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was called for; clause b fulfills this function and would have to receive a strained interpretation in order that it should include claims arising purely ex delicto. Such claims might easily have been mentioned if intended to be included. Upon every consideration we are clear that claims based upon a mere tort are not provable. Where the tortious act constitutes at the same time a breach of contract a different question may be raised, with which we have no present concern; and where, by means of the tort, the tort feasor obtains something of value, for which an equivalent price ought to be paid, even if the tort as such, be forgiven, there may be a claim provable quasi ex contractu.

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(Note: Torts reduced to judgment prior to bankruptcy are provable; and also dischargeable unless the injury was wilful or malicious.)

§ 861. (Bankruptcy, Sec. 71.) Fines.

(Fines are not provable.)

B. Proof and Allowance of Claims.

§ 862. How claims proved.

§ 863. Allowance of claims.

§ 862. (Bankruptcy, Sec. 52.)

How claims proved.

(Note: Claims in bankruptcy are proved by filing a sworn statement of the claim upon forms established by the bankruptcy rules. The matter in practice is of rather informal character. Such claim may be objected to by any party in interest, and then a trial is had upon the merits.)

§ 863. (Bankruptcy, Sec. 73.)

Allowance of claims.

(Note: The allowance of a claim is an order entered judicially recognizing the claim, after proof, by which it becomes entitled to dividends.)

C. Secured and Lien Claims.

§ 864. In general.

§ 865. The standing of a secured creditor. § 866. Other lien claims.

§§ 864, 865. (Bankruptcy, Secs. 74, 75.) In general— secured creditors.

(Note: It has been seen in another connection that bankruptcy proceedings do not deprive a creditor of the advantage of his security, unless received by way of preference within the four months period. Security is taken by creditors to provide against possible bankruptcy. So a creditor who has a lien given by the general law which elevates him above the plane of a general creditor is not deprived thereof unless it is a lien secured through judicial proceedings within the four months prior to bankruptcy, for to allow it in the latter case would be to permit a general creditor to get an advantage merely by taking judgment, and thereby overcome that equality of standing among general creditors which the bankruptcy law contemplates.

A secured creditor may surrender his security and come in as a general creditor. Obviously this would be unusual. A secured creditor is a general creditor and to be treated as such to the extent that his claim exceeds his security.

The act provides: (Sec. 57 e) "claims of secured creditors and those who have priority may be allowed to enable such creditors to participate in the proceedings at creditors' meetings held prior to the determination of the value of their securities or priorities, but shall be allowed for such sums only as to the court seem to be owing over and above the value of their securities and priorities."

(Sec. 57 h) "The value of securities held by secured creditors shall be determined by converting the same into money according to the terms of the agreement pursuant to which such securities were delivered to such creditors or by such creditors and the trustee by agreement, arbitration, compromise or liti gation, as the court may direct, and the amount of such value shall be credited upon such claims and a dividend shall be paid only on the unpaid balance.')

§ 866. (Bankruptcy, Sec. 76.) Other lien claims.

(Note: The law may allow certain classes of creditors liens upon the debtor's property which places them at an advantage over other general creditors. Liens allowed by law and not arising out of judicial proceedings are not dissolved and liens

arising out of judicial proceedings are not dissolved if the lien is older than four months when the petition is filed.)

D. Claims Having Priority.

§ 867. How a claim having priority differs from a secured claim. § 868. What claims have priority.

§ 867. (Bankruptcy, Sec. 77.) How a claim having priority differs from a secured claim.

(Note: What is the difference between

(1) A creditor having security;

(2) A creditor having a lien allowed by law;
(3) A creditor who has been preferred;
(4) A creditor having priority?

We may answer by an illustration:

Debtor X goes into bankruptcy on July 15. Creditor No. 1 has sold him goods on open account and received no payment. He is a general creditor without security, without preference and without priority.

Creditor No. 2 has sold X a cash register prior to bankruptcy and taken back a chattel mortgage which he duly records; He is a creditor having security of whose advantage the bankruptcy proceedings will not deprive him.

Creditor No. 3 has prior to bankruptcy sold and delivered to X material for a building on X's real estate. The law of the state gives Creditor No. 3, a mechanic's lien upon the real estate benefitted. The practical result is much the same as if the creditor had a mortgage upon such real estate, and the bankruptcy proceedings do not deprive him of the advantage thereof.

In

Creditor No. 4 has prior to bankruptcy sold X goods on credit and within four months prior to the filing of the bankruptcy petition X pays Creditor No. 4 his claim, the creditor knowing or having reason to know that a preference was intended. order to preserve equality of distribution among creditors of the same class, the law provides that this creditor must surrender his preference.

Creditor No. 5 is a workman to whom X when he goes into bankruptcy owes $200; this creditor has no lien on any assets, and is a general creditor; but before other general creditors are entitled to any dividend X is entitled to payment in full of

his claim. However, if there are only enough assets to pay costs of administration, they are to be paid in full before Creditor No. 5 is entitled to anything for they are first in order of priority.)

§ 868. (Bankruptcy, Sec. 78.) What claims have priority.

Case 821. Bankruptcy Law, Sec. 64.

Sec. 64. Debts Which Have Priority.-a. The court shall order the trustee to pay all taxes legally due and owing by the bankrupt to the United States, state, county, district, or municipality in advance of the payment of dividends to creditors, and upon filing the receipts of the proper public officers for such payment he shall be credited with the amount thereof, and in case any question arises as to the amount or legality of any such tax the same shall be heard and determined by the court.

b. The debts to have priority, except as herein provided, and to be paid in full out of bankrupt estates, and the order of payment shall be

(1) The actual and necessary cost of preserving the estate subsequent to filing the petition;

(2) The filing fees paid by creditors in involuntary cases, and, where property of the bankrupt, transferred or concealed by him either before or after the filing of the petition, shall have been recovered for the benefit of the estate of the bankrupt by the efforts and at the expense of one or more creditors, the reasonable expenses of such recovery.

(3) The cost of administration, including the fees and mileage payable to witnesses as now or hereafter provided by the laws of the United States, and one reasonable attorney's fee, for the professional services actually rendered, irrespective of the number of attorneys employed, to the petitioning creditors in involuntary cases, to the bankrupt in involuntary cases while performing the duties herein prescribed, and to the bankrupt in voluntary cases, as the court may allow;

(4) Wages due to workmen, clerks, traveling or city

salesmen, or servants which have been earned within three months before the date of commencement of proceedings, not to exceed three hundred dollars to each claimant.

(5) Debts owing to any person who by the laws of the States or the United States is entitled to priority.

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.

Case 822. In re Bonk, In re Shank, 270 Federal Reporter, 657 (D. C., Mich.).

Facts: This appeal is to review an order denying priority to a claim alleged to have been earned as wages during the three months just prior to filing the petition.

TUTTLE, D. J.:

*

From the testimony on the hearing before the referee it appeared that the claimant, pursuant to his contract with the bankrupt, just quoted, took charge of the drug store and managed it for the bankrupt, purchasing the merchandise for the store and paying the rent and the other expenses in connection with the operation of such store, including the salary of a pharmacist who was employed there while claimant was in charge, and who in addition to his other duties had charge of the cash register and kept all the records showing the receipts and expenditures of the business. It does not appear that claimant rendered services in any other capacity than as manager of the store, operating the same for the owner, but exercising his own discretion in the performance of his duties. His claim for wages is based, not on a quantum meruit for work and labor performed but on the contract under

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