Nor does any presumption of the existence of insolvency arise from the making of an adjudication in bankruptcy, nor from the want of ready money to pay debts.33

In determining the value of property, it is estimated on the theory of a fair appraisement, and not necessarily on the price that a purchaser would give who tried to take advantage of the bankrupt's situation.31

A partnership is solvent if the individual and firm assets together exceed the liabilities.35

But though the bankrupt is insolvent, the transaction will still hold, unless the party benefited had reasonable cause to believe that he was insolvent, and that he intended to violate the act. Here, too, the decisions under the former act must be used with caution. Where insolvency consists in an inability to meet obligations as they mature, many circumstances of suspicion might be brought home to the party benefited that would be entitled to little weight under the meaning of the word in the present statute. Even under the former act mere suspicion that the bankrupt was in trouble, or knowledge that he was slow in paying his debts, was not sufficient to bring such knowledge home to the party benefited. Under the present act a stronger train of circumstances would be necessary, for,

receiver on the ground of insolvency an act of bankruptcy. In proceedings of this character the word may have a much wider meaning than under the bankrupt act. Cincinnati Equipment Co. v. Degnan, 184 Fed. 834, 107 C. C. A. 158. See "Bankruptcy," Dec. Dig. (Key-No.) § 160; Cent. Dig. § 249.

33 In re Chappell (D. C.) 113 Fed. 545. But where the fact of insolvency is one of the issues necessarily involved in making the adjudication, its existence is conclusively established by the adjudication and cannot be collaterally questioned. Cook v. Robinson, 194 Fed. 785, 114 C. C. A. 505. See "Bankruptcy," Dec. Dig. (Key-No.) §§ 100, 160.

34 In re Hines (D. C.) 144 Fed. 142; Rutland County Nat. Bank v. Graves (D. C.) 156 Fed. 168. See "Bankruptcy," Dec. Dig. (KeyNo.) §§ 54, 160; Cent. Dig. §§ 54, 84, 85, 249.

35 Francis v. McNeal, 186 Fed. 481, 108 C. C. A. 549. See "Bankruptcy," Dec. Dig. (Key-No.) §§ 54, 160; Cent. Dig. §§ 54, 84, 85, 249.

36

as has been seen above, a party embarrassed might go to protest, and still be solvent. An interesting discussion of the meaning of insolvency under the present act, as compared with the old act, is contained in Re Eggert, though that decision apparently gives more weight to the cases under the old act than they ought to have, and does not sufficiently emphasize the difference between the two acts. So, too, the knowledge by the party benefited of the existence of certain indebtedness on the part of the bankrupt is not of itself sufficient, for it must be remembered that the interests of the commercial world demand freedom of alienation just as much as they demand the enforcement of the provisions of the bankrupt act.37

THE TRUSTEE'S INTEREST IN INSURANCE POLICIES

62. The trustee is entitled to any insurance policy payable to the bankrupt which has a cash surrender or an actual value, unless the bankrupt chooses to redeem such policy.

Under section 70 the trustee is entitled to any insurance policy in the name of the bankrupt which has a cash surrender value and is payable to the bankrupt, unless the bankrupt chooses to redeem the policy. But this only applies to policies that have a cash surrender value, though the decisions on the point were for a long time in conflict.39

36 (D. C.) 98 Fed. 843, Id., 102 Fed. 735, 43 C. C. A. 1. See "Bankruptcy," Dec. Dig. (Key-No.) §§ 54, 160, 166.

37 As to the test of "reasonable cause to believe," see First Nat. Bank of Philadelphia v. Abbott, 165 Fed. 852, 91 C. C. A. 538; Stern v. Paper (D. C.) 183 Fed. 228. See "Bankruptcy," Dec. Dig. (KeyNo.) § 166; Cent. Dig. §§ 250-258.

38 Hiscock v. Mertens, 205 U. S. 202, 27 Sup. Ct. 488, 51 L. Ed. 771; Burlingham v. Crouse, 228 U. S. 459, 33 Sup. Ct. 564, 57 L. Ed. This section of the act does not apply in states which make an insurance policy exempt from claims of creditors. In such case the

THE TRUSTEE'S INTEREST IN RIGHTS OF AC

TION

63. The trustee is entitled to all rights of action arising upon contracts, or from the unlawful taking or detention of, or injury to, the bankrupt's property.

The seventieth section of the act provides that the trustee shall be entitled to all rights of action arising upon contracts, or from the unlawful taking or detention of, or injury to, the bankrupt's property. Under this provision the trustee does not become entitled to the bankrupt's right of action for torts to the person-for instance, to rights of action for slander or malicious prosecution.3

THE TRUSTEE'S POWER OF SALE

64. The trustee has the power to hold a sale after due notice to all parties in interest, which, however, is subject to confirmation by the court. The sale may be a public or private one, according to cir

cumstances.

This power is necessarily implied in the right given by the forty-seventh section of the act to collect and reduce to money the property of the estates for which they are trus

bankrupt can retain them without being required to pay the cash surrender value to the trustee. Holden v. Stratton, 198 U. S. 202, 25 Sup. Ct. 656, 49 L. Ed. 1018; In re Johnson (D. C.) 176 Fed. 591. See "Bankruptcy," Dec. Dig. (Key-No.) § 396; Cent. Dig. §§ 659–668. 39 Dillard v. Collins, 25 Grat. (Va.) 343; In re Haensell (D. C.) 91 Fed. 355. An action of deceit based on false representations as to goods is an injury to property and passes to the trustee. In re Gay (D. C.) 182 Fed. 260. So an action to recover usurious interest. First Nat. Bank v. Lasater, 196 U. S. 115, 25 Sup. Ct. 206, 49 L. Ed. 408. See "Bankruptcy," Dec. Dig. (Key-No.) § 145; Cent. Dig. §§ 205, 230-234.

HUGHES FED.PR.(2D ED.)-11

tees, under the direction of the court. Under the fiftyeighth section, creditors are entitled to notice of all proposed sales of property; and, after the property is sold, the court has a general supervision over the question whether to confirm the sale or not, and exercises it under the ordinary principles governing judicial sales, but will not set aside a sale merely because a somewhat better price could be obtained, though it will set it aside if improperly conducted, though the purchaser was not himself guilty of any impropriety.40

The eighteenth bankruptcy order 1 requires sales to be at public auction, unless otherwise ordered, but permits private sales under certain circumstances.

There is no express provision in the present act authorizing the sale of property free of incumbrances. This was a common practice under the former act, and the courts deduce the right to order such sales under the present act from the necessity for prompt action, and the general powers conferred upon them by the act. A sale may be ordered free from incumbrances even when it is not certain that there is no equity of redemption.*2

But there must be some probability that it is to the interest of the general creditors, before such a sale will be ordered. 43

Such a sale, however, cannot be ordered without giving

40 In re Ethier (D. C.) 118 Fed. 107; In re Belden (D. C.) 120 Fed. 524; In re Shea (D. C.) 122 Fed. 742. See "Bankruptcy," Dec. Dig. (Key-No.) § 269; Cent. Dig. § 870.

41 172 U. S. 659, 18 Sup. Ct. vi, 43 L. Ed. 1191; post, p. 460. See "Bankruptcy," Dec. Dig. (Key-No.) § 262; Cent. Dig. §§ 363-365.

42 In re Union Trust Co., 122 Fed. 937, 59 C. C. A. 461; In re Torchia (D. C.) 185 Fed. 576. See “Bankruptcy," Dec. Dig. (Key-No.) § 258; Cent. Dig. §§ 358–362.

43 In re Pittelkow (D. O.) 92 Fed. 901;

Southern Loan & Trust

Co. v. Benbow (D. C.) 96 Fed. 514; In re Shaeffer (D. C.) 105 Fed. 352; In re Roger Brown & Co., 196 Fed. 758, 116 C. C. A. 386; In re Fayetteville Wagon-Wood & Lumber Co. (D. C.) 197 Fed. 580. See "Bankruptcy," Dec. Dig. (Key-No.) § 257.

notice to all parties in interest, and giving them a day in court." A sale may be ordered by the referee.*5

THE TRUSTEE'S DUTIES AS TO DISTRIBUTION OF THE ESTATE

65. It is the trustee's duty to distribute the estate in accordance with, and observance of, certain priorities prescribed by law.

In the distribution, certain priorities are prescribed by the sixty-fourth section of the act. The trustee must, of course, observe them. He must pay all taxes due to the United States or state, or any municipal subdivision thereof, before he can pay any dividend, including taxes after his qualification.1o

Debts Due the United States

It was long a question, under the present act, whether debts due to the United States which are not taxes are a prior claim. Under the act of 1867 there was an express provision giving them priority. The fact that this provision is omitted in the present act, and only taxes due the United States mentioned as prior, might be taken as

47

44 Factors' & Traders' Ins. Co. v. Murphy, 111 U. S. 738, 4 Sup. Ct. 679, 28 L. Ed. 582; In re Pittelkow (D. C.) 92 Fed. 901; In re Kohl-Hepp Brick Co., 176 Fed. 340, 100 C. C. A. 260. But if he knows of the sale and does not object, he cannot set up want of formal notice. In re Caldwell (D. C.) 178 Fed. 377. See "Bankruptcy," Dec. Dig. (Key-No.) § 261; Cent. Dig. §§ 361, 362.

45 In re Sanborn (D. C.) 96 Fed. 551; In re Waterloo Organ Co. (D. C.) 118 Fed. 904; In re Miners' Brewing Co. (D. C.) 162 Fed. 327. See "Bankruptcy," Dec. Dig. (Key-No.) § 262.

46 Swarts v. Hammer, 194 U. S. 441, 24 Sup. Ct. 695, 48 L. Ed. 1060. And he must not wait for the tax officials to present the bills. In re Weissman (D. C.) 178 Fed. 115. Water rents under municipal ordinances are taxes. In re Industrial Cold Storage & Ice Co. (D. C.) 163 Fed. 390. See "Bankruptcy," Dec. Dig. (Key-No.) § 346; Cent. Dig. § 535.

47 Lewis v. U. S., 92 U. S. 618, 23 L. Ed. 513. See "Bankruptcy,” Dec. Dig. (Key-No.) §§ 345, 349; Cent. Dig. § 533.