96 F. 308 | E.D. Mo. | 1899
(after stating the facts as above). Accompanying the certilicate of this case to this court, the referee sent up the testimony of Rosser and that of various other witnesses, who were examined on the 23d and 24 th days of June, 1899, and also the schedules as hied by the said Rosser. From these schedules and the testimony of said Rosser the following facts appeared: Rosser began the general merchandise business at Center, Ralls county, Mo., in the month of June, 1898. It is not made to appear from the testimony that at the time he entered the business he was iu debt. On the contrary, it appears that he had a cash capital of about §52,000, a portion of which was iu hank. He first bought out a small stock of goods, and then began making small purchases, hut later made large purchases of various merchants in different cities, chiefly in the city of Hi. Louis. During the months of January and February, 1899, large quantities of these goods purchased were delivered. Early in March following, and before the bills for these large quantities of goods had nialured. Rosser began negotiating a trade of his entire stock of goods and merchandise to one Briscoe for a house and lot in said town of Genter, and a 120-acre tract of land situate near thereto. Tiie negotiations were pending about 12 days, and on the 16th of March the trade was consummated. Immediately before the trade was consummated, an invoice of the goods on hand was taken, showing something about $3,600 of stock on hand. Of this stock $3,000, as invoiced, was turned over to Briscoe for the realty aforesaid, and (he remainder of the stock was sold in job lots to confidential friends, former employes, and near relatives. The persons to whom these job lots of goods were sold were creditors of Rosser, and, notwithstanding that fact, paid cash for the goods which they bought. The 120-acre tract of land which Briscoe conveyed to him in part payment for the goods was mortgaged at that time for nearly its full value, and the mortgage due. The house and lot were unincumbered, and worth about §>1.400. Pending the negotiations for this trade between Briscoe and himself, Rosser, with the assistance of his attorney, was negotiating a loan upon the land and house and lot above referred to. The deed from Briscoe to the bankrupt for the house and lot and land was executed on the 16th of March, and on the day following a man by the name of Logan, with whom Rosser’s attorney had been negotiating for a loan, advanced to Rosser $2,500 on the laud and house and lot, and took a mortgage to secure the same, which matured in six months. The deeds from Briscoe to Rosser, and the mortgage from Rosser to Logan, were recorded about the same time, — possibly on the same day, — so that the negotiations for the sale of the mer
I have carefully read over all the testimony, and carefully considered the questions involved, because of its important bearing, not only upon the rights of the bankrupt, but as it may affect the general administration of the bankrupt law. The ninth paragraph of section 7 of the bankrupt law provides that the bankrupt shall, "when present at the first meeting of his creditors, and at such other times as the court shall order, submit to an examination concerning the conduct of his business, the cause of his bankruptcy, his dealings with his creditors and other persons, the amount, kind and whereabouts of his property, and, in addition, all matters which may affect the administration'and settlement of Ms estate”; and section 41 provides that "a person shall not, in proceedings before a referee, disobey or resist any lawful order, process, writ,” etc.; and in paragraph b of that section it is provided “that the referee shall certify the facts to the judge, if any person shall do any of the things forbidden in the section. The judge shall thereupon, in a summary manner, hear evidence as to the acts complained of, and if it is such as to warrant him in so doing, punish such person in the same manner and to the same extent as for a contempt committed before ihe court of bankruptcy, or commit such person upon ihe same conditions as if the doing of the forbidden act bad occurred with reference to the process of, or in the presence of, the court.” The question, therefore, arises whether the order made by the referee was a lawful order, within the meaning of section 41 of the bankrupt act. The present bankrupt law is new, and there are very few adjudications. A good deal of light, however, is Thrown upon this subject by decisions under the English bankrupt law, as well as under the former bankrupt laws of this country. A case strikingly in point with this (in which the cases are reviewed) is the case of In re Salkey, 21 Fed. Cas. 235 (No. 32,253), in which Judge Blodgett said:
“The bankrupts in this case occupy substantially the attitude of saying to the court: ‘We have had in, our possession assets to the value of over $20,000 between January and October, 1873, and refuse to give any account thereof. We have not turned them over to our assignee. We do not admit we have them in our possession. The court and creditors must help themselves; do the best you can. We stand mute, and refuse to throw any light upon the subject of the disposition of this large amount of funds.’ ”
That statement is no stronger than the facts in this case. Between June, 1898, and March, 1899, this defendant had in his possession many thousands of dollars’ worth of goods. He had capital, when he entered business, of S2.Ü00. He quit business with the $2,000 gone, §10,000 in debt, $5,400 contracted for merchandise bought, and in about one month before he was adjudicated a bankrupt he had in his possession $2,500 in cash, raised by mortgage, and several hundred dollars in cash, the proceeds of the sale of the goods. He says:
“I have paid no debts. T have no goods. I disposed of the $2,500 in money. .My book accounts are practically worthless, and nominal in amount. My*312 other assets amount to very little. I decline to give any account of what I have done with the money I have received on this mortgage, and I have not turned over to the trustee that which I received for goods. Now, do the best you can. I decline to give any account of what I did with it.”
In the case of In re Salkey, supra, Judge Blodgett said: .
“Is the court to sit tamely hy, and be baffled by such acts of practical contumacy on the part of a bankrupt? Perhaps no more forcible illustration of the n'ecessity of the exercise of the powers specifically granted to the English bankrupt court, and, as I have claimed, impliedly granted to the bankrupt courts under our law, could be imagined than the ease before us. Here the bankrupts admit that between the 1st of January, 1873, and the time that proceedings in bankruptcy were commenced against them, they had merchandise and property in their possession which they had purchased on credit, and not paid for, to the value of over $35,000. They refuse to explain what has become of that property. They offer no hypothesis to account for its disappearance, but simply say, in response to the final order for accounting, that they have no further account to give. Can it be said that any reasonable mind should be satisfied with such an accounting by a bankrupt for his assets? Can it be said that a court charged with the administration of the estate of a bankrupt, and bound to see that all the estate goes to the assignee for the benefit of creditors, is to be satisfied, on such a showing, that the bankrupts have honestly turned over to the officers of the court all their assets? Ought the court to be put off with mere silence, or refusal or negjeet to account in a reasonable manner for assets traced clearly to and admitted by the bankrupts themselves to have been in their hands and under their control at so recent a date? The administration of bankrupt estates is, in the main, unsatisfactory at best; but how much more must it be if there is no power to unearth concealed assets, and compel bankrupts to disgorge their hidden property. The duty of the bankrupt is to honestly account for his assets according to facts. He may have lost his property by unfortunate speculations, or by gambling, even, so that it is beyond his reach or that of his assignees, and a true statement of the facts would be an accounting for it. That is a showing of what has become of it, within the intention of the law; but until some explanation is made the court must hold the bankrupt accountable. If, upon such examination, it is made to appear to the satisfaction of the court that a bankrupt has assets secreted which he has not delivered to his assignee, surely it could not be expected that the court should be content with the mere barren results of the information which the examination should give; but the court clearly has the power to enforce the surrender of the property, if it appears to the satisfaction of the court that it is still in the control of the bankrupts themselves, or no disclosure is made to show that any other person has possession of it. The conclusion is inevitable, from the admissions of the bankrupts in the examinations, that they still have the possession, in some manner, of those goods or their proceeds, or they have information or knowledge as to where those goods or proceeds can be found, and fraudulently withhold such information.”
,If this language had been used with reference to the case at bar it must he conceded it could no't have been more apposite. In this connection, see the Case of Purvine, reported in the National Bankruptcy News, June 15, 1899, No. 14, p. 326, decided by United States District Judge Edward R. Meeks. In both cases cited the parties were committed until they disgorged the assets in their possession.
If any case was ever presented to a court of justice which disclosed a more deliberate and corrupt scheme on the part of a bankrupt to swindle his creditors than the one at bar, I have not met with it. The story he tells of what he did after getting the money is so evasive, unreasonable, and incredible as to produce but one effect, — that of utterly destroying the credibility of the bankrupt. Indeed, his whole evidence covering the period in which he was in business shows