III. Fixed Liability Absolutely Owing - Continued.

d. Evidenced by an instrument in writing, 1391.
(1) IN GENERAL, 1391.

(2) BILLS, NOTES, AND CHECKS, 1392.

(I) In general, 1392.

(II) Who may prove, 1392.

(III) Notes and bonds of corporations, 1393.

(IV) Stipulation for payment of collection fees, 1394.

(3) INTEREST, 1395.

(4) LEASES, 1396.

e. Indorser and surety debts, 1398.

(1) CLAIMS OF BANKRUPT'S INDORSERS OR SURETIES, 1398. (2) LIABILITY OF BANKRUPT AS INDORSER OR SURETY, 1399.

f. Other debts falling within this paragraph, 1401.

IV. Claims for Costs, 1401.

a. In general, 1401.

b. Costs against an involuntary bankrupt, 1402.

c. Costs incurred in good faith in an action to recover a provable debt, 1402.

d. Costs in attachment suits, 1403.

V. Debts on Open Accounts or Contracts. 1404.

a. Debt founded on open account, 1404.

b. Debt founded on a contract, express or implied, 1405.

(1) IN GENERAL, 1405.

(2) TIME OF FILING PETITION CONTROLS, 1405.

(3) CLAIMS TORTIOUS IN CHARACTER BASED UPON CONTRACT, 1406.

(4) BREACH OF EXECUTORY CONTRACT, 1408.

(I) In general, 1408.

(II) Anticipatory breach, 1409.

(5) CONTINUING CONTRACTS, 1410.

(6) BREACH OF WARRANTY, 1411.

(7) EMPLOYMENT AND COMMISSION CONTRACTS, 1411.

(8) ILLEGAL CONTRACTS, 1412.

(I) In general, 1412.

(II) Gambling transactions, 1413.

(9) ULTRA VIRES CONTRACTS, 1414. (10) IMPLIED CONTRACTS, 1416.

VI. Judgments entered after Bankruptcy, 1417.

VII. Unliquidated Claims, 1418.

a. In general, 1418.

b. Liquidation, how accomplished, 1418.

c. Contingent liabilities, 1419.

d. Rent to accrue, 1422.

(1) REAL PROPERTY, 1422.

(2) PERSONAL PROPERTY, 1427.

VIII. Tort Claims. 1428.

a. Rule under former law, 1428.

b. Rule under present law, 1428.

c. Injuries to person or property, 1429.

IX. Taxes, 1430.

X. Debts Barred by Statute of Limitations, 1430.

I. HISTORY AND COMPARATIVE LEGISLATION

A clear understanding of what is a provable debt is important to either the due administration of, or practice under, all bankruptcy laws. If provable, a debt is the basis of its owner's right to a pro rata share in the estate; if provable, with certain exceptions, always stated in the statute,1 it is barred by the discharge. The earlier statutes were inclined to go far afield in defining such debts. Of late, the tendency has been to make the phrasing generic, and leave its construction to the courts. Thus, the present English law, after excepting all "demands in the nature of unliquidated damages arising otherwise than by reason of a contract, promise or breach of trust," in substance declares provable: "all debts and liabilities, present or future, certain or contingent."2 The same is true of the Canadian act. The same tendency is apparent in the United States. Section 19 of the law of 1867 was phrased in greater detail than § 63 of the present statute. Much of it was expressive of existvision authorizing the proving of contingent debts and liabilities, or the liability of the bankrupt, as surety, indorser, or guarantor; second, omission of any express provision as to the proving of damages resulting from a conversion or trespass by the bankrupt; third, omission of any express provi sion as to the apportionment of rent and proving for the same; fourth, the

3

1. See Bankr. Act, § 17. 2. Eng. Act of 1914, § 30.

3. Can. Bankr. Act of 1919, § 44. 4. The difference between the two statutes in this particular are tersely stated in a previous edition, as follows (3d ed., p. 380):

"The following are the most important differences: first, omission from the present act of any express pro

ing rules of law; these are unquestionably still in force, even though omitted from the act of 1898. The omission of other provisions, not expressive of general rules, seems to warrant the view that having been dropped out, they are no longer the law. These differences are considered in appropriate paragraphs, post.

II. DETERMINATION OF PROVABILITY

a. As affected by statute.- Subsection a indicates those "debts” that are provable; subsection b those debts which, because unliquidated at the time of the petition, are not immediately provable, but may be when liquidated. "Debt" and "liability" are here used somewhat loosely. The definition of the former in § 1 (11) seems hardly applicable, as it results in the truism: a debt is a debt. The tendency of the courts has been to give a somewhat narrow meaning to the word. Strictly, a debt is "something owed." Here this is immaterial; the five subdivisions of subsection a indicate the only obligations of the debtor which are, strictly speaking, provable.

b. Defenses to allowance. In general every existing claim upon which an action at law or in equity could be maintained at the time of the filing of the petition is provable in bankruptcy, and any defense which might have been urged had action been brought on the claim may be urged against its allowance in bankruptcy. If the claim is not enforceable because of some State statute, and this clearly appears from the character of the claim itself, it is not to be regarded in a strict sense as a provable debt.

embodiment in the present act of an express provision as to proving a judgment recovered after the commencement of proceedings in bankruptcy upon a debt at that time provable; fifth, the embodiment of an express provision making costs incurred by the bankrupt in certain suits by and against him provable debts; sixth, the embodiment of a provision that unliquidated claims against the bankrupt may, pursuant to application to the court, be liquidated in such a manner as it shall direct, and may thereafter be proved and allowed against the bankrupt's estate; seventh, the lack of any general provision as to the time when a debt must have become fixed and owing in order to be provable."

5. In re Sutherland, Fed. Cas. 13,

Thus it has been held that a

639; In re Foye, Fed. Cas. 5,021; Wilson v. Bank, 3 Fed. 391.

6. In re Prescott, 9 N. B. R. 385, Fed. Cas. 11,389, 5 Biss. 523.

7. In re Talbot (D. C., Mass.), 7 Am. B. R. 29, 110 Fed. 924, in which case it was held that in Massachusetts, a wife's claim for money advanced to her husband from her separate estate as a loan cannot be enforced by either legal or equitable proceedings, and so cannot be proved against her husband's estate in bankruptcy.

Claims unauthorized by statute.Claim for merchandise sold and delivered to a co-operative company, on credit, in violation of a statutory inhibition, are not provable debts in bankruptcy, so as to entitle the holders thereof to petition for the adjudica

feme covert may set up her coverture as a defense to a claim made against her estate: And if a corporation enters into an ultra vires contract upon which it could not bring an action it cannot prove a claim arising thereon in bankruptcy. So contracts void because of the consideration being illegal or because the contract is against public policy cannot be the foundation of a debt provable or at least allowable in bankruptcy.10 But the burden of proof rests upon those disputing a contract apparently valid." So if the statute of frauds. would be a defense to an action it may be set up as an objection to the allowance of a claim.12 The considerations here referred to relate more to the allowance of the claim than to the mere presentation of it for the purpose of proof.

14

c. "Proved" and "allowed."- In this connection, it is important to recall the difference between a debt which may be proved and one which may be allowed. As has been stated, every claim on which an action in law or in equity might have been maintained may be proved; 13 whether a debt so proved will be allowed is decidedly another matter. This distinction is perhaps somewhat artificial, the words "proved and allowed" being in § 63 yoked together and their equivalency to "provable" apparently taken for granted. A disallowed claim and a non-provable debt are not identical things; and where a debt is disallowed because without foundation the claimant does not have a non-provable debt.15 It has been held that the term "provable debt" is not limited in its meaning to a debt against the allowance of which no defense can be successfully interposed; as where a claim is disallowed for the reason that it was barred by the statute of limitations it is nevertheless a provable debt, so far at least as the bankrupt's discharge therefrom is concerned.16 But this

tion in bankruptcy of said association. In re Wyoming Valley Co-operative Association (D. C., Pa.), 28 Am. B. R. 462, 198 Fed. 436.

8. In re Rachel Goodwin, 8 N. B. R. 380, Fed. Cas. 5,540, 5 Biss. 401.

9. See this section, post, subtitle "Ultra vires contracts."

10. See this section, post, subtitle "Illegal contracts."

11. See Hill v. Levy (D. C., Va.), 3 Am. B. R. 374, and note, 98 Fed. 94. 12. Capell v. Trinity Church, 11 N. B. R. 536, Fed. Cas. 2,392.

13. See In re Jordan, 2 Fed. 319.
14. Note that the words "provable

15. Lesser v. Gray, 236 U. S. 70, 34 Am. B. R. 8, 59 L. Ed. 471, 35 Sup. Ct. 227.

16. Hargadine, etc., Dry Goods Co. v. Hudson (C. C. A., 8th Cir.), 10 Am. B. R. 225, 122 Fed. 232, affg. 6 Am. B. R. 657, 111 Fed. 361. Where a firm gives a promissory note to secure an existing indebtedness of one of the members, the statute of limitation is not a bar to the provability of the note, although the original indebtedness was so barred. Dacovich v. Schley (C. C. A., 5th Cir.), 13 Am. B. R. 752, 134 Fed. 72.

4

does not affect the question of the "provability" of a debt for the purpose of determining whether or not it should be paid out of the estate. It would seem better, therefore, to retain the distinction between the "provability" and "allowability" of a debt; the latter term including the former and requiring in addition thereto a determination as to whether the debt is a valid claim against the estate." d. Time of existence of debt.-The rule is that the provability of a claim depends upon its status at the time the petition is filed.18 If the existence of a debt or claim, liquidated or unliquidated, is contingent at the time of the filing of the petition it is not provable,"