Case Name: In re TRIANGLE SHOE MFG. CO., Inc.
Court: United States District Court for the Eastern District of New York
Jurisdiction: United States
Decision Date: 1924-12-16
Citations: 7 F.2d 704
Docket Number: 
Parties: In re TRIANGLE SHOE MFG. CO., Inc.
Judges: 
Reporter: Federal Reporter 2d Series
Volume: 7
Pages: 704–709

Head Matter:
In re TRIANGLE SHOE MFG. CO., Inc.
District Court, E. D. New York.
December 16, 1924.
Lesser Bros., of New York City (William Lesser, of New York City, of counsel), for receiver and trustee.
Gilbert & Gilbert, of New York City (Francis Gilbert, of New York City, of counsel), for M. J. Frank & Co., Inc.
Marks & Marks, of New York City (Isaac Marks, of New York City, of counsel), for Esmay Products Corporation and J. Brand & Son.
Bernard F. Nathan, of New York City, for Prosper Shevenell & Son, Inc.

Opinion:
INCH District Judge.
This is a motion for an order confirming a special commissioner's report. It is in effect an appeal to this eourt to review the findings of fact and conclusions of law of said special commissioner.
On September 17, 1923, an involuntary petition in bankruptcy was filed against the above-named bankrupt. Some little time prior to this, four creditors had sold and delivered to the bankrupt certain merchandise, and, when the bankruptcy became a fact, sought to become legally preferred to the other creditors by means of reclamation proceedings, for that in substance is- what the. result of such proceedings amounts to. The issues raised by the answers of the trustee in bankruptcy to the petitions of these creditors were duly referred to a special commissioner.
The main contest was between the creditor M. J. Frank & Co., and the trustee. The other three creditors apparently were Content to rest on a decision in the Frank Case, although certain testimony was also taken in their eases. The Frank Case commenced before the special commissioner on or about November 19, 1923, and. continued, with certain adjournments, to,January 24,1924, during which time approximately 381 pages of testimony were taken down, pud this record is submitted, together with all the other papers, to me on tins motion.
Judging from the brief submitted to the special commissioner in behalf of Frank & Co., by its, counsel, that reclaiming creditor contended that it was entitled to the return of its property, provided it had established either of two propositions: (a) That the goods 'sought to he reclaimed had been procured through misrepresentations of the bankrupt as to its financial condition or by any other fraud; (b) that the goods had been procured under circumstances which conclusively showed that the bankrupt bought them without intending to pay for them. Although differing in amount of merchandise and dates of delivery, etc., the above were the two propositions also relied on by the other three creditors as necessary to be proved before the special commissioner.
The burden of proving, by a fair.preponderance of evidence, either or both of the above propositions, rested on the respective creditors, and, as I have above stated, a great deal of testimony was taken, from my examination of which a sharp conflict as to material facts appears. The special commissioner apparently gave most careful and earnest consideration to- all this testimony, for not only did he withhold rendering his decision until October, 1924, indicating a most careful review by him of the written testimony, hut he had the witnesses before him and could' observe their demeanor, their credibility, and the weight to- be given théir testimony far better than this court can from printed pages.
It is also apparent that whether or not a fraud was. committed, either by giving a statement (admittedly an oral one in the first instance), or there existed an intention not to pay, were, under the circumstances of this case, almost entirely questions of fact. The report of the special commissioner, after reviewing in a general way the testimony, distinctly finds that the Frank creditor has failed to prove; by a preponderance of credible- evidence, that the bankrupt "made any false representation whatever to Mr. Frank at the interview of August 28," and furthermore- contains a finding that this creditor "did not rely upon the statement of July 31, or upon any misrepresentation of a fact, orally made, by bankrupt, at said interview of August 28."
Possibly, if the attention of the special commissioner had been called to the criticism now urged before me; his report might have been worded somewhat differently; but it appears to me plain that, not only did the special commissioner find as a conclusion of law, as I read his report, that this creditor failed toi sustain the burden of proof, but that, as a conclusion of fact, there were no false representations made o-n August 28, and that the creditor did not rely upon a statement of July 31, or upon any representation of bankrupt. Also the special commissioner specifically finds from the testimony "that the officers of the bankrupt had no intention of withholding payment for any of the goods purchased, and that it did not purchase them without reasonable hope or expectation for paying same."
Accordingly, on the two points urged before the special commissioner by the Frank creditor and the others, it would seem that the special commissioner found against such contentions on the facts, and this court should be and is reluctant to- substitute its own opinion on facts, where a conflict plainly existed, and the special commissioner has had the- advantage of weighing the testimony in the light of the actual presence of the witnesses, unless there is present some obvious error of law, or the evidence cannot, in any reasonable view, he said to justify his findings. Lumpkin v. Foley, 204 F. 372, 122 C. C. A. 542; Brookheim v. Greenbaum, 225 F. 763, 141 C. C. A. 89.
If, as found by the special commissioner as a matter of fact, there were no misrepresentations ma.de, and there was no intention not to pay for the goods when purchased, there would seem, in spile of the argument now made before me, to be nothing left to justify what is practically a rescission of a sale and a return to the vendor of merchandise sold to a party subsequently becoming an involuntary bankrupt.
I also carefully considered the report of the- special commissioner as to the other creditors' claims, and for the reason assigned in the Frank case, to wit, an apparently earnest and fair consideration by the special commissioner of conflicting testimony of witnesses before him, and a finding on those facts against the contention of said creditors, I have no desire to disturb such findings and the conclusions necessarily based on them.
Therefore, for the reason above mentioned, and after careful consideration of the able briefs submitted to me; as well, as those submitted to the special commissioner, together with a reading of the testimony submitted, whieh as I have said plainly shows a conflict of facts, I feel that the report should be in all respects confirmed.
As to the contention of the trustee that these creditors should be compelled to pay storage charges for the time these proceedings took, I do not think that this burden should be imposed o-n them, as practically nine months of this time was consumed by the special commissioner in considering the caso and in rendering his report.
Report confirmed.