rupt act see: Bigelow, Fraud, Vol. II.; Bump, Fraudulent Conveyances, 4th ed.; Burrill, Assignments, 6th ed.; Hunt, Fraudulent Conveyances, 2nd ed.; May, Fraudulent and Voluntary Dispositions of Property, 2nd ed.; Wait, Fraudulent Conveyances, 3rd ed. See also Twyne's Case, 1 Smith L. C. and notes.

Paragraph ƒ applies only to liens which are acquired by the completion of legal proceedings and as a result of the determination of the controversy. It is evident from its terms, as well as by a comparison of paragraph c, that paragraph ƒ does not apply to attachments on mesne process. Another distinction between this paragraph and paragraph e is, that the lien is void if acquired within four months of the filing of a petition, though the suit were begun long before, while under paragraph c the proceedings must have been begun within four months. Paragraph ƒ applies only to involuntary proceedings. 2 The decisions to the contrary overlook the phraseology of the paragraph.

1

3

The Act of 1800 dissolved all attachments, but under the Act of 1867 only attachments on mesne process were affected by bankruptcy proceedings, and such is usually the case under insolvent laws of the different states. 5 Paragraph ƒ enacts that liens obtained by legal proceedings within four months of the petition in bankruptcy shall be void except in case of bona fide purchasers for value without notice. This paragraph means that a bona fide purchaser of a claim of the debtor may acquire a valid lien by legal proceedings, but any one with notice or reasonable cause for inquiry cannot get a valid lien. If the creditor have no notice when he brings his suit, but finds out the state of affairs before a judgment or levy, his lien will not be valid. A curious result

1 Re Brown, 91 Fed. Rep. 358. See Re De Lue, 91 Fed. Rep. 510; Re Easley, 1 N. B. N. 230; Re Friedman, 1 N. B. N. 208.

2 Re De Lue, 91 Fed. Rep. 510; Re Easley, 1 N. B. N. 230. Contra Peck Lumber Co. v. Mitchell, 1 N. B. N. 262.

6

8 Harrison v. Sterry, 5 Cranch, 289. 4 Marshall v. Knox, 16 Wall. 551. 5 Pub. Stats. (Mass.) c. 157, § 46; Hefner v. Herron, 117 Cal. 473; Hurlbutt v. Currier, 38 Atl. Rep. 502 (N. H.). 6 Re Brown, 91 Fed. Rep. 358.

would be reached in case an attachment on mesne process was made more than four months before a petition in bankruptcy was filed against a debtor, and the attaching creditor wished to prosecute the suit after the petition was filed. His attachment would be valid under the provisions of paragraph c, but if he proceeded to judgment and levied execution, the lien would be void. If the suit were on a claim which was not released by the discharge, it would be for the creditor's interest to keep his attachment good. This he could do only by delaying until the bankruptcy proceedings were closed and then getting judgment.

It has been held that a lien given by statute when an execution is placed in the hands of a sheriff, though no levy be made, is included within paragraph f1

The trustee or bankrupt or any creditor who has proved his debt may petition to redeem the property from a lien of any kind. 2

§ 531. Act of 1898. 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.

1 Re Hopkins, 1 N. B. N. 20.

2 Rule XXVIII. Form 43. See also

§ 533.

This section is like § 5073 of the Revised Statutes, which was taken from § 20 of the Act of 18671 with a slight addition. The words" estate of a bankrupt" are new in this act, the old law relating to mutual debts and credits "between the parties." It is evident, however, from a consideration of paragraph b, that this expression will have the same scope. The limit of time in paragraph b is different, and the qualification of knowledge of insolvency or that an act of bankruptcy had been committed is added. There was a conflict of authority whether a set-off would be allowed if bought after notice of insolvency.2 This question is now settled by the statute in this section.

The words "with a view to such use," taken in connection with the rest of the section, evidently mean with a view to use as a set-off against the debtor himself and not in bankruptcy proceedings. Otherwise the last provision of the section as to knowledge of bankruptcy would be superfluous, because a man could not purchase a set-off intending to use it in bankruptcy proceedings unless he knew the debtor was bankrupt or likely to become so.

A creditor who has been preferred and afterward gives credit to a bankrupt for property which the bankrupt uses in his business is entitled to set off the latter amount in a suit by the trustee to recover the preference. 3

For the general rules of the law of set-off see supra, §§ 251

et seq.

§ 532. Act of 1898. 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

1 14 Stats. 526.

2 Supra, § 285.

3 Act of 1898, § 60 c.; supra, § 523.

marshal to seize and hold it subject to further orders. Before such warrant is issued the petitioners applying therefor shall enter into a bond in such an amount as the judge shall fix, with such sureties as he shall approve, conditioned to indemnify such bankrupt for such damages as he shall sustain in the event such seizure shall prove to have been wrongfully obtained: Such property shall be released, if such bankrupt shall give bond in a sum which shall be fixed by the judge, with such sureties as he shall approve, conditioned to turn over such property, or pay the value thereof in money to the trustee, in the event he is adjudged a bankrupt pursuant to such petition.

Section 69 gives the court no power to take possession of the estate if the debtor is wasting the estate, but merely if he is neglecting it.1 Forms are prescribed for the bonds mentioned in this section. 2

The court has no authority under this section to take the property of third persons alleged to have been wrongfully conveyed to them by the bankrupt. 3 In a proper case the third person might be enjoined from disposing of the property.

The proper procedure under § 69 is by way of petition to the court. 5 A prayer for a warrant under this section should not be introduced into an involuntary petition in bankruptcy. The affidavit should be full and explicit.7

§ 533. Act of 1898. SEC. 70. TITLE TO PROPERTY. -a. The trustee of the estate of a bankrupt, upon his appointment and qualification, and his successor or suc

1 See Form No. 8.

2 Forms 8 & 9.

3 Re Briggs, 3 N. B. R. 638, Fed. Cas. No. 1869; Re Harthill, 4 N. B. R. 392, Fed. Cas. No. 6161; Re Holland, 12 N. B. R. 403, Fed Cas. No. 6605; Mollison v. Eaton, 16 Minn. 426; Marsh

v. Armstrong, 20 Minn. 81; Re Rockwood, 91 Fed. Rep. 363, 1 N. B. N. 134; Re Kelly, 91 Fed. Rep. 504.

4 Shiras, J., in the case last cited. 5 Re Kelly, 91 Fed. Rep. 504.

6 Ib.

7 Ib.

cessors, if he shall have one or more, upon his or their appointment and qualification, shall in turn be vested by operation of law with the title of the bankrupt, as of the date he was adjudged a bankrupt, except in so far as it is to property which is exempt, to all (1) documents relating to his property; (2) interests in patents, patent rights, copyrights, and trade-marks; (3) powers which he might have exercised for his own benefit, but not those which he might have exercised for some other person; (4) property transferred by him in fraud of his creditors; (5) property which prior to the filing of the petition he could by any means have transferred or which might have been levied upon and sold under judicial process against him: Provided, That when any bankrupt shall have any insurance policy which has a cash surrender value payable to himself, his estate, or personal representatives, he may, within thirty days after the cash surrender value has been ascertained and stated to the trustee by the company issuing the same, pay or secure to the trustee the sum so ascertained and stated, and continue to hold, own, and carry such policy free from the claims of the creditors participating in the distribution of his estate under the bankruptcy proceedings, otherwise 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 property shall, when practicable, be sold subject to the approval of the court; it shall not be sold otherwise than subject to the ap