Herget v. CENTRAL NAT. BANK & TRUST CO. OF PEORIA

• Decision Date: 05 April 1944
• Docket Number: No. 8418.,8418.
• Citation: 141 F.2d 150
• Parties: HERGET v. CENTRAL NAT. BANK & TRUST CO. OF PEORIA.
• Court: U.S. Court of Appeals — Seventh Circuit

141 F.2d 150 (1944)

HERGET v. CENTRAL NAT. BANK & TRUST CO. OF PEORIA.

No. 8418.

Circuit Court of Appeals, Seventh Circuit.

February 5, 1944.

Rehearing Denied April 5, 1944.

Ira J. Covey, of Peoria, Ill., for appellant.

John M. Elliott and Chester L. Anderson, both of Peoria, Ill., and Walter Bachrach, of Chicago, Ill., for appellee.

Before EVANS and SPARKS, Circuit Judges, and LINDLEY, District Judge.

SPARKS, Circuit Judge.

The trustee in bankruptcy appeals from the dismissal of his action to recover preferences alleged to have been given by the bankrupt within four months previous to the filing of its voluntary petition in bankruptcy. The District Court sustained appellee's motion to dismiss the complaint on the ground that it was barred by the applicable statute of limitations, and the correctness of that ruling is the only question presented to us.

The bill of complaint, filed March 3, 1943, alleged that N. L. Rogers and Company was adjudicated a bankrupt on April 11, 1938, on its petition filed on that date, and appellant was thereupon elected and qualified as trustee of its estate on May 25, 1938. It further alleged that during the four-month period prior to the adjudication, the company was indebted to appellee in sums varying from $50,000 to $350,000 from day to day, all of which indebtedness was either unsecured or very inadequately secured, and that during that period the company delivered to appellee money and securities in amounts varying from $5 to $20,000, aggregating $308,122, all of which was applied by appellee on the antecedent unsecured debt, thereby effecting an illegal preference, recovery of which appellant demanded in the full amount.

Appellee contends, and the District Court held, that the action was barred by § 11, sub. e of the Bankruptcy Act, 11 U.S. C.A. § 29, sub. e:

"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. * * *" (Our ital.)

Appellee contends that § 11, sub. e, fixes a two-year period within which the current suit could be brought, inasmuch as there is no other federal or state law under which the period could be extended. Appellant, on the other hand, contends that the section permits maintenance of the suit by reason of the extension allowed therein by state law, spelling out a five-year period by interweaving § 11, sub. e, and two sections of the Illinois Statute on Limitations, Chap. 83, Ill.R.S.

The District Court held, we think correctly, that inasmuch as the suit, being one to avoid a preference, arose under the Bankruptcy Act, the Illinois statute of limitations could not operate to fix the time within which it could be brought. It is obvious that the cause of action is predicated solely upon § 60 of the Bankruptcy Act, 11 U.S.C.A. § 96, and although subsection b of that section provides for concurrent jurisdiction in state and federal courts for suits brought thereunder, it does not specify the period within which such suits must be brought, hence the applicability of § 11, sub. e, above. Both parties are agreed that § 11, sub. e, controls, but they differ as to its proper construction.

In...