No. 2661 | D. Or. | Jan 3, 1916
This matter comes up on objections to the discharge of the bankrupts; the bankrupts consisting of Hannah Josephson, Sam S. Josephson, and Julien Josephson, doing business under the firm name of Josephsons. Specifications were filed by Pontiac Shoe Manufacturing Company, Dougherty Shoe Company, and Krausse Bros. The specifications set forth that the bankrupts obtained property on credit, through material false statements in writing made to each of the above-named firms, and to the firm of Bradshaw Bros., and that, with intent to conceal their true financial condition, the bankrupts have destroyed, concealed, or failed to keep hooks of account or records from which such condition might be ascertained.
The cause was referred to C. D. Hamilton, referee in bankruptcy, to hear and take the testimony and to report his findings and recommendations. This the 'ref erée has attended to, and has reported recommending that a discharge be not allowed as to each of the members of the firm. The report shows, among other things, that in the management of the firm’s business Julien Josephson had charge of the correspondence, paying, bills, etc., and that Sam S. Josephson had charge of the sales department, but that both were actively engaged in carrying on and transacting the business of the firm; that Hannah Josephson was not an active member of the firm, and had been absent for the greater portion of the time for the past four years prior to closing the business, and knew little of the affairs of the firm, and was not actively engaged in carrying on the business thereof.
“That about two years previous to their closing business they discontinued doing a general credit business and went onto a cash basis, and from that time on until they filed their petition in bankruptcy the only record of the business kept was that afforded by a daily balance system, as shown by the National Gash Register sales slips. A record of their indebtedness to wholesale houses from whom they purchased stock was kept hy filing the invoices or bills for reference, and prior to closing business they entered up these invoices or bills in a book, for the purpose of referring to their creditors' in making up the schedules in bankruptcy, and afteri entering up said bills in the book they were either mislaid or destroyed.”
This finding, read in connection with the evidence, shows its intendment to be that, prior to closing the business — that is, when it was found that bankruptcy was the inevitable result — they entered up these invoices, etc.; so that there was no entering up of the invoices or bills in any book during the continuance of the business. Now, the question arises whether, under Bankruptcy Act, § 14b (2), the bankrupts have, with intent to conceal their financial condition,
The intent spoken of in this clause of the act need not be proven by absolute showing that the party, in failing to keep, books, designed to conceal assets or fail to disclose 'the state of his business; but it may be deduced from all-the facts and circumstances in the case and thus ascertained and deterrhined. The well-established rule is often invoked in determining the intent, namely, that a man must be presumed to intend the natural consequences of his act. Now, from the findings of the referee it would appear that this firm kept absolutely no books at all, and the only record that they had for reference was the register record of cash receipts. The invoices showing the purchases were simply filed for reference, but during the course of the business, no record — book record or otherwise — was made of these bills, so that there were absolutely no books by which the condition, financial or otherwise, of the firm could be ascertained or kept; and I think the inference is so strong as to admit of no cavil that this firm failed to keep books with the purpose of covering their assets, so that they might not be definitely known to their creditors, or to those whose business it might become to look into their financial condition. This conclusion is borne out upon authority. See In re Newbury & Dunham, 209 F. 195" court="2d Cir." date_filed="1913-11-11" href="https://app.midpage.ai/document/in-re-newbury--dunham-8789976?utm_source=webapp" opinion_id="8789976">209 Fed. 195, 126 C. C. A. 207; In re Goldich (D. C.) 164 F. 882" court="E.D. Pa." date_filed="1908-10-09" href="https://app.midpage.ai/document/in-re-goldich-8768736?utm_source=webapp" opinion_id="8768736">164 Fed. 882.
That “in the schedules as filed the indebtedness is given as unsecured claims, $28,786.99; secured claims, $20,590 — making a total indebtedness of $49,376.99. In addition to the above, there has been filed and allowed, up to and including the 23d of April, 1914, additional unsecured' claims amounting to $9,597.56, making the total indebtedness $58,974.55.”
This latter finding relates to the showing made at the time of filing the schedule in the bankruptcy court, and from this finding it appears that there was a grossly incorrect statement of the financial condition of the firm made to Krausse Bros., and the question arises whether this act upon the part of the bankrupts will defeat their right of discharge. That the statement was incorrect and misleading there is no shadow of doubt, but whether it was false in the sense of the