Court Opinion

ID: 8745518
Source: CourtListenerOpinion
Date Created: 2022-11-26 11:05:34.970743+00
Date Added: 2024-06-11T17:00:39.008469
License: Public Domain

SWAN, District Judge.
Specifications in opposition to the discharge of the bankrupt were filed by several of his creditors, and on March 12, 1900, were referred to the referee. On April 2, 1901, on cause shown, the creditors were permitted to file amended specifications. These were as follows ;
••(1) That said bankrupt. In his petition and schedule filed in this cause, and in his application for a discharge thereof, did knowingly and willfully make false oath and false oaths, in this: that the said bankrupt in said schedules and petitions filed herein did make oath that at the time of filing *508said petition in bankruptcy be had no assets, whereas in truth and in fact he, the said bankrupt, had and still has in his possession and ownership money and property to the value of $5,000. (2) That said bankrupt, in his schedules and petition filed herein, and in his sworn testimony taken before the referee, did knowingly and willfully make false oath, in declaring under oath that he had no assets or property, whereas in truth and in fact he had and still has, in money and property taken, received, and abstracted from his store and stock of goods and business owned and operated by him previous to filing said petition in bankruptcy, assets to the amount of $5,000, which the above-named objectors are not able to more particularly describe.”
The contest over the bankrupt’s discharge was had over these two, specifications, the prior objections being practically abandoned.
Prior to January x, 1898, the bankrupt had been in business in Bay-City for upward of five years as a retail dealer in clothing, boots and shoes, and men’s furnishing goods. He testifies that he can neither read nor write, except to write his name, and there is no showing to the contrary. His principal business man, the bookkeeper, was one Simon Grabowski, who apparently continued with him until about January 1, 1899. On or about January 31, 1898, the bankrupt made a statement of his financial condition to R. G. Dun & Co. This statement was made out by Grabowski, but signed and'delivered by the bankrupt to Dun & Co. It reads as follows:
“M. Grossman, Dealer in Clothing, Hats and Caps, Gent’s Furnishing Goods, Boots and Shoes, 806 Water Street, Bay City, Mich., Jan. 4, 1898.
Stock on hand................................................... $5,467 34
Cash on hand and in bank....................................... 1,011 72
Accounts ....................................................... 175 00
Fixtures ....................................................... 80 00
Kesources ...................................................... $6,734 06
Liabilities ...................................................... 2,075 29
Balance .................................................. $4,658 77
“[Signed] M. Grossman.”
Upon his examination his bank book was put in evidence, from which it appears that on January 1, 1898, his balance in the bank was $481.92. On the 1st day of November, 1898, according to the bank book, his balance was $273.23, and his monthly payments from said bank account in 1898 to November 1st were as follows:
January ., $1,402 60
February • 542 40
March ... 084 27
April .... 1,573 32
May ..... 757 58
June _____ July ..... 1,485 66 787 18
August ... 1,135 48
September 718 48
October .. 456 10
Total .................................................... $9,843 21
Between July 1 and November 23,1898, the proofs show that he received new goods to the amount of $7,457 at invoice prices, and that his payments on account of such goods were less than $200. November 23,1898,he filed a chattel mortgage running to one Orr as trustee, *509purporting to cover all of his property and to secure all of his debts. In this chattel mortgage his indebtedness is scheduled at $11,505.83, including $1,250 to his wife and $2,230 to his mother-in-law, Mrs. Kate Roth. The trustee, Mr. Orr, took immediate possession of his property, inventoried and appraised it at once, and the value o( the stock and fixtures was appraised at $2,560. The trustee sold under the mortgage, and realized from the stock and fixtures the sum of $1,985. The chattel mortgage sale was held December 23, 1898, and the property was purchased by the bankrupt’s mother-in-law. The business has been carried on in the same store from that time until the present, with the bankrupt in full charge and management. The testimony shows that the stock of the bankrupt in January, 1898, and in July, 1898, amounted to about $4,000 in value.. The bankrupt filed his voluntary petition in October, 1899, in which he declared that he had no property except such as was exempt by law. In his schedules he sets forth his liabilities as $10,386.14. These were almost entirely lor goods purchased after July 1, 1898, excepting the sums of $1,095.05 and $1,986.48, which he alleged were loans from his wife and mother-in-law, respectively, made in 1895 and in 1897. The only book of account sent up with the testimony by the referee is the bankrupt’s bank book, from which the following facts appear: July 1, 1898, he had a balance of $124.74, and his total deposits during the month were $895.98. At the end of the month the balance to his credit in the batik was $98.80. In August, 1898, be deposited $1,370.46. Of this sum he paid out in August ail but $234.84. lie deposited during September $772.31, of which in that month he paid out all but $53.73. In October, 1898, he deposited $729.23, of which he paid out in that month $273.23. November 8th he deposited $50; November 14th, $39.65. At this date his bank book transactions seem to have been closed. From the foregoing it will be seen that he received and deposited from July 1 to November 14, 1898, $3,409.86; that he paid out during the same time $3,097.42. Not a dollar of the latter amount seems to have been paid for goods purchased during" the period mentioned, nor does it appear that the funds in the hank were used to pay creditors, or for what purpose the sums drawn were paid. Grabowski, his bookkeeper, testifies, from the merchandise accounts which were produced before the referee, to the substantial correctness of the indebtedness for merchandise purchased and delivered to the bankrupt after July x, 1898. The bankrupt does not deny the correctness of any of these claims, or pretend to have paid any of his creditors except the Peerless Manufacturing Company, which seems to have received ahí mi $14,-5 for goods sold and delivered to the bankrupt after July ;>. 1898. No attempt is made by the bankrupt to account for tí 'disposition of the moneys, the payment of which is evidenced by Ins mink books, of to explain the disappearance from his assets of cl 1 v2 difference between his stock on hand July 1, 1898, with his :í¡ib:,u.y.ient purchases of $7,457, and that covered by the chattel it o ftgage, which was inventoried at $2,560, as stated. If, as the torcteo finds, he had his stock of $4,000 worth of goods July 1, i8.<)8, and added thereto by purchases of goods of the value of $7,457, it is obvious that he must *510have had a stock of value between eleven and twelve thousand dollars during the period between July i and November 23, 1898. ' Whether this stock was sold in great part, and the proceeds deposited and used by the bankrupt, or what became of it, does not appear. The checks drawn by the bankrupt upon his bank account were not produced. The check stub book he had destroyed. The books of account kept by Grabowslci, who described himself as a “general utility man,” and disclaimed competency as a bookkeeper, fail to afford any explanation for the disappearance of these goods from the bankrupt’s assets, or their avails if.sold. The bankrupt’s testimony, making due allowance for the fact that he did not keep the books and was unable to read and write, is very unsatisfactory. He disclaims remembrance of the most important business transactions, which must have been known to him, or should have been evidenced by entries on the books. Grabowslci testifies that such entries were made thereof as were directed by Grossman. It further appears that prior to July 1, 1898, the bankrupt had made a statement to R. G. Dun & Co., which made no mention whatever of the alleged indebtedness of the bankrupt to his mother-in-law or his wife, and claimed that his net assets were about $4,600. He seeks • to evade responsibility for this statement by the fact that it was made out by Grabowslci, but it is scarcely credible that Grossman signed it, as he admits he did, without knowing its substance. It is difficult to reconcile the omission in his statements of his alleged indebtedness to his mother-in-law and to his wife with the acknowledgments in the schedules attached to his voluntary petition that he was in their debt to the amount of over $3,000, which indebtedness was created in 1895 and in 1897. While this in itself is not ground for refusing his discharge, it discredits his testimony, and casts a strong suspicion upon the rectitude of his subsequent business career, and his disposition of the large purchase's of goods made after July 1, 1898. The burden of showing a lawful disposition of his property and its proceeds, and of explaining the concealment until he filed his petition in bankruptcy of his alleged debts to his wife and mother-in-law, and generally of making a full and frank disclosure of his pecuniary transactions, was upon the bankrupt. This is the express requirement of section 7, subd. 9, of the bankruptcy act. He has failed to perform this duty, to produce his books for examination by his creditors, or to offer any explanation whatever of the disposition of his property and its avails. It is impossible to learn from his testimony what he did with the $7,457 worth of goods bought after July 1,'-1898, or the $4,000 of goods in stock before that time. Accepting thp facts as found by the referee, from whose careful report I have quoJqd largely, I am compelled to differ from him as to the effect of the testimony. I cannot believe that nearly $12,000 worth of goods could''have honestly dwindled to -a stock of $2,560, as- evidenced by the inventory of Mr. Bralcie, the trustee under the chattel mortgage, between ..July x, 1898, and November 23, 1898, without the knowledge and actiye aid of the bankrupt. If he sold goods in .that time to the amount of the difference between these sums, his books should show the sales and what he did with the proceeds. He *511vouchsafes no explanation of this shrinkage in his stock, and admits no additions to his bank account which would throw light upon flic matter, lie must have had the goods or.their proceeds when he filed his petition. The only conclusion of law which can be drawn from these facts is that the bankrupt knowingly and fraudulently swore falsely that he had no assets, and therefore is not entitled to a discharge. In re Dewell, 2 Nat. Bankr. N. 598, 100 Fed. 633; In re Finkelstein, 2 Nat. Bankr. N. 839, 101 Fed. 418; Knitting Works v. Schreiber, 2 Nat. Bankr. N. 899, 101 Fed. 810; Id., 4 Am. Bankr. R. 299, 101 Fed. 810.
In reference to the compensation to which the referee is entitled, it is clear that the duty he has performed in this matter is outside of his official position, and is that of a special master. Fellows v. Freudenthal, 3 Nat. Bankr. N. 97, 102 Fed. 731. It appears that the examination upon the reference had upon the bankrupt’s application for a discharge occupied three days. For this the referee should be allowed the sum of $25, and his necessary disbursements for stenographer's fees at the usual rates for taking and reporting the testimony.
An order will be entered in accordance with the foregoing o¡>iuion.