96 F. 468 | W.D. Tenn. | 1899
The first specification, as originally hied, in opposition to the bankrupt's discharge, set out that he “had not offered to surrender all his property for the benefit of his creditors; that he is now the real owner of the stock of goods, business, and property of the Jacob Hirsch Company, a corporation located and doing business at Somerville, Tennessee; and that he is now withholding ihat property from his creditors.” The second specification charged that, with the fraudulent intent to conceal his true financial condition, and in contemplation of bankruptcy, be destroyed, concealed, or failed to keep books of account or records from which his true condition might be ascertained, in this: that he has destroyed or concealed the hook where he kept the account of the cash taken in by him in his business at Somerville, Tenn., during the year 189(1, and prior thereto, from which the original entriés of his business were copied in the ledger. A motion to strike out these specifications, as insufficient, was granted upon the ground that specifications in opposition to a disci large must distinctly aver the facts of the case, and not mere conclusions of fact. Substantially, the plead
It was also objected to the specifications, in their original form, that the alleged destruction of the books, or failure to keep them, had not been charged to have occurred since the passage of the act of 189B, but, upon the contrary, that it appeared upon the face of the specifications that they related to the business done in 1896. This objection is probably covered by the one just disposed of, but it is not improper to say that in the statute itself there, is no indication of any intention' to withhold a discharge because of any destruction or failure to keep books occurring before the passage of the act. Undoubtedly congress might have extended the grounds of opposition in that manner, but, by the statute itself, the act complained of “must have been in contemplation of bankruptcy.” It was ruled in Re Holman, 92 Fed. 512, that this phrase necessarily implies that it must have been done after the passage of the bankruptcy statute, since, before that time, there could have been no .bankruptcy in contemplation, and if seems to me that there is no answer to that proposition; but of this more will be said presently, in considering-the amended specifications. Indeed, it has been argued for the bankrupt that this provision of the fourteenth section cannot, in the nature of the case, apply to any books or records of a business carried on prior to the passage of the bankruptcy statute. But this is not, in my judgment, altogether sound, and I wish to guard against any misunderstanding on that point of the ruling that has been made. Whatever may be said of “keeping” books of account or records, in respect of that, certainly if one has kept records of his business carried on before the passage of the bankruptcy statute, and these were destroyed or concealed after the passage of the act, the offense would fall within the provisions of the second class of offenses denounced, as a cause for withholding a discharge, by the fourteenth section.
Another reason urged for striking out the first specification is that it does not charge any ground for denying a discharge which is recognized by the fourteenth section of the statute. The act of 1898 nowhere requires the bankrupt to “offer to surrender his property,” nor does it provide any penalty for “withholding the same from his creditors.” If we turn to section 29, which designates the offenses punishable by imprisonment under the statute, we find that what is
The amended specifications upon which issues have been taken now present the following grounds of opposition to the discharge: First. That the bankrupt knowingly and fraudulently concealed from the referee, from his creditors, and from the trustee, while a bankrupt, certain proj>erty; that is to say, that he was, on the day on which he filed his petition in bankruptcy, the sole owner of the stock of goods, wares, and merchandise with which he is now doing business in the town of Somerville under (lie name and style of the Jacob Ilirscli Company, and he has not returned this property upon any sworn schedule filed by Mm, showing its location or value. Second. Thai' he has likewise concealed one share of stock, of which he was and is the owner at the time of the filing of his petition in bankruptcy, in the corporation known as the Jacob Hirsch Company, of the value of $50, which he did not return upon Ms schedules, and which he has not made known to his creditors by any sworn return in the bankruptcy proceedings. Third. That, with the fraudulent intent to conceal Ids true financial condition, lie had failed to keep books of account from which ids true financial condition might be ascertained, in that on the 24th of December, 1896, he was engaged in business as a merchant, and made a general assignment for the benefit of his creditors on December 5, 1896, at which time he kept and had on hand a full set of books, consisting of two ledgers, a cotton book, a blotter, and a cash book; that he had filed with the referee Ids ledgers and Ids cotton hook, but not: Ms cash book and blotter from which the original entries were made, hut pretends that he has lost those two books, when, as a matter of fact, he has destroyed or concealed them in contemplation of bankruptcy. Fourth. That he has, with, like fraudulent intent and in like contemplation of bankruptcy, destroyed or concealed the cash book and the blotter, where he kept the original records of his receipts of cash and other entries, pretending that he has lost the same, when in fact he has
No objection is taken to the form of these specifications as amended, but the bankrupt files a general plea of not guilty, and special pleas explaining his conduct in relation to the books, and the share of stock. The court shall not, of its own motion, take any exceptions to the form of the amended specifications, but desires it to be understood that it is not to be thereby implied that they are, in their form, within* the requirements of the law for specific pleading. They do not yet set out how the property has been concealed from the creditors or trustee, nor how the books have been concealed or destroyed, unless it may be said that the pleading goes upon the ground that the mere fact that the property was not put upon the schedules is, of itself, conclusive evidence of such concealment as is denounced by the statute, both criminally, and ¿s a ground for withholding the discharge, and that the mere nonproduction of the books on demand is conclusive of their destruction or concealment. It is well enough to notify attorneys that, where objection is made, the court will insist that the specifications in opposition to a discharge shall notify the bankrupt of the conduct on his part which is relied upon for denying the discharge to him, and mere general charges or “fishing” specifications will not suffice. The law affords ample opportunity, by examination of the bankrupt and otherwise, to enable the creditors to disclose the actual facts; and, while it will not be required that the evidence shall be put in the pleadings, it should be required, in all justice, and in accordance with the ordinary rules of penal or criminal as well as of civil procedure of that kind which charges fraud, that the facts must be stated, and not mere epithetical conclusions of fact, as is too common in pleadings of this character. A sufficient pleading by averring the facts would disclose the character of the transaction, without any use at all of the denunciatory words, and yet be completely within the impeachment of the statute. To say that a bankrupt has' knowingly and fraudulently concealed a thing is only to accuse by calling names, and is not pleading a fact. On the face of these specifications nothing appears. It is said that the bankrupt is the sole owner of a certain stock of goods described in the specifications. But how has he concealed it? The specification does not inform us. We can see from the proof what the creditors probably mean, but the pleading should require no such aid from the proof. The evidence should Support the averments of the plea by proving them, but it cannot supply the necessary averments of a pleading.
Briefly, the proof in this case shows that the bankrupt was in former times a prosperous merchant in the town of Somerville; that, to enlarge his business, he removed to the city of Memphis, where he failed, and subsequently returned to Somerville and went into business, and again failed, and in 1896 made a general assignment. Some six months after this last failure he again appeared in the town of Somerville, doing business under the corporate name of the Jacob Hirsch Company. He was so carrying on business at the time of the filing of his petition in bankruptcy, and is now carrying on business in that manner. He was, and is yet, the owner of one
As to the §50 share of stock owned by the bankrupt in the corporation, it appears that long before his bankruptcy — some nine months, say — he hypothecated that share of stock with his brother-in-law for a loan of §50, which has not been paid, and that the brother-in-law had, in addition to that, loaned the concern, in cash, $100, for which he is still a creditor. Nothing else appears about the ownership of the stock, and the bankrupt testifies that he forgot to put it in the schedules because he supposed that, being pledged for its value, it was not his property.
It has been very earnestly and forcibly argued that section 7 of the act of 1898 makes it the duty of the bankrupt to prepare, make out, aud file in court a schedule of his property, the location thereof, and testimony of the value in detail, and that a failure to discharge this duty is of itself a sufficient ground for the court to deny the discharge. As already intimated, the statute does not present the grounds of opposition to a discharge in that way. It is specific and definite in prescribing that conduct of a bankrupt which shall defeat him of his discharge, and the courts can incorporate into the statute no other grounds of opposition. Indeed, the general scheme of this act seems very narrowly to limit the grounds for withholding a discharge, and, on the other hand, to declare that it shall have no effect as against creditors who have certain rights and equities against the bankrupt as prescribed in the statute, some of which were, under former acts, prescribed as grounds for denying the discharge. It is unnecessary, however, to go into this feature of the act, for it is too plain for any argument that 1he mere fact: that a bankrupt has not disclosed his properly upon the schedules is not of itself a ground for denying the discharge. If the withholding from the schedules be of such a character as makes his oath to the schedules false, upon a proper specification, not found here, the falsity of that oath would be a good ground for withholding his discharge. Ho, if the withholding be of such a character as to amount, on the facts of the particular case, to knowingly and fraudulently concealing his property from the trustee, it is not only a good ground for withholding the discharge, but a criminal offense, punishable by imprisonment. As stated to counsel in Ihe argument, it is my judgment that, in the absence of all other facts, if it. should appear only that the bankrupt had willfully left his property oil' the schedules, that fact would he conclusive as a matter of evidence both of the false oath and of the concealment of his property from the trustee, but it is only as a matter of evidence that it could have that effect. If, however, it should appear from the proof that the fact of withholding the property from the schedules was satisfactorily explained by circumstances consistent with an honest belief that it did not belong to the bankrupt, it would be no ground either for a criminal prosecution or for withholding the discharge». Here the bankrupt conclusively shows that he is not engaged in I lie ordinary processes of concealment, because he had been for a long time and was openly engaged in doing business when he filed his petition; and he continues, as before he filed his petition, openly to conduct that business through the method of an organized corporation. It was and is his opinion that the corpoi*ate property has no place upon his schedules, aud does not belong to his creditors; and, if he and his brother-in-law tell the truth about it,— and there is nothing but suspicion to the contrary, — it does not, in fact or law, belong to his creditors, and therefore has no place upon
The case equally fails on the proof as to the destruction of the books. There is no proof whatever to show that he did not keep proper books of account, but, even if there were, it would fall distinctly within the ruling in Re Holman, supra, as to the charge of not keeping books or records at a time anterior to the bankruptcy statute of 1898. Also, it seems to me, on the proof, that a fair and reasonable explanation is given for the nonproduction of the blotter and cash book. What happened to this bankrupt, as shown by experience, is liable to happen to any merchant. The creditors have produced no proof to show that he has concealed or destroyed the books. The charge all hinges upon their nonproduction, and whatever implication may be drawn from the fact that he said on his examination that he had the books, and afterwards did not produce them. He gives a reasonable explanation of this, by saying that at the time of his examination he supposed they were in the store, but when he came to look for them he could not find them, and does not know where they are. Unless his testimony on this point is to be
But, apart from all this, there is nothing to show that the books were in existence at the time the bankruptcy act was passed, or that they have been lost or mislaid, and thereby concealed, since that time. In an old case, under the act of 1843, the supreme court of the United States considered the meaning of the phrase “in contemplation of bankruptcy” when used in a bankruptcy statute. Attention was called to the conflict of authority on the point as to whether it meant in contemplation of insolvency, or in contemplation of some act: of bankruptcy under the statute; and it was held that, under our legislation, it means that the debtor must be acting in view of Mug his own petition in bankruptcy, as provided by the statute, or of proceedings which might be taken against him by his creditors for some act declared by the statute to bo an act of bankruptcy. Buckingham v. McLean-, 13 How. ISO. It is to he presumed that congress used the phrase in view of this definition, as established under the act of 1841. The act of 1898 does not use the words “in contemplation of bankruptcy or insolvency,” — a phrase found in the act of 1867, — and the omission of the added word “insolvency” is therefore quite significant. Taking the two phrases together, as found in the act of 1843 and that of 3867, and the interpretations given to each by the adjudicated cases, and we can have no doubt of the meaning of the words as used in the fourteenth section of the act of 1898. In re Black, 2 Ben. 196. Fed. Cas. No. 1,457; In re Craft, 6 Blatchf. 177, Fed. Cas. No. 3,317; Id., 2 Ben. 214, Fed. Cas. No. 3,316; Carr v. Hilton, 1 Curt. 230, Fed. Cas. No. 2,436; Rison v. Knapp, 1 Dill. 187, Fed. Cas. No. 11,861; In re Wolfskill, 5 Sawy. 385, Fed. Cas. No. 17,930; In re Jones, 2 Low. 451, Fed. Cas. No. 7,446. In the last-cited case the court seems to express the opinion tha t under the act of 1867 a fraud committed before the act was passed could not be set up in opposition to a discharge. And in Re Waite, 1 Low. 207, Fed. Cas. No. 17,044, the same learned judge held that the fact of one being in contemplation of bankruptcy might be proven by circumstances.
It is in proof here that after the bankrupt’s failure, in 1896, and some time in the latter part of 1897, while the bankruptcy legislation was pending in congress, he went to one of his creditors, named Bern-hold, for the purpose of negotiating a. settlement at 20 cents on the dollar. He urged Bernhold to accept it, upon the ground that congress was about to pass a bankruptcy law, and that, if he did not, he would surely go into bankruptcy. From this circumstance it is argued by counsel for the creditors that it is conclusively proved that
On the whole case, suspicious as the circumstances may be considered, I am of the opinion that the creditors have entirely failed to show by proof that there exists any ground prescribed by the statute for withholding the discharge. Discharge granted.
Additional- Opinion.
Since the foregoing judgment was rendered, the bankrupt has asked to have his certificate of discharge issued immediately, and the creditors ask time to consider whether they shall appeal. It is not worth while now to consider the circumstances under which an appeal would operate as a supersedeas of the order overruling specifications and directing a discharge of the bankrupt, nor whether, if a certificate should be issued, a subsequent appeal would annul the discharge. It is always competent for a court temporarily to suspend the execution of its orders to give the adverse party a reasonable time to consider the next step to be taken by him; and, inasmuch as the twenty-fifth section of the act of 1898 allows only 10 days within which to appeal from a judgment granting or denying a discharge, it is fair to all parties to await the expiration of that time before issuing the certificate. Therefore it will be established as a general rule of the practice of this court that, in any case where specifications have been filed in opposition to the discharge of the bankrupt, the certificate on form No. 59 of the official forms in bankruptcy shall not issue until 10 days after the order granting the discharge has been entered, nor until any extension of the 10 days allowed by the twenty-fifth section of the act of 1898 for an appeal from the order has expired.