Court Opinion

ID: 8814664
Source: CourtListenerOpinion
Date Created: 2022-11-26 15:14:11.732097+00
Date Added: 2024-06-11T17:04:25.357629
License: Public Domain

HOUGH, Circuit Judge
(after stating the facts as above). [1] The motion to dismiss is based on Field v. Wolf, 120 Fed. 815, 57 C. C. A. 326. The appeal record in that case shows an objection filed to a composition, alleging that it was not for the “best interests of the creditors,” because (in substance) the bankrupts were well able to pay more than the offered amount, which fact they had concealed, or tried to, by a system of bookkeeping obnoxious to the statute.1 The evidence *732in that record is principally (but not wholly) devoted to showing that the bankrupts had or controlled far more property than they had offered to use in composition.
If the case cited holds no more than that, when the sole or principal ground of appeal is that the District Judge should have disapproved the composition because it was not large enough, the decision relates to something we are not now concerned with, and as to which we express no opinion. Whether a composition is in the interest of creditors, or was accepted out of sympathy and merely with a view to benefit the debtor, is a point not infrequently mooted under the British statute (e. g. Ex parte Hudson, 22 Ch. Div. 773), but hitherto not considered with us.
If, however, the Field decision be thought to lay down a general rule that consenting creditors, or a representative fraction of them, are necessary parties respondent in proceedings like the present, we are compelled to disagree. The ruling as so understood is opposed to our decision in Re Bay State Milling Co., 223 Fed. 778, 139 C. C. A. 598 (subsequently heard on the merits as Re Soloway, 234 Fed. 67, 148 C. C. A. 83). It is also at variance with the considered judgment of the Sixth Circuit in United States ex rel. Adler v. Hammond, 104 Fed. 862, 44 C. C. A. 229.
[2] We adhere to the doctrine that a confirmed composition, because it results in discharge, is the subject of appeal, as is a discharge. Further than that this case does not require a ruling. See In re McVoy Hardware Co., 200 Fed. 949, 119 C. C. A. 337; In re Brookstone, etc., Co., 239 Fed. 697, 152 C. C. A. 531; In re Graham & Sons, 252 Fed. 93, 164 C. C. A. 205.
The motion to dismiss is denied.
The evidence before us first compels belief in one important fact; i$pis baldly impossible that Gottlieb’s financial statement, his schedules in bankruptcy and his testimony before the Commissioner can all be true. Using (for brevity’s sake) approximate figures only, he says he had at the beginning of 1918, by actual count and at cost price, goods worth $19,000. His merchandise debts amounted to no more than $5,000, and his bank borrowings to $4,000. Thirty-three weeks later he had, by his sworn schedules, goods worth at least $22,000, and which had cost more than that, while he owed $22,000 for merchandise.
If he had sold no goods and paid for none during the year 1918, he bought on credit in that year $17,000 worth of merchandise; a figure by the bankrupt’s own statement much too small. On the same hypothesis, of neither paying nor selling, but always buying on credit, he should have had at least $36,000 worth of goods on the day of bankruptcy. Of course, he admits some selling, but makes no effort worthy the name to show where the sale price went to. It does appear that in 1918 he paid off his bank indebtedness, and drew and expended for clerk hire and family expenses what he estimates at $104 a week or say $3,500. The only additional business expense mentioned is the rent of his store, which he ceased to pay (to his father-in-law) in April; its amount does not appear. If in 1918 he sold only at the rate he testified to for January, he would have taken in nearly $10,000 be*733fore bankruptcy; but, if he sold at the rate he gave for 1917, he would have similarly received over $21,000. Yet on the day of bankruptcy his cash as per schedules amounted to just $3.
The computations suggested by these figures, every one of them based on a statement of Gottlieb, are numerous and obvious, and each leads to palpable falsity under some one of the points above stated. It makes small difference for the purposes of this case whether such falsity is ultimately allocated to one heading or the other.
[3] In matters of discharge every objecting creditor starts out with the burden of proving that which he alleges. In re Miller, 212 Fed. 920, 129 C. C. A. 440. But when a set of facts is shown which unexplained would lead a reasonable man to believe the allegations of the objector, the bankrupt must explain, and a deficit in assets far less than that demonstrably existing here has been held sufficient for that purpose in this court. In re Loeb, 232 Fed. 601, 146 C. C. A. 559; In re Schultz, 250 Fed. 103, 162 C. C. A. 275. Nor is any creditor called upon to prove the substance of his objection beyond a reasonable doubt; a fair preponderance is enough. In re Garrity, 247 Fed. 311, 159 C. C. A. 404.
When such condemning facts arc shown, the bankrupt’s usual effort is in confession and avoidance; he admits the facts and seeks to avoid by ignorance, and thereby show lack of intent; for the objecting creditor lias the burden, not only of showing facts in the ordinary sense of the word, but intent also. In re Garrison, 149 Fed. 178, 79 C. C. A. 126.
But intent, being pre-eminently a fact or phenomenon that (barring confession) can never be proved otherwise than by inference, the same facts — i. e. acts and documents — which cast the burden of explanation or evidence upon ihe bankrupt also cast on him the burden of disproving the intent of doing those things which are the inevitable and natural consequences of said acts and documents. This is well considered by Sanborn, J., in McKibbon v. Haskell, 198 Fed. 639, 117 C. C. A. 343, and was, we think, plainly indicated in our decision in Re Weston, 206 Fed. 281, 124 C. C. A. 345.
In this evidence, there is no confession in the sense that untruth is admitted; the court is asked to believe what the very statement disproves. The inference from such an attitude, leads to belief in intentional falsity. Nor is there any avoidance. Gottlieb had been in business 15 years, and said he was unable personally to keep proper books; but he was under no such obligation, and never tried; his clerk kept whatever was wanted. That, after so much experience, he could not indicate the results desired from his (unproduced) clerk’s bookkeeping, is not even asserted. Indeed, his defense consists in saying (substantially), in response to his counsel’s leading question, that he did not intend to deceive anybody. Illiteracy or ignorance of English, the usual avenues of palliation, are not even suggested.
[4] Assuming, what cannot be complained of by appellee, that his financial statement of January, 1918, is true, we hold that his oath to the schedules was an oath to a falsity, and further that he failed to keep books with intent to conceal his financial condition.
On these grounds, the order appealed from is reversed, with costs.

 The specification goes into much greater detail; but the above illustrates the pleader’s theory, viz. that acts by the bankrupt that would bar a discharge, were reasons why the composition was not for the best interests of creditors. He did not assert that acts barring discharge are per so preventive of composition.