Gretsch v. United States

• Decision Date: 24 March 1916
• Docket Number: 2003.
• Citation: 231 F. 57
• Parties: GRETSCH v. UNITED STATES.
• Court: U.S. Court of Appeals — Third Circuit

231 F. 57

GRETSCH v. UNITED STATES.

No. 2003.

United States Court of Appeals, Third Circuit.

March 24, 1916

Elgin L. McBurney, of New York City, for plaintiff in error.

J Warren Davis, U.S. Atty., of Trenton, N.J.

Before BUFFINGTON, McPHERSON, and WOOLLEY, Circuit Judges.

WOOLLEY Circuit Judge.

The defendant (plaintiff in error) was tried and convicted in the District of New Jersey for a criminal violation of the Bankruptcy Act. By this writ he raises the question, whether his constitutional right to a trial by a jury in the district wherein the crime was committed, has been invaded.

It appears in the testimony that Birnbaum and the defendant Gretsch formed a partnership in the jewelry business in February, 1914, which ended in bankruptcy in August of the same year. Their salesrooms were in the City of New York. The amount of capital contributed by Birnbaum was inconsiderable and whether any capital was contributed by Gretsch was a controverted question. By statements of their financial condition to trade associations, falsely made by Birnbaum at the instigation or with the acquiescence of Gretsch, the firm secured credit and purchased jewelry, principally diamonds in large quantities and of considerable value. When the partnership ended in bankruptcy there was a discrepancy of about $20,000 between the value of goods purchased and receipts from goods sold. Jewelry in that amount had vanished. When the petition was filed, Birnbaum and Gretsch had in their safe in New York only $1,400 worth of jewelry. This likewise disappeared.

Birnbaum was a resident of the State of New Jersey, and Gretsch of the State of New York. They filed a voluntary petition in bankruptcy in the District Court of the United States for the District of New Jersey. In due course they were adjudged bankrupt. It then became their duty to disclose and turn over their property to their trustee. They neither delivered their property to their trustee nor included it in their schedule. Thereupon an indictment was found under section 29b, cl. 1, of the Bankruptcy Act of 1898, charging them with having knowingly and fraudulently concealed from their trustee property belonging to the bankrupt estate, and laying the offense in the District of New Jersey. Birnbaum pleaded guilty; Gretsch stood trial and was convicted. The principal witnesses at the trial were the defendants themselves. Each charged the other with guilt of the crime for which they were jointly indicted. It is not necessary to recite their testimony. It is enough to say that the testimony of whichever one is believed, supported by the corroborating circumstances, was sufficient for a jury to find, that in the formation of the partnership and the conduct of the business, the partners jointly pursued a scheme to defraud their creditors, and each separately pursued a plan to defraud the other, with the result that from $10,000 to $20,000 of partnership property was withheld and fraudulently concealed from the trustee in bankruptcy.

There is no question that the goods were concealed. The question is, whether they were concealed within the territorial jurisdiction of the court that tried the defendant, and whether the defendant's constitutional right to a trial by a jury of the district wherein the crime was committed, was invaded. Article VI, Constitution of the United States.

The undisputed facts upon which this question is raised and argued are: The defendant was indicted and tried for concealing property in the District of New Jersey, when the property alleged to have been concealed had never been in that district; the defendant knowingly and fraudulently omitted to include the property in his schedules and failed to surrender it to his trustee in bankruptcy.

When Gretsch submitted himself to the bankruptcy jurisdiction of the District Court in the district in which his partner Birnbaum was resident, that court unquestionably acquired jurisdiction of him and of his estate wheresoever situated, for all purposes of bankruptcy. Bankruptcy Act of 1898, Sec. 5c; In re Murray (D.C.) 96 F. 600; In re Blair (D.C.) 99 F. 76. The government, however, goes further and maintains that the jurisdiction of the District Court thus acquired over Gretsch in bankruptcy extends to him and embraces his criminal offenses against the Bankruptcy Act wheresoever committed, and that the physical concealment in a district of New York of property which had never been in the District of New Jersey was an offense committed within the jurisdiction of the District Court for the District of New Jersey.

At the trial, the main controversy centered on the physical concealment of the property that disappeared from the defendant's safe in New York, less regard being given to the very considerable amount of property that otherwise disappeared. On review, there developed two theories as to what constitutes fraudulent concealment of property from a trustee. The first contemplated concealment of property by physical conversion; the other merely by a failure to reveal. We feel that without other circumstances neither constitutes fraudulent concealment, though either may be evidence of it.

The physical conversion of bankrupt assets may be evidence, and perhaps the best evidence, of the concealment of such property. Concealment of property, however, may be accomplished without conversion. Secretly retaining property already in possession, and withholding it from the trustee under circumstances indicating an intention to defraud and conceal, may amount to concealment within the meaning of the statute. But whether property be concealed by conversion or retention, it must be at hand. Concealment is a positive act committed at some time or other with respect to a physical thing. It must, therefore, be done somewhere, and wherever done in violation of the statute, there and there alone has the court jurisdiction of the offense.

Against the theory of conversion, it is urged that property is concealed within the meaning of the statute when the bankrupt omits it from his schedule. We are slow to believe that the mere omission to reveal constitutes concealment. When property is innocently omitted from a schedule, as by mistake or inadvertence, the courts are prompt to allow amendments. In re McKee (D.C.) 165 F. 269; In re Bean (D.C.) 100 F. 262; In re Eaton (D.C.) 110 F. 731; In re Irwin (D.C.) 177 F. 284. When an omission from a schedule is purposely and fraudulently made, the verification of such a false schedule constitutes a criminal offense in itself. Section 29b, cl. 2, provides the offense of making 'a false oath or account in, or in relation to, any proceeding in bankruptcy. ' In re Eaton (D.C.) 110 F. 731; In re Royal (D.C.) 112 F. 135. As the false oath to a schedule from which property is fraudulently omitted is a criminal offense described by clause 2 of section 29b of the Bankruptcy Act, and as the criminal offense of concealing property from a trustee is prescribed by clause 1 of the same sub-section, we are of opinion that the two offenses separately described do not constitute the same substantive crime. As the two subjects in their nature are susceptible of clear distinction, their treatment in separate clauses of the statute would indicate that they are not the same. While omission of property from a schedule may be evidence of a fraudulent intent to conceal, we do not think that such omission in itself constitutes concealment of property.

As we are of opinion that the defendant's failure to reveal his property by his schedule does not alone constitute the crime of concealing property from a trustee, and as the testimony nowhere discloses that any of the goods charged to have been concealed were ever in the District of New Jersey, we are irresistibly driven to the conclusion that the government did not prove the material averment of the indictment that the property of the bankrupt defendant was concealed by him from his trustee in the District of New Jersey. We therefore find that the defendant was deprived of his constitutional right to a trial by a jury of the district wherein the crime was committed, and that the judgment against him should be reversed.

While Birnbaum pleaded guilty, and Gretsch, upon trial, was found guilty, of the crime charged, the constitutional right of each was alike invaded by indictment in a district in which the crime was not committed. Although the judgment entered upon Birnbaum's plea of guilty is not before us, we venture to suggest to the District Court that a suspension of Birnbaum's sentence and a disposition of the indictment against him, in harmony with the views expressed in this opinion, would tend to uniformity in the administration of justice.

The judgment is reversed.

BUFFINGTON Circuit Judge (dissenting).

I am constrained to record a dissent in this case.

Gretsch, the plaintiff in error, was a resident of New York state and a lawyer of many years practice. When he and his partner, Birnbaum, went into bankruptcy, Gretsch advised their petition be filed in New Jersey. The two men met in New Jersey, prepared their schedules, signed them there and filed their voluntary petition in the District Court of the District of New Jersey. In their schedules, no return was made of some twenty-odd thousand dollars worth of jewelry which both men, when subsequently indicted, conceded had disappeared.

Schedule B, prescribed by the Supreme Court in pursuance of statutory power, requires a 'statement of all property of a bankrupt,' and subdivision (2) requires a listing of amount and location of stock in trade. It contemplates, not only a listing of all the goods, but a disclosure of where they can be found. For example, item B(1) provides for a return of 'machinery, fixtures,...