In re Leslie

• Decision Date: 03 January 1903
• Citation: 119 F. 406
• Parties: In re LESLIE.
• Court: U.S. District Court — Northern District of New York

119 F. 406

In re LESLIE.

United States District Court, N.D. New York.

January 3, 1903

White Cheney & Shinaman, for bankrupt.

Benjamin Stolz, for opposing creditors.

RAY District Judge.

On or about October 1, 1900, the bankrupt filed his petition and schedules in bankruptcy. The schedules contained a list of his liabilities and an inventory of his assets. At the first meeting of the creditors a trustee was elected, and he proceeded, as the evidence shows, to perform the duties of his office in a very loose and unsatisfactory manner. The bankrupt himself seems to have conducted his business in a very loose and unsatisfactory manner. The opposing creditors allege, and the petition and schedules of the bankrupt, with other evidence, demonstrate, that within a year of the failure of Leslie there was a shrinkage in his assets of at least $12,000. From this fact the creditors claim that the court is justified in finding and holding that the bankrupt had that amount of property at the time of his failure, and has concealed the same from his creditors and from the trustee. The bankrupt does not explain or attempt to explain this shrinkage. His mode and manner of living are not shown. There is no pretense that he met with serious losses. The naked fact stands that there was a shrinkage in his assets of about $12,000 within the time mentioned. It may be that the bankrupt had this money at the time of his failure, but there is no proof of the fact. He may have wasted the same in riotous and extravagant living or in gambling. The case is bare of proof on this question. The referee was justified in holding that there was no sufficient proof that the bankrupt had this amount of money at the time of his failure.

But a more serious question is presented from the evidence. It is alleged and shown that the bankrupt had in his employ at the time of his failure a person who was selling goods for himself or the bankrupt, and paying therefor to the bankrupt. It is immaterial how that fact was. At the time of the failure, and at the time of filing the petition in bankruptcy, at least $113 was owing to the bankrupt, either from the persons who had had the goods, or from the salesman who made the sales. This salesman or agent, whichever he may be called, collected the money and turned it over to the bookkeeper of the bankrupt; and she, in turn, paid it to the bankrupt after he had filed his petition in bankruptcy, and at about the time the trustee was appointed. It is claimed that the bankrupt did not turn this money over to the trustee, but he says that he cannot tell the time or place when he paid it over, or the circumstances under which the payment was made. He took no receipt. One witness testifies in substance, that he was requested by the bankrupt not to say anything about this money. The trustee says that the money was paid over to him by the bankrupt, but he gave no receipt, and is unable to tell when or where the money was paid to him. He did not deposit it as a separate or distinct item, nor does he pretend that he deposited it at the time he received it. He claims that he took it to his office, and that it was put in the drawer of a clerk in the office, and remained there for several days, and that in the meantime he was making collections, and finally sold the whole stock, and that the money was all deposited in a lump sum. The trustee also testifies that he kept no book of account, but did keep some loose memoranda on slips of paper, and that these memoranda have all been lost or destroyed. When, where, or how such loss occurred, is not explained. The law partner of the trustee was not sworn, nor were the clerks in the office. At one time the trustee testified, and his accounts show certain collections of certain accounts. If that testimony was true, and he collected accounts to the amount he said he did, then he never received this $113 from the bankrupt, or, if he did, he never accounted for it or deposited it in the bank, as it was his duty to do. The special master evinced a disinclination to accept this statement of the bankrupt and of the trustee, but, as it was not contradicted directly, appears to have felt himself bound to accept the statement. A witness may be as thoroughly discredited by the inherent improbabilities of his testimony as by the direct testimony of witnesses. This court is not inclined to believe, and does not believe, on the evidence now produced, that his money was ever turned over by the bankrupt to the trustee. It is satisfied from the evidence now before it that the bankrupt and the trustee were in collusion. It may be, however, that the testimony of the law partner of the trustee and of his clerks, if they are called as witnesses, will be of such a nature as to convince this court that the money was paid over to the trustee as alleged. It seems incredible that an officer of this court, receiving that amount of money belonging to the creditors of this bankrupt estate, would allow it to lie around loose in his office in the manner described. If, however, it shall appear that this was the manner of doing business in that office, the court may be compelled to accept the statements of the witnesses; but it will not accept the evidence now before the court, or believe that such a loose manner of conducting business prevailed, or that the trustee was guilty of such gross violations of duty as the evidence and his own confessions, unexplained, establish, when given to secure a discharge for the bankrupt, and after the trustee has been discharged. The fact that this bankrupt received this money after his petition was filed, without authority of the trustee, which he had no right to do, being conceded, and its disposition not being disclosed, the burden of proof so far shifted that it was incumbent on him to establish by credible evidence that he paid it over to the trustee. Asher v. Bank, 7 Alb.Law J. 43; Heinemann v. Heard, 62 N.Y. 448; Eichhold v. Tiffany, 20 Misc.Rep. 680, 46 N.Y.Supp. 534; Whitlatch v. Casualty Co., 149 N.Y. 50, 43 N.E. 405. This is the only transaction of the kind connected with that estate, and it is not credible that intelligent men have forgotten where or about when the payment of that money took place.

Again, in his report, the trustee says:

'From the time of the acceptance of my trust herein to the date of sale, I made strenuous efforts through my attorney, to collect in the outstanding accounts due and owing the bankrupt estate, and did succeed in collecting, after having sent out in the neighborhood of 800 letters, the sum of $151.81.'

Here is a plain statement that the trustee, as the result of strenuous effort through his attorney, collected on these accounts $151.81 after sending 800 letters. No suggestion that $113 of this sum was voluntarily paid in to the bankrupt before the appointment of the trustee, and prior to the sending of letters, and was speedily paid over, without any effort, 'strenuous' or otherwise,-- certainly not through the efforts of his attorney. Is it true, in the face of this statement, that the trustee collected, through these strenuous efforts made through his attorney, only $38.81 on accounts?

Again in the summary this trustee reports the amount received on the lump sale of the stocks of goods at $3,002.90. Then, 'Cash received from D. Y. Leslie, balance on hand at the time of filing the petition,' $4.63. If the trustee...