Section 11(e) of the Bankruptcy Act bars, after two years from
the date of adjudication in bankruptcy, an action brought by the
trustee in bankruptcy to set aside and recover a preferential
transfer, and a state statute of limitations cannot operate to
extend the period. P.
324 U. S. 8.
141 F.2d 150 affirmed.
Certiorari, 323 U.S. 691, to review the affirmance of a judgment
dismissing the complaint in a suit by a trustee in bankruptcy to
set aside and recover an alleged preferential transfer.
MR. JUSTICE MURPHY delivered the opinion of the Court.
This case presents the narrow issue of whether Section 11e of
the Bankruptcy Act, 11 U.S.C. § 29e, bars at the end of
Page 324 U. S. 5
two years from the date of adjudication in bankruptcy, an action
brought by the trustee in bankruptcy to set aside and recover a
preferential transfer.
On April 11, 1938, N. L. Rogers & Company, Inc., filed a
voluntary petition in bankruptcy, and was duly adjudged a bankrupt
on the same day. On March 3, 1943, the petitioner trustee filed a
complaint under Section 60 of the Bankruptcy Act, 11 U.S.C. § 96,
against the respondent bank to set aside and recover payments
totalling over $300,000 alleged to have been given illegally by the
bankrupt to the respondent within four months prior to the filing
of the bankruptcy petition. The District Court dismissed the
complaint on the ground that the suit had been instituted more than
two years subsequent to the date of adjudication in bankruptcy, and
hence was barred by Section 11e. It thus overruled the trustee's
contention that Illinois law allowed him five years in which to
bring this action, and that this five-year limitation was
controlling, since it fell within the provision of Section 11e
allowing suits "within such further period of time as the Federal
or State law may permit." 53 F. Supp. 265. The court below affirmed
this judgment. 141 F.2d 150. In our view, such a result is plainly
right.
Two-year limitations on suits by and against trustees have long
been integral parts of federal bankruptcy statutes. Section 8 of
the Bankruptcy Act of 1841, 5 Stat. 440, 446, 447, applied a
two-year limitation on any "suit at law or in equity" by or against
any assignee of the bankrupt. Courts held that this related only to
suits involving claims held by the bankrupt before assignment,
rather than to suits on claims arising after the bankruptcy
proceedings began, [
Footnote 1]
but its applicability as to rights accruing to the assignee on the
date of the assignment by virtue
Page 324 U. S. 6
of the Bankruptcy Act apparently was not raised or
determined.
Section 2 of the Bankruptcy Act of 1867, 14 Stat. 517, 518,
which was reenacted in substantially the same form in Revised
Statutes § 5057, placed a similar limitation on any "suit at law or
in equity . . . by or against such assignee . . . touching the
property and rights of property" of the bankrupt. Here again, the
limitation was held to apply only to suits growing out of disputes
and transactions prior to assignment. [
Footnote 2]
Dushane v. Beall, 161 U.
S. 513. But, in
Bailey v.
Glover, 21 Wall. 342,
88 U. S. 346,
this Court stated that this limitation
"applies to all judicial contests between the assignee and other
persons touching the property rights of property of the bankrupt
transferable to or vested in the assignee."
See also Gifford v. Helms, 98 U. S.
248,
98 U. S. 252;
Jenkins v. International Bank, 106 U.
S. 571,
106 U. S. 575.
The inference seems clear from this that suits to set aside
preferential transfers made prior to the assignment would have been
held to fall within the reach of the two-year limitation.
Section 11d of the Bankruptcy Act of 1898, 30 Stat. 544, 549,
provided that "[s]uits shall not be brought by or against a trustee
of a bankrupt estate subsequent to two years after the estate has
been closed." State and lower federal courts explicitly and
uniformly held that this two-year limitation controlled the
trustee's right to set aside and recover preferential transfers
under Section 60 of the Act. [
Footnote 3] But courts differed as to whether Section 11d
or state statutes of limitation applied to causes of action
inherited by the trustee from the bankrupt or the bankrupt's
creditors. [
Footnote 4]
Page 324 U. S. 7
It was this conflict under Section 11d of the 1898 Act that was
primarily responsible for the framing of the new Section 11e in
1938. This latter provision, which is controlling in this case,
settled the problem by stating in part that
"A receiver or trustee may, within two years subsequent to the
date of adjudication or within such further period of time as the
Federal or State law may permit, institute proceedings in behalf of
the estate upon any claim against which the period of limitation
fixed by Federal or State law had not expired at the time of the
filing of the petition in bankruptcy."
In light of the judicial construction and application of
analogous provisions in earlier bankruptcy acts, it is significant
that Congress, in Section 11e, failed to enlarge the time for
bringing suits arising under the Bankruptcy Act by making state
statutes of limitation of longer duration applicable to such
federal causes of action. None of the prior provisions had been
construed so as to apply state statutes of limitations to actions
by trustees based on claims arising under the bankruptcy statutes.
And the courts had frankly and unmistakably imposed the two-year
limitation of Section 11d of the 1898 Act, which is the immediate
predecessor of Section 11e, to suits by trustees to set aside and
recover preferential transfers. The legislative background and
history, as well as the language of Section 11e, are barren of any
basis for concluding that Congress intended to make suits of this
nature subject to longer limitations imposed by state laws.
[
Footnote 5] Congress could
have
Page 324 U. S. 8
expressly restricted the field within which the two-year
limitation was to be operative had it so wished. Its failure to do
so cannot be ignored.
The actual language used in Section 11e is clearly appropriate
to an action under Section 60. Section 11e is not limited by its
words to actions inherited by the trustee; nor does it discriminate
against actions by the trustee accruing to him under the Act. It
provides simply that the trustee must bring action on any claim in
behalf of the estate within two years subsequent to the date of
adjudication or within such further time as the federal or state
law permits, provided that such law did not bar the action on the
date when the petition was filed.
Here, the only applicable law is Section 60 of the Bankruptcy
Act, which generates the cause of action and which contains no time
limitations as to actions brought pursuant thereto. And since the
trustee's right to set aside and recover preferential transfers
relates to transactions occurring prior to the filing of the
petition, and since this right did not accrue before the date on
which the petition was filed, such an action obviously cannot be
excluded from the limitation on the ground that it was barred by
federal or state law at the time the petition was filed. Hence, the
trustee was bound to "institute proceedings in
Page 324 U. S. 9
behalf of the estate" to set aside and recover any preferential
transfers "within two years subsequent to the date of
adjudication." More than two years having elapsed between the date
of adjudication and the commencement of the suit in this instance,
the courts below properly held that the action was barred under
Section 11e.
Inasmuch as the federal Bankruptcy Act has created the liability
and has also fixed the limitation of time for commencing actions to
enforce it, we have no occasion to consider the trustee's arguments
concerning the applicability and construction of the Illinois
statutes of limitation.
Cf. Campbell v. Haverhill,
155 U. S. 610;
McClaine v. Rankin, 197 U. S. 154;
Rawlings v. Ray, 312 U. S. 96;
Davies Warehouse Co. v. Bowles, 321 U.
S. 144,
321 U. S.
155-156.
The judgment of the court below is affirmed.
[
Footnote 1]
See In re Conant, Fed.Cas.No.3,086;
Stevens v.
Hauser, 39 N.Y. 302.
Cf. 69 U. S. Ogden,
2 Wall. 57,
69 U. S. 70.
[
Footnote 2]
See Bowen v. Delaware, L. & W.R. R. Co., 153 N.Y.
476, 47 N.E. 907.
Cf. Phelan v. O'Brien, 13 F. 656.
[
Footnote 3]
Davis v. Willey, 273 F. 397;
Meikle v. Drain,
69 F.2d 290;
Arnold Grocery Co. v. Shackelford, 140 Ga.
585, 79 S.E. 470.
[
Footnote 4]
Among those cases holding that Section 11d applied are
Isaacs v. Neece, 75 F.2d 566;
Engebretson v.
West, 133 Neb. 846, 277 N.W. 433, and
Callaghan v.
Bailey, 293 N.Y. 396, 57 N.E.2d 729. Cases holding that the
state statutes of limitation applied include
Davis v.
Willey, 273 F. 397, and
Silverman v. Christian, 123
N.J.Eq. 506, 198 A. 832.
See also Charlesworth v. Hipsch,
Inc., 84 F.2d 834;
Nairn v. McCarthy, 120 F.2d
910.
[
Footnote 5]
H.Rep. No. 1409 (75th Cong., 1st Sess.) p. 20, stated that
"A new provision in subdivision e permits receivers and
trustees, within 2 years after the adjudication, to institute suits
on claims against which the period of limitation fixed by Federal
or State law had not expired at the time of the bankruptcy or
within such further time as the Federal or State law may
permit."
S.Rep. No.1916 (75th Cong., 3rd Sess.) p. 13, stated:
"The provisions of the existing law in regard to suits by or
against trustees have been revised and modified, and receivers are
included. The period of limitations in respect to such suits has
been restricted in the bill to 2 years after the date of
adjudication, instead of 2 years after the date of the closing of
the estate."
See also Joint Hearings before the Subcommittees of the
Committees on the Judiciary (72d Cong., 1st Sess.) on S. 3866, Part
4, pp. 932-933; 6 Journal of Nat. Assoc. of Referees in Bankruptcy
65; 1 Collier on Bankruptcy, 14th Ed., 1186.