Where the trustee in bankruptcy brings a bill in equity in the
Circuit Court to set aside a transfer made by the bankrupt, the
appeal is not governed by § 25 of the Bankruptcy Act but by
the Court of Appeals Act of March 3, 1891, c. 517, § 6, 26
Stat. 828.
Knapp v. Milwaukee Trust Co., 216 U.
S. 545.
The rule that an act of election directed toward a third person
may operate
in rem and establish title as to all concerned
does not apply where, as in this case, the title is in the person
enforcing the remedies, and there was no element of election.
The fact that a trustee in bankruptcy obtained a money judgment
against one to whom the bankrupt transferred certain assets to
delay and defraud creditors
held in this case not to have
amounted to ratification of the bankrupt's act or to an election
not to pursue the assets transferred, but the bankrupt was entitled
to also maintain a bill in equity to set aside the transfer.
157 F. 669 reversed.
The facts are stated in the opinion.
Page 218 U. S. 133
MR. JUSTICE HOLMES delivered the opinion of the Court.
This is a bill in equity brought by a trustee in bankruptcy to
set aside a transfer of accounts and bills receivable, made by the
bankrupt to the defendant, Sugarman, with intent to delay and
defraud creditors. Sugarman pleaded in bar that the plaintiff had
ratified his dealings because, with knowledge of all the facts, the
plaintiff had taken a judgment against the bankrupt for $17,500, a
part or all of which was money remaining in the bankrupt's hands of
$30,000, alleged by the bill to have been paid to him by Sugarman
in pursuance of the fraudulent scheme. A majority of the circuit
court of appeals held the ratification made out on the ground that,
to get the judgment, the trustee had to rely upon a right
inconsistent with that now set up. 157 F. 669. T he plaintiff
appealed to this Court.
It is argued that the appeal was too late because not taken
within thirty days after the degree, as required by
Page 218 U. S. 134
General Orders in Bankruptcy No. 36, for appeals under the act.
But this is not an appeal under the act, § 25, by authority of
which the general order was adopted, and is not governed by that
order. The appellate jurisdiction is under or is the same as that
under the Court of Appeals Act of March 3, 1891, c. 517, § 6,
26 Stat. 828.
Knapp v. Milwaukee Trust Co., March 7, 1910,
216 U. S. 545. The
appeal was taken within a year, and was in time.
On the merits, we are of opinion that the decision was wrong. We
are quite ready to assume what the court below was at some trouble
to establish that an act of election directed toward a third person
may operate
in rem and establish title as to all parties
concerned. But the demand of the trustee on the bankrupt, even when
enforced by a resort to the courts and by judgment, had no element
of election about it. The legal title to the money had been in the
bankrupt, and was transferred by the statute to the trustee, §
70. He was entitled to have that money in his hands as against the
bankrupt in any event, whether he decided to hand it back to
Sugarman or to distribute it in dividends. The law had put him in
the bankrupt's shoes with additional powers. Therefore to insist
that the bankrupt should do what the statute required him to do was
as consistent with a subsequent rescission of the bankrupt's
fraudulent acquisition of title as with an affirmance of it. It had
no relation to that question, except possibly to put the plaintiff
in a position better to decide it.
Decree reversed.
