In re Amster

• Decision Date: 26 March 1918
• Docket Number: 6124.
• Citation: 249 F. 256
• Parties: In re AMSTER.
• Court: U.S. District Court — Northern District of Ohio

249 F. 256

In re AMSTER.

No. 6124.

United States District Court, N.D. Ohio, Eastern Division.

March 26, 1918

A.F Ingersoll, of Cleveland, Ohio, for trustee.

A.D Metz, of Wooster, Ohio, for bankrupt.

WESTENHAVER District Judge.

In this matter the trustee opposed bankrupt's discharge on two grounds, of which the first seems to have been abandoned, and the second is that the bankrupt, with intent to conceal his financial condition, either destroyed, concealed, or failed to keep books of account or records from which his financial condition might be ascertained. The special master, to whom these specifications were referred, reports that the second specification is sustained by the evidence, and recommends that the discharge be not granted. The bankrupt excepts to this report, as not sustained by the evidence and as being contrary to law.

The bankrupt and a man named Power early in 1914 engaged as partners in business in the city of Wooster. The bankrupt contributed $1,000 and Power $225 as the firm's capital. In the autumn of 1915 Power retired from the firm, the bankrupt acquiring his interest therein, claiming to have paid therefor $500 in cash, although no evidence supporting this payment appears in the record, other than the bankrupt's statement, nor indicating from what source said money was derived. On October 27, 1916, the bankrupt made an assignment for the benefit of creditors, and shortly thereafter an involuntary petition in bankruptcy was filed in this court by creditors, and an adjudication of bankruptcy was made.

The business was a general boot and shoe store. The only evidence of the volume of business done is the statements of bankrupt's assets and liabilities. Prior to his assignment the bankrupt gave a statement in writing of his financial condition, showing stock in trade of $10,000 machinery and tools, $250; accounts receivable, $462.14; accounts payable, $16,357.56; bills payable, which should be paid by persons other than the bankrupt, $3,017.80; taxes and wages, $26.04. His schedules in bankruptcy contain precisely the same items, except indebtedness for wages and taxes, which is eliminated.

The bankrupt kept no books of any kind, except, perhaps, a ledger showing cash received. He produced on his examination, check stubs, and canceled checks; but these do not appear to have been complete, and many stubs did not have any corresponding checks or entry. The special master finds that they were so detached, so broken and irregular, a part lost and destroyed, that no system of accounting could be established therefrom. A cash register was used, which printed automatically on slips the money received and placed therein; but these slips, the bankrupt testified, were destroyed at the end of each day, and such money as had not been taken from the till by the partners for their own personal use, clerks' wages, or other debts, was deposited in the bank.

The bank deposit book, produced at bankrupt's first examination, was either lost or destroyed before his final examination; the contention being that the examination was completed, and there was no longer any necessity for preserving this deposit book, or the check stubs and canceled checks, and on behalf of the trustee that the examination had been adjourned from time to time without a discharge of the bankrupt as a witness, and that the destruction thereof was intentional.

Counsel for bankrupt earnestly urge that, while it is true no books were kept, the evidence fails to show that such failure to keep books was with intent to conceal the bankrupt's financial condition, and that, the burden of proof being on the trustee to prove this intent to the satisfaction of the court, the master's finding is without evidence to support it, and is contrary to law.

Section 14b of the Bankruptcy Act provides that the applicant shall be discharged unless he has "with intent to conceal his financial condition destroyed, concealed or failed to keep books of account or records from which such condition might be ascertained." Prior to the amendment of 1903 this section contained, before the word "intent," the word "fraudulent"; before the words "financial condition" the word "true"; before the word "destroyed" the words "and in contemplation of bankruptcy"; and in place of the word "such," before the words "condition might be ascertained," the words "his true."

Obviously, the meaning of the original act has been much limited by these amendments. It is no longer necessary to prove intentional fraud, or that the concealment was in contemplation of bankruptcy. It is, of course, necessary to prove that the bankrupt shall fail to keep books of account or records, and that this failure must have been with intent to conceal his financial condition. In this case, failure to keep books of account or records being admitted, the controversy comes down to the bankrupt's intent.

Many cases...