Court Opinion

ID: 8754157
Source: CourtListenerOpinion
Date Created: 2022-11-26 11:38:59.32003+00
Date Added: 2024-06-11T17:01:08.364986
License: Public Domain

HOOK, Circuit Judge,
after stating the case as above, delivered the opinion of the court.
To defeat the discharge of the bankrupt the appellant relies upon section 14b of the bankrupt act of July 1, 1898, c. 541, 30 Stat. 550 [U. S. Comp. St. 1901, p. 3428], the pertinent provision of which is that the bankrupt shall be discharged unless he has “with fraudulent intent to conceal his true financial condition and in contemplation of bankruptcy * * * failed to keep books of account or records from which his true condition might be ascertained.” Two conditions must accompany and give character to the failure of the bankrupt to keep the requisite books of account or records in order to justify its use as a bar to his discharge. In connection with such failure there must be present in his mind not only a fraudulent intent to thereby conceal his true financial condition, but also a contemplation of proceedings in bankruptcy. The existence of the former without the latter is insufficient. The case before us turns upon the fact that the ledger of the bankrupt, the only record kept by him, did not show the indebtedness to two of his creditors, the inquiry as to the purpose of the omission, and his answer. He admitted that his intent was to prevent the appellant, his principal creditor, from ascertaining that he had secured financial assistance from others, and by fair inference from this admission it may be assumed that the first condition operating to prevent his discharge was proven. But was his failure to exhibit such indebtedness upon his books in contemplation of bankruptcy? The bankrupt testified that he thought he could work along from season to season; that business would get better, and that he could pay up. This testimony affirmatively negatives the contention that he was then contemplating bankruptcy. The appellant claims in this connection that the bankrupt was in a state of hopeless insolvency, and that, therefore, it may be presumed that he had in contemplation the necessary end and consequence of that condition. But, assuming that such a presumption may be utilized in a case of this character, it is sufficient to say that the record does not supply the fact from which it is drawn. It does not appear that the bankrupt was hopelessly insolvent. The items and the gross amount of his indebtedness appear in the record, but the amount or value of his assets is not shown. For aught that appears, the hope of the bankrupt to ultimately pay all of the claims of his creditors may have been fairly justified by his business prospects and the amount of his assets. At any rate, we cannot assume a condition not shown by the record, and then predicate thereon a presumption to supply a reason for reversing the order of the trial court. As bearing upon the question whether the bankrupt had in contemplation proceedings in bankruptcy, it should be observed that he did not voluntarily seek the benefit of the provisions of the act, but that, on the contrary, the proceeding was an involuntary one, and was instituted by the appellant as petitioning creditor. Radical changes were made in the provisions of the act of 1898 concerning the discharge of bankrupts by the amendatory act of February 5, 1903 (32 Stat. 797 [U.- S. Comp. St. Supp. 1903, p. 410]), and among them was the elimination *354of the requirement that the failure to keep books of account from which the bankrupt’s financial condition might be ascertained must, in order to operate as a bar to his discharge, be in contemplation of bankruptcy. But the case in hand is controlled by the provisions of the original act.
The order of the District Court will be affirmed.