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(c) A date and place, with reference to the convenience of the parties in interest, shall be fixed for the hearing upon each application for the confirmation of a composition, and such objections 11 as may be made to its confirmation. (d) The judge 12 shall confirm a composition if satisfied that (1) it is for the best interests of the creditors; 13 (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; 14 and (3) the offer and
cure an order from the judge desig. nating the amount of the deposit and the place thereof. Re Frear, 120 Fed. 978; Re BloodworthStembridge Co., 178 Fed. 372; although it is the more usual custom for the referee to certify the requisite amount and the bankrupt to deposit the money in the regular depository. Remington on Bankruptcy, $ 2364. A deposit must be sufficient to pay all costs, priority claims and expenses. Re Rider, 96 Fed. 808; Re Harris, 117 Fed. 575; Re Harvey, 144 Fed. 901. The expense of conducting the bankruptcy proceedings for the purposes of the composition must be included in the deposit, Re Miller, 243 Fed. 242. It has been held that the fees of an attorney employed by a creditors' committee to investigate the condition of the bankrupt 's estate should not be paid therefrom. Re Siegel, 252 Fed. 197. The preference collected by the bankrupt can. not be given priority. Re Alpert, 237 Fed. 295. The deposit in case the composition fails may be used for the expenses occasioned by the stay which the bankrupt thereby secured; but not, it has been held, for delay caused by the opposition of creditors. Re Wiener, 217 Fed. 169.
See Re Miller, 243 Fed. 242. The deposit should not be distrib. uted until after the liquidation of the claims of secured creditors who are entitled to share therein. Re H. B. Hollins & Co., 230 Fed. 920. See Re Spiller, 230 Fed. 490. Interest which accrued upon the de
posit pending litigation in opposition to the confirmation was allowed to the bankrupt. Re Kelley, 223 Fed. 383. It has been held that the creditors may waive the actual deposit of money or securities. Kinkead v. Bacon & Son, C. C. A., 230 Fed. 362.
11 Creditors whose claims have been barred by failure to present the same within the statutory time have no standing to oppose the composition. Re French, 181 Fed. 83, holding that it is immaterial that the claims have been omitted from the schedules and denying an adjournment of the proceedings because no provisions had been made for them. The acceptance by the creditor of a former offer which the court had not approved did not prevent him from objecting to a subsequent offer in substantially the same terms. Re Kinnane Co., 221 Fed. 762. Ohjections cannot be withdrawn in consideration of a promise to pay the objector more than any other creditor. Re Levenson, 228 Fed. 875. It has been held that the objectors cannot at this hearing question the right of a claimant to share in the distribution. Re Griffith Stillings Press, 244 Fed. 315.
12 The composition must be approved by the judge; Re Harvey, 144 Fed. 808; criticised in Reming. ton Bankruptcy, $ 2367; Re Bloodworth-Stembridge Co., 178 Fed. 372; Re Graham & Sons, C. C. A., 252 Féd. 93; but he may refer the questions that arise there
upon to a referee as special master to report his findings for final disposition. Re Frear, 120 Fed. 978; Re Levy, 172 Fed. 372. The judge may refuse confirmation even when there are
no objections. Re Kinnane Co., 221 Fed. 762.
13 Re Doyle, C. C. A., 220 Fed. 434; Re Dozier Wholesale Grocery Co., 234 Fed. 169. It is not a fatal objection that the offer is in the same terms as an assignment for the benefit of creditors which was an act of bankruptcy. Re Graham & Sons, C. C. A., 252 Fed. 93. The approval of the majority of creditors creates a presumption that the composition is for the best interests of all, and the burden of proof is upon those who oppose the confirmation. Re Hoxie, 180 Fed. 508; Re McLellan, 204 Fed. 482; Re Silberstein, 225 Fed. 665; Re Spiller, 230 Fed. 490; Re Soloway & Katz, C. C. A., 234 Fed. 67. Confirmation of a composition may be refused, although it has been accepted by a majority in interest of the creditors, when the consideration appears to be insufficient. Adler v. Jones, C. C. A., 109 Fed. 967; Riley v. Pope, 186 Fed. 857. As when made in consideration of a promise by the creditors, that they will not prosecute the bankrupts criminally, nor furnish evidence against them in any criminal prosecution; Re Rosenblatt, 153 Fed. 335.
A clause providing for a provisional order of adjudication
not approved when an order of adjudication that could not be attacked by the bank.
rupt had been previously made. Re Linderman, 166 Fed. 593. The court declined to review so much of the agreement as concerned the raising of funds to make payments to others than creditors in connec. tion with the estate. Ibid. Con firmation may be refused when the consideration seems to be consider. ably less than the creditors would receive from the administration of the assets. Adler v. Jones, C. C. A., 109 Fed. 967 ; Re Morris, 246 Fed. 1021. But see Re Weber Furni. ture Co., Fed. Cas. No. 17,330, 13 N. B. R. 529; Re Arrington Co., 113 Fed. 498. The burden of showing this, is upon the objectors. Re Waynesboro Drug Co., 157 Fed. 101.
14 Re Rivkin, 206 Fed. 218; Re Burman, 210 Fed. 512; Bolles v. Kelley, C. C. A., 222 Fed. 63; Re Silberstein, 225 Fed. 665; Re Levenson, 223 Fed. 875; Re Weintrob, 240 Fed. 532, where a large amount of assets described in the bankrupt’s statement to sellers of merchandise had disappeared without any explanation by him ; International Trust Co. v. Myers, C. C. A., 245 Fed. 110; Re Kerner, 245 Fed. 807. A false statement in the schedules by the bankrupt, if unknown to the petitioning creditor until after the confirmation, is a ground for setting this aside, although the order confirming it has recited that it appears that the bankrupt has not been guilty of any acts that would be a bar to his discharge. Re Roukous, 128 Fed. 645.
The confirmation of a composition may be
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 dismissed. Whenever a composition is not confirmed, the estate shall be administered in bankruptcy as herein provided.” 15 “(a) The judge may, upon the application of parties in interest filed at any time within six months after a composition has been confirmed,16 set the same aside and reinstate
denied because the bankrupt has committed an act, which would be a bar to his discharge, although the creditors would have thereby received more than they could obtain from the regular administration of the estate. Pe Godwin, 122 Fed. 111; Re Olman, 134 Fed. 681; Re Comstock, 154 Fed. 747; Re Griffin, 180 Fed. 792; Re B. Jacobson & Son Co., C. C. A., 196 Fed. 949. The fact that the objector had hought the claim against the bankrupt for the purpose of compelling, by threats of opposition to the confirmation, the settlement of a suit brought by the trustee did not influence the decision of the court. Re Comstock, 154 Fed. 747. Pref. erential payments to actual creditors who received them in good faith are no grounds for refusing to confirm the composition. Re McLellan, 204 Fed. 482; Re Rivkin, 206 Fed. 218.
15 30 St. at L. 544, 549, § 12, as am'd 36 St. at L. 838, 839. See Ross v. Saunders, C. C. A., 105 Fed. 915; Re Hilborn, 104 Fed. 866. No composition can be made without unanimous consent of the creditors, except in the manner directed by the statute, Re Malkan, C. C. A., 261 Fed. 894. The composition and the proceedings thereupon are a con
tinuation of the original proceedings in bankruptcy, voluntary or involuntary as the case may be. Re Radley, 252 Fed. 205.
16 A composition cannot be set aside when an application is made more than six months after the date of its confirmation. Re Eisenberg, 148 Fed. 325; Re Jersey Island Packing Co., 152 Fed. 839; Re Ennis, 183 Fed. 859. It has been keld: that the fact that a bankrupt has failed to perform the covenants in an agreement of composition is no ground for setting the composition aside, whatever may be its effect upon the operation of the composition as a discharge, Re Eisenberg, 148 Fed. 325; that, in the absence of fraud, a creditor who assents to a proposition releases his claim for damages caused by a breach of a contract, of which breach he then was ignorant, Fowle v. Park, 48 Fed. 789; and that an erroneous statement of the address of a creditor made in the schedules in good faith is no reason for setting aside the confirmation of the composition, although the creditor had no notice of the proceedings and his claim was not included in the composition, Re Rudnick, 93 Fed. 787.
the case if it shall be made to appear upon a trial that fraud was practiced in the procuring of such composition, 17 and that the knowledge thereof has come to the petitioners since the confirmation of such composition." 18 "The confirmation of a composi17 Re Siegel, 256 Fed. 220.
the facts, was insufficient. Re Rou18 30 St. at L. 544, 550, § 13. kous, 128 Fed. 648. That the petiRe Ballance, 205 Fed. 505; Re tion is not demurrable for the Siegel, 256 Fed. 220; Re Kass, 263 omission of an allegation that the Fed. 138. An order setting aside petitioner has restored, or offers a composition should not be granted to restore, the consideration. Re without notice to all the creditors Roukous, 128 Fed. 645. Nor for a who have consented thereto.
failure to allege the time and Dunn, 53 Fed. 341. As to the
in which the petitioner rights of secured creditors under a acquired knowledge of the fraud composition, see Flower v. Greene- charged, when there is an allegation baum, 50 Fed. 190. It was held that it was unknown to him until to be error to deny the application after the confirmation. Re Roukous, upon the payment by the bankrupt 128 Fed. 645. And that lea to of part of the objector's claim. Re file a petition to set aside the conBallance, C. C. A., 219 Fed. 537. firmation of a composition should It has been held: that a creditor, not be refused unless the petition, who has sold his claim for a con- on its face, shows that, upon the sideration, cannot maintain a peti- facts stated, the petitioner cannot, tion to set aside the confirmation of under any circumstances, be entitled a composition subsequently made, to relief. Re Allen B. Wrisley Co., although the sale obtained C. C. A., 133 Fed. 388. The burden through the fraudulent misrepre- of proof rests upon the party who sentations of the bankrupt and his seeks to have the order of confirma. trustee, Re Allen B. Wrisley Co., tion set aside. City Nat. Bank v. C. C. A., 133 Fed. 388; but that Doolittle, C. C. A., 107 Fed. 236. the institution of an action at law The composition will be set aside against the bankrupt does not when it was obtained through false justify the dismissal of a petition, representations, made by the trustee previously filed by a creditor, to concerning the assets, Re Allen B. set aside the confirmation of Wrisley Co., C. C. A., 133 Fed. 388. composition, Re Roukous, 128 Fed. A secret agreement made before 648. It has been held that a verifi- the composition, that one creditor cation of the petition to set aside shall receive more than the other, a composition may be made in the is a fraud, which cannot be enusual form of the verification to a forced, Brownsville Mfg. Co. bill in equity. Re Roukous, 128 Lockwood, 11 Fed. 705; Re Starr, 56 Fed. 645; but that, where the prin- Fed. 142; Fairbanks y. Amoskeag cipal allegations were made on in- Nat. Bank, 38 Fed. 630; Cavanna v. formation and belief, a verification Bassett, 3 Fed. 215; but see Zavelo by a joint petitioner, who had v. Reeves, 227 U. S. 625, even shown no personal knowledge of though the additional payment is for
tion shall discharge the bankrupt from his debts, other than those agreed to be paid by the terms of the composition and those not affected by a discharge." 19
expenses incurred in investigation, Re M. & H. Gordon, 245 Fed. 905. Such an agreement is no ground for relieving the promisee from the legal consequences of his failure to prove his claim. Re Starr, 56 Fed. 142; and because of it the composition may be set aside. Brownsville Mfg. Co. v. Lockwood, 11 Fed. 705. But see Re Jacobson & Son Co., C. C. A., 196 Fed. 949. But after such creditor's claim had been withdrawn, the bankrupt was allowed to renew his application for confirmation. Re M. & H. Gordon, 245 Fed. 905. It has been held: that the trustee may recover any property that has been in pursuance of such an agreement conveyed to the creditor, even if part of the consideration was his assistance in procuring the consent of others by the purchase of claims and other wise, Fairbanks v. Amoskeag Nat. Bank, 38 Fed. 630; but that the creditors cannot. Crowder v. AllenWest Commission Co., C. C. A., 213 Fed. 1. That the debtor may recover any excess he has paid the preferred creditor before the composition was made. Ibid. Batchelder & Lincoln Co. v. Whitmore, C. C. A., 122 Fed. 355, 359, 360, 362. But not what he has volun. tarily paid after the composition was made, although paid pursuant to a previous agreement. Ibid. A mortgage or other security given be. fore the composition for such a payment cannot be enforced. Copeland v. Hornik, 216 Fed. 117. Where a note with security, to pay the baiance of a debt discharged by the
composition, was given thereafter, it was held that it could be attacked for insufficient consideration when the payee had received the dividend, Spann v. Read Phosphate Co., C. C. A., 238 Fed. 338; but an agreement to pay in full, a creditor who advanced the funds to carry out a composition, did not prevent him from proving his claim in full upon the subsequent bankruptcy proceedings, Re Hawks, 204 Fed. 309. See Zavelo v. Reeves, 227 U. S. 625; Crowder V. AllenWest Commission Co., C. C. A., 213 Fed. 1, supra, $ 652; and proof may then be made by anyone who has advanced funds for such a purpose. McKey v. Bruns, C. C. A., 243 Fed. 370.
19 Bankruptcy Law, $ 14c. The confirmation of a composition is, in effect, a discharge of the bankrupt. U. S. ex rel. Adler v. Hammond, C. C. A., 104 Fed. 862; Ross v. Saunders, C. C. A., 105 Fed. 915; Re Friend, C. C. A., 134 Fed. 778; Re Cooper Bros., 166 Fed. 932; Re Wilkens, 191 Fed. 94, infra, $ 657. Notes which share in a composition cannot subsequently be used as a set-off. Re Am. Paper Co., 243 Fed. 753. See supra, $ 652. A composition by a firm does not discharge the liability of the individual members for their individual indebtedness. Re Coe, C. C. A., 183 Fed. 745. Neither does the composition discharge a claim against the stockholders of the bankrupt corporation. Re Berler Shoe Co., 246 Fed. 1018. The confirmation of a composition dissolves liens by