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Bankruptcy. Fraudulent Conveyances. Rights of Subsequent Creditors When No Fraud as to Them

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  • Bankruptcy. Fraudulent Conveyances. Rights of Subsequent Creditors When No Fraud as toThemSource: Harvard Law Review, Vol. 33, No. 3 (Jan., 1920), p. 471Published by: The Harvard Law Review AssociationStable URL: .Accessed: 21/05/2014 04:06

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    seeks to bring his claim within one of the exceptions. Bluthenthal v. Jones, supra; In re Miller, 212 Fed. 920. Where the debt is a judgment, the court will look behind that in order to see upon what the judgment is based. Bullis v. O'Beirne, 195 U. S. 6o6; Forsyth v. Vehmeyer, 176 Ill. 359, 52 N. E. 55, affirmed in 177 U. S. 177. However, in determining this question, only the records of the case are available and admissible. Bullis v. O'Beirne, supra; Burnham v. Pidcock, 58 App. Div. 273, 68 N. Y. Supp. I007. A claim on an express war- ranty is essentially a claim arising out of a contract. Frederic L. Grant Shoe Co. v. Laird Co., 212 U. S. 445. Where it is doubtful whether it was based on contract or on fraud, the creditor has not sustained his burden of proving the claim to be within the excepted class and hence it is discharged. Cooke v. Plaisted, i8i Mass. 82, 62 N. E. 1054; Hallagan v. Dowell, I79 Iowa, I72, i6i N. W. I77. This seems to be the situation in the principal case.

    BANKRUPTCY - FRAUDULENT CONVEYANCES - RIGHTS OF SUBSEQUENT CREDITORS WHEN NO FRAUD AS TO THEM. - A trustee in bankruptcy, proceed- ing under ? 70 e of the Bankruptcy Act of i898, had imposed a charge on certain property, fraudulently conveyed only as to existing creditors. The amount of the charge had been paid to the trustee, and the only existing creditor petitioned that the whole amount be paid over to him. The petition was denied. Held, that the judgment be reversed. American Trust & Savings Bank v. Duncan, 43 Am. B. R. 7 (Circ. Ct. App.).

    A trustee in bankruptcy, suing under ? 70 e of the Bankruptcy Act of I898, to set aside a conveyance, fraudulent only as to existing creditors, did not in his bill give the names of the existing creditors. The conveyance was set aside. Held, that the decree be sustained. Riggs v. Price, 43 Am. B. R. 413 (Mo.).

    The right of subsequent creditors to set aside conveyances is variously made to depend upon fraud as to them and fraud as to existing creditors. Harlan v. Maglaughlin, go Pa. 293; Ebbitt v. Dunham, 25 Misc. 232, 55 N. Y. Supp. 78. But where the subsequent creditor cannot set aside the conveyance, he should not participate in the proceeds in case one with a better right does set it aside. Lee v. Hollister, 5 Fed. 752. See Gardner v. Kleinke, 46 N. J. Eq. 90, 94, i8 Atl. 457, 459. However, the rights of subsequent creditors, when the debtor becomes bankrupt, have been in effect increased by the Bankruptcy Act. The trustee, it would seem, acts for the benefit of all the creditors and not for the benefit of a particular creditor. See In re Rodgers, 125 Fed. i69, i8o. Thus, where a creditor holds a note, in which the bankrupt has waived certain exemp- tions for the benefit of the creditor, the trustee will not act for that creditor on the waiver of exemption. Lockwood v. Exchange Bank, 190 U. S. 294. Again, ? 67 f of the Bankruptcy Act, which avoids all liens obtained through legal pro- ceedings within four months prior to the petition unless the court orders the lien preserved for the benefit of the estate, is interpreted as meaning that when the lien has been so preserved, the distribution of the proceeds is not con- fined to the existing creditors. First National Bank v. Stake, 202 U. S. I4I; Globe Bank, etc. v. Martin, 236 U. S. 288. See 28 HARV. L. REV. 703. Section 70 e provides that the trustee may set aside a conveyance which any creditor might have avoided. Neither ? 67 f nor ? 70 e prescribes a distribution of proceeds which come into the trustee's hands as a result of his succeeding to the creditor's rights, but it would seem that the trustee is acting for the benefit of all the cred- itors, as well under ? 70 e as under ? 67 f. If American Trust & Savings Bank v. Duncan is sound, it must follow that existing creditors alone will benefit from a charge imposed through their rights by the trustee, while they will have to share with subsequent creditors in case they have themselves secured a lien, within four months prior to bankruptcy, through legal proceedings. Nothing further than the statement of this result seems necessary to point out the un- desirability of the decision.

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    Article Contentsp. 471

    Issue Table of ContentsHarvard Law Review, Vol. 33, No. 3 (Jan., 1920), pp. 337-492Dependent Relative Revocation [pp. 337-357]The Rights of Ideas: And of Corporations [pp. 358-375]Implied-in-Fact Contracts and Mutual Assent [pp. 376-400]State Socialism and the School Land Grants [pp. 401-419]The Progress of the Law, 1918-1919 Equity [pp. 420-441]NotesThe Espionage Act and the Limits of Legal Toleration [pp. 442-449]Separate and Distinct Penalties for Women [pp. 449-451]Actionable Injuries in Street Regulation [pp. 451-453]The Nature of Salvage Service [pp. 453-455]Effect in Equity of a Conditional Contract to Mortgage [pp. 456-458]Title to Seashore and Soil under Navigable Rivers and Streams [pp. 458-462]Control of Executive Officers by Mandamus [pp. 462-467]Erroneous Description of Land in a Will [pp. 467-469]

    Recent CasesAdmiralty. Torts. Limitation of Liability [pp. 469-470]Animals. Damage to Persons and Chattels by Animals. Horse Straying on the Highway [p. 470]Bankruptcy. Discharge. Burden of Proof in Attacking Discharge [pp. 470-471]Bankruptcy. Fraudulent Conveyances. Rights of Subsequent Creditors When No Fraud as to Them [p. 471]Charities and Trusts for Charitable Uses. What Constitutes Charities. Bequest for Masses [p. 472]Charities and Trusts for Charitable Uses. What Constitute Charities. Bequest for the Benefit of "Deserving" Members of a Specified Religious Creed upon Marriage [pp. 472-473]Constitutional Law. Workmen's Compensation Acts. Liability without Fault. Facial Disfigurement [p. 473]Corporations. Directors and Other Officers. Liability of President to Corporation for Secret Profits [pp. 473-474]Criminal Law. Statutory Offences. Violation of Espionage Act of 1918. What Constitutes Specific Intent [p. 474]Damages. Measure of Damages. Conversion of Stock [pp. 474-475]Damages. Measure of Damages. Recovery for Breach of Warranty [p. 475]Descent and Distribution. Forfeiture of Estate. Constitutionality of Statute Denying Dower to Slayer of Husband [pp. 475-476]Eminent Domain. When Is Property Taken?. Street Construction and Re-Grading [p. 476]Equitable Liens. Effect of Promise That Bondholders Shall Share in Security of Future Mortgages [p. 476]Equity. Bills of Peace. Bill to Enjoin Numerous Suits in a Justice's Court and Try as One in Equity [pp. 476-477]Federal Courts. Jurisdiction Based on Amount in Controversy. Reasonableness and Good Faith of Claim [pp. 477-478]Intoxicating Liquors. Certiorari. License to Sell Liquor Granted during National Prohibition Set Aside at Suit of Private Citizen [p. 478]Mandamus. Persons and Acts Subject to Mandamus. Control of Executive Officers by the Writ [pp. 478-479]Sales. After-Acquired Property. Future Crops. Retention of Possession by Vendor [p. 479]Sales. Risk of Loss. Time of Passing of Title. C. I. F. Contracts [pp. 479-480]Salvage. What Constitutes Salvage Service [p. 480]Specific Performance. Inadequacy of Consideration as a Defense. Contract to Devise in Consideration of Personal Services [pp. 480-481]Taxation. Local Assessment for "Stock Law Fences". Diversion to General Fund [p. 481]Taxation. Particular Forms of Taxation. Transfer Tax. Transfer to Take Effect at Death [pp. 481-482]Tenancy in Common. Lease by Cotenant. Right of a Cotenant to Assign His Rights to the Use of a Specific Part of Premises [p. 482]Trusts. Creation and Validity. Annuity Conditioned upon Continued Separation from Husband [p. 483]Trusts. Creation and Validity. Cestui que Trust as Trustee of a Spendthrift Trust [pp. 483-484]Trusts. Creation and Validity. Meritorious Consideration for Executory Promise [p. 484]Trusts. Infant Trustee. Compelling Execution of Trust [pp. 484-485]Vendor and Purchaser. Remedies of Vendor. Equitable Lien of Unpaid Vendor [p. 485]Wills. Construction. Conditional Wills [pp. 485-486]

    Book ReviewsReview: untitled [pp. 486-487]Review: untitled [pp. 487-488]Review: untitled [pp. 489-490]Review: untitled [pp. 490-491]Review: untitled [p. 491]Review: untitled [pp. 491-492]

    Books Received [p. 492]