Traer v. Clews - 115 U.S. 528 (1885)
U.S. Supreme Court
Traer v. Clews, 115 U.S. 528 (1885)
Traer v. Clews
Argued November 9-10, 1886
Decided November 23, 1885
115 U.S. 528
A suit in which the purchaser from a trustee in bankruptcy of property of the bankrupt estate asserts title against a defendant claiming an adverse interest therein, though brought more than two years after the cause of action accrues to the trustee, is not barred by the limitation of two years prescribed by Rev.Stat. § 5057 if the defendant acquired title by a fraud practiced by him on the trustee and the fraud was concealed by the defendant from the trustee and the purchaser until within two years before the suit was brought.
When an incorporated company has been dissolved and its affairs are in the course of liquidation, a sale and transfer by a stockholder of all his claims and demands on account of his stock is not void, because the vendee may be compelled to bring suit to enforce his right to such claims and demands.
There is nothing in the policy or terms of the Bankrupt Act which forbids the bankrupt from purchasing from the trustee property of the bankrupt estate.
A trustee in bankruptcy may sell the unencumbered property of the estate on credit when he thinks it most for the interest of the creditors.
Henry Clews, the defendant in error, on January 17, 1878, brought this suit in the Circuit Court of Linn County, Iowa, against John W. Traer and others to recover the value of fifty shares, of one thousand dollars each, of capital stock in the Cedar Rapids Northwestern Construction Company and the dividends which had been declared thereon. The stock had been originally subscribed and owned by Clews. The construction company was organized in 1870. The dividends sued for were declared, ten thousand dollars in December, 1873, and five hundred dollars in January, 1874, and were in the treasury of the company ready to be paid out to the holder of the stock. On November 28, 1874, Clews was adjudicated a bankrupt, and his stock in the construction company, with the dividends which had been declared thereon, passed to J. Nelson Tappan, trustee of his bankrupt estate. In February, 1875, the construction company went into voluntary dissolution and liquidation, and John W. Traer, John F. Ely, and William
Green were appointed trustees to settle up its affairs and divide its assets among its stockholders according to their interest therein. Traer, knowing that the dividends above mentioned had been declared, and the same being unknown to Clews and Tappan, his trustee in bankruptcy, on March 4, 1876, for the consideration of twelve hundred dollars, through the intervention of one Armstrong, who did not disclose his agency, purchased of Tappan, the trustee, the fifty shares of stock above mentioned. Traer alleged and it appeared that the purchase was made by him for his wife, Mrs. Ella D. Traer. Afterwards, on December 6, 1877, Tappan, the trustee in bankruptcy, assuming, as it may be supposed, that the sale of the stock made at the instance of Armstrong was void for fraud, sold all his claims and demands on account of the stock to Clews, who, on January 17, 1878, brought this suit. John W. Traer and others, who had been officers and trustees of the construction company, were made defendants to the original petition. The defendants demurred to the petition on the ground that it did not state facts sufficient to entitle the plaintiff to the relief demanded. The court overruled the demurrer. Afterwards, the plaintiff having discovered that on March 4, 1876, the stock in the construction company had been assigned to Ella D. Traer, on October 28, 1879, amended his petition by making her a party defendant to his suit. Upon final hearing in the Circuit Court for Linn County, the suit was dismissed as to all the defendants except John W. Traer and Ella D. Traer, and judgment was rendered against them for $15,000. Traer and his wife appealed from this judgment to the Supreme Court of Iowa, which affirmed the judgment of the circuit court. By the present writ of error, Traer and wife ask a review of the judgment of the Supreme Court of Iowa.