and paid on all allowed claims, except such as have priority or are secured.

"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: Provided, That the first dividend shall not include more than fifty per centum of the money of the estate in excess of the amount necessary to pay the debts which have priority and such claims as probably will be allowed: And provided further, That the final dividend shall not be declared within three months after the first dividend shall be declared.

"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.

"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 amount.

"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."

G. Compositions with Creditors.

§ 871. Composition may be offered by bankrupt.

§ 872. Conditions of the composition.

§ 873. When compositions set aside.

§§ 871, 872, 873. (Bankruptcy, Secs. 81, 82, 83.)
Compositions.

Case 826. Bankruptcy Act, Secs. 12, 13.

"Sec. 12. Compositions, When Confirmed.-a. A bankrupt may offer, either before or after adjudication, terms of composition to his creditors after, but not before, he has been examined in open court or at a meeting of his creditors, and has filed in court the schedule of his property and the list of his creditors required to be filed by bankrupts. In compositions before adjudication the bankrupt shall file the required schedules, and thereupon the court shall call a meeting of creditors for the allowance of claims, examination of the bankrupt, and preservation or conduct of estates, at which meeting the judge or referee shall preside; and action upon the petition for adjudication shall be delayed until it shall be determined whether such composition shall be confirmed.

"b. An application for the confirmation of a composition may be filed in the court of bankruptcy after, but not before, it has been accepted in writing by a majority in number of all creditors whose claims have been allowed, which number must represent a majority in amount of such claims, and the consideration to be paid by the bankrupt to his creditors, and the money necessary to pay all debts which have priority and the cost of the proceedings, have been deposited in such place as shall be designated by and subject to the order of the judge.

"c. A date and place, with reference to the convenience of the parties in interest, shall be fixed for the hearing upon each application for the confirmation of a composition, and such objection as may be made to its confirmation.

"d. The judge shall confirm a composition if satisfied that (1) it is for the best interests of the creditors: (2) the bankrupt has not been guilty of any of the acts or failed to perform any of the duties which would be a bar to his discharge; and (3) the offer and its acceptance are in good faith and have not been made or procured except as herein provided, or by any means, promises, or acts herein forbidden.

"e. Upon the confirmation of a composition, the consideration shall be distributed as the judge shall direct, and the case dismissed. Whenever a composition is not confirmed, the estate shall be administered in bankruptcy as herein provided.

"Sec. 13. Compositions, When Set Aside.-a. The judge may, upon the application of parties in interest filed at any time within six months after a composition has been confirmed, set the same aside and reinstate the case if it shall be made to appear upon a trial that fraud was practiced in the procuring of such compensation, and that the knowledge thereof has come to the petitioners since the confirmation of such composition."

H. Set-Offs.

§ 874. (Bankruptcy, Sec. 84.) Right to set-off.

Case 827.

Bankruptcy Law, Sec. 68.

"Sec. 68. Set-Offs and Counter-Claims.-a. In all cases of mutual debts or credits between the estate of a bankrupt and a creditor the account shall be stated and one debt be set off against the other, and the balance only shall be allowed or paid.

"b. A set-off or counter-claim shall not be allowed in favor of any debtor of the bankrupt which (1) is not provable against the estate; or (2) was purchased by or transferred to him after the filing of the petition, or within four months before such filing, with a view to such use and with knowledge or notice that such bankrupt was insolvent or had committed an act of bankruptcy."

Case 828. In re Potter & Slymus Co., 262 Federal Reports, 955 (C. C. A. 2nd Cir.).

HOUGH, C. J.:

It is quite true that set-off does work a preference; but while the Bankrupt Act itself creates preferences, it does not create, but recognizes set-offs (Studley v. Boylston Bank, 229 U. S. at 528, 33 Sup. Ct. 806, 57 L. Ed. 1313); indeed, a set-off may be described as a sort of lawful preference."

Case 829. New York County National Bank v. Massey.

Facts: Stege & Brother owed the N. Y. County National Bank $40,000 for money borrowed, and had at the time of bankruptcy $6,209.25 upon deposit. The bank proved its claim for the difference, being $33,750.25 (with adjustments for interest). The trustee moved to disallow and expunge from his list of claims the claim of the bank unless it surrendered the amount of the deposit. The referee denied the motion. Upon that point it comes to this court.

Held: A bank being a debtor to a depositor, and being also his creditor for moneys loaned, there is a case of "mutual debts or mutual credits," within the meaning of Sec. 68 B. A. And in the absence of fraud or collusion between the bank and the bankrupt, there is a right of set-off with right to prove the balance of the claim and receive dividends thereon; distinguishing this case from Pirie v. Chicago Title & Trust Co., 182 U. S. 438, which was a case of a payment by the bankrupt to a creditor, while this was a deposit, that is to say, a lending of money by the depositor to the bank, that being the nature of a bank deposit.

CHAPTER 110

DUTIES AND RIGHTS OF BANKRUPT

§ 875. Duties enumerated by act.

§ 876.

Duty to submit to examinations.

§ 877. Protection of bankrupt from arrest in civil cases.

§ 878. Detention of bankrupt.

§ 879. Offenses of bankrupt created by bankruptcy law. § 880. The bankrupt's exemptions.

§ 875. (Bankruptcy, Sec. 85.) Duties of bankrupts enumerated by the act.

Case 830. Bankruptcy Law, Sec. 7.

"Sec. 7. Duties of Bankrupts.-a. The bankrupt shall

"(1) Attend the first meeting of his creditors if directed by the court or a judge thereof to do so, and the hearing upon his application for a discharge, if filed;

"(2) Comply with all lawful orders of the court;

"(3) Examine the correctness of all proofs of claims filed against his estate;

"(4) Execute and deliver such papers as shall be ordered by the court;

"(5) Execute to his trustee transfers of all his property in foreign countries;

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(6) Immediately inform his trustee of any attempt, by his creditors or other persons, to evade the provisions of this Act, coming to his knowledge;

"(7) In case of any person having to his knowledge proved a false claim against his estate, disclose that fact immediately to his trustee;

"(8) Prepare, make oath to, and file in court within ten days, unless further time is granted, after the adjudication, if an involuntary bankrupt, and with the petition if a voluntary bankrupt, a schedule of his property,