In re Gordon & Gelberg

• Decision Date: 13 February 1934
• Docket Number: No. 205.,205.
• Citation: 69 F.2d 81
• Parties: In re GORDON & GELBERG. Appeal of GORDON et al.
• Court: U.S. Court of Appeals — Second Circuit

69 F.2d 81 (1934)

In re GORDON & GELBERG Appeal of GORDON et al.

No. 205.

Circuit Court of Appeals, Second Circuit.

February 13, 1934.

David Haar, of New York City, for appellants.

Burnstine & Geist, of New York City (George E. Netter and George G. Charney, both of New York City, of counsel), for appellee.

Before MANTON, SWAN, and AUGUSTUS N. HAND, Circuit Judges.

MANTON, Circuit Judge.

The order appealed from directs the appellants, who were officers of the corporation, to turn over books of account belonging to the bankrupt.

The petition filed in the proceeding, which resulted in the order, alleges that the corporation was organized and doing business for about five years, manufacturing fur garments. Each of the appellants owned one-half of its capital stock. Books of account were kept by the bankrupt which employed a competent bookkeeper who made entries of the corporation's business. In addition, the bankrupt employed a certified public accountant, who audited the books monthly, prepared trial balances, and made out income tax returns. It alleges that it was the custom on the 1st of February of each year to transfer to a new set of books of account the balances as shown on the preceding year's books, and this practice prevailed and was followed on the 1st of February, 1930, the fiscal year of the bankrupt corporation ending on January 31 of each year. It alleges that prior to bankruptcy the bankrupt submitted its financial affairs to the American Fur Merchants' Association and executed a deed of trust of all its property and surrendered its books and records for the association's accountants to prepare a balance sheet showing the status of the bankrupt corporation at that time. It alleges that in turning over its books to the accountant, it did not produce the books and records for the year prior to February 1, 1930, but current books were turned over in which appeared the balances from the preceding year, and these balances in no way indicated the details of the transactions resulting in the balances. It alleges that no record whatever of the transactions prior to February 1, 1930, were available to the trustee. The bankrupt issued a financial statement subsequent to February 1, 1930, a copy of which was annexed to the petition. The petition further states that the appellants, in their testimony, claimed that the books of account of records for 1929 were not in their personal custody, that they had a bookkeeper who had charge of the books of account, and that neither of the appellants ever had occasion to examine the books of account, and that, if they required information, they, obtained it by inquiry from the bookkeeper or from the accountant whom they employed. It alleges that the custom of the firm was to place the books of account that were not used in packing boxes, and a number of these cases had accumulated containing the books of account in question. These were moved in July, 1930, to an additional loft on Seventh avenue, New York City, which had been leased under a lease expiring December 1, 1930. The bankrupt moved considerable other property to this loft in order to make room for carrying on its business in the place it occupied. It alleges that the foreman who had charge of these boxes, with other employees, transferred them; that after the transfer the foreman was instructed to throw out the cases of books, and he did so by paying a dirtman who carried away other junk with them. The petition alleges in conclusion: "It is manifest from a mere recital of the facts that no definite explanation has been made yet of the disappearance of these permanent records which are so vital and necessary in the investigation of the affairs of this bankrupt concern."

An answer was filed denying that the appellants had in their possession or control the books, records, or other documents referred to in the petition.

To substantiate this petition, the receiver called both appellants, the bookkeeper, the foreman, and other employees who had to do with the removal of the books.

The testimony of appellant Gordon established the routine method employed by the bankrupt in its business with respect to the keeping of records. He testified it was the practice to open a new set of books every year and make the transfer of the balance from the old to the new books. He testified to the lease of the Seventh avenue loft in July, 1930, and the...