Buffum v. Peter Barceloux Co., 289 U.S. 227 (1933)

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Buffum v. Peter Barceloux Co.

No. 564

Argued March 20, 21, 1933
Decided April 10, 1933
289 U.S. 227

CERTIORARI TO THE CIRCUIT COURT OF APPEALS

FOR THE NINTH CIRCUIT

Syllabus

1. Where a pledge, followed by a secret and unfair sale to the pledgee for much less than value, was part of a general scheme of the parties to defraud the pledgor’s creditors, the remedy of his trustee in bankruptcy is not merely to set aside the sale and have a new one ordered, but to set aside the pledge and recover the property or its value. Bankruptcy Act, § 70(e). P. 232.

2. Even though one of the creditors of a bankrupt, by accepting a junior lien, may have estopped himself from attacking a pledge made by the bankrupt in fraud of creditors, this does not prevent the Trustee from setting it aside under § 70(e), and recovery will be for the benefit of all the creditors. Moore v. Bay, 284 U.S. 4. P. 233.

3. A creditor who takes security on his insolvent debtor’s property subject to a specific lien may be estopped while he retains the benefit from disavowing the attendant burden, but the basis for an estoppel is cut away if the transaction is lawfully disaffirmed and his security is abandoned. P. 234.

4. The right to object to equity jurisdiction upon the ground of adequate remedy at law may be waived. P. 235.

5. A trustee who sells property in fraud of his trust and buys it back pending suit must account, at the option of the cestui que trust, for the value at the time of sale, with interest, or for the property itself. Pp. 235-236.

6. This duty is the same whether the trust be actual or constructive, for the implication of a trust is the implication of every duty proper to a trust. P. 237.

7. A creditor of a bankrupt is entitled to participate on the same basis with other creditors in the distribution of assets recovered from him by the trustee in a suit under § 70(e). Moore v. Bay, 284 U.S. 4. P. 237.

61 F.2d 145 reversed.

Certiorari, 288 U.S. 595, to review the reversal of a money decree secured by Buffum, Trustee, in a suit under § 70(e) of the Bankruptcy Act to set aside a fraudulent transfer. 51 F.2d 80 modified and affirmed.