j. Debts owing to the United States, a State, a county, a district, or a municipality as a penalty or forfeiture shall not be allowed, except for the amount of the pecuniary loss sustained by the act, transaction, or proceeding out of which the penalty or forfeiture arose, with reasonable and actual costs occasioned thereby and such interest as may have accrued thereon according to law.

Debts due the United States or a state. - It was held under the act of 1867 that the United States was entitled to priority of payment without regard to the form of the indebtedness, and was entitled to priority although it does not prove its claim. It need not exhaust the collaterals held by it before claiming priority of payment out of a bankrupt's estate. It may file a bill in a circuit court to obtain payment out of a trust fund held by a trustee, appointed in proceedings in bankruptcy. (Lewis, Trustee, v. United States, 14 N. B. R. 64; 92 U. S. 618.) Its claim against a bankrupt to recover as a penalty 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. Weekly Dig. 177; Fed. Cas. 1023.) It was also held that a state need not prove its claim in bankruptcy to recover taxes due it on property of the bankrupt, and the bankrupt law cannot compel proof of such claim, nor sell the property so subject free from the tax lien. (Stokes v. State of Georgia, 9 N. B. R. 191.) The state is the creditor where the bond is payable to the people of the state, though the moneys collected are to be turned into the treasury of a city thereof. (In re Chamberlain, 17 N. B. R. 50; 9 Ben. 149; Fed. Cas. 2580.) Where a bankrupt employs convicts from a state under a contract by the terms of which the state is to keep them under good discipline and at diligent labor, the damage sustained by the failure of the state to perform the stipulations should be deducted from the contract price in estimating the amount due the state. (In re Southwestern Car Co., 19 N. B. R. 404; Fed. Cas. 13192)

The warden of a state prison deposited money, coming into his hands as warden, in a bank upon the order of the directors, the account being kept in the name of "H. N. Smith, warden." The bank was put into bankruptcy, and the question arose as to whether the state could claim the money and so have priority over other creditors. The district court held that the state could claim, but the circuit court reversed that decision and held that the warden could prove his account as a general creditor. (In re Corn Exchange Bank, 15 N. B. R. 431; 7 Biss. 400; 9 Chi. Leg. News, 254; 4 Law & Eq. Rep. 29: 15 Alb. Law J. 351; Fed. Cas. 3242; reversing In re Corn Exchange Bank, 15 N. B. R. 216; Fed. Cas. 32-43.)

k. Claims which have been allowed may be reconsidered for cause and reallowed or rejected in whole or in part, according to the equities of the case, before but not after the estate has been closed.

Estates of bankrupts are to be closed by the court wherever it appears that they have been fully administered. (Sec. 2-8.) Claims shall not be proved against a bankrupt estate subsequent to one year after the adjudication; or, if they are liquidated by litigation, and the final judgment therein is rendered within thirty days before or after the expiration of such time, then within sixty days after the rendition of such judgment. (Sec. 57, n.) The right 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, etc. (Sec. 65, c.) Whenever a composition has been confirmed or discharge granted, and it is made to appear that fraud was practiced in procuring the same, it will be revoked or set aside. (Secs. 13, 15.)

The reconsideration of allowed claims. - The moving party is entitled to open and close on the hearing of a motion to expunge a proof of claim. Where papers annexed to an answer to a petition to expunge proof are sought to be used as evidence, they must be proved in the usual manner, but the answer to the petition cannot be used as evidence. (Canby, Ass., v. McLear, 13 N. B. R. 22; Fed. Cas. 2378.) Where proof of a claim is objected to by the assignee, but upon re-examination is sustained, the creditor will, upon motion, be held entitled to interest at the rate allowed by the laws of the state. (In re Kitzinger et al., 19 Ν. Β. R. 238; Fed. Cas. 862.) The proper mode of presenting to the court the question of the right of secured creditors, who have offered prima facie proofs of debt, to participate in a dividend and vote at a creditors' meeting, is by motion of the assignee to expunge the proofs of debt. (In re Jaycox and Green, 7 N. B. R. 303; 7 West. Jur. 18; Fed. Cas. 7240.) When he files a petition for a re-examination of a proof, the creditor need only offer himself for examination, and the assignee must introduce such opposing proof as he may have. (In re Robinson, 14 N. B. R. 130; 8 Ben. 406; Fed. Cas. 11938.) Proof of a claim will not be expunged on motion of the assignee on the ground that a trustee of a bankrupt corporation has made himself liable for its debts by a false report, as the assignee does not represent the other creditors in their right to proceed against the trustee, and cannot exclude him from a share in the assets. (Bristol, Ass., v. Sanford, 13 N. B. R. 78; 12 Blatch. 341; Fed. Cas. 1893.)

The decision of a register allowing the claim of a creditor for principal and usurious interest may be re-examined, as the creditor forfeits all usurious interest, and the assignee may apply the same towards the extinguishment of the principal debt. (In re Prescott, 9 N. B. R. 385; 5 Biss. 523; 6 Chi. Leg. News, 151; Fed. Cas. 11389.)

Where a mortgage creditor with leave of the court forecloses in a state court and proves his claim for the deficiency, the claim may be re-examined, since he has no right to prove the claim, the sale in the state court not being the proper mode for ascertaining the value of the security. (In re Herrick et al., 17 N. B. R. 335; Fed. Cas. 6421.)

Where, less than four months before the filing of the petition, the debtor assigns securities to cover an indebtedness, and suit is brought by the assignee to recover them, and the defendant then surrenders the entire amount to the assignee and proves his debt, the proof will, upon re-examination, be allowed to stand. (In re Riorden, 14 N. B. R. 332; Fed. Cas. 11852.)

Where it appears that a bankrupt has paid more usury than principal, an order authorizing the assignee to surrender to the creditor certain securities on a release of the debt secured thereby, granted ex parte on application by the assignee, who files an affidavit setting forth that the debt is due and amounts to more than the value of the securities, will be vacated on motion. (In re Hoole, 19 N. B. R. 477; Fed. Cas. 6673.)

1. 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.

Provision for the declaration and payment of dividends is made in section 65.

m. The claim of any estate which is being administered in bankruptcy against any like estate may be proved by the trustee and allowed by the court in the same manner and upon like terms as the claims of other creditors.

n. Claims shall not be proved against a bankrupt estate subsequent to one year after the adjudication; or if they are liquidated by litigation and the final judgment therein is rendered within thirty days before or after the expiration of such time, then within sixty days after the rendition of such judgment: Provided, That the right of infants and insane persons without guardians, without notice of the proceedings, may continue six months longer.

Courts of bankruptcy may re-open estates whenever it appears they were closed before being fully administered. (Sec. 2-8.) Dividends remaining unclaimed for one year must be distributed to the creditors whose claims have been allowed but not paid in full, and after such claims have been paid in full the balance must be paid to the bankrupt. If, however, the unclaimed dividends belong to minors, such minors have one year after arriving at majority to claim them. (Sec. 66, b.)

The period within which a claim may be proved. The statute of limitations ceases to run against the creditor of a bankrupt at the commencement of the proceedings in bankruptcy, and if not barred at that time his claim may be proved afterwards, though at the time of proof it would be otherwise barred. (In re Eldridge & Co., 12 N. B. R. 540; 2 Hughes, 256; 1 N. Y. Weekly Dig. 243; Fed. Cas. 4331. For contra, see Nicholas, Ass., v. Murray et al., 18 N. B. R. 469; Fed. Cas. 10223.) But a debt barred by the statute of limitations of the state in which the proceedings in bankruptcy are pending is not provable against the estate of the bankrupt, and cannot be reckoned in computing the number necessary to join in an involuntary petition in bankruptcy (In re Noesen, 12 N. B. R. 422; 6 Biss. 443; 7 Chi. Leg. News, 419; 1 N. Y. Weekly Dig. 125; 2 Cent. Law J. 570; Fed. Cas. 10288; In re Doty, 16 N. B. R. 202; 10 Chi. Leg. News, 1; 25 Pittsb. Leg. J. 24; Fed. Cas. 4017), if objected to by the bankrupt or any creditor. (In re Kingsley, 1 N. B. R. 52; 1 Lowell, 216; 15 Pittsb. Leg. J. 235; Fed. Cas. 7819.) Where property is held for thirty years without a payment to a third party in trust for others, as directed by a will, there is only an implied or resulting trust, and it is barred by the statute of limitations. (In re O'Neale, 6 N. B. R. 425; Fed. Cas. 10512.)

Where a note payable in one year is, at the end of one year, taken up and a new note for the same amount and time given in exchange, and this process is repeated year after year, the debt will be deemed to have been contracted on the date of the last note. (In re Schumpert, 8 Ν. Β. R. 415; Fed. Cas. 12491.)

A debt due from a bankrupt under an agreement made on the surrender of a lease for a term, that he would pay any deficiency arising on a reletting by the landlord, will be considered as contracted at the time of such agreement, and not at the time a judgment was obtained therefor. (In re Swift, 7 N. B. R. 591; 6 Ben. 324; Fed. Cas. 13693.)

A bankrupt indorser cannot be held on a note payable on demand, when the same is not presented for payment for four years. (In re Crawford, 5 N. B. R. 301; Fed. Cas. 3364)

Sec. 58. Notices to creditors. - a. Creditors shall have at least ten days' notice by mail, to their respective addresses as they appear in the list of creditors of the bankrupt, or as afterwards filed with the papers in the case by the creditors, unless they waive notice in writing, of (1) all examinations of the bankrupt; (2) all hearings upon applications for the confirmation of compositions or the discharge of bankrupts; (3) all meetings of creditors; (4) all proposed sales of property; (5) the declaration and time of payment of dividends; (6) the filing of the final accounts of the trustee, and the time when and the place where they will be examined and passed upon; (7) the proposed compromise of any controversy, and (8) the proposed dismissal of the proceedings.

or

[Act of 1867. SEC. 11. The judge register shall issue a warrant to be signed by such judge or register, directed to the marshal of said district, authorizing him forthwith, as messenger, to publish notices in such newspapers, as the warrant specifies; to serve written or printed notice, by mail or personally, on all creditors upon the schedule filed with the debtor's petition, or whose names may be given to him in addition by the debtor, and to give such personal or other notice to any persons concerned as the warrant specifies, which notice shall state:

First. That a warrant in bankruptcy has been issued against the estate of the debtor.

Second. That the payment of any debts and the delivery of any property belonging to such debtor to him or for his use, and the transfer of any property by him, are forbidden by law.

Third. That a meeting of the creditors of the debtor, giving the names, residences, and amounts, so far as known, to prove their debts and choose one or more assignees of his estate, will be held at a court of bankruptcy, to be holden at a time and place designated in the warrant, not less than ten nor more than ninety days after the issuing of the same. SEC. 17. The assignee shall give written notice to all known creditors, by mail or otherwise, of all dividends, and such notice of meetings, after the first, as may be ordered by the court.

for

SEC. 27. In case a dividend is ordered, the register shall, within ten days after such meeting, ward by mail to every creditor a statement of the dividend to which he is entitled.

SEC. 28. Preparatory to the final dividend, the assignee shall submit his account to the court and file the same, and give notice to the creditors of such filing, and shall also give notice that he will apply for a settlement of his accons and for a discharge from all liability as as

Signee.