THOMAS, AS TRUSTEE IN BANKRUPTCY OF LIGHTSTONE,
v.
SUGARMAN

U.S. | 1910-05-31
No. 131
218 U.S. 129 Supreme Court of the United States (1910) Negative Treatment
Also reported at: 54 L. Ed. 967 · 30 S. Ct. 650 · 1910 U.S. LEXIS 2010 · SCDB 1909-169
Cited by 23 cases

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Synopsis

A trustee in bankruptcy sought to set aside a fraudulent transfer of assets made by the bankrupt to Sugarman, but Sugarman argued the trustee had ratified the transfer by obtaining a judgment against the bankrupt for money allegedly paid as part of the fraudulent scheme. The Supreme Court reversed, holding that the trustee's demand for the money, enforced through judgment, was not an act of election that would ratify the fraudulent transfer, since the trustee was statutorily entitled to recover the funds regardless of whether it later affirmed or rescinded the bankrupt's fraudulent acquisition of title.

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Opinion of the Court
Mr. Justice Holmes

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 Fed. Rep. 669; S. C., 85 C.

C. A.

337. The plaintiff appealed to this court.

It is argued that the appeal was too late because not taken within thirty days after the decree, as required by 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 goyerned 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 monéy in his hands as against the bankrupt in any eyent, 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.

Cases With Similar Vibessemantic neighbors from the corpus

Citator

Cited By

  • United States v. Or. Lumber Co., 260 U.S. 290 (U.S. 1922)
    …vendor to his remedy at law; and conversely, the vendor might, if he chosé, limit his suit in equity to the recovery of the property. In either event he could recover his damages at law. Compare Brady v. Daly, 175 U. S. 148, 161; Thomas v. Sugarman, 218 U. S. 129; Zimmerman v. Harding, 227 U. S. 489, 493. There is, therefore, lacking here inconsistency of remedies; and for that reason, also, the doctrine of election of remedies does not apply. There are some cases in this Court, earlier than those discussed…
  • Globe Bank & Tr. Co. of Paducah v. Atkins, 236 U.S. 288 (U.S. 1915)
  • Connell v. Walker, 291 U.S. 1 (U.S. 1934)
    …are Sparhawk v. Yerkes, 142 U.S. 1; Dushane v. Beall, 161 U.S. 513; First National Bank v. Lasater, 196 U.S. 115; American Exchange Bank v. Goetz, 283 Fed. 900; Laughlin v. Calumet & Chicago Canal & Dock Co., 65 Fed. 441; and cf. Thomas v. Sugarman, 218 U.S. 129. Upon this record no case is made entitling the petitioners, under any provision of the Bankruptcy Act, to a judgment of dismissal. . The question remains whether, the trustee having failed to assert any rights with respect tó the pending action, t…

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