KINDER
v.
SCHARFF

U.S. | 1913-12-15
No. 99
Mu. Justice Pitney concurs in the result.
231 U.S. 517 Supreme Court of the United States (1913) Caution
Also reported at: 58 L. Ed. 343 · 34 S. Ct. 164 · SCDB 1913-014 · 1913 U.S. LEXIS 2529
Cited by 29 cases

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Synopsis

A bankruptcy trustee sought to recover land allegedly conveyed by the bankrupt in fraud of creditors, but the two-year statute of limitations under the Bankruptcy Act had run and the estate had been closed. The Supreme Court held that the trustee's prior knowledge of the suspected fraud and his voluntary failure to investigate during the original proceeding barred him from reopening the estate to circumvent the statute of limitations, and that bankruptcy courts lack authority to remove a completed statutory bar merely because a trustee later changes his mind about pursuing a known claim.

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Opinion of the Court
Mr. Justice Holmes

Mr. Justice Holmes delivered the opinion of the court.

This is an action by a trustee in bankruptcy to recover land alleged to have been conveyed by the bankrupt in fraud of creditors. The defendant pleaded that the estate had been closed and that the action was barred by the lapse of two years, under § lid of the Bankruptcy Act, July 1, 1898, c. 541, 30 Stat. 544, 549, and also that he purchased the land for its full value and in good faith. The estate had been closed and the two years had run, but after they had elapsed the former trustee petitioned to have the proceedings reopened on the ground that he had just discovered the facts and that the sale should be set aside. The petition was granted, this suit was brought and the judge of first instance ordered a reconveyance. The. Supreme Court of Louisiana found, as it was compelled to by the testimony of the trustee himself, that during the pendency of the original proceeding the trustee suspected the alleged fraud, made some inquiries, but dropped the matter because he thought that it was not worth while, that is, that it would not pay to go farther. He ‘voluntarily abstained from availing himself of the means put in his hand by the law itself for the ascertainment of a suspected fact,’ by examining the bankrupt and otherwise. On this ground the court held that he could not remove the bar of the statute, reversed the judgment and dismissed the suit. 129 Louisiana, 218.

We are of opinion that the decision of the Supreme Court was right. It is not necessary to consider whether the running of the two years after the estate is first closed is a bar to all suits upon claims that might have been collected if they had been known, or to controvert the conclusion of Bilafsky v. Abraham, 183 Massachusetts, 401, that such suits are not barred. But it is obvious that there must be some limits if the promise of repose after two years in § lid is not to be a mirage. The power to reopen estates given in § 2 (8) ‘whenever it appears that they were closed before being fully administered’ cannot be taken to put it into the power of the court of bankruptcy to remove the bar of § 11 at its own will simply because a trustee may have changed his mind. It was argued that the court of first instance found fraud and that we could not review thé findings of fact. Waters-Pierce Oil Co. v. Texas (No. 1), 212 U. S. 86, 97. But if so, we equally are barred from reviewing the findings of the Supreme Court, that the trustee was chargeable with knowledge of the fraud, if there was one.

Therefore, apart from the difference between the statutes considered there and here, cases like Bailey v. Glover, 21 Wall. 342, and Traer v. Clews, 115 U. S. 528, where the cause of action for fraud was concealed, do not apply. The question is simply whether, when, after an estate is closed, and more than two years later a trustee comes to the conclusion that he undervalued a claijn that he knew of and might have sued upon, or finds that the value has risen since, the Bankruptcy Court may reopen the estate for the sole purpose of getting rid of the statute,- and allowing the. trustee to sue. See Wood v. Carpenter, 101 U. S.

135. Rosenthal v. Walker, 111 U. S. 185, 196.

The judge had no power by an ex parte order reopening the estate to remove the bar that was completed, and that there was no ground for removing. Whether it be put on the construction of the Bankruptcy Act or on the ground that the estate was fully administered quoad hoc, or of laches on the part of the trustee, it comes to the same thing. The claim in controversy cannot be made the ground of a suit.

Judgment of the Supreme Court affirmed.

Mu. Justice Pitney concurs in the result.

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Citator

Cited By

  • Exploration Co. v. United States, 247 U.S. 435 (U.S. 1918)
  • In re Schreiber, 23 F.2d 428 (2d Cir. 1928)
    …e proceeds of the claim he must hold upon the same trust. Such proceeds are therefore unadministered assets of the estate, and a proceeding by the trustee to compel the bankrupt to account for them will not be within section lid. Kinder v. Seharff, 231 U. S. 517, 34 S. Ct. 164, 58 L. Ed. 343, upon which the bankrupt rests his entire argument, is not inconsistent with what we have said above. There the trustee was suing a third person to recover property fraudulently conveyed before the bankruptcy.' Mr. Just…
    1 / 2
  • In re Thomas v. Lurie, 204 F.2d 788 (7th Cir. 1953)
    …has acted as a receiver or trustee of a bankrupt estate, upon any matter arising in connection with the administration thereof, subsequent to two years after the estate has been closed.” Great stress is placed by the bankrupt upon Kinder v. Scharff, 231 U.S. 517, 34 S.Ct. 164, 58 L.Ed. 343. A study of that case reveals that it- is without application. It is rather obvious, we think, from a reading of the statutory provision lastly quoted that it is not relevant to a proceeding to reopen a bankruptcy estate.…

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