1 F. Cas. 1054 | D. Mich. | 1878
Substantially three objections are made to the bankrupt’s books of account. 1. That they did not exhibit the condition of his business, that no trial balance could be made from them, and that Antisdel’s individual account was unintelligible. 2. That there were unexplained mutilations and erasures. 3. That he had omitted to credit two or three small amounts, and had made false entries of advances to his wife.
With regard to the first objection, I fully concur in the opinion of Judge Longyear in the case of In re Archenbrown, [Case No. 505,] that the books of account of a merchant, whatever be their form and number, must be so kept as to give the creditors an intelligible idea of the business, and enable a competent accountant to ascertain the debt- or’s financial condition. If that be done, tbe form in which they are kept is of no importance; but if it be not done, then it is immaterial whether the omission was fraudulent or otherwise. The evidence of the experts upon the subject is somewhat conflicting — one testifying that a trial balance could not be made, and three that it could be. The books consist of a ledger, a cash-book, a journal or day-book, and are kept in the form in which the books of country merchants are ordinarily kept. While there may be errors in posting, which would prevent • a balance being obtained, upon the first trial, I am satisfied that such balance could be obtained with no extraordinary effort, and that from an examination of these books a competent accountant could gain a correct idea of the bankrupt’s business. .
To sustain tbe second objection, I think it should be made to appear that the mutilations or erasures were fraudulent, and that the ruling in the case of In re Archenbrown, [supra,] above cited, extends no further than to the form and nature of the books. In re Beatty, [Case No. 1,196;] In re Pierson, [Id. 11,153;] In re Burgess, [Id. 2,153.] There are undoubtedly numerous erasures through these books, but all of them seem to have arisen from errors in the original entries, subsequently corrected by erasing the figures, and writing the corrected ones over them. There is not the slightest evidence of a fraudulent intent.
The third objection, that certain credits to which his customers were entitled were omitted and certain false entries made, is wholly unsupported by the testimony.
In support of the first specification, it was proven that on the 6th of August, 1873, the bankrupt conveyed directly to his wife, for the nominal consideration of two thousand dollars, about twenty acres of land in Union City; that on 7th of February, 1872, he con
The second subdivision of section 5110 requires the court to refuse a discharge, “if the bankrupt has concealed any part of his estate or effects.” This specification is satisfied by proof that the bankrupt has concealed his title to real estate, by leaving out of his schedules property that has been conveyed by him in fraud of his creditors. In re Hussman, [Case No. 6,051;] In re Rathbone, [Id. 11,583, Id. 11,581;] In re Hill, [Id. 6,483;] In re Goodridge; [Id. 5,547.] The facts in this case seem to me to fall within the ruling of the supreme court in Humes v. Scruggs, 94 U. S. 22, and to establish a case of a conveyance made with intent to hinder, delay, and defraud creditors. The court in his case seems to me to establish a most salutary principle in holding that “if the money that a married woman might have had secured to her own use is allowed to go into the business of her husband, and to be mixed with his property, and is applied to the purchase of real estate for his advantage, or for the purpose of giving him credit in his business, and is thus used for a series of years, there being no specification when the same is purchased that such real estate shall be the property of the wife, the same becomes the property of the husband for the purpose of paying his debts; he cannot retain it until bankruptcy occurs and then convey it to his wife; such conveyance is in fraud of the just claims of the creditors of the husband.” See, also, Phipps v. Sedgwick, 95 U. S. 3. Putting the facts in this case in the most favorable light for the bankrupt, it appears that he received this money of his wife without giving her security, or any written evidence of the loan; that he held it in his possession for upwards of twenty years, having in the meantime purchased land which he might have conveyed to his wife in satisfaction of the debt, but which he held in his own name, and thereby acquired credit at the bank; that the loan was made, partly at least, upon the faith of this security, and that he made the conveyance to his wife at a time when he was heavily indebted, and when a withdrawal of this amount of property from his assets was likely to embarrass him seriously in meeting his obligations. Although it does not appear that he had failed to meet his paper at that time, he continued embarrassed, and finally was compelled to wind up his business in a court of bankruptcy. This is regarded as sufficient evidence of insolvency as to existing creditors, whose debts remain unpaid. Bump, Fraud. Gonv. 294. To hold that a member of a firm in embarrassed circumstances may convey all his individual property to his wife in payment of a debt barred by the statute of limitations for fourteen years is a premium upon fraud I am unwilling to offer. If such a transfer be sustainable at all, I think it should be made within a reasonable time, at least within the six years fixed by the statute. But it appears by the record in this case that Charles T. Allen, cashier of the Union City National Bank, the opposing creditor, in June, 1875, recovered a judgment in the circuit court for the county of Branch against the bankrupt for the debt which was proved by the bank in this court; that he afterwards filed a creditor’s bill against Antisdel and his wife, praying that these conveyances be set aside and declared to have been made in fraud of creditors; that the case went to a regular hearing upon pleadings and proofs, and his bill was dismissed, and upon appeal to the supreme court, the decree of the circuit court in that regard was affirmed. It is insisted that the objecting creditor is estopped by this decree to claim here that this conveyance was made in fraud of creditors.
Three replies are made to this defence:
1. That the proceedings are not identical. A similar question arose in Re Hussman, [Case No. 6,951,] in which the opposing creditors pleaded a decree of a state court setting aside a similar conveyance as fraudulent in bar of a discharge, and the learned judge held it to be a case of res adjudicata. The question litigated in the state court was practically the same, .and I see no reason why its judgment does not operate as an estoppel. See Downer v. Rowell, 25 Vt. 336. The cases of Jones v. Milbank, 6 Lans. 73, and Bradley v. Hunter, 50 Ala. 265, evidently have no application.
2. That the parties are not identical. But it appears distinctly by tne testimony in this case, that Allen was cashier of the Union City National Bank, that the foundation of his suit was the debt proved by the bank in
3. That admitting the question is res adju-dicata as between the opposing creditor and the bankrupt, it is insisted that the court is bound óf its own motion to refuse a discharge, wherever it can see that the bankrupt has committed an act which if properly pleaded would bar a discharge. I know of but one case»which tends to support this .proposition, viz.: In Re Wilkinson, [Case No. 17,667,] in which the court, upon inspecting the record of the bankrupt’s examination by the assignee, discovered that he had lost a large sum of money in gambling, and refused a discharge, although creditors interposed no objection. The circumstances of this ease were such as to appeal strongly to the discretion of the court. The questio'u does not seem to have been argued, and the matter apparently did not receive any very careful consideration. The other cases cited by counsel lend no support at all to this proposition. In Re Houghton, [Id. 6,730,] the only point considered was, whether the court could permit opposition to be made after the return day of the order to show cause, where a creditor, who ought to have considered himself the representative of all the creditors, had filed specifications of opposition, and then withdrew them. In the ease of In re Palmer, [Id. 10,678,] the bankrupt obtained the consent of a sufficient number to entitle him to his discharge, but desiring to obtain also the consent of another creditor, “to strengthen his application,” he gave him a note for $40 with security, and in consideration thereof the creditor signed his consent; another creditor opposed the discharge because of this transaction, and the learned chief justice held that, although there was a sufficient number and amount without this, he was still precluded from obtaining his discharge. It is true that he remarks in the course of his opinion that “the courts are as much bound by the provisions of the act as the bankrupt himself, and if it appears in the regular course of the proceedings that an applicant for a discharge has failed»in any particular to perform his duties as a bankrupt, the application must be refused.” This language, however, must be considered In connection with the facts of the case, which were far from sustaining the position that the court is bound of its own motion to refuse a discharge. The better opinion seems to be, that creditors who have been duly notified, and make no opposition, are regarded as consenting to a discharge; and that the court will only consider whether the bankrupt has committed an act which would bar a discharge, upon specifications regularly-filed in opposition thereto. Creditors v. Williams, [Case No. 3,379;] In re Sullivan, [In re Sutherland, Case No. 13,640;] In re Schuyler, [Id. 12,494;] In re Rosenfeld, [Id. 12,057.] Tlie books are full of cases holding that the specifications must not be vague and general, but distinct, precise and specific, and so framed as to advise the bankrupt what facts he must be prepared to meet and resist. In re Rathbone, [Id. 11,580;] In re Hill, [Id. 6,482;] In re Hansen, [Id. 6,039;] In re Waggoner, [Id. 17,037.] But of what use all this particularity in framing an issue, if the court may disregard the issue thus framed, and refuse a discharge mero motu if it appears the bankrupt has committed any other act not covered by the specifications? Suppose there be a trial by jury upon the specifications; that upon such trial it should appear that the bankrupt had not'committed the act alleged, or that a creditor was estopped to take advantage of it; but, that he had committed some other act which would bar his discharge; would the court be bound to refuse a discharge, notwithstanding the verdict of the jury that the specifications were not sustained. It seems to me that the statement of this proposition is its own answer. When the bankrupt has taken the required oath, I think a discharge should only be refused when some creditor has filed specifications of his opposition thereto upon which an issue can be joined, and the bankrupt be heard in his defence. I do not feel authorized in this case to refuse a discharge, but will direct it to be withheld for a few days to permit other creditors to intervene in case they should desire to do so. The point upon which these specifications are overruled is a technical one, and it may be that the court would permit other creditors who have awaited the result of this proceeding to intervene and take up these specifications in their own behalf.