In re Adams

104 F. 72 | N.D.N.Y. | 1900

COXE, District. Judge.

The discharge is opposed upon two grounds: First, failure of the bankrupt to keep proper books; second, fraudulent concealment by him of property consisting: first, of his interest in the Adams Lumber Company; second, of his interest in certain policies of insurance upon his life; and, third, of his interest as a residuary owner in funds amounting to $5,000 transferred by general assignment to one Charles T. Eldred. There is no specification charging the bankrupt with having made a false oath; that question cannot, therefore, be considered in this proceeding. In re Pierce D. C.) 303 Fed. 64.

The objection that the bankrupt failed to keep books is unsupported by the proof and is not seriously pressed.

The specification alleging concealment of property is insufficient. The allegation is that the bankrupt “with a fraudulent intent has failed to include in his schedules property belonging to him,” describing it. The essential allegation, that he “kno wingly and fraudulently” concealed this property from his trustee, is omitted. The counsel for the bankrupt has, however, waived all formal objections to the specification and the question may be considered as if the allegation properly stated a case of fraudulent concealment under section 29 of the act.

The principles of law involved in this controversy are almost identical with those considered in Re Fitchard (D. C.) 103 Fed. 742, the decision in which case will be filed simultaneously with this decision. It is unnecessary to repeat what was there said.

Regarding the policies of insurance it appears that, prior to the passage of the bankruptcy act, the bankrupt and his two daughters made a joint and several note for $550, which was discounted at the Farmers’ National Bank of Malone, N. Y. This note was the success- or of two notes made by the bankrupt and indorsed by his daughter Etta during the time that the lumber business was transacted in her name. The money thus obtained was used in that business. The note was secured by two policies of insurance on the life of the bankrupt, the surrender value of which is about $500. Both policies are payable in 1905 to the bankrupt and, in case of his death, to his daughters. Both policies were; assigned to the Farmers’ National Bank, May 13, 1897. The bankrupt is a man of advanced years. His daughters have a valuable interest in the policies. They are hypothecated as security for §550, an amount greater than their surrender value. It is by no means clear, therefore, that the bankrupt has any appreciable interest therein. In re Buelow (D. C.) 3 Am. Bankr. R. 389, 98 Fed. 86; In re Steele (D. C.) 3 Am. Bankr. R. 549, 98 Fed. 78; In re Diack (D. C.) 100 Fed. 770. But conceding that the bankrupt has an interest, it is so vague, indefinite and uncertain that a charge of fraudulent concealment: cannot be predicated of the omission of the policies from his schedules. The omission is not incompatible with honesty of purpose; lie may, in entire good faith, have entertained the idea that he had no assignable interest.

The other allegations of fraud are based upon and grow out of the general assignment made by the bankrupt in December, 1891, to Charles T. Eldred. This was eight years before the petition was filed. The assignment has never been attacked in any legal proceeding. It must, therefore, be treated as an unimpeached and perfectly legal document which operated to transfer to the assignee all the property then owned by the bankrupt. There is nothing to show that the bankrupt, since the ássignment, has had any part of the assigned property in Ms possession or under bis control except as the servant of others. The proposition that the assignment was a fictitious and fraudulent transfer of title, designed to conceal the property and enable the bankrupt to retain its possession and secretly enjoy its emoluments, is based upon the merest conjecture. On the contrary it appears that the-property passed to the assignee and bas been administered by him under the assignment. Whether bis conduct bas been wise- or unwise, prudent or imprudent, are questions which are not pertinent bo the present issue. He can Kpe called to answer for bis stewardship in the courts of the state. Tbe fact that be bas not been asked to account furnishes a strong presumption that the creditors Have no valid ground of complaint. His wrongdoing, assuming it to exist, cannot be imputed to the bankrupt unless be is privy to it, or is to receive profit or advantage therefrom. There is no proof that the bankrupt and the assignee have entered into a conspiracy to plunder the creditors for the benefit of the bankrupt. Starting with the proposition, which cannot be controverted, that the assignment was and is a valid instrument vesting the title in Eldred to all the property, there- is little difficulty in discovering the fallacy of the arguments in opposition to the discharge. They all rest upon the unsupported assumption that the assignment was a fraudulent device intended to create a secret resulting trust in favor of the bankrupt. Since the assignment the bankrupt bas been endeavoring to support himself and family and bas transacted business as agent for his daughters, a makeshift not infrequently resorted to by insolvent debtors who seek to exempt their future earnings from the grasp of creditors. His action in this regard may be the subject of criticism, but that it was not illegal has been asserted by the highest judicial authority. Abbey v. Deyo, 44 N. Y. 343, and cases cited. Surely it did not amount to a fraudulent concealment of bis property. The assignee leased to one of the bankrupt’s daughters a bop yard, which was part of the assigned property, and she realized about $800 from its cultivation. This was in 1892. About the same time a small lumber business was organized under the name of the Adams Lumber Company. Tbe bankrupt’s daughters were the partners in this enterprise. They furnished the capital but took no active part in the business, which was managed by the bankrupt who contributed bis experience, labor and skill. The business was at no time remunerative and there is iiotbing to show that any one connected with it was able to save any of the profits received therefrom. Certainly there is no proof that the bankrupt has property, derived from the bop yard or the lumber company, which be has bidden from Ms trustee.

Without pursuing the subject further it may be confidently asserted that, with the possible.exception of the insurance policies, there was not a dollar’s worth of the property formerly owned by the bankrupt,' which at the date of filing the petition in bankruptcy, was owned by him or which was in bis possession or under bis control. There ivas no property the title to which vested in the trustee by virtue of the bankruptcy act. There was none which, upon the evidence here, can be recovered by the trustee. In 1891 the bankrupt assigned all his property to Eldred. He bas acquired nothing since. How then can be be convicted of fraudulent concealment? One cannot be guilty of concealment who has nothing to conceal. The bankrupt is entitled to a discharge.