In re Gentile

• Decision Date: 02 September 1952
• Docket Number: No. 15773,15774.,15773
• Citation: 107 F. Supp. 476
• Parties: In re GENTILE et al.
• Court: U.S. District Court — Western District of Kentucky

107 F. Supp. 476

In re GENTILE et al.

Nos. 15773, 15774.

United States District Court W. D. Kentucky, Louisville Division.

September 2, 1952.

D. A. Sachs, Jr., Louisville, Ky., for bankrupts.

Henry J. Burt, Jr., Louisville, Ky., for trustee.

Charles E. Keller, Louisville, Ky., for Louise Tyler.

James S. Shaw, Louisville, Ky., for Schmoeller.

MILLER, District Judge. (Sitting by designation.)

By orders of May 6, 1952, the referee overruled objections of the trustee to the discharge of the bankrupts and granted them a discharge. The trustee has filed a petition for review of the order in each case.

Although the objections specified five separate grounds, it is only necessary to consider the following two on this review, namely (1) the bankrupt failed to keep or preserve books of account or records from which his financial condition and business transactions might be ascertained, § 14 sub. c of the Bankruptcy Act, § 32, sub. c, Title 11 U.S.C.A. and (2) the bankrupt was a taker of bets upon race horses, generally referred to as a "bookie", although classified in his petition as a "horse broker," and as such was a gambler and a known and adjudged violator of the public policy of Kentucky, as enunciated by Chapters 372 and 436, Kentucky Revised Statutes.

Considering the second ground first, I agree with the Referee's ruling that the fact that the bankrupt is engaged in gambling as his chief occupation does not operate as a bar to his discharge in bankruptcy. § 14, sub. c of the Act provides that the Court shall grant the discharge unless satisfied that the bankrupt has done any one of seven different acts, as therein specified. Having engaged in gambling, or being a "bookie", or having violated the public policy of the state, are not included among the seven. The right to a discharge in bankruptcy is liberally construed. In re Newman, 6 Cir., 126 F.2d 336, 337. The Court is not authorized to enlarge the grounds specified in the statute. International Shoe Co. v. Kahn, 4 Cir., 22 F.2d 131, 133. It appears well settled that an application for discharge must be granted unless it appears that the bankrupt has committed one of the offenses specified in the Act as barring a discharge. In re Hughes, 2 Cir., 262 F. 500; Bluthenthal v. Jones, 208 U.S. 64, 66, 28 S.Ct. 192, 52 L.Ed. 390; In re Masor, 7 Cir., 117 F.2d 368; Farmers Savings Bank v. Allen, 8 Cir., 41 F.2d 208, 212.

Counsel for the trustee and for creditors who have obtained judgments against the bankrupts for the recovery of money lost to them in their bookmaking operations, vigorously contend that the bankrupts should not be permitted to avoid the payment of such judgments, sanctioned by the statutory law of Kentucky, by obtaining a discharge in bankruptcy. The foregoing ruling does not adjudicate the enforceability or nonenforceability hereafter of such claims. Whether such claims are dischargeable in bankruptcy is not involved in this proceeding. In re Lowe, D.C.W.D.Ky., 36 F.Supp. 772. There may be other debts in cases of this type, which are not connected with gambling activities, against which a bankrupt gambler has an undoubted right to plead a discharge, and is accordingly entitled to a discharge.

On the issue of the failure to keep adequate books or records, the bankrupts testified that the records prior to 1950 had been lost in moving or inadvertently thrown away. There was produced two small books, one for 1950 and the other for 1951, some cancelled checks and some bank statements. The Trustee testified that the books showed the net profit or loss from booking horse races by weeks, giving a lump sum amount won or lost for each week, with no breakdown into receipts and disbursements, and with nothing to indicate where the money came from or to whom it was paid. The bankrupts did not supply the names of any customers. Neither the trustee nor the bankrupts were able to testify about the kind of books customarily kept by other people in the same type of business. The trustee and objecting creditors contend that the records produced did not meet the requirements of the statute.

The referee based his ruling overruling the objection to the discharge on this ground upon the proposition that there was no competent evidence on behalf of the trustee as to the contents of the two small books reflecting the weekly profit or loss of the bankrupts in 1950 and 1951. He held that the books were available but were not offered in evidence by the trustee; that testimony by the trustee concerning their contents was secondary in nature and not competent; and that in the absence of evidence showing what was...