of the United States, of the state in which proceedings are pending, exists because Congress so enacts; and if Congress had not so enacted, or if it should afterwards enact otherwise, the preference would cease. (Six Penny Savings Bank et al. v. Estate of the Stuyvesant Bank, 10 N. B. R. 399; Fed. Cas. 12919.)

Under internal revenue laws.-A claim of the United States against bankrupts to recover the value of goods imported and entered contrary to law is a provable debt against the estate. (Barnes, Ass., v. United States, 12 N. B. R. 526; 21 Int. Rev. Rec. 212; 1 N. Y. Wkly. Dig. 177; Fed. Cas. 1023; In re Rosey, 8 N. B. R. 509; 6 Ben. 507; Fed. Cas. 12066.) And if a party purchases an inported article duty free, and is compelled to pay the duty in order to get possession of the article, he is entitled to be subrogated to the priority of the United States. (In re Kirkland, Chase & Co., 14 N. B. R. 139; 2 Hughes, 208; Fed. Cas. 7843.)

c. In the event of the confirmation of a composition being set aside, or a discharge revoked, the property acquired by the bankrupt in addition to his estate at the time the composition was confirmed or the adjudication was made shall be applied to the payment in full of the claims of creditors for property sold to him on credit, in good faith, while such composition or discharge was in force, and the residue, if any, shall be applied to the payment of the debts which were owing at the time of the adjudication.

Two classes of creditors arise where a confirmation of a composition is set aside or a discharge revoked, i, e, those whose claims accrued prior and those subsequent to the confirmation or discharge. The latter class, acting in good faith on the strength of the confirmation or discharge, give new credit to the debtor, and the purpose of this provision is to permit the application of the subsequently-acquired property, together with the estate at the time the composition was confirmed or the adjudication was made, to the payment in full of such claims to the exclusion of those antedating such confirmation or discharge. The residue of the estate, if any, after the payment of such claims, should be applied to the payment of the debts which accrued prior to the adjudication. The purpose of this provision is self-evident. It is only by placing this sanctity upon the adjudication that it will cause full faith and credit to be given it. It permits the transaction of business with persons who have been discharged or who have entered into a composition with creditors, without fear as to the title they may convey, and without fear of loss.

A composition may be set aside or a discharge revoked on the ground of fraud. (Secs. 13, 15.)

Sec. 65. Declaration and payment of dividends.-a. Dividends of an equal per centum shall be declared and paid on all allowed claims, except such as have priority or are secured.

[Act of 1867. SEC. 27... That all creditors whose debts are duly proved and allowed shall be entitled to share in the bankrupt's property and estate pro rata, without any priority or preference whatever, except that wages due from him to any operative, or clerk, or house servant, to an amount not exceeding fifty dollars, for labor performed within six months next preceding the adjudication of bankruptcy, shall be entitled to priority, and shall be first paid in full: Provided, That any debt proved by any person liable, as bail, surety, guarantor, or otherwise, for the bankrupt, shall not be paid to the person so proving the same until satisfactory evidence shall be produced of the payment of such debt by such person so liable, and the share to which such debt would be entitled may be paid into court, or otherwise held for the benefit of the party entitled thereto, as the court may direct.]

Referees are required to declare dividends and prepare and deliver to the trustees dividend sheets showing the dividends prepared and to whom payable (sec. 39-1), while the trustee must pay such dividends within ten days after having been declared. (Sec. 47-9.) The debts entitled to priority of payment are set forth under section 64, and liens, etc., given in good faith, under section 67. Whenever a claim shall have been reconsidered and rejected, in whole or in part, upon which a dividend has been paid, the trustee may recover from the creditor the amount of the dividend received upon the claim, if rejected in whole, or the proportional part thereof, if rejected only in part. (Sec. 57, L.)

Payment of dividends.-Perfect equality among creditors is the fundamental principle upon which the Bankrupt Act proceeds; anything that defeats that is a fraud upon the law. (In re Palmer, 14 N. B. R. 437; 2 Hughes, 177; Fed. Cas. 10678.) Upon making proof, all who had valid subsisting claims at the time the bankrupt proceedings commenced shall be permitted to participate in the fund so long as there is anything to distribute. (In re Maybin, 15 N. B. R. 468; Fed. Cas. 9337.) The holder of a note given by a firm and also by an individual member of the firm is entitled to receive dividends from the estates of both. (Emery et al. v. Canal National Bank, 7 N. B. R. 217; 3 Cliff. 507; 6 West. Jur. 515; 5 Amer. Law T. Rep. (U. S. Cts.) 419; Fed. Cas. 4446.) On objections by assignee to a foreign creditor claiming dividend on his debt without regard to the amount collected by a judgment and levy had against the bankrupt subsequent to the adjudication, held, that he must account to

assignee for such amourt, and could only have dividend on the original debt. (In re Bugbee, 9 N. B. R. 258; Fed. Cas. 2115.) The trustee of a bankrupt corporation, who as creditor has proved his debt against said corporation, cannot be deprived of his right to share in the dividends merely because he has rendered himself individually liable for the debts of said corporation. (Bristol, Ass., v. Sanford, 13 N. B. R. 78; 12 Blatchf. 841; Fed. Cas. 1893.) A creditor held certain notes indorsed by the bankrupt, upon which payments were made by the makers after the creditors had proved the notes against the estate of the bankrupt. Held, that such payments must be deducted from the sum on which a dividend could be demanded. (In re Weeks, 13 N. B. R. 263; 8 Ben. 265; Fed. Cas 17349.) A debt was proved against the estate of the bankrupts on a note made by them and indorsed. After proof was made, the indorsers paid a portion of the amount due and were released by the holder from further liability. Held, that the creditor should receive dividends on the whole amount, holding any excess of dividends in trust for the surety. (In re Ellerhorst & Co., 5 N. B. R. 144; 6 Amer. Law Rev. 162; Fed. Cas. 4381.)

Dividends not allowed.-If a creditor of a bankrupt include in his claim items which are valid, and also items which he knows to be illegal, supporting his claim for the entire amount by a false oath, he is not entitled to any dividends whatever on any part of his claim. (Marrett, Ass., v. Atterbury, 11 N. B. R. 225; 3 Dill. 444; 2 Cent. Law J. 11; Fed. Cas. 9102.) A firm filed a petition with a register, setting up that they had performed certain services for the bankrupt, for which services they held a note past due, and prayed that the assignee be directed to pay them out of the funds for dividend. They had not presented the claim either on or prior to the day appointed for the declaration of the dividend, and the court held that the fund could not be re-opened to pay such claim. (In re Smith, 15 N. B. R. 97; 1 Tex. Law J. 42; Fed. Cas. 12989.)

Payment suspended.-The assignee can withhold payment of dividend to creditor declared upon the net proceeds of firm property until recovery or final determination of suit brought by assignee against said creditor to recover amount due a member of said firm. (Atkinson v. Kellogg, 10 N. B. R. 535; 7 Chi. Leg. News, 9; Fed. Cas. 613.) A judgment from which an appeal is taken on writ of error before commencement of proceedings in bankruptcy is a provable debt; but no dividends will be paid to the judgment creditor until judgment on the writ of error. (In re Sheehan, 8 N. B. R. 315; Fed. Cas. 12737.) The assignee may withhold payment of a dividend on a particular claim where its declaration was unauthorized. (In re Herrick et al., 13 N. B. R. 312; Fed. Cas. 6420.) Where a dividend was ordered on a claim for professional services rendered the bankrupt, the court restrained the register and assignee from making or paying such dividend until further order, to enable those in

terested to apply to vacate the order for dividend. (In re New York Mail Steamship Co., 3 N. B. R. 73; Fed. Cas. 10212.)

Interest.- Interest on claims proved will be allowed from day of filing of petition when funds in hands of assignee are sufficient. (In re Hagan, 10 N. B. R. 383; 6 Ben. 407; Fed. Cas. 5898.) Proof of claim by C. was objected to by trustee, but upon re-examination was sustained. On motion for interest on dividend, held, that creditor was entitled to interest at rate allowed by laws of state. (In re Kitzinger et al., 19 N. B. R. 238; Fed. Cas. 7862.) If a surplus remain after the payment of all claims at the amount computed to be due on the date of adjudication, creditors may be allowed interest from the date of adjudication to the time of payment of dividends. (In re Bank of North Carolina, 12 N. B. R. 130; 1 N. Y. Weekly Dig. 127; Fed. Cas. 895; In re Town et al., 8 N. B. R. 40; Fed. Cas. 14112.)

Miscellaneous.-The distribution of the assets of a bankrupt cannot be interfered with by the process of a state court. (In re Bridgeman, 2 N. B. R. 84.) Any money remaining in the hands of the assignee after the payment in full of creditors who have proven their claims must be distributed among such creditors as are named in the bankrupt's list, although they have failed to make proof of their claims. (In re James, 2 N. B. R. 78; 1 Gaz. 78; Fed. Cas. 7175.) When but a single creditor proves his claim, he is entitled to be paid in full as far as the assets are sufficient for that purpose, and if there be any residue the same must be applied to the payment of such creditors as the bankrupt has acknowledged to hold valid claims. (In re Haynes, 2 N. B. R. 78; 1 Gaz. 78; Fed. Cas. 6269.) If an offer of composition is accepted, the payment is for the satisfaction of the debts, and not as a dividend from the estate in bankruptcy. (In re Lissberger, 18 N. B. R. 230; Fed. Cas. 8384.) Appeal having been taken from order allowing creditor interest upon unpaid dividends, creditor procured order directing trustee to deposit dividend, interest and costs. Held, that such deposit was not a setting aside of money as constituting creditor's dividend. (In re Kitzinger et al., 19 N. B. R. 307; Fed. Cas. 7863.) A debtor gave a creditor his accommodation notes for an amount greater than the debt, and the notes were discounted and afterwards proved against the debtor's estate in bankruptcy. Held, that an assignee could set off against the dividend due the creditor the dividend paid on the notes and recover from the creditor the balance of the dividend paid, and that in case of a composition the same right obtained. (In re Purcell, 18 N. B. R. 447; Fed. Cas. 11470.)

b. The first dividend shall be declared within thirty days after the adjudication, if the money of the estate in excess of the amount necessary to pay the debts which have priority and such claims as have not been, but probably will be,

allowed equals five per centum or more of such allowed claims. Dividends subsequent to the first shall be declared upon like terms as the first and as often as the amount shall equal ten per centum or more and upon closing the estate. Dividends may be declared oftener and in smaller proportions if the judge shall so order.

[Act of 1867. SEC. 28. The court shall thereupon [on the discharge of the assignee] order a dividend of the estate and effects, or of such part thereof as it sees fit, among such of the creditors as have proved their claims, in proportion to the respective amount of their said debts.]

c. The rights of creditors who have received dividends, or in whose favor final dividends have been declared, shall not be affected by the proof and allowance of claims subsequent to the date of such payment or declarations of dividends; but the creditors proving and securing the allowance of such claims shall be paid dividends equal in amount to those already received by the other creditors if the estate equals so much before such other creditors are paid any further dividends.

[Act of 1867. SEC. 28. No dividend already declared shall be disturbed by reason of debts being subsequently proved, but the creditors proving such debts shall be entitled to a dividend equal to those already received by the other creditors before any further payment is made to the latter.]

d. Whenever a person shall have been adjudged a bankrupt by a court without the United States and also by a court of bankruptcy, creditors residing within the United States shall first be paid a dividend equal to that received in the court without the United States by other creditors before creditors who have received a dividend in such courts shall be paid any amounts.

e. A claimant shall not be entitled to collect from a bankrupt estate any greater amount than shall accrue pursuant to the provisions of this Act.