M. & M. Mаnufacturing Company, Inc., a New York corporation, was adjudicated bankrupt upon an involuntary petition filed on April 21, 1932. Timothy P. Edwards, the appellee, was elected its trustee in bankruptcy, and thereafter filed with the referee two petitions, identical in form, directed, respectively, to the bankrupt and its president, to require the turning over of certain books of account alleged to be concealed from the trustee. Both petitions were consolidated into one proceeding. They were dismissed by the referee upon the ground that the trustee’s proof was not sufficiеntly clear and convincing. Upon review by the District Court the order of the referee was reversed, and the appellants were directed to turn over three specified books. From this order they have appealed.
It is urged that the petitions are insufficient in failing to allege possessiоn of the books by either of the respondents; the allegations being merely that the 'books are missing and are concealed from the petitioner by the respective respondents. This is doubtless а defect in pleading. See In re Brockton Ideal Shoe Co.,
There is substantially no dispute in the testimony as to the facts. About a month prior to the petition in bankruptcy, the corporation made an assignmеnt for the benefit of creditors, and immediately thereafter accountants for the assignee, who subsequently became accountants for the trustee in bankruptcy, went to the assignor’s premises tо make an audit of its books and records. It at onco developed that various books and records needed for the audit were missing and could not be located by the assignor’s employees. No explanation whatever was then advanced, or has since been given, as to how or when the particular hooks specified in the order appealed from disappearеd. The testimony shows that they were on the premises and used by the corporation’s auditor and bookkeeper shortly before the date of the assignment of March 29, 1932. When property is traced intо a bankrupt’s possession shortly before bankruptcy, his failure to produce it or to explain whаt became of it, supports an inference that it is still subject to his control, and justifies the entry of a turnover order. In re Graning,
As to- the aрpellant Milberg, he had, as president of the corporation, access to the books, and it appears that lie alone could have had a motive for concealing them. The three books in question were necessary to enable the auditors to check a financial statement which the bankrupt corporation issued on July 31, 1931, and which was under scrutiny by the creditors. The evidenсe shows that the bankrupt’s accountant had refused to certify the statement because he had not Ijeen allowed access to the sales record for the purpose of verifying the аccounts receivable. Milberg had then issued the statement over his own signature without the accоuntant’s certificate. He admits that in the preparation of this statement certain accounts payable relating to merchandise on hand were omitted; but he explains that this merchandise had been prematurely delivered and so he had excluded from the statement both the merchandisе and invoices covering it. Additional facts which would furnish a motive
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for Milberg. to .withhold the books in question are not lacking, but the admitted inaccuracy of the statement is the one most strongly relied upon by the trustеe. It is worthy of note that only sueh books are missing as might throw light on the actual condition of the bankrupt’s business at the date of this financial statement. This evidence was sufficient to establish' a prima faciе case, and Milberg’s bald denial that he has not the bdoks and does not know where they are was not enough to overcome it. See In re Weber Co.,
It is further urged that the District Court erred in overruling the referеe’s finding that the evidence was too inconclusive to grant the petitioner relief. It is true that, when thе trier of facts malíes a decision upon conflicting testimony involving the credibility of witnesses, his findings should be upset only in exceptional circumstances. In re Slocum,
The order is affirmed.