This means a jury trial according to the course of the common law, not a mere issue out of chancery, and hence proceedings on a trial are reviewable only by writ of error and on bills of exceptions, where bills of exceptions are usually necessary.28

Ordinarily the burden of proof is upon the creditors to make out the facts charged in the petition.29 Section 3, "c" and "d," however, provides that the burden of proving solvency shall be upon the bankrupt when that is set up as a defense to the charge that the bankrupt has attempted to hinder, delay, or defraud his creditors, or when he fails to appear with his books, papers, and accounts, and submit to an examination, and give testimony as to all matters tending to establish solvency or insolvency, on a charge of making an illegal preference, or suffering or permitting

one.

As the trial is according to the course of the common law, this means that the evidence will be taken before the jury in open court, except in cases where it can be taken by deposition under the present rules of common-law practice in the federal courts.

The bankrupt is entitled to a jury trial only on the issue of insolvency and the commission of an act of bankruptcy. The submission of any other questions to a jury is discretionary with the court.30

28 ELLIOTT v. TOEPPNER, 187 U. S. 327, 23 Sup. Ct. 133, 47 L. Ed. 200. But this is not true as to questions submitted to a jury under the general powers of the court, and not under the provisions of the bankrupt act. The verdict in such case is only advisory. In re Neasmith, 147 Fed. 160, 77 C. C. A. 402. See "Bankruptcy," Dec. Dig. (Key-No.) § 93; Cent. Dig. § 140.

29 In re Rome Planing Mill Co. (D. C.) 96 Fed. 812; In re Taylor, 102 Fed. 728, 42 C. C. A. 1. See "Bankruptcy," Dec. Dig. (Key-No.) § 91; Cent. Dig. §§ 137–139.

30 Carpenter v. Cudd, 174 Fed. 603, 98 C. C. A. 449, 20 Ann. Cas. 977; Stephens v. Merchants' Nat. Bank of Aurora, Ill., 154 Fed. 341, 83 C. C. A. 119. See "Bankruptcy," Dec. Dig. (Key-No.) § 93; Cent. Dig. § 140.

HUGHES FED.Pr.(2D ED.)-9

THE ADJUDICATION

52. The next step in the progress of a bankruptcy case, if the issue raised on the petition is decided against the bankrupt, is the adjudication.

In case of a voluntary petition this is a matter of course.31 In case of an involuntary petition it is a matter of course if the issues are decided against the bankrupt, and it is also a matter of course if the bankrupt makes no defense.32 If the judge is present, the adjudication is made by him. If he is absent from the district or the division of the district in which the petition is filed, the clerk refers the case to the referee, and the referee on such reference can make the adjudication.33 The order of reference, therefore, when made by the clerk, is made before adjudication, and for the purpose of enabling the referee to make the adjudication. When made by the judge, it is after adjudication, and for the purpose of investing the referee with the general supervision of the case in its details, which the bankruptcy act contemplates. The things required to be stated in the order are set out in bankruptcy order 12, and its form constitutes No. 14 35 and No. 15 36 of the forms prescribed by the Supreme Court.

34

31 Bankr. Act, § 18g; HANOVER NAT. BANK v. MOYSES, 186 U. S. 181, 22 Sup. Ct. 857, 46 L. Ed. 1113. See "Bankruptcy," Dec. Dig. (Key-No.) § 51.

32 Bankr. Act, § 18e.

33 Bankr. Act, §§ 18e-g, 38a (1).

84 172 U. S. 657, 18 Sup. Ct. vi, 43 L. Ed. 1190.

85 172 U. S. 690, 18 Sup. Ct. xxv, 43 L. Ed. 1212. 36 172 U. S. 690, 18 Sup. Ct. xxv, 43 L. Ed. 1212.

THE CREDITORS' MEETING

53. The first important step after the adjudication is the meeting of creditors. The thirty-ninth section of the act requires the referee to give the notice of such meeting, and the fifty-eighth section requires at least ten days' notice by mail, and also by publication. The proceedings at a creditors' meeting are prescribed by the fifty-fifth section of the act. The judge or referee presides, and the important business before the meeting is the allowance or disallowance of claims of creditors, the examination of the bankrupt, and the election of a trustee.

Proof of Claims

The proof and allowance of claims are regulated by the fifty-seventh section of the act, which has been amplified by bankruptcy order 21.37 The proof is under oath; must specify the claim, the consideration, the payments, the securities held therefor, if any, and that the same is justly owing. Creditors are defined in the first section of the act as including any one who owns a demand or claim provable in bankruptcy, and may include a duly authorized agent, attorney, or proxy. Hence only those creditors whose claims are provable in bankruptcy are included. The claims which are provable are set out in the sixtythird section of the act. The bankrupt himself, as fiduciary, can prove a claim against his estate.38

Under the present act, secured creditors and those who have priority can prove their claims and participate in the meeting, but only for such part of their debt as is not cov

37 172 U. S. 660, 18 Sup. Ct. vii, 43 L. Ed. 1192.

38 Warner v. Spooner (C. C.) 3 Fed. 890. See “Bankruptcy," Dec. Dig. (Key-No.) § 308; Cent. Dig. § 490.

ered by their securities. And "secured creditors," in this sense, mean creditors secured by the bankrupt, not creditors secured by claims against other parties. For instance, where a creditor had a judgment against the bankrupt and another, and levied on the property of the other as well, he could still prove his claim against the bankrupt. And so a partner who has bought up judgments against the firm can prove against the estate of an individual partner, though not in such a manner as to come into competition with partnership debts on which he himself would be responsible.40

39

Under section 57g of the act as first passed, the claims of creditors who have received preferences could not be allowed unless such creditors surrendered their preferences. It will appear hereafter, in discussing the question what preferences are voidable, that a transfer or other method of preference adopted by the bankrupt may be a preference as to him, and yet may be valid as to the party preferred, if the latter did not have reasonable cause to believe that it was intended as a preference. Hence care must be taken, in this connection, to distinguish between preferences voidable even as to the creditor, and preferences valid as to him, and yet against the bankrupt law. The idea of the bankrupt law is equality of distribution of the assets among the creditors, as far as it is possible to bring about that equality without interfering with freedom of alienation in ordinary business transactions. Hence this provision of the bankrupt law was intended to put the creditor to his election. He had to choose between holding on to his preference, or giving up his hope of dividends

39 In re Headly (D. C.) 97 Fed. 765; Board of Com'rs of Shawnee County, Kan., v. Hurley, 169 Fed. 92, 94 C. C. A. 362. See "Bankruptcy," Dec. Dig. (Key-No.) § 310; Cent. Dig. §§ 501-507.

40 In re Carmichael (D. C.) 96 Fed. 594. See "Bankruptcy," Dec. Dig. (Key-No.) § 309; Cent. Dig. §§ 555–564.

1

from the bankrupt's estate. He could not claim his preference, and still insist on his dividend. Hence, under the act, as first passed, even a creditor whose preference could not be set aside had to surrender it before he could participate in the benefits of the act.41 And Judge Lowell held that even a preference which could not be set aside for the reason that it had been made for more than four months had to be surrendered before the creditor could prove his claim. In other words, under the original act, if the result of a payment or transfer was a preference, that preference had to be surrendered before the creditor could claim under the bankruptcy proceeding. However, the amendment of February 5, 1903, changed section 57g of the original act so as to provide that the claims of creditors who have received preferences voidable under section 60, subd. "b," or to whom conveyances, transfers, assignments or incumbrances, void or voidable under section 67, subd. “e,” have been made or given, shall not be allowed, unless such creditors shall surrender such preference, conveyances, transfers, assignments, or incumbrances. This amendment was evidently intended to change these decisions, and to allow creditors who had received a preference innocently to still hold on to their preference and prove their claim. For it must be remembered that the receipt of a preference is not considered as an actual fraud. Here, too, the preference contemplated is a preference by the bankrupt. A

43

41 In re Fixen, 102 Fed. 295, 42 C. C. A. 354, 50 L. R. A. 605; Pirie v. Trust Co., 182 U. S. 438, 21 Sup. Ct. 906, 45 L. Ed. 1171. See "Bankruptcy," Dec. Dig. (Key-No.) § 311; Cent. Dig. §§ 497-500. 42 In re Jones (D. C.) 110 Fed. 736. But compare In re Chaplin, 115 Fed. 162, 171. See "Bankruptcy," Dec. Dig. (Key-No.) § 311; Cent. Dig. §§ 497-500.

43 Streeter v. Jefferson County Nat. Bank, 147 U. S. 36, 13 Sup. Ct. 236, 37 L. Ed. 68; Keppel v. Tiffin Saving Bank, 197 U. S. 356, 25 Sup. Ct. 443, 49 L. Ed. 790; Page v. Rogers, 211 U. S. 575, 29 Sup. Ct. 159, 53 L. Ed. 332. See "Bankruptcy," Dec. Dig. (Key-No.) § 311; Cent. Dig. 88 497-500.