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17. Preferences to bankrupt's attorney; subs. d.-The services referred to in subdivision d of section 60 are those "to be rendered," which are paid for in advance "in contemplation of the filing of a petition by or against" the bankrupt. The compensation for these services depends both as to payment and amount on the acts of the parties, and what the statute does is to recognize the validity of the payment, but subjects the reasonableness of the amount to the supervision of the court.52 The attorney for the bankrupt is entitled to compensation for his services out of the estate.53 The law gives him the option, either of collecting his compensation in advance or of asking its allowance, as entitled to priority, under section 64b(3); with, however, this exception, that, if he elects to pursue the former method, the court has the power to inquire into the payment, and the trustee to recover any excess for the benefit of the estate. This re-examination has been held merely a part of the proceeding and therefore not affected by the now abrogated doctrine that suits to recover preferences must be brought in the State courts.54 A suit to recover a preference under this subdivision will rarely be necessary, although an order to restore made in a summary proceeding, if not obeyed, is perhaps not now a foundation for a proceeding in contempt.55 Cases arising under this subsection are cited in the note below.56

52. Pratt v. Bothe, 12 Am. B. R. 529, 130 Fed. 670; Furth v. Stahl, 10 Am. B. R. 442, 205 Pa. St. 439.

53. Bankr. Act, 1898, section 62. 54. In re Habegger, 15 Am. B. R. 198, 71 C. C. A. 607, 139 Fed. 123; In re Lewin, 4 Am, B. R. 632.

55. Comingor v. Louisville Trust Co., 184 U. S. 18, 7 Am. B. R. 421.

Compare In re Sims, Fed. Cas. No. 12,888.

56. In re Corbett, 5 Am. B. R. 224, 104 Fed. 872; In re Lewin, 4 Am. B. R. 632; In re Kross, 3 Am. B. R. 187. 96 Fed. 816; In re Tollett, 2 N. B. N. Rep. 1096; In re Goodwin, 2 N. B. N. Rep. 445.

CHAPTER XXIV.

POWERS AND DUTIES OF TRUSTEES AS TO PROPERTY TRANSFERRED IN FRAUD OF CREDITORS.

Section 1. Title to property-Statutory provision.

2. Scope of section.

3. When title vests. Subs. a.

4. Nature of trustee's title in general.

5. Property transferred in fraud of creditors.

6. Effect of a general assignment.

7. Property which might have been transferred or levied upon.

8. Remainders and interests in trust.

9. Dower and curtesy rights.

10. Licenses, franchises, and personal privileges.

11. Life insurance policies.

12. Property sold to the bankrupt on condition.

13. Property affected by fraudulent representations.

14. Reclamation proceedings.

15. Rights of action.

16. Burdensome property.

17. Exempt property.

18. Exemptions in property fraudulently transferred or concealed.

19. Transfers fraudulent under State laws may be avoided by trustee.

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27. Amendment of 1903.

28. Summary jurisdiction.

29. Effect of auxiliary remedies.

30. Jurisdiction of State courts.

31. Suits by and against bankrupt-Statutory provision.

32. Suits by trustees generally.

33. Stays of suits begun after filing of petition.

34. Stays of suits against bankrupt.

35. Of suits or proceedings in rem.

36. To enforce a lien.

37. General assignments.

38. Of suits or proceedings in personam.

Section 39. Practice.

40. Papers and procedure.

41. Duration of stays.

42. Continuance of suits-Where bankrupt is defendant.

43. Where bankrupt is plaintiff.

44. Practice.

45. Limitation on suits by trustee and when it begins to run.

Section 1. Title to property; statutory provision.-The Bankruptcy Act of 1898 provides as follows:

§ 70. Title to property.—(a) The trustee of the estate of a bankrupt, upon his appointment and qualification, and his successor or successors, if he shall have one or more, upon his or their appointment and qualification, shall in turn be vested by operation of law with the title of the bankrupt, as of the date he was adjudged a bankrupt, except in so far as it is to property which is exempt, to all (1) documents relating to his property; (2) interests in patents, patent rights, copyrights, and trade-marks; (3) powers which he might have exercised for his own benefit, but not those which he might have exercised for some other person; (4) property transferred by him in fraud of his creditors; (5) property which prior to the filing of the petition he could by any means have transferred or which might have been levied upon and sold under judicial process against him: Provided, That when any bankrupt shall have any insurance policy which has a cash surrender value payable to himself, his estate, or personal representatives, he may, within thirty days after the cash surrender value has been ascertained and stated to the trustee by the company issuing the same, pay or secure to the trustee the sum so ascertained and stated, and continue to hold, own, and carry such policy free from the claims of the creditors participating in the distribution of his estate under the bankruptcy proceedings, otherwise the policy shall pass to the trustee as assets; and (6) rights of action arising upon contracts or from the unlawful taking or detention of, or injury to, his property.

(b) All real and personal property belonging to bankrupt estates shall be appraised by three disinterested appraisers; they shall be appointed by, and report to, the court. Real and personal prop

erty shall, when practicable, be sold subject to the approval of the court; it shall not be sold otherwise than subject to the approval of the court for less than seventy-five per centum of its appraised value.

(c) The title to property of a bankrupt estate which has been sold, as herein provided, shall be conveyed to the purchaser by the

trustee.

(d) Whenever a composition shall be set aside, or discharge revoked, the trustee shall, upon his appointment and qualification, be vested as herein provided with the title to all the property of the bankrupt as of the date of the final decree setting aside the composition or revoking the discharge.

(e) The trustee may avoid any transfer by the bankrupt of his property which any creditor of such bankrupt might have avoided, and may recover the property so transferred, or its value, from the person to whom it was transferred, unless he was a bona fide holder for value prior to the date of the adjudication. Such property may be recovered or its value collected from whoever may have received it, except a bona fide holder for value. For the purpose of such recovery any court of bankruptcy as hereinbefore defined, and any State court which would have had jurisdiction if bankruptcy had not intervened, shall have concurrent jurisdiction.* (f) Upon the confirmation of a composition offered by a bankrupt, the title to his property shall thereupon revest in him.

§ 2. Scope of section. This section of the Bankruptcy Law is chiefly important (a) for its provisions fixing what property of a bankrupt vests in his trustee and the time when it vests, and (b) as adopting as a part of the bankruptcy system the respective State statutes providing a remedy against fraudulent transfers. It also includes nearly all that is in the law relative to the method of selling a bankrupt's property, provides for the appointment and reports of appraisers and certain minor matters of practice, which have no relation to the subject of this work. The matters first named only will, therefore, be considered.

* This sentence was added by the

amendatory act of 1903.

1

§ 3. When title vests; subs. a.-Under the previous law, the trustee's title vested by relation as of the date of the commencement of the proceeding. This cast doubt on the validity of even bona fide transactions between petition filed and adjudication. The words "as of the date he was adjudicated a bankrupt " seem to have been inserted to meet this difficulty. They are not antagonistic to the words found later in subdivision (5). The former refer to the time of vesting; the latter to what vests.2 The filing of an involuntary petition does not, ipso facto, take from the alleged bankrupt his dominion over his property; while his disposition of his property may be invalidated and set aside under certain circumstances, such property remains under his control until the adjudication. The remedy of the petitioning creditors, in case this freedom to trade is abused, is by the appointment of a receiver under section 2(3)(15), or an appropriate proceeding under section 3e or section 69.3 It follows that, under the present law, the title remains in the bankrupt at least to the date of the adjudication; perhaps even to the date of the appointment of the trustee.* Prior to adjudication, in the absence of fraud, it may be transferred; but, being liable to be divested, no permanent lien can attach to it. When, however, the trustee is appointed, his title goes back by relation to the date of the commencement of the proceeding. The trustee takes no title to exempt property; the right

1. In re Rosenberg, Fed. Cas. No. 12.055; in re Wynne, Fed. Cas. No. 18.117; Markson v. Heaney, Fed. Cas. No. 9,098. See also cases cited under note 15, infra.

2. In re Elmira Steel Co., 5 Am. B. R. 484, 109 Fed. 456; In re Burka, 5 Am. B. R. 12, 104 Fed. 326; In re Pease, 4 Am. B. R. 578.

3. In re Laplum Condensed Milk Co., 16 Am. B. R. 729, 145 Fed. 1,013; American Trust Co. v. Wallis (C. C. A.), 11 Am. B. R. 360.

4. Though, perhaps, the better view is that, after adjudication, it is in custodia legis. Keegan v. King, 3

Am. B. R. 79, 96 Fed. 758; March v. Heaton, Fed. Cas. 9.061; In re Rosenberg, supra. See In re Duncan, 17 Am. B. R. 283, the property is in custodia legis, after the filing of the petition and before adjudication.

5. State Bank of Chicago v. Cox (C. C. A.), 16 Am. B. R. 32, 143 Fed. 91; In re Engle, 5 Am. B. R. 372, 105 Fed. 893. Compare In re Corbett, 5 Am. B. R. 224, 104 Fed. 872.

6. In re Appel, 4 Am. B. R. 722, 103 Fed. 931. See also In re Cramond. 17 Am. B. R. 22, the amount due to a bankrupt upon a paving contract with a city, when he files his

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