not error for a referee to deduct one item and allow the claim as reduced without requiring it to be resworn. 260 V. RECONSIDERATION OF CLAIMS AFTER ALLOWANCE a. In general.- Subsections k and I provide for a reconsideration and reallowance or rejection of claims, in whole or in part, after allowance and before the estate is closed. The methods prescribed by this section seem to be exclusive.261 Such a claim may be reconsidered for cause before the estate has been closed and a subsequent disposition thereof may be made according to the equities. 262 b. Jurisdiction of court or referee. The practice is indicated in General Order XXI (6). The referee is the court of first instance; the register under the former law was obliged to certify such contests to the judge. If a claim is rejected, it must be "for cause," and "before but not after the estate has been closed." The district court has no jurisdiction to act upon a petition for a rehearing of the claim during the pendency of appeal under § 25-a.263 A bankruptcy court in which an estate is being administered has full power to inquire into the validity of any alleged debt or obligation of the bankrupt upon which a demand or claim against the estate is based.204 c. Who may apply for reconsideration. The application is made by parties in interest,265 and when there is a trustee in existence can only be presented by him, and then only when demanded by the interests of all the creditors." But where no trustee has been 266 260. In re Goldstein (D. C., Mass.), 29 Am. B. R. 301, 199 Fed. 665. 261. In re Roanoke Furnace Co. (D. C., Pa.), 18 Am. B. R. 661, 152 Fed. 846; Matter of Collins (D. C., Ia.), 37 Am. B. R. 692, 235 Fed. 937. See Am. Bankr. Dig., § 760. 262. In re Effinger (D. C., Md.), Am. B. R. 924, 184 Fed. 724. 25 263. First Nat'l Bank v. State Nat'l Bank (C. C. A., 9th Cir.), 12 Am. B. R. 429, 440, 131 Fed. 422. 264. Lesser v. Gray, 236 U. S. 70, 34 Am. B. R. 8. 265. Matter of Sully & Co. (C. C. A., 2d Cir.), 18 Am. B. R. 123, 152 Fed. 619, mod. 15 Am. B. R. 304, 142 Fed. 895. See also this section, ante, subtitle, "Who may object." Debtors of a bankrupt estate are de nied the right to move for the reconsideration of claims which have been allowed. In re Pittsburgh Lead & Zinc Co., Consolidated (D. C., Mo.), 28 Am. B. R. 880, 198 Fed. 316. Stockholders of a bankrupt corporation upon whom has been levied an assessment which they will have to pay if the claim they object to is allowed, are "parties in interest," and may move to set aside the order allowing such claim and to expunge and disallow the same. Rosenbaum v. Dutton (C. C. A., 8th Cir.), 30 Am. B. R. 155, 203 Fed. 838. 266. Matter of Lewensohn (C. C. A., 2d Cir.), 9 Am. B. R. 368, 121 Fed. 538; Matter of Sully & Co. (D. C., N. Y.), 15 Am. B. R. 304, 142 Fed. 895, modfd. 18 Am. B. R. 123, 152 Fed. 619 267 appointed the bankrupt may move to set aside and expunge a claim which has been allowed.20 Creditors themselves should not be perImitted to supersede the trustees, and intervene for the purpose of having a claim reconsidered, unless the trustee refuses to act.268 If a trustee refuses to move for the reconsideration of a claim which has been allowed when he ought to do so, he may be compelled to act or to permit the objecting creditors to act in his name.209 The right of a creditor who moves to expunge the allowance of another creditor's Compare In re Levy (Ref., N. Y.), 7 Am. B. R. 56; In re Howard (D. C., Cal.), 4 Am. B. R. 69, 100 Fed. 630. Reconsideration of claims; rights of creditors. Where certain creditors have made objection to and conducted a controversy over a claim in their own names, having voluntarily assumed the liability for costs and expenses, and have shown that the claim should be disallowed, the court will not ignore what has been done, upon the technical ground that the trustee is the only person to dispute the validity of claims against a bankrupt's estate. In re Canton Iron & Steel Co. (D. C., Md.), 28 Am. B. R. 791, 197 Fed 767. 267. In re Ankeny (D. C., Iowa), 4 Am. B. R. 72, 100 Fed. 614, 2 N. B. N. 249. 268. Application for re-examination in the interest of bankrupt's debtors. -That an application by creditors whose claims have been proven and allowed for an order compelling a trus tee to petition for the reexamination of the claims of other creditors was made in the interest of alleged debts of the bankrupt is not a sufficient reason for denying it where it does not appear that in other respects the application was not a meritorious one as the application being a legitimate one and the assertion of a clear, legal right, under section 57, should not have been denied upon a consideration of motive. Matter of Sully & Co. (C. C. A., 2d Cir.), 18 Am. B. R. 123, 152 Fed. 619. 269. Refusal of trustee to act.- In the case of In re Stern (C. C. A., 8th Cir.), 16 Am. B. R. 510, 144 Fed. 956, the court said: "In respect to opposing the allowance of claims and moving for their reconsideration after they have been allowed, the trustee is not bound to comply with every request preferred by objecting creditors, irrespective of its merits, nor is he clothed with absolute discretion to refuse. As the representative of the estate, he is bound to exercise his judgment and to act for the best interests of all concerned, but subject to the supervising power of the referee and the district judge. He does not act judicially but only administratively, and if he refuses to oppose a claim or to move for its reconsideration when he ought to do so, he may be compelled to act or to permit the objecting creditors to act in his name." See also In re Lewensohn (C. C. A., 2d Cir.), 9 Am. B. R. 368, 121 Fed. 538; In re Baird (D. C., Pa.), 7 Am. B. R. 448, 112 Fed. 960; Chatfield v. O'Dwyer (C. C. A., 8th Cir.), 4 Am. B. R. 313, 101 Fed. 797; Matter of Ferrer (D. C., Porto Rico), 22 Am. B. R. 785, holding that if a trustee wrongfully refuses to take the necessary action to secure a reconsideration, an order will be granted, compelling the trustee to show cause why he should not move for a reconsideration. Remedy of creditors.- Where a general creditor is dissatisfied with the allowance of the claim of another creditor, his proper remedy is a demand upon the trustee to move for a recon claim is no higher than that of the bankrupt 's.270 A referee may, upon his own motion, take such action as may be necessary to correct an erroneous determination as to the allowance of a claim, due notice being given to the parties concerned.271 d. Time for making application. The application for reconsideration must be made promptly or it will be denied because of laches.272 The time for filing the petition may be fixed by rule of the district court, which may authorize an extension of time for good cause shown,273 or if not so fixed, objections after allowance should be made within the year within which an amended proof of claim might have been filed.274 But it has been held that reconsideration sideration or review of such claim, or, if the trustee upon demand declines to act, then by a motion to the District Court that the trustee be required to move, or that the objecting creditor be permitted to move in his own name. In re Mexico Hardware Co. (D. C., N. Mex.), 28 Am. B. R. 736, 197 Fed. 650. 270. In re Arnold & Co. (D. C., Mo.), 13 Am. B. R. 320, 133 Fed. 789. 271. International Agricultural Corp. v. Cary (C. C. A., 6th Cir.), 38 Am. B. R. 753, 240 Fed. 101, in which the court said: "While it is probably the better practice generally for the referee to act upon petition of the trustee or of creditors, and, in case the information comes in the first instance to the referee, to direct the trustee to institute proceedings for re-examination, yet we cannot think that the referee is without jurisdiction to act, as in the case in question, upon his own motion. There may or may not have been good reason for proceeding sua sponte, but the presence or absence of such reason is not fatal to jurisdiction. A court of bankruptcy is a court of equity (Bardes v. National Bank, 178 U. S. 524, 535, 4 Am. B. R. 163); the proceedings therein are more summary than in ordinary suits; and it cannot be that an equity court, acting under such summary practice, is powerless, in the interests of justice, on its own motion to take steps to correct what it believes to have been an erroneous action had upon insufficient knowledge; and the general rule is that firm creditors are not entitled to receive dividends from the separate estates of the partners until separate creditors have been paid in full." 272. In re Hamilton Furniture Co. (D. C., Pa.), 8 Am. B. R. 588, 116 Fed. 115; In Matter of Hinckel Brewing Co. (D. C., N. Y.), 10 Am. B. R. 484, 123 Fed. 492; Matter of Collins (D. C., W. Va.), 32 Am. B. R. 785, 215 Fed. 247. The question of laches is a question of law where the facts are undisputed. Matter of Sully & Co. (C. C. A., 2d Cir.), 18 Am. B. R. 123, 152 Fed. 619. Time within which objection should be made. After the lapse of four years since the allowance of a claim the trustee is estopped from objecting to the sufficiency of the form of the claim. Matter of Collins (D. C., W. Va.), 32 Am. B. R. 785, 215 Fed. 247. 273. Matter of Caledonia Coal Co. (D. C., Mich.), 43 Am. B. R. 93, 254 Fed. 742. See also Rules in Bankruptcy, Vol. IV, post. 274. In re Chambers (Ref., N. Y.), 6 Am. B. R. 707. A delay by a trustee in bankruptcy of a year in filing a petition for the re-examination of a claim does not constitute laches, where it appears that the delay has not resulted in injury or prejudice to the claimant which may be allowed after twelve months have elapsed since the filing of a claim, where it appears that no dividend has been paid on the claim and nothing has happened to prejudice the rights of the claimant.275 276 It e. Practice and evidence. The application is by petition." should allege facts which, if true, are sufficient cause for a re-examination. It is not necessary to allege facts which, if proved, would defeat the claim.277 When application is made to increase or decrease the sum at which a claim has previously been allowed, the better practice is to vacate the former order of allowance, and allow the claim for the new amount.278 The creditors whose claims it is sought to reconsider should be given an opportunity to oppose the application for reconsideration. The bankrupt is not interested in the application and is charged with no duty concerning it and is therefore not entitled to be heard upon it.279 The claimant is entitled to "due notice" by mail; 279a the time is usually fixed by the referee. It is customary to notify the claimant's' attorney of record also. The issue is made by the petition and the proof of debt, the burden being on the petitioner, at least to overcome the prima facie case made by the proof of debt.280 Objections to proofs of claims should be set would make it inequitable to allow the trustee to file his objections to the claim. Matter of Caledonia Coal Co. (D. C., Mich.), 43 Am. B. R. 93, 254 Fed. 742. 275. In re Globe Laundry (D. C., Tenn.), 28 Am. B. R. 831, 198 Fed. 365. 276. See form of petition and notice in Forms in Bankruptcy, No. 214, Vol. III, post. See also Hagar and Alexander's Bankruptcy Forms (2d Ed.). As to petition against several creditors, see In re Lyon (Ref. N. Y.), 7 Am. B. R. 61. Irregular procedure.- Where creditors have filed exceptions to a claim which have been treated precisely as a petition for the reconsideration and disallowance of the claims, an order disallowing the claim will not be set aside on the ground that a petition for reconsideration and disallowance, and not exceptions, should have been filed. In re Canton Iron & Steel Co. (D. C., Md.), 28 Am. B. R. 791, 197 Fed. 767. 277. In re Watkinson & Co. (D. C., Pa.), 12 Am. B. R. 370, 130 Fed. 218. Sufficiency of petition.- Where the pétition for reconsideration of a claim avers the renewal and extension of an obligation without the knowledge of the bankrupt, but does not aver that the renewed obligation was taken in lieu of the original obligation or that there was a consideration given for the contract of renewal, it is sufficient to let in proof showing an extension. In re Ankeny (D. C., Ia.), 4 Am. B. R. 72, 100 Fed. 614, 2 N. B. N. 249. 278. In re Smith (Ref., N. Y.), 2 Am. B. R. 648. 279. In re Effinger (D. C., Md.), 25 Am. B. R. 924, 184 Fed. 724. 279a. Form of Notice.-See Forms in Bankruptcy Nos. 216, 217, Vol. III, post. 280. In re Doty (Ref., N. Y.), 5 Am. B. R. 58; In re Sumner (D. C., N. Y.), 4 Am. B. R. 123, 101 Fed. 223. Compare also In re Saunders, Fed. Cas. 12.371. The burden of proof is upon a cred- forth in the form of a petition for review. 281 Each creditor must file his own objections, and make an issue, he cannot adopt the answer of the bankrupt.282 The defense of usury is as available to the debtor's trustee in bankruptcy as to the debtor himself.283 Although the bankrupt has failed to deny an allegation that one of the petitioners is a creditor, the petitioner must prove his claim, and the trustee or any creditor may contest the claim.284 Neither party is entitled to a jury.285 The customary rules of evidence apply.286 The practice on trials in equity should be followed. 287 f. Decision; form of order. The result is an order either (1) reallowing the claim, or (2) rejecting it, or (3) reducing or increasing it.288 The referee cannot allow the claim conditionally.289 If the claim is rejected, Form No. 39 should be used; if it is reduced, Form No. 38. The referee cannot pass upon and decide controversies involving questions of fact pertaining to or involving the interests of third parties in property belonging to the estate.200 After a decision and before a formal order has been entered, the referee may, in itor moving for the re-examination of another's claim on the ground of an alleged release of the same to the bankrupt. In re Howard (D. C., Cal.), 4 Am. B. R. 69, 100 Fed. 630. 281. Matter of Linton (Ref., Pa.), 7 Am. B. R. 676. 282. Ayres v. Cone (C. C. A., 8th Cir.), 14 Am. B. R. 739, 746, 138 Fed. 783, 283. In re Stern (C. C. A., 8th Cir.), 16 Am. B. R. 570, 144 Fed. 956. See also Tennessee Finance Co. v. Thompson (C. C. A., 6th Cir.), 48 Am. B. R. 294, 278 Fed. 597. 284. In re Harper (D. C., N. Y.), 23 Am. B. R. 918, 175 Fed. 412. 285. In re Christensen (D. C., Iowa), 4 Am. B. R. 99, 101 Fed. 243; Barton v. Barbour, 104 U. S. 126. 286. See, in this connection, In re Shaw (D. C., Pa.), 6 Am. B. R. 499, 109 Fed. 780. Consult also In re Merrill, Fed. Cas. 9,466; In re Moore, Fed. Cas. 9,752; Canby v. McLear, Fed. Cas. 2,378. Oral confessions, denied and uncorroborated, are not sufficient to support a claim. In re Kaldenberg (D. VOL. II-6 C., N. Y.), 5 Am. B. R. 6, 105 Fed. 232. 287. Compare the Equity Rules. See also In re Keller (D. C., Iowa), 6 Am. B. R. 334, 109 Fed. 118. Expiration of time to file answer.Where the time allowed a claimant to file an answer to a petition to expunge his claim expires without an answer being filed, an application for leave to file an answer, made after the trustee has presented all his testimony, is properly denied. In re Lewis, Eck & Co. (D. C., Pa.), 18 Am. B. R. 657, 153 Fed. 495. 288. In re Paterson Co. (C. C. A, 8th Cir.), 25 Am. B. R. 855, 186 Fed. 629. Forms.- In addition to the official forms mentioned in the text, See Forms in Bankruptcy, Nos. 218-220, Vol. III, post. 289. Matter of United Grocery Co. (D. C., Fla.), 41 Am. B. R. 824, 253 Fed. 267; Keith v. Kilmer (C. C. A., 1st Cir.), 47 Am. B. R. 92, 272 Fed. 643. 290. In re Peacock (D. C., N. Car.), 24 Am. B. R. 159, 178 Fed. 851. |