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In re Verona Const. Co.

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT


March 23, 1942

IN RE VERONA CONST. CO.

Appeal from the District Court of the United States for the District of New Jersey; William F. Smith, Judge.

Author: Clark

Before MARIS, CLARK, and GOODRICH, Circuit Judges.

CLARK, W., Circuit Judge.

On August 18, 1941, a petition for involuntary bankruptcy was filed against the Verona Construction Company. The complainant alleged that the debtor had "concealed or removed property with intent to hinder, delay or defraud its creditors during the year 1939 by turning over" to two of its officers certain sums of money. The debtor moved to dismiss the petition on the ground that the alleged act of bankruptcy had been committed more than four months prior to the filing. From the District Court's denial of the motion, the debtor has appealed.

Appellant argues that Section 3, sub. b. of the Bankruptcy Act*fn1 provides a blanket limitation of four months following an act of bankruptcy within which time a petition may be filed. As authority it cites a single case.*fn2 That case is one which involves an alleged transfer of assets. We are here concerned not with a transfer, but with a concealment.*fn3 It has long been settled that the four month limitation begins to run upon continuing concealments only from the time of discovery.*fn4 The recent modernizations of the Bankruptcy Act*fn5 have not affected this precedent. A leading treatise speaking of the present provision says:

"Although ยง 3b appears to cover the entire first act of bankruptcy, it deals expressly with transfers and assignments, not mentioning concealments and removals. Consequently, as to the latter, the fourmonth period does not expire until four months after the concealment or removal is discovered by creditros." 1 Collier on Bankruptcy, 14th Ed., Para. 3.702.

Thus, the bankruptcy rule that the four month period shall not begin to run on the concealment of assets until discovery is quite similar to the doctrine prevailing in England*fn6 and the majority of the United States*fn7 that the statute of limitations is tolled where there has been a fraudulent concealment of a cause of action.

The order of the District Court is affirmed.


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