In re Elias

• Citation: 240 F. 448
• Decision Date: 15 March 1917
• Docket Number: 536.
• Parties: In re ELIAS.
• Court: United States Courts of Appeals. United States Court of Appeals (4th Circuit)

240 F. 448

In re ELIAS.

No. 536.

United States District Court, E.D. North Carolina.

March 15, 1917

Moe Levy, of Norfolk, Va., and W. L. Knight, of Weldon, N.C., for trustee.

T. T Thorne, of Rocky Mount, N.C., for bankrupt.

CONNOR District Judge.

The referee certified that, after hearing the examination of the bankrupt and other evidence, on February 1, 1917, he found as a fact that the bankrupt was withholding from the trustee and concealing from his creditors $4,047.90 in merchandise, or its equivalent in money, upon which finding he made an order requiring him on or before 12 o'clock noon of February 15, 1917, to pay to A. B. Stainback, trustee, the said sum. A copy of the order and the findings of fact were served on the bankrupt, delivered to his attorneys, and certified to the judge. The bankrupt failed to comply with the order whereupon notice was issued to and served upon him, directing that he show cause before the judge, at Raleigh, on March 6 1917, which, at the request of his attorney, was continued until Saturday, March 10, 1917. The bankrupt appeared in person, and was represented by counsel. He filed an answer averring his inability to comply with the order of the referee, and further averring that he has not, in his possession or under his control, said sum, either in money or merchandise, or any part thereof. He says:

'The entire assets, money, and property belonging to this respondent, at the time he filed petition in bankruptcy, was so far as he could do so, correctly set out in the schedule filed by him at the time of his adjudication as a bankrupt.'

In his answer he sets out that he is a Syrian, born near Mt. Lebanon, and, until he came to America, was unable to speak the English language; that, since coming, he has learned to speak, but is unable to write, English. He further says that he was unable to keep books, or make any record of his business; that his sister, a young woman about 21 years of age, kept such books and made such records as she was able, regarding his business; that she is of very limited education. The petition in bankruptcy was filed, and respondent adjudged bankrupt, May 4, 1916. The case was referred to Jas. R. Gaskill, referee, and an examination of the bankrupt had before him (the examination and other evidence taken before him is certified by the referee). Mr. Gaskill died pending the proceedings in the cause. It was referred to Jos. B. Cheshire, Jr., Esq., referee, who proceeded to further examine the bankrupt and hear further evidence. He has made a very thorough and exhaustive examination and analysis of the evidence, such books and other papers as were furnished, and in his report he finds: 'The bankrupt conducted a general mercantile business at Weldon, N.C. His books were kept by his sister. He could not read nor write. While he has been in business for several years, his only book of record seems to run from January 1, 1916, only. He destroyed all of his invoices by burning them immediately before bankruptcy. The book shows but little, except some accounts of some peddlers. While he kept a bank account, a large part of the money taken in from his business was not deposited in the bank. During the spring, April, 1916, the bankrupt went to Lynchburg, Norfolk, Philadelphia, and New York, where he made statements to persons and firms from whom he purchased goods, showing his financial condition. In these statements he represented that he had a stock of goods on hand, March 1, 1916, amounting to about $4,000, and owed no debts. Between March 1, 1916, and May 4, 1916, it appears upon his own evidence that the bankrupt bought goods amounting to $5,500, all of which were shipped and delivered to him at Weldon and none of which have been paid for. ' In his petition and schedules he states that he had only $700 worth of goods on hand, and no other goods, or other property, except cash from a bank balance of $20.20, have been received by the trustee. 'The goods found by the receiver are largely old stock and in very poor condition. The weekly sales, estimated by the bankrupt and his sister, including peddlers' accounts, between January 1 and May 1, 1916, are put at $300; exclusive of peddler accounts, $75."

The referee has made analytical statements, based upon the bankrupt's own evidence and estimates, showing what amount of goods he had on hand and received, what amount of sales he made, the expenses incurred, and the amount of accounts found on his books, from which he draws the following conclusions:

'The referee is clearly of the opinion that the bankrupt has defrauded his creditors. It is beyond all human possibility that a man can have on hand March 1, 1916, $4,000 in goods, buy $5,500 by May 4, 1916, and pay no creditor a cent, and have left only $900 in goods on May 4, 1916, when he voluntarily goes into bankruptcy, having only $1,794.61 due him on his books.'

There appears on the book produced by the bankrupt a number of accounts for goods alleged to have been sold to peddlers, aggregating some $6,000. The book was produced on this hearing. The accounts have, from any and every viewpoint, the appearance of being 'manufactured.' There is evidence strongly sustaining the suggestion that they were 'raised' on the books after the adjudication, and before the books were turned over to the court and its officers. The evidence amply sustains the conclusion of the referee, who says that he--

'does not believe these accounts are bona fide. It is inconceivable that anybody would sell over $6,000 of goods on a credit to men who were almost absolute strangers, many of whom he knows nothing about. If such sales were made, the bankrupt acknowledges receiving a considerable amount of cash which is unaccounted for.'

The referee, in his report, makes and notes reference to the particular portions of the testimony upon which his findings are based:

'The referee therefore finds as a fact that the bankrupt, J. A. Elias, has concealed from his creditors and is withholding from the trustee of his estate $4,047.90 in merchandise, or its equivalent in money, and that the bankrupt either has this property in his possession, or under his control, and that he should forthwith turn it over to the trustee.'

Upon this finding he makes the order, etc.

The bankrupt, in his answer to the rule to show cause, contends that the conclusions of the referee are based upon deductions which are not sustained by the evidence. While it is true, as stated by the referee, many of his findings in regard to amount of sales and disposition of the proceeds are estimates, they are all based upon the evidence of the bankrupt and upon the view of it most favorable to him. The quantity and value of the goods on hand, March 1, 1916, is given by the bankrupt, in statements made during the month of April, 1916, as a basis of credit for the purpose of buying goods. It may be that he overestimated the stock. There is other evidence, from witnesses who had the opportunity of estimating in a general way the stock, which would tend to show that it amounted to as much as $3,000. There is no controversy in regard to the amount of goods purchased between March 1, 1916, and May 4, 1916. The evidence is conclusive in respect to them. If there is uncertainty in regard to amount of sales, cash receipts, and the disposition made of it, the bankrupt has no just cause to complain, as it was his duty to furnish to the court the evidence in that respect. Especially is this so when the referee has adopted such estimates as he furnishes and given to them the conclusion most favorable to him. The bankrupt concedes that his stock on hand, March 1, 1916, was worth as much as $2,250 to $2,500. He does not seriously contend that his sales were larger than found, or that he has in any manner accounted for the proceeds thereof.

The referee has been very liberal in the allowance of expenses and support of the family of the bankrupt. There can be no reasonable doubt that the bankrupt, when filing his schedules, withheld from his schedules, and from his trustee, goods and merchandise amounting to several thousand dollars. Adopting his estimate of amount on hand as being $2,250, there is a shortage of $2,297, for which he gives no account. The evidence in regard to his conduct from March 1, 1916, when he had, as he represented to those from whom he was seeking credit, $4,000, and now says $2,250, and owed no debts, until May 4, 1916, during which period he bought goods on credit, amounting to $5,500, for which he has not paid $1, is incapable of any explanation otherwise than that he concealed either the goods or their proceeds from his creditors, and had them on hand, or under his control, when he filed his schedules. The schedule shows debts, $5,149; stock on hand, $700, from which he claims his exemption of $500; open accounts, $3,500, which are fraudulent, and, if valid, worthless. The entire indebtedness was contracted between April 1, 1916, and May 1, 1916. He burned his invoices just before filing his petition. He says he did this because Mr. Gaskill, the former referee, who took a list of them, told him that he had no further use for them. Mr. Gaskill has since that time died. The manifest effort to account for goods by 'raising' accounts against the peddlers is too obviously fraudulent to impose on any intelligent person. It is in evidence that the bankrupt turned over the goods allotted to him from the stock, as his exemptions, to his wife, who opened up, and is now conducting, a mercantile business in the same storehouse occupied by the bankrupt, which is owned by his mother; that one Rabill, a Syrian merchant, in Weldon, N.C., holds a mortgage on the stock of goods with which the wife is conducting business.

The...