Standard Outfitting Co. v. Heyker

27 F.2d 229 | 6th Cir. | 1928

MACK, Circuit Judge.

Appeal from an adjudication in bankruptcy. Exceptions to the report of a special master, to whom the issue of insolvency was referred, and who reported appellant to have been solvent, were sustained by the District Judge.

Appellant, an Ohio corporation, carried on a retail installment furniture business. Its president and sole stockholder is the wife of Louis Levinson. The business had been transferred by husband to wife. Levinson held no official position and received no salary, but did the buying, exercised managerial control, and in all matters spoke for the corporation. The corporation kept no books other than a loose-leaf ledger recording each customer’s name, address, purchases, and payments. At the hearing before the master, no corporate officer was present to testify concerning its finances except Mrs. Levinson; she had very little knowledge of them.

From time to time Levinson paid the corporation creditors out of his personal funds; to what extent is not clear. Two instances of substantial payments just prior to the bankruptcy are proved. One of the creditors testified that Levinson bought the claim. When Levinson filed appellant’s schedules he did not list himself as a creditor. After the adjudication, to support a motion for rehearing, he filed an affidavit that he neither then had nor ever had had a claim against appellant on account of these payments. At the time he made the affidavit, an indictment was pending against him and several codefendants for conspiracy to violate the bankruptcy laws in respect to appellant.

Especially in view of the fact that appellant’s failure to keep books or produce informative testimony about its finances imposes upon it the burden of proving solvency, the District Judge was clearly right in including among appellant’s labilities the amounts of its indebtedness proved to have been paid by Levinson, and in characterizing his actions as an attempt to blow hot and cold: “If it suited Levinson’s purpose, the respondent could be made insolvent by the mere presentation of a presumably valid claim for money advanced. Or, if solvency suited the purpose better, bankruptcy could be defeated by disclaiming indebtedness.” Levinson was in control of appellant to such an extent as to raise the strongest inference that any payment by him was as a loan to the corporation and not a gift. No evidence contemporaneous with the payments points to an intent to make a gift; his later ex post facto statements under the shadow of an indictment were properly deemed by the District Judge to be entitled to practically no weight.

Whatever the effect of this affidavit may be to bar any claim that he may hereafter make as a creditor, it cannot affect the rights of petitioning creditors. If he was in fact a creditor on account of these payments at the time the petition in bankruptcy was filed, the subsequent waiver or disclaimer is immaterial. The liabilities in that event clearly exceeded the assets and appellee therefore was insolvent as found by the District Judge, in whose finding in this respect we concur. The valuations placed by the special master on the stock of goods and accounts receivable were properly reduced by the District Judge.

On the oral argument counsel stated a question of serious doubt as to the existence of any act of bankruptcy. The record as sent up contains no indication that any proof was offered to establish the act of bankruptcy alleged in the petition and denied in the answer. We find, however, that no error in this respect was assigned, and hence, whatever the proof, it might naturally have been omitted from the record. We are not so satisfied that the adjudication was unjust as to induce us to look into this matter, in the absence of any pertinent assignment of error.

The order of adjudication is affirmed.