A demand being barred by the statute of limitations of the state where the bankrupt resides and thereby extinguished, is, therefore, not provable against the estate of the bankrupt. (Citing In re Kingsley, Fed. Cas. No. 7819; In re Hardin, id. 6048; In re Sheppard, id. 1273; In re Ray, id. 11589.) In re Noesen, 7 Ohi. Leg. News, 419; 18 Fed. Cas. 294.

No debt can be proved in bankruptcy on which an action could not be maintained against the bankrupt in the state where the petition is filed if proceedings in bankruptcy had not been instituted. So held in a case where the claim sought to be proved consisted of two notes barred by the statute of limitations of Minnesota. In re Doty, 16 N. B. R. 202; 7 Fed. Cas. 957.

Judge Blodgett said: "I shall allow the defense of the state statute of limitations by the assignee to the claim of a creditor seeking to prove his debt in bankruptcy wherever that defense might have been made in a suit in the state where the debtor resides." In re Reed, 6 Biss. 250; 20 Fed. Cas. 408.

Federal courts sitting within their respective states regard their statutes of limitations, and give them the interpretation and effect which they received in the courts of the state. In re Noesen, 7 Chi. Leg. News, 419; 18 Fed. Cas. 294 (1875).

It was held in the case cited that a debt might be proved in bankruptcy though barred by the statute of limitations of the state where the bankrupt resides. In re Shepard, 1 N. B. R. 439; 21 Fed. Cas. 1250 (1868).

Referring to the Law of 1867, Judge Blatchford said: "No provision is found in the act which destroys the provability of a debt because it is barred by the statute of limitations of one state." In re Ray, 2 Ben. 53; 20 Fed. Cas. 322.

A debt which is barred by the statute of limitations, but which was included in the debtor's schedules, may be proved and allowed. In re Hertzog, 18 N. B. R. 526; 12 Fed. Cus. 59.

The fact that a bankrupt entered a debt on his schedule which was barred by the statute of limitations will not revive it. In re Kingsley, 1 Low. 216; 14 Fed. Cas. 587.

A debt barred by the statute of limitations is not revived by entering it on the bankrupt's schedule of liabilities. In re Hardin, 1 Hask. 163; 11 Fed. Cas. 488.

The period between the commencement of proceedings and the order denying a discharge is not included or considered in determining the statutory limitation of claims against the bankrupt. Hall v. Greenbaum, 33 Fed. Rep. 22.

The statute of limitations will not run against a party having a cause of action against the bankrupt while the right of action was suspended on account of proceedings in bankruptcy. Greenwald v. Appell, 17 Fed. Rep. 140.

Where the bar of a statute of limitations is not complete before adjudication, it does not commence to run. In re Graves, 9 Fed. Rep. 816; In re McKinney, 15 id. 912.

The running of the statute of limitations is stopped by the filing of a petition in bankruptcy. In re Maybin, 15 N. B. R. 468; 16 Fed. Cas. 1221. The court put the proposition that the statute of limitations ceases to run against the creditor of a bankrupt at the commencement of the proceedings on two grounds: First, that the filing of the petition, and the including of the debt in the schedules by the debtor, is a new promise; second, that the effect of the adjudication in bankruptcy is to vest the assets in the assignee as a trust, against which the statute of limitations will not run. In re Eldridge et al., 2 Hughes, 256; 8 Fed. Cas. 414.

Claims provable and not barred by the statute of limitations when the proceedings in bankruptcy are commenced must remain provable after the period of limitation has expired. In re Wright, 6 Biss. 317; 30 Fed. Cas. 661 (1875).

The statute of limitations may be waived, and when relied on as a defense must be set up by the debtor; hence a claim may be proved in bankruptcy notwithstanding it appears on its face that it is barred by the statute. In re Knoepfel, 1 Ben. 398; 14 Fed. Cas. 783.

Usury as a Defense.

A defense on the ground of usury is not open to an assignee in bankruptcy. In re Kintzinger et al., 19 N. B. R. 152; 14 Fed. Cas. 709.

Notes given for excess of interest over legal interest are not provable in bankruptcy. Shaffer v. Fritchery, 4 N. B. R. 548; 21 Fed. Cas 1147 (1871). When an assignee seeks relief from a contract of the bankrupt on the ground of usury, he must tender the amount borrowed, and he will then be released from the usurious overplus. Under the laws of Wisconsin the right to avoid such a contract was held to be confined to the borrower. Bromley v. Smith et al., 2 Biss. 511; 4 Fed. Cas. 209.

A creditor seeking to prove a debt is in the position of one who brings a suit in an action at law. Upon the tender of such proof, the assignee can oppose the same on the ground of usury. It was held under the laws of Illinois, if the debt was usurious, the claimant forfeits the whole interest. In re Prescott, 5 Biss. 523; 19 Fed. Cas. 1286.

Where a bank charged a higher rate of interest than its charter allowed. but the charter failed to prescribe a penalty, it was held that a contract with excessive interest was only void as to the excess. Where the note was paid, neither the borrower nor his assignee in bankruptcy could recover the principal. Darby v. Boatman's Sav. Inst., 1 Dill. 141; 6 Fed. Cas. 1179.

In the case of a claim founded on a note tainted with usury under the laws of the state, Judge Deady, of the district court of Oregon, used this language: 'Because this court may not have jurisdiction to enforce all the penalties consequent upon this illegal transaction by the laws of the state, it by no means follows that it cannot inquire into its legality when the question arises in a proceeding duly before it. This court has express jurisdiction to allow or disallow claims against the estate of a bankrupt,

and in so doing must determine their legality. According to the law of this state, this claim is illegal, and must, therefore, be rejected." In re Pittock, 2 Saw. 416; 19 Fed. Cas. 745.

When Interest Will be Allowed.

Interest will be allowed upon a claim which accrued after the commencement of proceedings. In re Bonsfield & Poole M. Co., 17 N. B. R. 153; 3 Fed. Cas. 1016.

When creditors objected to a claim, and thereby caused delay in the payment of a dividend, the creditor should be allowed interest from the time the dividend became payable. In re Kintzinger et al., 19 N. B. R. 238; 14 Fed. Cas. 713.

When there is sufficient money belonging to the estate for the payment of all the debts, any surplus may be applied to the payment of interest from the filing of the petition to the time when the principal was paid. In re Hagan, 6 Ben. 407; 11 Fed. Cas. 154.

The assignee having sold certain real estate of the bankrupt discharged of liens, the court ordered him to allow interest on the lien claims to the date of making his report of distribution. In re Devore, 16 N. B. R. 56; 7 Fed. Cas. 570.

A surplus in the hands of the assignee after the payment of all debts will be applied to the payment of interest, computed from the day of adjudication. In re Town et al., 8 N. B. R. 40; 24 Fed. Cas. 85.

As a general rule, interest on a claim ceases with the adjudication in bankruptcy; but a secured creditor can apply the proceeds of his security to the payment of principal and interest until paid, when it is so provided in the contract. In re Haake, 2 Saw. 231; 11 Fed. Cas. 134.

Under the Act of 1867 the provable debts against a bankrupt include interest from maturity until adjudication, and when the interest is not payable until after the time of adjudication, interest from that time until maturity should be deducted in making proof of claim. In re Orne, 1 N. B. R. 79; 18 Fed. Cas. 821 (1867).

Miscellaneous.

The court considers and construes section 14 of the Act of 1867 relating to contingent liabilities of the bankrupt. U. S. v. Throckmorton et al., 8 N. B. R. 309; 28 Fed. Cas. 158.

Courts of bankruptcy will respect the statute of frauds of the states where the transactions occur. Edmondson v. Hyde, 2 Saw. 205; 8 Fed. Cas. 324.

The finding as a jurisdictional fact that the petitioning creditor has a valid claim to a certain amount does not conclude the assignee or creditors from contesting his right to participate in the assets. In re Cleveland Ins. Co., 22 Fed. Rep. 200.

Where a note is given in renewal of another, the bankrupt will be per

mitted to show how and when the indebtedness represented by the first note originated. In re Perkins et al., 6 Biss. 185; 19 Fed. Cas. 237.

A certificate of deposit issued by private bankers ceases to be negotiable paper upon the commencement of proceedings in bankruptcy. In re Sime et al., 3 Saw. 305; 22 Fed. Cas. 147.

A waiver of the performance of conditions by a fire insurance company while solvent is binding on its assignee in bankruptcy. In re Firemen's Ins. Co., 3 Biss. 462; 9 Fed. Cas. 72.

Where a loss by fire has been adjusted by the company and the insuree before the filing of a petition in bankruptcy against the former, it operates as a waiver of the limitation. Ibid.

A provision in a policy of fire insurance limiting the right of action to one year, is binding upon the bankrupt company; but it is complied with by proof of the debt in bankruptcy within that period. Ibid.

The holder of a note who has received a partial payment from an indorser should prove the note in full against the bankrupt maker. Any dividends that he receives above the balance due, he must hold for the benefit of the indorser. In re Souther, 2 Low. 320; 22 Fed. Cas. 815.

The bankrupt had made a contract by which he purchased certain goods to be delivered in installments and paid for as delivered. While insolvent, he called for an installment with no intention to pay for the same. It was held that the indebtedness accrued when the goods were delivered. Aimes v. Moir, 138 U. S. 306.

A bankrupt indorser is liable only for the balance due on notes indorsed by him after deducting the amount paid by the original debtor. In re Pulsifer, 14 Fed. Rep. 247.

On the foreclosure of a first mortgage on the property of the bankrupt. it was bought by the second mortgagee. The court refused to order the assignee to pay to the purchaser, out of the bankrupt's estate, money collected as rents of the mortgaged premises prior to the foreclosure, and also rejected a claim of the purchaser for taxes paid out of his purchase money. In re Foster, 6 Ben. 268; 9 Fed. Cas. 523.

Claims of attorneys for services in preparing a petition and schedules should be proved against the estate in the same manner as other claims against the bankrupt. In re Gies, 12 N. B. R. 179; 10 Fed. Cas. 339.

[See notes to §§ 59 and 64.]

DEBTS HAVING PRIORITY.

§ 64. Debts which have Priority.- (a.) The court shall order the trustee to pay all taxes legally due and owing by the bankrupt to the United States, State, county, district, or municipality in advance of the payment of dividends to creditors, and upon filing the receipts of the proper public officers for such payment he shall be credited with the amount thereof, and in case any question arises as to the amount or legality of any such tax the same shall be heard and determined by the court.

(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 creditors in involuntary cases; (3) the cost of administration, including the fees and mileage payable to witnesses as now or hereafter provided by the laws of the United States, and one reasonable attorney's fee, for the professional services actually rendered, irrespective of the number of attorneys employed, to the petitioning 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 claimant; and (5) debts owing to any person who by the laws of the States or the United States is entitled to priority.

(c.) In the event of the confirmation of a composition being set aside, or a discharge revoked, the property acquired by the bankrupt in addition to his estate at the time the composition was confirmed or the adjudication was made shall be applied to the payment in full of the claims of creditors for property sold to him on credit, in good faith, while such composition or discharge was in force, and the residue, if any, shall be applied to the payment of the debts which were owing at the time of the adjudication.

Costs of Preserving the Estate.

The costs of a marshal under section 47 of the Act of 1867 could only be allowed if they were just and reasonable, and had been actually incurred and paid. In re Lowenstein et al., 3 Ben. 422; 15 Fed. Cas. 1025. While a petitioning creditor may be reimbursed for costs and reasonable expenses in procuring the adjudication, he is not entitled to compensation for personal services. In re Mead et al., 28 Leg. Int. 277; 16 Fed. Cas. 1274. The assignee was ordered to pay out of the estate the expenses of opposing the allowance of a claim where the bankrupt was without means to do so. In re Richardson, 7 Ben. 155; 20 Fed. Cas. 697.

The circumstances under which an assignee may incur expense, payable out of the assets of the estate, for professional and clerical services, must depend on the exigencies of each individual case. Abuse of such discretion will be corrected by the court when applied to. In re Noies, 18 Fed. Cas. 465 (1872).

Held, that section 5101, R. S., covered a claim for services of a person employed in examining the books and accounts of a bankrupt within six