Court Opinion

ID: 9639929
Source: CourtListenerOpinion
Date Created: 2023-08-22 16:51:58.717781+00
Date Added: 2024-06-11T18:10:23.061127
License: Public Domain

CLARK, Circuit Judge
(dissenting).
The business here was actually conducted as a single unit; as the auditor says, “As far as I was concerned, there was one identity and that was the corporation.” The referee states that there is no contention “that the books did not truly record all the transactions of the consolidated entities.” The bankrupts appear to have been simple salesmen, out on their trucks all day 'long. They left bookkeeping and legal problems to others, presumably more wise —a course which at times at least has served as adequate protection to untutored business folk. In re Marcus, 2 Cir., 203 F. 29; In re Livermore, 2 Cir., 96 F.2d 93; In re Lovich, 2 Cir., 117 F.2d 612, 133 A.L.R. 673. They did keep, or cause to be kept, books honest, but not legally sophisticated. I believe the statute requires no more. Hedges v. Bushnell, 10 Cir., 106 F.2d 979; 1 Moore’s Collier on Bankruptcy, l4th Ed. 1940, pars. 14.32, 14.33. They should not be penalized for failing to draw those legal conclusions which the bankruptcy court must — and I believe rather easily can— draw from the facts herein when it settles the bankrupt estate.
The result seems all the more harsh because apparently it stems from a dilemma *583engendered by the lawyers. For after the corporation was formed, corporate books were opened listing the various assets and liabilities of the business, including even the bank accounts, and apparently showing the natural intent to transfer the former partnership assets and liabilities to the corporation. True, no formal transfer of the checking account was made; it is this to which the auditor took exception. (“You see, in 1935 I objected seriously to the way the bank account was handled, and I insisted upon a change over to the corporate entity; because that was the way they were operating.”) And the parties still continued to receive and pay bills addressed to the firm, though the sales were billed in the name of the corporation. It seems doubtful whether such legal informality was sufficient to overturn the manifest intent to incorporate the business. But when insolvency came, the lawyers, apparently affected by that excess of caution which afflicts our profession, concluded that to be safe not only should the corporation petition, but the individuals should do so also. And there they are.
I would affirm.