In re Newman, 8963.

• Court: U.S. Court of Appeals — Sixth Circuit
• Writing for the Court: SIMONS and MARTIN, Circuit , and SWINFORD
• Citation: In re Newman, 126 F.2d 336 (6th Cir. 1942)
• Decision Date: 12 March 1942
• Docket Number: No. 8963.,8963.
• Parties: In re NEWMAN. NEWMAN v. BURNHAM.

126 F.2d 336 (1942)

In re NEWMAN NEWMAN v. BURNHAM.

No. 8963.

Circuit Court of Appeals, Sixth Circuit.

March 12, 1942.

David Ralph Hertz, of Cleveland, Ohio (Wm. J. Dawley and David Ralph Hertz, both of Cleveland, Ohio, on the brief), for appellant.

Edwin F. Woodle, of Cleveland, Ohio (Woodle & Wachtel, of Cleveland, Ohio, on the brief), for appellee.

Before SIMONS and MARTIN, Circuit Judges, and SWINFORD, District Judge.

MARTIN, Circuit Judge.

The Referee in Bankruptcy overruled the objections of the Trustee to the discharge of the bankrupt. The objections were grounded upon specifications to the effect that the bankrupt had failed to keep or preserve books of account or records, in conformity with Section 14, sub. c (2), and had failed to explain satisfactorily losses of assets as required by Section 14, sub. c (7) of the Bankruptcy Act, Title 11, Sec. 32, sub. c (2), (7), U.S.C.A.

From the certificate of the Referee upon review of his order granting the discharge, it appears that the only testimony of record was that of the bankrupt.

The Referee found the facts to be that the bankrupt, an inexperienced young man, engaged for about three years in buying and selling drug store merchandise in odd lots. His capital was not munificent, being approximately $200 cash. Without a bank account or an office and with no employees, he conducted his small personal business from his home. He carried no stock of goods, but occasionally stored merchandise in the storeroom of the apartment in which he lived.

The bankrupt's total purchases amounted to eight or ten thousand dollars. On some re-sales there were profits; on others, there were losses. In one instance, he bought a worthless lot of combs for $2,000; in another, he sustained losses in the purchase of cosmetics, spoiled by freezing. On another occasion, he bought crystals which evaporated "like thin air." As a business man, the bankrupt was indeed a crystal gazer.

The appellant bankrupt testified that he sold no goods at less than their cost price. In every instance, credit was extended to him without request for a financial statement. He said he kept no books, because he considered bookkeeping unnecessary. After paying creditors varying amounts, on account of goods purchased, he used the money received from sales for the support of himself and his wife. His somewhat serious illness augmented his living expense. At the time of his adjudication in bankruptcy, he owed creditors approximately $6,000.

In his findings, the Referee pointed out that the only records ever kept by the bankrupt were some purchase invoices, which were later lost or destroyed without any deliberate purpose; that the nature of the bankrupt's business transactions was such that his failure to keep and preserve books and records was justified in the circumstances disclosed by the evidence; and that the bankrupt had satisfactorily explained losses of assets, and the deficiency of assets to meet...