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 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.2

1No former act had analogous provisions. It is the duty of the trustee to deposit all estate money received in such depositories (847 [3]) and to disburse it only by check or draft (847[4]; Rule XXIX).

*For analogous provisions, see Act of 1800, 29; Act of 1867, 28; R. S. 885099, 5127A, 5127B. See 2(18) as to the taxation of costs; 5e as to the payment of expenses from individual and firm estates; 64(3) as to the costs of administration being priority debts; Rule X as to indemnity for expenses; Rule XXVI as to traveling and incidental expenses of the referee; and Rule XXXV as to the compensation of clerks, referees and trustees. Aside from the actual and necessary expenses here provided for, the court may make reasonable allowance as compensation for the services of persons not expressly provided for elsewhere, where such services are necessary (In re Scott et al. [D. C.], 99 Fed. Rep. 404).

No definite rule has ever been laid down relative to just what expenses might be incurred in administering a bankrupt estate. Each case has been made to depend upon its own peculiar exigencies (In re Noyes, 6 B. R. 277). The law unquestionably presumes that one charged with the duties of administering an estate is qualified to do so without legal or clerical assistance. The trustees, if he should require assistance in the faithful discharge of his duties; should first obtain an order therefor. He 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 allowed by the court", though where the exigencies of the case are such that an order could not be first obtained, he will be

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 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 (2) due as costs taxable against an involuntary allowed reasonable compensation for such expenses as he may have incurred (In re Noyes, supra). It has been held that a trustee may engage counsel to investigate the affairs of an estate, though no litigation followed (In re Colwell, 15 B. R. 92), and to prosecute and defend suits as well as obtain legal advice when necessary, but not for the compromise of an ordinary claim (In re Davenport, 3 B. R. 77). When the trustee is himself an attorney, and acts where, had he not been an attorney, one would have to be engaged, the court may undoubtedly allow him therefor (In re Welge, 1 McCrary, 46). It will not allow him for an auctioneer's services unless he first procures an order (In re Peques, 3 B. R. 80; in re Sweet, 9 B. R. 48). The trustee will undoubtedly be allowed necessary and reasonable expenses for preserving the property of the estate (In re Gregg, 3 B. R. 529). It had also been held under the old law that he might allow the assignee, when a general assignment for the benefit of creditors has been set aside by adjudication in bankruptcy, expenses for converting the property into money, and be reimbursed therefor on the theory that the action of the assignee saved the bankrupt's estate that expense (McDonald v. Moore, 15 B. R. 26; s. c. 1 Abb. N. C. 53; Burkholder v. Stump, 4 B. R. 597; in re Cohn, 6 B. R. 379), as well as money advanced by such assignee to discharge valid liens upon the property (Livingston v. Bruce, 1 Blatch. 318. See also in re Gregg, 3 B. R. 529), as well as money paid to creditors by such assignee in carrying out his trust (Cragin v Thompson, 2 Dill. 513; s. c. 12 B. R. 81; Jones v. Kinney, 5 Ben. 259; s. c. 4 B. R. 649). The amounts so paid, under the former act could be reasonably construed as expenses of administration, but under the provisions of the next section of this act, they would undoubtedly be provable debts with regard to which the trustee would have nothing to do.

1 For analogous provisions, see R. S. 85067, 5068, 5069, 5070; Act of 1800, 39; of 1841, 85; of 1867, 19. See also 5g as to proof of partnership claims against individual estates and vice versa, 14 relative to discharges, 17 as to debts not affected by a discharge, 857 as to proof and allowance of claims, 865 as to declaration and payment of dividends, 868 as to set-offs and counter claims, and Rule XXI relative to proof of debts, as well as the notes to such cross-references. Debts which are not provable do not come in for a dividend, and are not affected by a discharge (In re May & Merwin, 9 B. R. 419; s. c. 47 How. Pr. 37; s. c. 7 Ben. 238).

Under former acts a distinction was made by the courts between judgments obtained in the ordinary course of litigation upon a right of action and those resulting from penal steps or proceedings. Thus, a judgment imposed as a fine by way of a penalty was not considered a debt, and was not provable (In re Sutherland, 3 B. R. 314; s. c. Deady, 416), nor was one growing out of contempt proceedings for disobeying an injunction, where the same was payable to the party in whose favor the injunction was issued and who suffered by its violation (People v. Spalding, 10 Paige, 284; s. c. 7 Hill, 301; s. c. [U. S. Supreme Ct., affirming], 4 How. 21). In construing the present act, the first proposition

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;2 (4) founded upon an open account, or upon a contract express or implied; and (5) founded upon provable debts reduced to

has been overruled in a holding that a judgment for a fine is provable (In re Alderson [D. C.], 98 Fed. Rep. 588). Where a judgment of a State court requires the payment of a weekly sum for the care of one's offspring, the amounts falling due after the filing of the petition are not provable (In re Hubbard [D. C.], 98 Fed. Rep. 710). This is also true as to alimony (In re Nowell [D. C.], 99 Fed. Rep. 931), though a judgment for alimony already accrued or to accrue has been held to be a provable debt (In re Challoner [D. C.], 98 Fed Rep. 82), yet even this has opposition in a case holding that the overdue is not provable (In re Anderson [D. C.], 97 Fed. Rep. 321). Judgments for breach of promise to marry, though in the nature of penalties, are provable (In re Sidle, 2 B. R. 220; in re Sheehan, 8 B. R. 345; in re McCauley [D. C.], 101 Fed. Rep. 223). Costs are invariably included as part of a judgment, and will be so considered without regard to whether the debt sued upon was provable in bankruptcy (Graham v. Pierson, 6 Hill, 247; in re O'Neil, 1 Lowell, 162). Any creditor or party in interest may impeach judgments sought to be proved on the ground of fraud, preference or irregularity (In re Fowler, ex p. O'Neil, 1 B. R. 677; s. c. 1 Low. 163; Partridge v. Dearborn, 9 B. R. 474; s. c. 2 Low. 286), or have them allowed, expunged or re-examined (In re Ankeny [D. C.], 100 Fed. Rep. 614), the party urging such to have the burden of proof as to the facts alleged in the petition therefor (In re Howard [D. C.], 100 Fed. Rep. 630).

1See II relative to suits by and against bankrupts.

2This provision does not exclude from priority such claims as referred to (In re Lewis [D. C.], 99 Fed. Rep. 934).

"Debts founded upon an open account or upon an express or implied contract must be in existence when the petition in bankruptcy is filed, even though not then payable (In re Orne, 1 B. R. 57; s. c. 1 Ben. 361; May v. Merwin, 7 Ben. 238; in re Roche [C. C. A.], 101 Fed. Rep. 956). If the debt is barred by the statute of limitation of the State where the parties resided when the debt was contracted, it is not provable in bankruptcy, and if proven, the proof will be expunged on motion of any creditor (In re Lipman [D. Č.], 1 N. B. News, 310; s. c. 94 Fed. Rep. 353; s. c. 2 A. B. R. 46; in re Resler [D. C.], 1 N. B. News, 280; s. c. 95 Fed. Rep. 804; in re Kingsley, 1 B. R. 329; s. c. I Low. 216; in re Hardin, 1 B. R. 395; in re Cornwall, 6 B. R. 305; s. c. 9 Blatch. 114; in re Reed, 11 B. R. 94; s. c. 6 Biss. 250; in re Noeson, 12 B. R. 422; s. c. 6 Biss. 443). This rule follows the English practice (Ex p. Dewney, 15 Vesey, 479; in re Clendening, 9 Irish Eq. R. N. S. 287), and is but an application of the statutes and rules of practice governing Federal courts whereby they must recognize the statute of limitation of each State within their jurisdiction (8 Peters, 372). While recognizing this rule, the bankruptcy courts of New York held, what seems to be in opposition, that such debts were provable when the statute affected the remedy and not the contract—that is when it barred the action in one jurisdiction but not in others, the statute under consideration providing that the action should only be barred when the defendant appeared

judgments after the filing of the petition and before the consideration of the bankrupt's application for a discharge,

and so plead it, the bar being otherwise considered waived (In re Ray, 1 B. R. 203; S. c. 2 Ben. 53). If a debt is not affected by the statute of limitation when the petition is filed, it cannot thereafter be so affected for the statute ceases to run on the filing of the petition (In re Eldridge, 12 B. R. 540; in re Wright, 6 Biss. 317; Contra, Nicholas v. Murray, 5 Saw. 320; s. c. 18 B. R. 469). A debt founded on a contract made between citizens of different States, valid in one State but invalid in the other because of prohibitory liquor laws, is provable in bankruptcy (In re Murray, 3 B. R. 765).

As a general rule, all claims existing at the time the petition is filed, and enforceable at law or in equity, are provable in bankruptcy.

There are certain classes of claims relative to which the rule is unsettled. It has been held that claims for alimony are provable and will be discharged (In re Challoner [D. C.], 98 Fed. Rep. 82), though another case holds the very opposite (In re Anderson [D. C.], 97 Fed. Rep. 321). Claims arising out of speculative contracts will be governed by the general rules of law, and if under these the validity of the contract can be affirmed, the claim is provable (Hill et al. v. Levy [D. C.], 98 Fed. Rep. 94). Whenever a debt has been fraudulently contracted, the same may be proved without the creditor thereby waiving the right to cause the bankrupt's arrest under a State law (In re Lewensohn [D. C.], 99 Fed. Rep. 73). Any creditor or party in interest may oppose the allowance upon any ground that might be urged as a defense by the bankrupt in an action thereon (In re Prescott, 5 Biss. 523; s. c. 9 B. R. 385; ex p. Yonge, 3 Vesey & Beames, 31; Jeffo v. Wood, 2 P. Wms. 128; Murphy's case, 1 Sch. & Le Froy 44; in re Goodman, 5 Biss. 401; s. c. 8 B. R. 380; in re Jaycox & Greene, 12 Blatch. 209; ex p. Jones, 17 Ves. 332; Lowe v. Waller, Doug. 736; in re Chandler, 6 Biss. 53; s. c. 9 B. R. 514; in re Young, 6 Biss. 53; ex p. Mumford, 15 Ves. 289; Lehman v. Strassberg, 2 Woods, 554; in re Greene, 15 B. R. 198; ex p. Cottrell, Cowp. 742; ex p. Daniels, 14 Ves. 191; Capell v. Trinity Church, 11 B. R. 536; in re Blandin, 5 B. R. 39; s. c. I Low. 543; Sigsby v. Willis, 3 B. R. 207; s. c. 3 Ben. 371; in re Carmichael [D. C.], 96 Fed. Rep. 594; in re Allen [D. C.], 96 Fed. Rep. 512), and if the claim be allowed, such creditor or party in interest may have the allowance vacated for fraud (In re Headley [D. C.], 97 Fed. Rep. 765), or because the claim is wanting in equity (In re Knox [D. C.], 98 Fed. Rep. 585). The proof of claim may be amended so as to save the benefit of a lien when a mistake has been made in inadvertently proving a claim as unsecured when the creditor held security (In re Falls City Shirt Mfg. Co. [D. C.], 98 Fed. Rep. 592), or for any reason on leave, when fraud is not present (In re Meyers et al. [D. C.], 99 Fed. Rep. 691; in re Wilder 101 Fed. Rep. 104). An assignee cannot prove a claim which the assignor could not have proved (In re Wiener & Goodman Shoe Co. [D C.], 96 Fed Rep. 949), especially when it has been assigned to him as collateral and is tainted with fraud (Beers v. Hanlin [D. C.], 99 Fed. Rep. 695). When one holds security covering both provable debts and others which are not provable, he is entitled to apply the security to the payment of the debts not provable [Ex p. Kensington, 2 M. & A. 362). It would also seem that one holding security is entitled to full interest up to the time the debt is paid out of the proceeds of the property (In re Newland, 7 Ben. 63; in re Haake, 7 B. R. 61; s. c. 2 Saw. 231), though a bankrupt's estate is only liable therefor up to the time the petition was filed (In re Orne, I B. R. 57; s. c. 1 Ben. 361; in re Haake, supra). A debt actually existing is provable, though not yet due, and if it bears interest, that amount unearned will be rebated (Sloan v. Lewis, 22 Wall. 150); if the debt be over-due, interest will be allowed after maturity at the legal rate and not at that agreed upon if the latter be

less costs incurred and interests accrued after the filing of

the greater (In re Bartenbach, 11 B R. 61). Debts of a joint or a joint and several nature may be proved against the estate of any one whom the creditor might have sued (In re Bates [D. C.], 100 Fed Rep. 263; Downing v. Trader's Bank, 2 Dill. 136; s. c. 11 B. R. 371; in re Troy Woolen Co. 8 B. R. 412), and against one after another until the entire amount is paid (In re Howard, Cole & Co., 4 B. R. 571; Mead v. Bank, 6 Blatch. 185; s. c. 2 B. R. 173; Emery v. Bank, 7 B. R. 217; S. c. 3 Cliff, 507). A similar rule obtains as to debts arising out of copartnership relations. Where the copartnership does not become bankrupt, it has been held that no provable claim arises between a partner not becoming bankrupt and one who does until the partnership debts have been paid and all the firm assets disposed of (Hester v Baldwin, 2 Woods, 433), though it would seem that where partners pay firm debts, they may prove such amount as may be equitably due after settling the firm affairs or crediting the bankrupt partner with such interest as he may be entitled to in the assets (Wilkins v Davis, 15 B. R. 61; Wood v. Dodgson, 2 Maule & S. 105; Afflalo v. Foundrinier, 6 Bing. 306; Butcher v Forman, 6 Hill, 583; ex p. Watson, 4 Maddock's Rep. 477; Sigsby v. Willis, 3 B. R. 207; S. C 3 Ben. 371). But where a partner misappropriates assets the loss to the solvent partners may be treated as independent of and foreign to the copartnership relations and proved as though such assets belonged to the solvent partners personally (Ex p. Yonge, 3 Vesey & Beames, 31; Sigsby v. Willis, 3 B. R. 207; s. c. 3 Ben. 371).

If a debt is not in existence at the time the petition is filed—that is, if it is not a "fixed liability, absolutely owing"-it cannot be proved against a bankrupt's estate, for no claim is provable except such as are expressly provided for by statute (May v. Merwin,7 Ben. 238; s. c. 9 B. R 419; s. c. 47 How. Pr. 37; in re Roche [D. C.], 101 Fed. Rep. 956). One may be contingently liable for the bankrupt as a surety, but such liability is not a debt and does not become such until an obligation to pay actually arises. Until that time such liabilities do not amount to provable debts (In re Loder, 4 B. R. 190; S. c. 4 Ben 305; Dyer v. Cleveland, 18 Vt. 241). It is not easy, however, to determine at the present time just what such a debt is so as to distinguish it from "a fixed liability, absolutely owing" The authorities do not clearly define such a debt. The Massachusetts courts hold that it is an existing demand but that the right to bring an action on it depended upon a contingency (French v. Morse, 68 Mass. 111). The New York courts hold that if there was a present claim, or when one was certain to arise, the liability was not contingent (Jemison v. Blowers, 5 Barb. 686). The United States Supreme court in passing on 85, of the Act of 1841, substantially confirms the last holding (Riggin v. Magwire, 15 Wall. 549. See also Mills v. Auriel, 1 Smith's Leading Cases; Sheldon v. Pease, 10 Mo. 475). In view of the provision in 857i authorizing a surety to prove the claim when the creditor fails to do so, the question of proving a contingent claim is only likely to arise when the surety is himself the bankrupt, or where the obligation rests upon continuing contracts. When it is remembered that no debt is discharged which is not provable, the question of what is "a fixed liability" becomes highly important since a discharge may leave the bankrupt in practically the same situation he occupied before becoming bankrupt by his contingent ones maturing into "fixed liabilities." Somewhat akin to the liability of a surety is that of a lessee upon a lease providing for rent to accrue from time to time in the future. It is well settled that such rent accruing in future installments is not provable except in so far as the installments have fallen due by an actual enjoyment of the lease-hold (In re Ells [D. C.], 98 Fed. Rep. 967; Bray v. Cobb, 100 Fed. Rep. 270; in re Arnstein et al. [D. C.], 101 Fed. Rep. 706; Savory v. Stocking, 4 Cush. 607; English v. Key, 39 Ala. 115; Frost v. Carter, 1 Johns Cas. 73: Bailey v. Loeb, 11 B. R. 271; s. c. 2 Woods, 578; Lansing v. Prendergast, 9