Albinak v. Kuhn

• Decision Date: 30 April 1945
• Docket Number: No. 9862.,9862.
• Citation: 149 F.2d 108
• Parties: ALBINAK v. KUHN. In re MANUFACTURERS TRADING CORPORATION.
• Court: U.S. Court of Appeals — Sixth Circuit

149 F.2d 108 (1945)

ALBINAK v. KUHN. In re MANUFACTURERS TRADING CORPORATION.

No. 9862.

Circuit Court of Appeals, Sixth Circuit.

April 30, 1945.

Nelson S. Shapero, of Detroit, Mich. (Jay F. McMullen, of Detroit, Mich., on the brief), for appellant.

Noble T. Lawson, of Detroit, Mich. (Anderson, Wilcox, Lacy & Lawson, Irwin I. Cohn, and Samuel R. Greenbaum, all of Detroit, Mich., Alfred H. Sachs, of Cleveland, Ohio, and Birnkrant, Birnkrant & Birnkrant, of Detroit, Mich., on the brief), for appellees.

Before HICKS, SIMONS, and MARTIN, Circuit Judges.

SIMONS, Circuit Judge.

The appellant was adjudicated a bankrupt on March 25, 1943, following his petition for arrangement under Chapter XI, 11 U.S.C.A. § 701 et seq. filed January 12, 1943. He duly filed his petition for discharge, but upon specifications in objection thereto, submitted both by the trustee and the co-appellee, discharge was denied on the ground that he had transferred property to his wife with the intent to hinder, delay, and defraud his creditors, and on the further ground that he had obtained money or property on credit by making or publishing a materially false statement in writing respecting his financial condition. It is from the order denying his discharge that he appeals.

Prior to the filing of his petition in bankruptcy the appellant was engaged in the manufacture of jigs and tools for approximately 2 years, and had received a large volume of orders for war products. Because of limited capital he found it necessary to hypothecate his invoices with finance companies in order to obtain money sufficient to meet payrolls. He made an arrangement with the Manufacturers Trading Corporation of Cleveland, Ohio, whereby it would purchase accounts then held by another investment company and discount additional accounts. On October 21, 1942, the bankrupt assigned to the Trading Company 96 invoices covering separate and distinct transactions with 19 of his customers, listing debts purporting to be due and owing to him from them, totaling upwards of $60,000. At a later date he made a second assignment which also listed a large number of invoices and accounts purporting to be due him. At the time of the execution of the contract he submitted a written statement purporting to be a true balance sheet of his assets and liabilities as of September 30, 1942, this balance sheet being, by reference, made a part of the original contract and subsequent assignments. The balance sheet is not made part of the record though it is alleged by the objectors to discharge that it was false and untrue, and that its falsity was not denied by the bankrupt.

The assignment of accounts is, however, presented on appeal by supplemental record, and the first assignment, in addition to listing the 96 debts owing to the bankrupt, recites that for the express purpose of inducing the Trading Corporation to part with its money and to purchase the accounts from the assignor, the assignor covenants and warrants that the financial statements, invoices, orders, proofs of delivery, and other documents submitted to the assignee, and which are made a part of the assignment, are absolutely true and genuine; that the goods described in and covered by such invoices and statements of account were manufactured strictly in accordance with the specifications of the purchasers, were not on consignment, were shipped to the purchasers on bona fide orders, not in any way, cancelled, countermanded or altered; that the accounts were without set-offs; that the purchasers are indebted to the assignor in accordance with the invoices; that the goods had not been previously conveyed, sold or pledged; that the title to the accounts had not been wholly or partially transferred; that no one had acquired any lien, right, or title to them; that the purchasers had not paid any part or all of the purchase price of the goods, nor returned the merchandise; that all collections received or credits allowed upon any of the accounts had been duly credited to the accounts of the respective customers, and, finally, that the assignor, as well as the purchasers on said accounts, are solvent.

The specifications in objection to discharge also recited that on February 2, 1942, the bankrupt contracted for the purchase of a new home in an amount in excess of $20,000, and took title to the property in himself and wife, creating an estate by the entireties; that he did so in order to place the property beyond the reach of his creditors, since under Michigan law such an estate is not subject to the debts of either spouse separately; that in furtherance of this same purpose he executed a quitclaim deed of his interest in the said property to his wife on May 14, 1942, withheld from record until October, and that the final payment on the purchase price of the property was made after an audit of the books of the bankrupt had shown him to be insolvent.

It is, in our view, entirely...