§ 205. Time of proving; Limitations. Debts may be proved at any time when there are assets to be divided; for, though the Statute of Limitations continues to run against the personal demand upon the bankrupt, all proofs of debt relate back to the beginning of the proceedings, and the assignees are trustees from thence forever, and there is no limitation unless expressly provided by the statute itself. In a case in the District of Massachusetts, debts were proved under the act of 1841 after thirty-eight years from the apparent close of the proceedings, fresh assets having come in, which furnished the occasion, but was not the cause of the right. In an administration suit in England orders were made ninety years after the declaration of the first dividend.2 And in several of the cases cited below twenty or more years had passed.3 It was held in one case that when the parties had agreed to a limitation, as is not uncommon in contracts of insurance, the debt must be offered for proof before the expiration of that time, though the debtor had before then become bankrupt.4 But a very able and sound opinion of the learned judge who decided that case seems inconsistent with it.5 A court may decide that a debt which is not presented until most of the parties are dead, and cannot be fully supported by proof, ought not to be admitted; but the decision will be one. of fact, namely, that the existence of the debt is not made out.6 1 [Under the act of 1898 proof must be made within a year of the adjudication. 57 n, infra, § 520.] 2 Ashley v. Ashley, 4 Ch. D. 757. 3 Ex parte Ross, 2 Gl. & J. 46, 330; Sterndale v. Hankinson, 1 Sim. 393; Ex parte Johnson, 3 De G. M. & G. 218; Ex parte Peake, L. R. 2 Ch. 453; Joint Stock Co.'s Claim, L. R. 7 Ch. 646; Gest v. Heiskill, 5 Rawle, 134; Shoenberger v. Adams, 4 Watts, 430; Ostrom v. Curtis, 1 Cush. 461; Minot v. Thacher, 7 Met. 348; Re Eldridge, 12 N. B. R. 540, Fed. Cas. No. 4331; Re Robinson, 2 Lowell, 326, Fed. Cas. No. 11,941; West v. Creditors, 1 La. An. 365; Von Sachs v. Kretz, 19 N. B. R. 83; Vance v. Sanders, 8 Baxter, 294; Ex parte Boddam, 2 De G. F. & J. 625; Re Leiman, 32 Md. 225; Ohio L. & T. Co. v. Winn, 4 Md. Ch. 253; Re Wright, 6 Biss. 317, Fed. Cas. No. 18,068; Ex parte Peake, L. R. 2 Ch. 453; Re McKinney, 15 Fed. Rep. 912; Re Graves, 9 Fed. Rep. 816; McCandless' Estate, 61 Penn. St. 9. 4 Re Firemen's Ins. Co., 8 N. B. R. 123, Fed. Cas. No. 4796. Re Wright, 6 Biss. 317, Fed. Cas. No. 18,068. • See Ex parte Anderson, 14 Q. B. D. 606; Ex parte Sanderson, 8 De G. M. In one case, where no debts had been proved, and the proceedings had been closed for some years, an able judge sustained a demurrer to a bill by the assignees to recover property fraudulently concealed from them; he held that they represented the creditors, and that it would be too late to make proof.1 But since the creditors may have neglected to prove simply because there were no assets, and since they could undoubtedly prove if their previous failures to do so were the only objection, the case should have been determined upon its merits, not upon the Statute of Limitations. When the statute fixes a time within which debts are to be proved, as in settling estates of persons deceased and in winding up corporations, but permits some discretion to the courts in extending the time, great liberality is always exercised in this respect.2 Dividend. § 206. Laches in proving, as affecting the Right to a Declared Delay to prove may amount to such laches that the court will not open the case to let the creditor in to share a dividend declared but not paid. Even in this the courts are very liberal if the dividend is likely to be final, and if any excuse can be given for the delay will admit the creditor, if he will pay all the necessary expenses.* Though it is never At the first meeting, § 207. Time of Proof; First Meeting. too late to prove,5 it may be too early. creditors whose debts are contingent cannot, in general, prove, because there is no opportunity to assess their value, and no assignee with whom to agree upon it. For similar reasons, creditors who hold security are not allowed to prove by our practice any part of the secured debt. & G. 849 Morris' Case, Crabbe, 70, Fed. Cas. No. 9825. The cases of Ex parte Peachy, 1 Atk. 111, and Ex parte Mather, 3 Ves. 373, were considered obsolete in 1826. Eden, 2d ed., p. 100. Kean v. Lowe, 147 Ill. 564; Budd v. 8 Ex parte Brees, 3 Dea. & Ch. 283. 4 Ex parte Day, Mont. 212; Re Graham, 2 Dea. & Ch. 554; Ex parte Colton, 3 Dea. & Ch. 194; Strike's 1 Nicholas v. Murray, 5 Sawyer, 320, Case, 1 Bland, 57, 86; Hammond v. Fed. Cas. No. 10,223. 2 Walker . Lyman, 6 Pick. 458; Bufford v. Johnson, 34 N. H. 489. See Hammond, 2 Bland, 306, 364; Ohio In England, the practice was prescribed, and is now sanctioned by statute, to permit a secured creditor to value his security and vote upon the deficiency; but he takes the risk of the valuation. If the property sells for more, he must pay the difference to the assignees, and if for less, he cannot increase his proof. This practice must have the effect to prevent secured creditors from proving at the first meeting, excepting where the choice of assignees is very important. If a secured creditor surrenders his security, or a preferred creditor his preference, he may vote at the first meeting, according to the preponderance of authority." § 208. Suspending Proof. The commissioner, or register, or court have always had power to suspend the proof of a doubtful debt until after the choice of the assignees. This practice has been adopted by some statutes.* The power should be exercised cautiously, with due regard to the importance of the issue and all the circumstances of the case.5 As, however, all proofs are subject to revision, and as the right to vote may be essential to the interests of a creditor, the practice has been very liberal to admit proofs for such amount as the creditors will positively agree to, leaving the precise sum to be adjusted afterwards." § 209. Discretionary with Court of Bankruptcy to await Decision of another Court. While it is within the power of the court of bankruptcy to delay or suspend a proof until the claim can be passed upon by a court of law or equity, this action is discretionary. A very instructive case upon this subject arose in Scotland, 1 [Under the act of 1898 a secured creditor may vote on the excess of his debt over the security as determined by the court. § 57 e, infra, § 520.] 2 Robson, 7th ed., pp. 412, 357; Re High, 3 N. B. R. 191, Fed. Cas. No. 6473. 3 Re Orne, 1 N. B. R. 57, Fed. Cas. No. 10,581; Re Lake Superior Canal Co., 7 N. B. R. 376, Fed. Cas. No. 7997. 4 Act of 1867, § 23; 14 Stat. 528; R. S. § 5083; Act of 1898, § 57 d, infra, § 520. Re Lake Superior Iron Co., 7 N. B. R. 376, Fed. Cas. No. 7997; Re Bartusch, 9 N. B. R. 478, Fed. Cas. No. 1086: Re Jackson, 14 N. B. R. 449, Fed. Cas. No. 7123; Re Northern Iron Co., 14 N. B. R. 356, Fed. Cas. No. 10,322. 6 Ex parte Simpson, 1 Atk. 70; Ex parte Ruffle, L. R. 8 Ch. 997. Phosphate Sewage Company v. Molleson.1 There the petitioning company maintained that the bankrupts were very largely indebted to them by reason of a fraudulent concealment concerning property in a foreign country, which had been conveyed by the bankrupts and others to the company at its formation, a fraud not uncommon, and which would, undoubtedly, give rise to a provable debt. They were unable to prove the facts to the satisfaction of the trustee or of the court, and asked for a delay of the proceedings until they could establish their right under a bill in equity already pending in England. This delay the court refused; and the House of Lords sustained the refusal and the rejection of the debt,2 upon the necessity for economy and despatch in bankruptcy. The sequel of this case is equally interesting. After the courts of Scotland had rejected the proof upon the facts, the plaintiffs obtained a decree in the suit in England for substantially their whole debt; and this decree contained an authority to prove in Scotland, where the proceedings were still pending. But the courts of Scotland held that the former decree made the rejection res judicata, and refused the proof; and this decision was approved by the Lords. In this case neither despatch nor justice appears to have been attained. § 210. Objections to Proof; Equitable Defences. An objection to the proof of a debt is like a defence to an action upon it; and any objection, excepting that it has not matured, which could have been made in court, such as illegality, want of consideration, payment, etc., may be availed of against the proof; and anything which would be a good reply to the defence may be proved by the creditor." The administration being equitable, defences of an equitable character are admitted." The converse is not equally true. If a debt is illegal,- for instance, if it is void for usury under the provisions of a statute, courts of bankruptcy do not admit it for the amount 1 1 Court Sess. (4th Series) 840. 21 App. Cas. 780. Phosphate Sewage Co. v. Lawson, 5 Court Sess. (4th Series) 1125. 4 Phosphate Sewage Co. v. Molleson, 4 App. Cas. 801. Ex parte Smith, 1 Dea. & Ch. 267. actually lent, because, though a court of equity would not enjoin an action at law without payment of that amount, it will not actively assist a creditor to recover an illegal debt, melior conditio possidentis. But if the assignees come into equity to set aside the security for an usurious debt, the court may impose the condition that the debt shall be admitted to proof as unsecured.2 If money was advanced to the debtor, and the contract is not absolutely void, as, for instance, if it is only ultra vires, or even prohibited without a positive provision for confiscation, the courts will admit proof for money had and received. So if a note cannot be given in evidence for want of a stamp, the creditor may prove for the original consideration.3 A good illustration of the method in bankruptcy is found in Ex parte Boussmaker, where the debt of an alien enemy was offered for proof. As war only suspends the remedy, the proof was admitted; but the dividend was reserved until peace should be made. § 211. Debt barred by Time before the Bankruptcy, not provable. A debt barred by the Statute of Limitations of the country of the bankruptcy, if the bar is complete before the commencement of the proceedings, cannot be proved. This has been doubted by able writers and judges, on the ground that the Statute of Limitations has but a local operation compared with the discharge, and so the creditor may lose the chance of a recovery of his debt in some other forum. The point was first decided in England in Ex parte Dewdney, and is still the law there. It is sustained by a great weight of authority in this country. 1 Ex parte Thompson, 1 Atk. 125; Ex parte Skip, 2 Ves. Sr. 489; Benfield v. Solomons, 9 Ves. 77; Ex parte Gwyn, 2 Dea. & Ch. 12. 2 Belcher v. Vardon, 2 Coll. Ch. 162. 3 Atlas Bank v. Nahant Bank, 3 Met. 581; Re Cork & Yoghal R. R. Co., L. R. 4 Ch. 748. 4 13 Ves. 71. 5 15 Ves. 479. 6 Burke v. Jones, 2 Ves. & B. 275; Ex parte Roffey, 2 Rose, 245; Ex parte Topping, 4 De G. J. & S. 551; Davies v. Edwards, 7 Ex. 22; Re Clendinning, 9 Irish Ch. 284; Middleton v. Mucklow, 10 Bing. 401. 7 Re Cornwall, 9 Blatch. 114, Fed. Cas. No. 3250 (overruling Re Ray, 2 Ben. 53, Fed. Cas. No. 11,589, and Re Shepard, 1 N. B. R. 439, Fed. Cas. No. |