Thе suit, brought under section 70e of the Bankruptcy Act section 110 (e), 11 US CA, against. preferred stockholders of the bankrupt, was in equity to cancel and set aside as fraudulent, and to recovеr back, payments the bankrupt had made to them in redemption of their stock.
The bill, filed March 7, and amended June 21, 1932, alleged the adjudication March 14, 1930, the purchase from defendants, thе contract for redemption 1 and the various payments, 'aggregating $6,957.53, made on account of it, all made more than two, but less than four, years before the filing of the suit. It alleged that thе brick company was at the time it made the contract, has been ever since, and now is, insolvent, in that its indebtedness, not including the obligations of the redemption contract, exceeded the reasonable value of its property. It was further alleged that the payments, made out of the capital assets of the bankrupt, while the bankrupt was insolvent, constituted a fraud on, and were held by defendants in trust for, creditors, of whom approximately $45,000 in amount have filed claims. Defendants, contending that the suit failed because the bill did not allege (1) that thе transfers were made and received with fraudulent intent; (2) that the bankrupt had ceased doing business when the payments were made; (3) that the transfers were made voluntarily and without consideration; (4) that the trustee was suing in the right of persons who were creditors at-the time the transfers were made, moved to dismiss it. Other grounds of the motion were that the bill having been filed more than two years after the transfers were made, and nearly two years after the trustee was appointed, the action was barred by the state statutes of limitations and by laches.
The District Judge sustainеd each count of the motion, and ordered the bill dismissed. This appeal is from that order. Here a good part of the briefs is devoted to the point whether the defendants, though in form stockholders, were in fact creditors of the company. Appellees argue with vigor and apparent confidence that though the contract declares that the consideration for the sale of the Mexia Brick Company was preferred stock in the Bridgeport Brick Company and such stock was issued to them, the sale was really for $40,000 in money, the stock to evidence the debt. The defendants, then, they say, must be regarded in law and in fact not as stockholders, but as creditors. In support of this position they cite Hookway v. McKnight (C. C. A.) 232 F.
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129; In re Hicks-Fuller Co. (C. C. A.)
We do not think sо. Whatever the ultimate intent, the fact is they were stockholders. We think appellant has the right of it when he says that one may not place himself in the comfortable position aрpellees undertake to assume, of claiming to be stockholders while the company is going well, and creditors when it is not. Having cast their relation as they did, in the form of holders of prеferred’ stock, they cannot, as to creditors, the company insolvent, deny that the relation was what they said it was. Spencer v. Smith (C. C. A.)
We do not think either that appellees stand any better on their claim that the bill fails for want of sufficient allegations. We think it clear that it sufficiently alleges that the company was insolvent, and that the payments made to defendants were as to company creditors mere voluntary payments and recoverable as such. Rev. Stat. of Texas, art. 3997; Wood v. National City Bank (C. C. A.)
It remains only to inquire whether, as appellee claims, the state statute of limitations of two years, article 5526, subd. 4, bars the suit, or whether, as the trustee claims, that statute does not apply, but either section lid of the Bankruptcy Act, section 29 (d), 11 USCA, or the Texas four-year statute, article 5529, governs.
Appellees insist that the suit is really an action for debt and is governed by subdivision 4 of article 5526, Revised Statutes of Texas, “actions for debt where the indebtedness is not evidenced by a contract in writing.” Appellant insists that the action is not one for debt, but is a suit in equity, governed, if by any state statute, by the general four-year statute, article 5529. He insists, however, that the matter is govеrned by neither of the state statutes, but by section 29, title 11 USCA, providing “suits shall not be brought by or against a trustee of a bankrupt estate subsequent to two years after the estate has been closеd.” Whether this statute or a state statute provides the limitation period in a suit by trustees under state statutes is, under the authorities involved, in some confusion. In one case, Davis v. Wil-ley,
We think the trustee’s position that section 29 fixes the time he may sue all causes of action not already barred when the bankruptcy proceedings were filed, furnishes a more reasonable, a more workable theory of limitation than the one advanced in the Davis and Drain Cases, suprа, that it applies to some actions, but not to others. This position is not only in accord with the uniform rule of decision under the corresponding section of the prior act, but it is in the interest of the just and effective administration oí bankruptcy estates. Cf. Coppard v. Stanush (Tex. Civ. App.)
We further, however, think it plain that if state statutes control rather than the federal statute whiсh the trustee invokes, limitation has not barred the action. For under settled decisions of the Texas courts, it is not one for debt under subdivision 4 of article 5526. It is a suit in equity for which no specific limitation statute is provided, and to which, therefore, the general limitation of four years provided by article 5529 applies. Vodrie v. Tynan (Tex. Civ. App.)
The bill stated a cause of action which was not barred. It was error to dismiss it. The judgment is reversed and the cause remanded for further, and not inconsistent proceedings.
Notes
it recited defendants’ sale of the Mex-ia Pressed Brick Comрany to the 'bankrupt for 40,000 shares of its preferred stock, of the .par value of $40,000, and the issue to a trustee of a certificate f.or 40,000'shares. It provided, upon the coh-siderations named in the contract not material to be stated here, that the brick company would redeem, retire, and táke up the stock in forty-eight monthly and six annual installments.