
    No. 644
    JOHNSON, Trustee, v. BENTEL & HYLAND
    Cincinnati Superior Court
    No. 58886.
    Decided 1924
    127. BANKRUPTCY — 1. Trustee may maintain action to recover diverted funds.
    2. Four months. limitation in Bankruptcy act does not apply to actions to recover diverted funds.
    3. Action to set aside a fraudulent conveyance; etc., must be brought in four months.
    4. Money held to be property within meaning of GC. 11104 and Bankruptcy Act.
    Attorneys — Leonard H. Freiborg, for Johnson; Sukre & Rielly, for Bentel & Hyland; all of Cincinnati.
   MARX, J.

Epitomized Opinion

This is an action by a trustee in bankruptcy to recover certain moneys wrongfully paid by the bankrupt. The plaintiff claimed that the bankrupt paid him $250 to discharge a debt owing the defendant by the Cincinnati Wood Products Co., which was a corporation separate and distinct from the bankrupt. He also claimed that payment was beyond the authority of the bankrupt and was a diversion of its funds and a fraud upon its holders and directors, all of which was well known to the defendant at the time payment was made. A demurrer was filed to the petition based mainly upon the ground that no recovery could be had by a trustee in bankruptcy for payments of money made by the bankrupt not paid four months prior to the filing of the petition in bankruptcy by virtue of Section 67-e and Section 70-e. It was also urged that payments were not within the transactions named in GC. 6343. In overruling the demurrer, the court held:

1. As the defendant did not stand in the position of a creditor of the bankrupt, a trustee can maintain an action to recover its diverted funds or property.

2. An action to recover diverted funds may not be brought within four months and is not subject to that limitation as provided in See. 60-b and 67-e of the Bankruptcy Act.

3. An action brought to avoid a transaction to hinder, delay or defraud creditors or avoid a conveyance, transfer or encumbrance, must be brought within four months of the filing of the bankruptcy petition.

4. Money is property within the meaning of the Bankruptcy Act and GC. 11104.  