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that a trustee can recover a secret preference paid a creditor upon a former composition.22 It has been held that a suit to recover a preference should be brought in equity, although it is simply to recover a sum of money.28 It must be a plenary suit, not a summary proceeding 24 It cannot be begun before the

22 Re Chaplin, 115 Fed. 162. But see Crowder V. Allen-West Commission Co., 213 Fed. 177.

23 Pond y. New York Nat. Exch. Bank, 124 Fed. 992; Re Plant, 148 Fed. 37; Wall v. Cox, 101 Fed. 403; Off v. Hakes, 142 Fed. 364; Parker v. Black, 151 Fed. 18; Mason v. Herkimer County Bank, 163 Fed. 920; Parker v. Sherman, C. C. A., 212 Fed. 917; Taylor v. Fram, 243 Fed. 735. See Parker v. Black, 143 Fed. 560; Kaufman v. Tredway, 195 U. S. 271, 49 L. ed. 190. Contra, Warmath v. O'Daniel, C. C. A., 159 Fed. 87; First State Bank v. Spencer, C. C. A., 219 Fed. 503; Simpson v. Western Hardware & Metal Co., 227 Fed. 304; Plumb v. Lyell Ave. Lumber Co., 202 N. Y. 617; Allen v. Gray, 201 N. Y. 504, a suit to set aside fraudulent transfers under $70; Reber Ellis Bros., 185 Fed. 313.

24 Re Knickerbocker, 121 Fed. 1004. See $$ 610, 635, Supra. The trustee's right to recover property transferred by the bankrupt as a preference is not assignable. Lovell v. Latham & Co., 211 Fed. 374. But in a proper case creditors may be authorized to sue in the trustee's • name at their own expense with the right to indemnity out property that may be recovered. It has been held that before the election of a trustee, such a suit may be instituted by a creditor; and that, in such case, the trustee upon his election should be made plaintiff in the same. Frost V. Latham

& Co., 181 Fed. 866.

See supra, 8 643. The trustee need not obtain judgment before beginning such a suit. Davis v. Gates, 235 Fed. 192; Sherwood v. Holbrook, 178 N. Y. App. Div. 462. No previous demand by the trustee is required before a suit to recover a preferential payment. Kaufman v. Tredway, 195 U. S. 271, 49 L. ed. 190; Wright V. Skinner, 136 Fed. 694.

As to a demand held to be sufficient, see Grant v. National Bank of Auburn, 197 Fed. 581. For cases where such a suit was held not to be an election that prevented the trustee from afterwards pursuing another remedy, see Rock Island Plow Co. v. Reardon, 222 U. S. 354, 56 L, ed. 231, § 368, supra. Contra, Re Hurst, C. C. A., 194 Fed. 830. Where the preference was made by the sale of property for less than its value, the trustee

may recover the surplus without a previous tender of the purchase money. Stern v. Louisville Trust Co., C. C. A., 112 Fed. 501. The trustee may join in the same suit, a claim to set aside a fraudulent transfer of property and one to recover back a preferential payment. French v. R. P. Smith & Sons, 81 Minn. 341. See note 12, supra.

The bill must contain four essential allegations: (1) that the bankrupt was insolvent when the alleged preference was given; (2) that it was within four months prior to the institution of the bankruptcy proceedings; (3) that the effect of the endorsement of the judgment or

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transfer, or the retention of the property or money, as the case may be, will be to enable the defendant to obtain a greater percentage of his debt than any other creditor of the same class; and (4) that defendant had reasonable grounds to believe that a preference was intended. Painter v. Napoleon Tp., 156 Fed. 289; Re Sanger, 169 Fed. 722; Watson v. Adams, C. C. A., 242 Fed. 441; Hoshaw v. Cosgriff, C. C. A., 247 Fed. 22. But it has been held that when the trustee sues to enjoin the enforcement of a judgment recovered within the statutory four months he need not allege that the judgment creditor at the time of its entry had reasonable cause to believe that its enforcement would effect a preference. Re Petersen, C. C. A., 200 Fed. 739. It has been held that the bill need not allege the intent of the bankrupt in making the payments. Cohen v. Goldman, C. C. A., 250 Fed. 599. It seems that a trustee is not required to make any tender in his bill of complaint. Stern v. Louisville Trust Co., C. C. A., 112 Fed. 501; Dreyer v. Kicklighter, 228 Fed. 744. But the defendant will be allowed any credit to which in equity he is entitled. Ibid. Toof v. City Nat. Bank of Paducah, Ky., C. C. A., 206 Fed. 250. Woodford V. Rice, 207 Fed. 473.

The complaint was held to be demurrable when it failed to show the amount of the preferred and unsecured claims. Grant v. National Bank of Auburn, 197 Fed. 581. In a suit to set aside a preference obtained by the confession of a judgment and the purchase of property at an execution sale, subject to prior judgments which were paid, the trustee in bankruptcy need not make

the sheriff nor the holders of the prior judgments parties, unless they are charged to have been guilty of misconduct in connection with the transaction. Ibid. The plaintiff need not plead, nor offer evidence, that claims have been proved against the estate of the bankrupt, but he should plead and offer evidence to show that the bankrupt is indebted to general creditors. Gering v. Leyda, C. C. A., 186 Fed. 119. Cf. Miller v. New Orleans, A. & F. Co., 211 U. S. 496, 505. The burden of proof is upon the trustee to establish the facts which constitute a preference. Pyle v. Texas Transport & Terminal Co., 238 U. S. 90; Angle v. Bankers' Surety Co., C. C. A.; Mayes v .Palmer, C. C. A., 208 Fed. 97; Baxter v. Ord, C. C. A., 239 Fed. 503. But see Winslow v. Staab, 233 Fed. 305. But when the defendant claims to be a purchaser he has the burden of proving that he paid a valuable consideration. Owens 8. Daniel, C. C. A., 230 Fed. 101; Watson v. Adams, C. C. A., 242 Fed. 441; Woodford v. Rice, 207 Fed. 473. See Klinger v. Hyman, C. C. A., 223 Fed. 257; and when the preference charged is an application of firm assets to payment of individual debt of a partner the burden is on the defendant to prove that the other partner consented. Ryan v. Cavanagh, C. C. A., 238 Fed. 604. A previous ruling in the bankruptcy proceedings will be regarded as the law of the case and will usually be followed in an independent suit in equity. Lewis v. Julius, 212 Fed. 225. In such a suit, the creditor is precluded by the adjudication, in so far as it determines that the bankrupt committed an act of bankruptcy within four months prior to the filing of the petition, Cook v. Robinson, C. C. A., 194 Fed. 785. The fact that a debtor was adjudged a bankrupt on the ground that a chattel mortgage was a preference and an act of bankruptcy does not affect the mortgage in an action to set aside the same as a preference, Hussey v. RichardsonRoberts Dry Goods Co., C. C. A., 148 Fed. 598. A judgment or order of a referee disallowing a claim against the bankrupt's estate on the ground that the claimant had received a preference is res ad judicata and admissible in evidence in a subsequent suit by the trustee to recover the preference, Ullman, Stern & Krausse v. Coppard, C. C. A., 246 Fed. 124. An order directing that the proceeds of a sale be paid into court to await the final decree does not estop the trustee from suing to set aside the sale as fraudulent, Faulkner v. Kaplon, 203 Fed. 114. It was held that the dismissal of a bill to set aside a preference by a firm, because of the failure to prove that the individual partner as well as the co-partnership were insolvent, was res ad judicata against a subsequent suit for the same relief alleging the insolvency of both the firm and its individual members, although the former bill did not contain the latter allegation. Worrell v. Kemmerer, C. C. A., 192 Fed. 911, The fact that a transfer is set aside as fraudulent does not deprive the defendant of the right to participate in the proceeds of the sale of the property recovered, so far as concerns a debt incurred previous to the execution of the fraudulent conveyance and not connected with the sale. Re Hurst, 188 Fed. 707. The defend ant cannot set off the amount of

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he would be entitled from the estate of the bankrupt, Templeton v. Kehler, 173 Fed. 574; Ommen v. Talcott, 175 Fed. 259; and the day of judgment will not be postponed until he has proved his claim and the dividend has been declared, Templeton v. Kehler, 173 Fed. 574. The fact that creditors have filed their claims and taken part in the election of the trustee does not estop them from asserting their right to attack a preferential transfer. International Silver Co. v. N. Y. Jewelry Co. C. C. A., 233 Fed. 945. Extreme insolvency at the time the petition is filed unless shown to arise in the absence of evidence to the contrary justifies the inference that it existed during the preceding four months. McGill v. Commercial Credit Co., 243 Fed. 637. Evidence of statements made by the bankrupt subsequent to the transfer is usually inadmissible against another defendant, First State Bank v. Lowry, C. C. A., 227 Fed. 846. Roseman v. Coppard, C. C. A., 228 Fed. 114. Evidence of previous transactions between the parties is usually inadmissible as irrelevant, Hanck v. Frey, 228 Fed. 779. As to the charge to the jury in such Campbell v. Krauss, C. C. A., 249 Fed. 670. In a suit to set aside a sale where the property sold had deteriorated in value its value at the time of the sale was adopted · as the basis of the decree. Dreyer v. Kicklighter, 228 Fed. 744.

But where it was agreed by the receiver er trustee that the defendant should hold the property pending the litigation it was held that such defendant was liable only for such property and not for its value

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referee. 26 The defendant in an action to recover a preference is not liable for more than he actually received from the proceeds of the sale of the property, provided that he acted in good faith and exercised reasonable diligence in selling the same. 26 Interest is recoverable from the beginning of the suit.27 It has been held that a judgment in such a suit may be enforced by contempt proceedings.28

$ 645. Proof and allowance of claims. “(a) Proof of claims shall consist of a statement under oath, in writing, signed by

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at the time the agreement made. National City Bank Hotchkiss, 231 U. S. 50; Ernst v. Mechanics & Metals Nat. Bank, C. C. A., 201 Fed. 664. Where a conveyance of a husband's real estate is set aside as preferential, it cannot be enforced so far as concerns the contemporary transfer of the wife's right of dower in the same property. Re Lingafelter, C. C. A., 32 L.R.A. (N.S.) 103, 181 Fed. 24. Where the preference consists of a payment of money the judgment should not direct the bankrupt to pay the money to the trustee. Re Cunney, 225 Fed. 426. The finding of the referee and judge in such a will not usually be disturbed upon appeal. Owens v. Farmers' Bank of Abbeville, C. C. A., 228 Fed. 508; Lake View State Bank v. Jones, C. C. A., 242 Fed. 821.

25 Weidhorn v. Levy, 253 U. S. 268, supra, $ 638.

26 Allen v. MeMannes, 156 Fed. 615.

27 Kaufman v. Tredway, 195 U. S. 271, 49 L. ed. 190.

28 Re Plant, 148 Fed. 37. A trustee cannot make a settlement with a preferential creditor that will give the latter's contested lien priority to the rights of a purchaser for value in good faith, and,

where the trustee was unwilling to continue the litigation, it was held that he should accept the offer of such a purchaser to pay the expenses of its further prosecution and the cost already incurred. Re Geiselhart, 181 Fed. 622. Where there are insufficient funds to justify litigation and no creditor is willing to pay such expenses, the trustee may sell his interest in real estate which has been preferentially

fraudulently transferred. Re Downing, 192 Fed. 683.

$ 645. 1 Thé claim may be verified before a foreign counsul of the United States (Re

(Re Sugenheimer, 91 Fed. 744), or before the creditor's attorney, Re Kimball, 100 Fed. 777. It has been held that the official seal and signature of a notary public is a sufficient authentication of his authority in another state. Re Pancoast, 129 Fed. 643. The oath may be made by the creditor or his agent, Re McCarthy Portable Elevator Co., 205 Fed. 986. When assigned after the institution of the proceedings in bankruptcy the claim should be supported by the oath of the person who owned it at the time the proceedings were begun. Ibid. An objection that the attorney who verified the claim failed to assign the reason why the claimant did not personally swear to the

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a creditor 2 setting forth the claim, the consideration therefor, same, may be cured by amend- Ordinarily a claim for a deficiency ment. Re Medina Quarry Co., 179 after the foreclosure of a mortgage Fed. 929; Re Stradley & Co., 187 to a trustee for the benefit of bondFed. 285. It is too late to make holders should be made by the latsuch an objection after the claim- ter and not by the former. U. S. ant has voted. Re Stradley & Co., Tr. Co. v. Gordon, 216 Fed. 929; 187 Fed. 285.

Re A. J. Ellis, Inc., C. C. A., 252 2 The signature may be made in Fed. 483; affirming 242 Fed. 156. the owner's name by his agent, J. A claim may be proved by the next & S. Ferguson v. Lyle, C. C. A.,

friend of a creditor who is non 267 Fed. 817; attorney or proxy, compos mentis although not actuRe H. E. Ploof Machinery Co., 243 ally insane, Re Kronberg, 208 Fed. Fed. 421; but it has been held that 203. The true owner of a claim an attorney should not sign several is not estopped from proving it beproofs of claims for different per- cause it was previously proved by sons. Ibid. The father of a minor another to whom it did not belong, may prove a claim for the latter's Re Dunlap Carpet Co., 206 Fed. wages. Re Haskell, 228 Fed. 819. 726; Assets Realization Co. v. Sov. Where an agent proves a claim in ereign Bank of Canada, C. C. A., his own name without disclosing the 210 Fed. 156; Re Louis J. Bergdoll fact that he is acting for another Motor Co., 230 Fed. 248. the proof may be disallowed

3 By General

Order XXI, false, Re Collins, 235 Fed. 937. It amended Nov 1, 1915. 1. Deseems that a creditor cannot be positions to prove claims against compelled to prove his claim, Re a bankrupt's estate shall be corKligerman, 219 Fed. 258; a claim rectly entitled in the court and may be presented in the name of in the cause. When made to the real party in interest although prove debt due to a partnerhe is not the owner at common law. ship, it must appear on oath that Re Worcester County, C. C. A., 102 the deponent is a member of the Fed. 808. If the claim has been partnership; when made by an assigned before bankruptcy, the as- agent, the reason the deposition is signee should make the proof in his not made by the claimant in per

Re Worcester County, must be stated; and when C. C. A., 102 Fed. 808. This is made to prove a debt due to a the case although the assignment corporation, the deposition shall be

made as collateral security. made by the treasurer, or, if the Re Am. Specialty Co., C. C. A., 191 corporation has no treasurer, by the Fed. 807. An assignment of officer whose duties most nearly claim gives the assignor any right correspond to those of treasurer; if of intervention which was held by the treasurer or corresponding ofthe assignor, Re Fitzgerald, 191 ficer is not within the district Fed. 95. The bankrupt may prove

wherein the bankruptcy proceedings against himself, a claim, which he are pending, the deposition may be holds in a representative capacity, made by some officer or agent of Warner v. Spooner, 3 Fed. 890. the corporation having knowledge

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