien thereon by adjudication
of bankruptcy, 87.
right of exemption fixed by laws existing at the time of petition, 87.
unencumbered property to be set aside for exemption, 87.
right of exemption personal to the bankrupt, 88.
exemption law of states to be followed, 88.
Exemption Laws.
of states arranged alphabetically, 767-794.
Expenses of Administering Estates. 375-379.
circumstances of each particular case to be considered in determining what
are necessary expenses, 376.
auctioneer's services, 377.
sums paid for the preservation of property, 377.
allowance to assignees for benefit of creditors, 378.
how accounts of trustee are to be examined, 379.
(See Attorney, Compensation.)
Extortion.
when a crime, 256.
Extradition.
of bankrupt, 118.
V.
Factor.
not fiduciary debtor, 203.
False Account.
a crime, when, 256.
844 GENERAL INDEX.
(References are to pages.)
False Claims.
a crime, when, 256.
bankrupt should report to trustee, 69.
False Oath.
a crime, when, 256, 257.
False Pretenses. (See Fraud.)
Farmer.
not subject to involuntary proceedings, 45, 49.
Fees. (See Compensation, Witnesses.)
Fiduciary Capacity.
debts incurred in, not dischargeable, 187.
what is, 203, 2C9.
Firm. . (See Partners.)
Foreign Discharge in Bankruptcy.
effect of, 190.
Foreign Creditors.
barred by discharge, 190.
Forms.
to be prescribed by Supreme Court, 258.
(For list of Official Forms and Index, see pp. 525-605.)
Franchises.
when trustee takes title to, 467.
Fraud.
ground for setting aside composition, 157.
ground for revoking discharge, 172, 178.
debts created by, not dischargeable, 187, 199.
judgments in actions for, not discharged, 202.
acts of, punishable, 255, 258.
lien and transfers in fraud of act dissolved, 429.
property fraudulently transferred vests in trustee, 453.
property fraudulently transferred, act of bankruptcy, 27.
do rights of action for, vest in trustee, 471.
Fraudulent Transfer. (See Conveyance, Fraud, Preference, Transfer.)
General Assignment. (See Acts of Bankruptcy, Assignment.)
General Orders and Index. 481-524.
to be prescribed by Supreme Court, 258.
Gift.
included in " transfer,'' 3.
(See Acts of Bankruptcy, Liens, Transfer, Preference.)
GENERAL INDEX. 845
(References are to pages.)
Good Faith.
unsecured credit given in, a set-off against preference, 339, 373.
transactions in, not preferential, 351.
liens given in, 421, 438.
transferee in, 369, 423, 438.
Good-will.
an asset of partnership business, 70.
Guarantors. (See Co-Debtors, Sureties.)
H.
Habeas Corpus.
for release of bankrupt from imprisonment when, no, in.
Hearing.
bankrupt denying insolvency to appear at, 23.
bankrupt to attend at meetings and, for discharge, 89.
on application for confirmation of composition, 138.
discharge, 158.
adjudication, 219.
on appeal (See Appeals.)
on proof of claims, 301, 305.
notice to creditors of, when, 324.
" Hinder, Delay or Defraud."
meaning as applied to acts of bankruptcy, 25.
Holiday.
defined, 2.
not counted in computing time, 259.
I.
Illegal Claim.
cannot be proved. 403.
Imprisonment.
release of imprisoned debtor when, no, in.
(See Offenses, Protection and Detention.)
Inability to Pay Debts.
admission of as act of bankruptcy, 22.
by corporation, 43.
Inability of Judge or Referee.
of judge to act, certification to referee, 219, 265.
referee to act, 269, 278.
Inability to Pay Pees.
affidavit of, made by voluntary bankrupt, 296, 298.
Incumbrances. (See Encumbrances, Transfers.)
846 GENERAL INDEX.
(References are to pages.)
Incumbered Property of Bankrupt.
exemption not to be set apart from, 87.
sale of by trustee, 475.
Indemnity.
bond of on involuntary proceedings, 23.
against expenses incurred by clerk, referee, marshal (G. O. X), 298.
Indictment.
prosecutions under act by, 258.
limitation of, 256.
in extradition, 118.
Individual Assets or Debts. (See Partners.)
Indorser. (See Endorser.)
Infants.
may not ordinarily be adjudicated bankrupt, 47.
on contracts for necessities, 48.
In Forma Pauperis. (See Inability to Pay Fees.)
Information.
required of bankrupt, 89.
referee, 269.
trustee, 287.
Injunction. (See Jurisdiction, Suits, Etc.)
Injuries.
claims for personal, whether provable, 385.
judgments for personal, whether provable, 385.
claims for do not pass to trustee, 471, 473.
Insane.
persons may not commit act of bankruptcy, 48.
proceedings do not abate upon bankrupt becoming, 106.
Insolvency.
what is, 4.
allegation of, 44.
proof of, when necessary to act of bankruptcy, 2S-
element of, preference. (See Preference.)
issue of, to be submitted to jury, 224.
Insolvent.
definition, 4.
proceedings against, 22, 327, 338.
jury trial of, when, 224.
liens by. (See Liens.)
GENERAL INDEX. 847
(References are to pages.)
Inspection.
of accounts, etc., of trustee, 294.
refusal to permit by referee or trustee an offense, 256.
of clerk's docket, 297.
Instruments in Writing.
debts founded on, proof of, 379.
Insurance.
policies pass to trustee when — rights of bankrupt with respect thereto, 470.
Intent.
when, a necessary element in an act of bankruptcy, 28, 36:
distinction between act of bankruptcy and preference with respect to, 29,
342-
intent as an element in offenses barring a discharge, 164.
in transfer to hinder, delay or defraud, 25, 422, 438.
Interlineations.
not permitted in pleadings, 221.
Intervening Creditors.
in involuntary proceedings — their rights, 330.
Invention.
no title in trustee to unpatented, 464.
Inventory.
required in schedules, 91, 529-539.
of trustee, 287.
Involuntary.
bankrupt, who may be, 45-55-
proceedings, 219, 224.
(See Bankrupts, Etc., and Cross-references.)
Issues.
to be determined by judge, when controverted upon involuntary petition,
jury trial upon, when, 224-226.
in general determined by referee, except confirmation of composition and
determination of discharge, 265-268.
J.
Joint.
and separate property of partners, 69.
and separate debts, 72.
debtors. (See Co-debtors.)
trustees — upon death of one suit does not abate, 285.
death of one creates vacancy to be filled, 292.
trustees may give joint or several bonds, 295.
848 GENERAL INDEX.
(References are to pages.)
Joint Stock Company.
included in corporation, 1.
Judge.
definition, 2.
absent, etc., referee acts, 219.
alone determines application to confirm composition or to grant discharge,
265, 268.
Judges and Clerks.
list of federal, 795-825
Judgments.
" suffering, etc.," as act of bankruptcy, 37.
" suffering, etc.," as preference, 339.
what are dischargeable, and what not, 194-197.
what are provable and what not, 384-394.
liens created by, within four months, 430.
discharge of lien of, does not necessarily invalidate, 437.
Jurisdiction.
of District Courts as courts of bankruptcy confined to strict bankruptcy
proceedings; of state courts, 8-14.
territorial jurisdiction, 14.
bankruptcy courts always open, 16.
power of bankruptcy court to adjudge persons bankrupt, 16.
distinction between domicil and residence, 17.
" principal place of business," 17.
aliens, 18.
power of bankruptcy court to take charge of property, 18.
power of bankruptcy court to enforce orders by contempt proceedings. 19.
Jurisdiction of United States and State Courts. 234-241.
who are adverse claimants (distinction between summary and plenary
jurisdiction), 235-237.
jurisdiction of Circuit Court, 238.
jurisdiction of state courts, 238-241.
jurisdiction of Circuit Court over crimes, 241.
Jurisdiction of Appellate Courts. 241-246.
appellate jurisdiction of Supreme Court in matters of bankruptcy, 242.
appellate jurisdiction of Circuit Court of Appeals, 243.
revisory power of Circuit Court of Appeals, 244.
(See Appeals and Writs of Error, Discharge, Liens, Preferences,
Transfer of Cases.)
Jury Trials. 224-226.
in what cases a jury may be had in bankruptcy courts, 225.
in collateral matters, 225.
statutory provisions as to in U. S. Courts, 225.
in equity, 225.
GENERAL INDEX. 849
(References are to pages.)
K.
Knowledge.
of insolvency as an element of reasonable cause for a transferee to believe
a preference was intended, 343-345.
of agent, 348.
of sub-agent, 348.
L.
Laches.
in application to revoke discharge, 172.
Landlord.
claim for rent provable when, 393.
lien for rent, 428.
distraint for rent, 429.
rights as against trustee, 393.
rights as against bankrupt, 393.
Lawyer.
trustee acting as his own, entitled to counsel fee, 294,
Lease.
trustee's rights in bankrupt's, 393.
bankrupt's liability on, 393.
(See Landlord.)
Levy.
upon bankrupt's property when void, 430.
property subject to, passes to trustee, 465.
Liability. (See Debts, Claims, Provable Debts.)
Licenses.
trustee's title in. (See Franchises, Title, etc.)
Liens. 421-439.
liens in general unaffected by Bankruptcy Act, 423.
such liens include all recognized by state laws, 424.
mechanics' liens, 424.
mortgages to secure future advances, 425.
mortgages on rents and profits, 425.
mortgages of property to be acquired, 426.
liens by judgment and execution obtained more than four months
prior to the filing of petition, 427.
actual levy not necessary, 428.
lien of vendor upon property sold for purchase price, 428.
lien of attorney, 428.
lien of obligee, 428.
lien of partner upon partnership property for surplus due him, 428.
lien of bank on shares of stockholders for payment of indebtedness,
428.
lessor's right of distraint for rent, 429.
(107) .^
850 GENERAL INDEX.
(References are to pages.)
Liens. — Continued.
trustee has no interest in lienor's relative rights of priority, 429.
liens dissolvable and liens deemed null and void under section 67, 429, 435,
claims void for want of record, 420. t
subrogation of trustee to rights of creditors in enforcing rights as
against lien created by bankrupt, 430.
liens, judgments, levies, etc., created within four months of bankruptcy,
430.
effect of paragraphs c and f of section 67, 430 et seq.
conveyances and encumbrances in fraud of creditors, 438.
proceedings to annul liens, 435.
trustee immediately vested with title to property covered by liens, 436.
whether bankruptcy court has jurisdiction to compel dissolution or
annulment of liens by summary process, 436.
action against adverse claimant cannot be brought in bankruptcy court
except by consent of defendant, 436.
goods seized from the actual possession of bankrupt after date of ad-
judication may be summarily recovered, 437.
as to whether assignment for benefit of creditors may be summarily
set aside, 437.
effect of dissolving lien; debt not affected, 437.
liens given or accepted in good faith for present consideration and not
in contemplation or in fraud of the act, 438.
Life Insurance. (See Insurance.)
Limitations.
of suits by or against trustee, 119.
of prosecutions for offences under the act, 256.
of time for proving claims, 306.
actions on bond of referee or trustee, 295.
List of Creditors.
bankrupt to prepare, verify and file, 89.
examination of by referee, when prepared by him, 268-270.
List of Federal Judges, Clerks, Terms and Districts, 795-825.
Lost Bill or Note.
method of proof, 305.
Lumber Co.
is manufacturing corporation, 52.
Lunatics. (See Insane Persons.)
m.
Mail.
referee to transmit certified copies of papers to clerk by, when, 264.
notice to creditors by, 324.
GENERAL INDEX. 851
(References are to pages.)
Majority.
infant arriving at affirming act of bankruptcy, effect of, 47.
of creditors in composition proceedings how reckoned. 137, 142.
Manufacturing Corporation.
may be involuntary bankrupt, what is, si-
Married Women,
as bankrupts, 48.
rights in estate of deceased bankrupt husband, 108.
contracts of, when provable debts, 404.
choses in action of bankrupt's wife, 473.
Marshals.
included in " officer," 2.
bankruptcy court may appoint and authorize business to be conducted by, 6.
fees of, 297.
to take bankrupt's property into possession, when, 452.
liability of, 452.
Marshaling Assets.
in case of bankrupt partners, 66.
Mechanics' Liens.
not invalid under section 67, 424.
Meetings of Creditors. 300-305.
order for and notice of, 301.
proceedings at, 301.
special meeting of creditors, 303.
voters at, 303.
voting by attorney-in-fact, 304.
(See Proof and Allowance op Claims. )
Memberships in Exchanges,
pass to trustee, 469.
Mercantile.
corporation may be subject to adjudication of bankruptcy.
(See Trading Corporations.)
Mesne Process.
attachments upon ; may creditors securing be counted, 333.
Mileage.
of witnesses, priority, 408.
Minors. (See Infants.)
Mining Corporations.
not subject to bankruptcy, 51.
Misappropriation.
offence, 255.
bars discharge, 158.
8S2 GENERAL INDEX.
(References are to pages.)
Money.
depositories for, 375.
trustee to collect and reduce property to, 286, 291.
mortgages.
included in " transfers," 3, 4.
(See Liens.)
Municipal Divisions.
entitled to priority, 409, 417.
debts to not discharged, 187, 191.
Mutilate.
included in " conceal," 2.
Mutual Debits and Credits. (See Set-offs.)
N.
National Banks.
not to be involuntary bankrupts, 46.
as depositories, 375.
Necessary Expenses. (See Expenses of Administering.)
Ne exeat.
writ of to detain bankrupt, 116.
Negligence.
actions for, do not vest in trustee, 471.
New Credit.
unsecured set-off against preference, 340, 373.
New Promise.
to revive discharged debt, 214-218.
Newspapers. (See Designation of. Etc.)
Notice.
unscheduled claims not discharged unless creditor had, 187, 197.
notice by publication when, 219.
of taking depositions, 228.
referee to give to creditors, 269.
creditors entitled to, in what cases, 301, 324.
how given, 324.
Number.
singular imports plural, and vice versa, when, 3.
of arbitrators, 253.
of referees, 265.
of trustees, 279.
of creditors who may petition, 327.
of creditors, computation of, 328-335.
GENERAL INDEX. 853
(References are to pages.)
Oaths and Affirmations. 226-227.
before whom proof of claim may be verified, 227.
Objections.
to confirmation of composition, 148-154.
to discharge, how pleaded and proved, 160-170.
to claims, 305, 318.
Offenses Against Bankruptcy Act and Penalties. 255-258.
what are such offenses, 256.
conspiracy as an offense, 257.
defendant may be a witness, 257.
proceeding by indictment, 258.
reasonable opportunity for inspecting accounts, 258.
bar discharge. (See Discharge.)
(See Concealment, Conspiracy, Contempt, Embezzlement, Extortion,
False Oath and Account, False Claims, False Pretenses, Indict-
ment, Fraud, Jurisdiction, Misappropriation.)
Office.
of referee and trustee, 263.
referee to hold no other office, 264.
referee to have in district, 264.
trustee to have in district, 283.
Officers.
include what.
(See Attorney-General, Clerk, Marshal, Receiver, Referee, Trus-
tee.)
Orders.
bankruptcy court to make and enforce obedience to, 7, 39.
bankrupt to comply with lawful, 89.
certified copy of as evidence, 228.
general orders (see this title).
transfer of cases by, 260.
P.
Papers.
bankrupt to execute and deliver, 69.
certified copies of as evidence. 228.
refusal to allow inspection of, by referee or trustee, an offense, 256.
refuse to transmit, 269.
accounts and, of trustee, 287, 294.
Part Payment.
does not revive discharged debt, 216.
854 GENERAL INDEX.
(References are to pages.)
Parties.
power to substitute additional, 7.
referees to furnish information to, 269.
referees to receive from clerk, 269.
intervening on petition, 328, 330.
Partners and Partnership.
when partners may be declared bankrupt, 55-77-
when partnership is insolvent, 58.
who must petition in partnership proceedings, 59.
act of bankruptcy of partnership, 60.
who may be adjudged bankrupt in partnership proceedings, 61.
adjudication after dissolution, 62.
jurisdiction of bankruptcy court over partnership estate in case of de-
ceased partner, 63.
right of trustee of individual partner in partnership estate, 64.
choice of trustee of bankrupt firm, 65.
marshalling assets, 66.
what are firm assets and what are individual assets, 69.
what are partnership and what are individual debts, 72.
rights of firm creditors in individual assets, 73.
rights of creditors holding joint and several obligations, 74.
proving claims of partnership estates against individual estates and rice
versa, 76.
marshalling of assets where one is member of two firms. 77.
Passage of Act.
time of going into effect, 477.
effect of on state insolvency proceedings, 477.
Patents.
pass to trustee, 453.
but not application for, 464
Payment.
to attorneys, re-examination of, 339, 373.
(See Dividends, Priority, Notice to Creditors.)
Penalties. (See Offenses.)
Petition.
defined, 2.
service of, answer to, hearing on, amendment of, 219-224.
when filed, 22.
duty of referee with respect to, 265.
who may file and dismiss, 327-332.
(See Petitioners.)
GENERAL INDEX. 855
(References are to pages.)
Petitioners in Bankruptcy. 327-338.
who may be voluntary petitioners, 328.
petitioners in involuntary proceedings, 329.
assignee of claims, 330.
as to when other creditors than original petitioners may join, 330.
number of petitioners, 331.
what debts to be taken in consideration when petition filed against one
partner, 331.
as to whether preferred creditors can be counted in making up amount of
debts, 332.
as to whether attaching creditors can be counted in number of creditors,
333-
or secured creditors, 335.
exclusion of employees in computing number of creditors, 335.
dismissal of petition, 335.
when creditors are estopped from petitioning, 336.
Place of Business.
as fixing venue, 6, 16.
Pleading. (See Process Pleading, Etc.)
Policy of Insurance. (See Insurance.)
Possession.
application to take, of bankrupt's property, bond thereon, and damages
on dismissal, 23.
Possession of Bankrupt's Property, Taking by Court. 452-453.
provisional remedy merely, 452.
marshal's liability in serving warrant, 452.
rights of transferee to property, 453.
Power.
of appointment when beneficial to donee passes to trustee, 466.
of judge, referee, trustee, etc., (see those titles),
of attorney, form and execution, 304, 305, 308.
Preferred Creditors. (See Preferences.)
Preference^. 338-374.
construction of section 60, what are preferences, 339.
what constitutes " suffering " of a judgment, 339.
elements of a preferential transfer, 341.
what is reasonable cause to believe preference was intended, 343-351.
transfers out of ordinary course of business, 345.
" reasonable cause " must have existed at time of transfer, 346.
knowledge of agent imputed to principal, 348.
knowledge of sub-agent, 348.
knowledge of attorney of creditor derived as attorney of debtor,
privileged, 350.
856 GENERAL INDEX.
(References are to pages.)
Preferences Continued.
transfers made under coercion, 351.
transfers not giving advantage to transferees, 351-355.
preferences only in cases of antecedent debts, 355.
mode of preferential transfer immaterial, 356.
partnership preferences, 357.
date of transfer within four months of bankruptcy, effect of failure to
record deeds, etc., 357-362.
ratification of unauthorized acts of agents with respect to time of receiving
preference, 362.
when do the four months expire, 364.
preference voidable, not void, 365.
preference to be avoided by trustee alone, 366.
appeal from, 366.
revival of merged liens by annulment of preferential transfer, 367.
recovery from party benefited, 368.
rights of bona fide purchasers, 369.
recovery of property preferentially transferred or its value, 369-371.
measure of damages in such actions, 371.
effect of debtors' collusion in preferential transfers, 372.
right to annul fraudulent transfers rests in trustee as representative of
creditors independent of express provisions of bankruptcy act, 373.
set-off against new unsecured credit given in good faith, 373.
re-examination of fee paid to attorneys, 373.
Preservation,
of liens, 421.
of estate. (See Priority.)
Presumption of Intent.
in voluntary transfers, 27.
that one intends legal consequences of acts, 30.
as to concealment of assets, 164.
as to transfers out of ordinary course of business, 346.
Printing Company.
may be involuntary bankrupt, 46.
Priority, Debts Which Have. 408-417.
priority of United States, state, county, district or municipality, 409.
when taxes should be paid by trustee, 410.
cost of preserving estate, 412.
costs of administration, 412.
attorney's fees, 412.
wages, 413-416.
priority personal, 413.
priority retained where assignment took place after commencement
of proceedings, 413.
GENERAL INDEX. 857
(References are to pages.)
Priority, Debts Which Have Continued.
wages claim reduced to judgment not affected, 413.
meaning of words " workmen, clerks and servants," 413.
traveling salesmen not, 414.
officers of corporation not, 416.
priorities under the laws of States or United States, 417.
liens under state laws to be recognized in priority as the state laws
have fixed them, 417.
rules of state practice yield to those of federal practice, 417.
disposition of property upon revocation of discharge or composition, 417.
Prison. (See Imprisonment, Protection and Detention.)
Private Sale.
by trustee when, 474.
Process, Pleadings and Adjudications. 219-224.
equity rules as to process, 220.
procedure in involuntary cases, 221.
procedure in voluntary cases, 223.
amendment of pleadings, 223.
(See Adjudication, Acts of Bankruptcy, Petitioners, Proof, Etc.)
Promise.
to pay discharged debt, 214.
Proof and Allowance of Claims. 305-327.
manner of proof of claim, 307-311.
how far a creditor may attack the validity of judgments presented for
allowance, 311.
claims of secured and preferential creditors, 314-321.
definition of secured creditor, 2, 314.
when secured creditor deemed to have elected to prove as unse-
cured, 315.
what is a preference, 316.
as to what preferences must be surrendered before proving claim,
payments of money on open account, etc., 318.
no claim to be proved until all preferences are surrendered, 318.
what constitutes a surrender, 319.
subrogation of surety to prove claim of creditor, 321, 323.
reconsideration of claims, 323.
Property. (See Title of Trustee.)
Protection and Detention of Bankrupt. 108-118.
purpose and character of protection, 109.
covers arrest while in attendance upon court, no.
covers arrest upon civil process on any debt or claim barred by discharge
in bankruptcy, no.
(108)
858 GENERAL INDEX.
(References are to pages.)
Protection and Detention of Bankrupt — Continued.
protection may be granted upon terms, in.
when the right of protection begins, 113.
how enforced, 11 3-
as to how far courts should go in determining whether a debt is dis-
chargeable or not in granting protection from arrest, 114.
in what actions is there exemption from arrest, 115.
method of detaining bankrupt from leaving district, 116.
(See Imprisonment.)
Provable Debts. 379-408.
construction of section 63, 380.
time when debt must have come into existence to be proved, 381.
are contingent liabilities provable, 381.
proof by surety of bankrupt, 383.
judgments as provable debts, 384.
unliquidated claims, how proved, 384.
impeaching judgments for fraud or collusion, 385.
as to whether judgments imposing fines are provable debts, 386.
is alimony a provable debt, 387.
debt not yet due, provable, if absolutely owing, 390.
stoppage of interest on such claims, 390-393-
how far claims for rent may be provable, 393.
judgment for costs as a provable debt, 394.
debts founded upon contract express or implied or on open account, 396.
continuing contracts, 397.
debt provable even though collectible from others than bankrupt, 398.
proving under contracts implied in law, quasi-contracts, 399.
claims for conversion have no priority, 401.
changes in form of debt after filing petition, 402.
provable debts in general, 403.
contracts void, ultra vires, or illegal cannot be foundation of provable
debt, 403.
claims cognizable only in equity are provable, 404.
debts due to aliens and effect of foreign discharges, 405.
claims affected by the Statute of Limitations, 405.
when statute begins to run, 406.
claim in general may be proved if statute affects only remedy and not
validity, 407.
debts not provable unaffected by bankruptcy proceedings, 407.
proof of claim subjects creditor to all orders of court, 407.
Proxy.
included in creditor, 2.
punishment of. (See Offenses.)
Publication. (See Designation of Newspapers, Notice.)
GENERAL INDEX. 859
(References are to pages.)
Publishing Companies.
subject to bankruptcy, 46.
punishment (See Offenses.)
Purchaser.
referee may not become, 256.
bona fide for present value protected, 351-356, 423, 438.
Q.
Qualifications.
of referee. (.See Referees.)
of trustee. (See Trustees.)
Quasi-contract,
proved, 399.
B.
Beal Estate.
passes to trustee, 453.
not to be sold for less than 75 per cent, of appraised value, 454.
" Seasonable Cause of Belief of Creditor." (See Preference.)
Bebate of Interest.
on debts payable in future, 390.
Receivers.
jurisdiction to appoint, 6.
compensation of, 19.
expenses of, entitled to priority, 408.
Beconsideration of Claims,
when allowed, 323.
Becord.
character of debt determined by, 197.
certified copies as evidence, 228.
referees to keep, etc., 269.
what are referees', 278.
Be-examination.
of claims, 323.
of payments to attorneys. (See Preferences.)
Beferees. 263-279.
appointment, removal and districts of, 263.
qualifications of, 264.
degree of relationship to bankrupt preventing appointment, 264.
S6o GENERAL INDEX.
(References are to pages.)
Referees — Continued.
oath of office, 265.
number of, 26s.
jurisdiction of, 265.
upon application for discharge, 268.
review of decision of by judge, 268.
duties of enumerated, 268-272.
taking of testimony by, 271.
restrictions upon acts of, 271.
must give notice to trustee of his appointment, 272.
expenses and accounts, 272.
compensation of, 272-275.
to depend on dividends and commissions, 273.
what are dividends, 274.
constitutionality of provisions for compensation of, 274,
contempts before, 276.
disobedience to subpoena, 277.
contempt proceedings, 277.
Tecords of, 278.
absence or disability of, 278.
bonds of, 294.
(See Account, Offenses, Court.)
Reference of Cases After Adjudication.
when made, 233, 234.
Rehearing.
ordered by court, 173.
Release. (See Discharge.)
Removal. (See Extradition, Referee, Trustee.)
Rent.
when provable, 393.
Replication or Reply,
when necessary, 212.
Reports.
of trustees, 287.
of expenses, to be made, 375.
Representations.
judgment for false not released. (See Fraud.)
Residence.
sureties' in jurisdiction of court, 23.
referees' in district. 264.
trustees' in district, 283.
GENERAL INDEX. 86!
(References are to pages.)
Revesting.
of title in bankrupt, 454.
(See Compositions, Discharge, Title to Property.)
Review.
of referee's decision, 268.
Revocation.
of discharge. (See Discharge.)
Rules.
power of court to make, 481.
Supreme Court to prescribe, 258.
may be amended by such court, 483.
obligatory and binding on courts of bankruptcy, 258.
but not exclusive as to cases not within terms, 259.
(See General Orders, pp. 481-513.)
S.
Salary.
wage earner, one receiving less than $1500 per annum, 3.
Sales by Bankrupt, (See Preference, Transfer.)
Sales of Property by Trustee,
notice of, to creditors, 301.
appraisal of property, 454.
for not less than 75 per cent, of appraised value, 454.
trustee to convey title, 454.
private sale of bankrupt's estate, 474.
upon approval of court only, 474.
may trustee sell free from encumbrances, 475-477.
Schedule. (See Duties of Bankrupts, and Official Forms, pp. 527, et seq.)
Secured Claims and Secured Creditor. (See Proof of Claims, Provable
Debts, Etc.)
Security. (See Preferences, Liens.)
Separate, Joint and, Estates of Partners. (See Partners.)
Servants.
priority of wages, 408.
who are, 413.
Service. (See Petition, Publication, Process Pleading, Etc.)
Setting Aside. (See Composition, Discharge, Preferences, Transfers.)
86? GENERAL INDEX.
(References are to pages.)
Set-offs and Counter-claims. 439-451.
section 68 declaratory of general legal principles, 440.
what are debts which may be set off, 440.
meaning of words " mutual credits," 441.
entrusting property to one for a specific purpose does not create mutual
credit, 444.
knowledge of the indebtedness and intent to give credit must exist, 445.
debts must be in the same right, 44s.
how far joint and partnership claims may be set off against individual
indebtedness, 446.
how far claims purchased after the filing of petition or within four months
prior thereto can be set off against debt of bankrupt, 448.
principle of subrogation, 449.
liability accruing to trustee set off against claim of creditor, 450.
banker's right to offset loans against deposits, 450.
distinction between claims of a provable nature and claims which ca»
be proved, 451.
waiver of set-off, 451.
Solvency.
burden of proof, 29.
defense, 22, 45.
jury trial, 224.
State Courts. (See Jurisdiction.)
Statistics.
to be laid before attorney-general and tabulated by him for Congress, 290.
Stay. (See Suits By and Against Bankrupt.)
Stenographer.
may be employed, compensation, 266.
Subpoena.
service with petition, 219.
Subrogation.
of surety to prove claim, 321.
" Suffering " or " Permitting " or " Procuring."
meaning, 37, 339.
Suits By and Against Bankrupt, Staying Proceedings in State Court.
1 19-137.
extent of power to stay, 119 et seq.
priority of jurisdiction and right to stay generally determined by pos-
session of res, 122 et seq.
effect of proof of claim on right of action in state court, 125.
what suits may be stayed, 126.
GENERAL INDEX. 863
(References are to pages.)
Suits By and Against Bankrupt, Staying Proceedings in State Court
Continued.
stay of proceedings brought to enforce lien, 128.
to what court application for stay to be made, 129.
state courts do not lose jurisdiction even if action is stayed, 131.
how far stay is discretionary, 131.
duration of stay, 132.
as to how far bankruptcy court upon application for stay should inquire
as to whether action is dischargeable or not, 133.
continuance of pending suits by trustee with approval of court, 133.
in what suits trustee may intervene, 134.
right of bankrupt to maintain pending action, 135.
liability of substituted trustee for costs, 135.
limitation of actions under section 11 of the act of 1898, 136.
assignment of causes of action, 137.
when estate is closed with reference to suits by or against bankrupt, ijy.
Summary Proceedings,
when employed, 235-237.
Sunday.
omitted in computing time. (.See Holiday.)
Supervisory Jurisdiction. ((See Jurisdiction.)
Supreme Court. (See Appeals and Writs of Error, Certiorari, Jurisdic-
tion, Etc.)
Sureties. (See Subrogation.)
Surrender.
of preference, what is, 318-319.
Surviving Partner,
rights of, 63.
T.
Taxes.
not released by discharge, 191.
priority of, 410.
should be paid by trustee, .410.
Terms.
of courts of bankruptcy.
(See List of Judges, Clerks, Districts and Terms, pp. 753-783.)
Territorial Jurisdiction. (See Jurisdiction.)
Time. (See Computation of.)
864 GENERAL INDEX.
(References are to pages.)
Title of Trustee to Bankrupt's Property. 453-477.
date of which trustee's title vests, 453-459.
words " prior to filing petition " refer to what passes, 455-
words " as of the date when he was adjudicated bankrupt " to time when
it passes, 455.
bankrupt's title and interest after adjudication and before appointment
of trustee, 459.
during such time bankrupt is trustee of property. 461.
title of trustee subject to all equities, 462-464.
bankrupt must make all necessary transfers to trustee, 464.
interest in patents does not include application for patent, 464.
power beneficial to bankrupt passes to trustee, 464.
property transferred by bankrupt in fraud of creditors, 464.
property transferrable and subject to levy, 465-470.
includes every vested right and interest, 465.
if burdensome, trustee may decline it, 465.
contingent interests and interests in trust do not generally pass, 465.
contingent remainders, 466.
how far beneficial interest under trust can be reached, 466.
personal privileges, licenses, franchises, seats in stock exchange, etc., 469.
insurance policies under section 70, 470.
rights of action generally covering all rights of action save those which die
with the person, 471-472.
choses in action of bankrupt's wife, 473.
(See Trustee.)
Tort.
may it be proved, 385.
Trade Marks.
pass to trustee, 453.
Trading Corporations.
may be bankrupt, what are, 52.
Trial. (See Jury Trial, Process, Pleading, and Adjudications.)
Transfer.
includes what, 3, 4.
when valid, void or voidable,
(See Acts of Bankruptcy, Liens, Preferences.)
of cases from one district to another, 260-262.
Trust.
companies as trustees, 283.
companies as sureties, 295.
interest in does not pass to trustee, 465.
how surplus income reached, 466.
GENERAL INDEX. 865
(References are to pages.)
Trustees. 279-294.
appointment of, in whom vested, 279, 282.
number of to be chosen, 282
when not necessarily appointed, 283.
no official or general trustee, 283.
qualifications of, 283.
death or removal of, 285.
resignation of, 266.
duties of, 286-292.
duty to pay interest and collect assets, 288.
when should he take legal proceedings, 290.
duty to reduce property to money, 291.
duty to furnish information, 291.
duty to designate and set apart exemptions, 292.
two must concur, 292.
compensation of, 292.
no compensation until services rendered, 293.
may there be extra compensation, 293.
accounts and papers of, 294.
audit of. 288.
bonds of, 294.
{See Account, Title of Trustee, Etc., Report, Offenses, Etc. )
u.
Unclaimed Dividends. {See Dividends.)
United States. {See Debts Dischargeable, Etc., Provable Debts, Priority.)
Unliquidated Claims. {See Provable Debts.)
Value.
transfer for. {See Lien, Preferences.)
sale for not less than 75 per cent, of appraised, 454.
Vesting of Property in Trustee.
when, 454-460.
Verification. {See Oath.)
Void Conveyances and Transfers. {See Liens.)
Voidable Transfers. {See Preference.)
Voluntary Bankruptcy.
who may go into, 328.
{See Process, Etc., Bankrupts, Etc., and Cross-references.)
(109)
866 GENERAL INDEX.
(References are to pages.)
W.
Wage Earner.
definition, 3.
not subject to involuntary bankruptcy, 45, 49.
Wages.
priority of, 413.
Warrant.
for detention of bankrupt, 108, 116.
Widow.
dower of, not affected, 106-108.
Witnesses.
must attend examination when ordered, scope of evidence, privilege, etc.,
227-232.
attendance before referee, how compelled, 276-278.
mileage and fees, 277.
mileage priority, 408.
Women. (See Married Women.)
Workmen.
have priority as to wages, 408-413.
Writ. (See Certiorari, Appeals and Writs of Error, Ne Exeat.)
Writing.
debts evidenced by instrument in, how proved, 379.
[Whole number of pages in book 910.]
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