In re Peters, B 725-66.

• Decision Date: 13 April 1967
• Docket Number: No. B 725-66.,B 725-66.
• Citation: 266 F. Supp. 742
• Parties: In the Matter of Erma Cazier PETERS, aka Marie Peters (formerly doing business as Marie Antoinette Professional Cosmetics), Voluntary Bankrupt.
• Court: U.S. District Court — District of Utah

266 F. Supp. 742

In the Matter of Erma Cazier PETERS, aka Marie Peters (formerly doing business as Marie Antoinette Professional Cosmetics), Voluntary Bankrupt.

No. B 725-66.

United States District Court D. Utah, Central Division.

April 13, 1967.

Grant Macfarlane, Salt Lake City, Utah, for bankrupt.

Mary C. Lehmer, Salt Lake City, Utah, pro se.

MEMORANDUM DECISION

CHRISTENSEN, District Judge.

Mary C. Lehmer, one of the creditors of the above-named bankrupt, filed timely objections to the discharge of the bankrupt. The Referee in Bankruptcy disqualified himself from hearing and ruling upon these objections in the first instance and accordingly a hearing on them was had before me. Evidence was taken including testimony from both the bankrupt and the objector. Briefs have been filed by the respective parties and the court considers itself fully advised.

One of the grounds for objection was that the bankrupt allegedly had violated 11 U.S.C. § 32(c) (2) in failing to keep or preserve books of account or records from which her financial condition and business transactions might be ascertained. I find that the objector has not sustained her burden of proof as to this ground but that on the contrary while the bankrupt's records were kept informally and imperfectly they were not fatally inappropriate or inadequate under the circumstances and there were no failures relating to their preservation which in and of themselves would justify denial of discharge.

The objector made the further separate claim that the bankrupt has violated 11 U.S.C. § 32(c) (7) by failing to give a satisfactory explanation of the $3500 received as consideration for the sale of her business to which more particular reference will be made hereafter. If by this assignment it is meant to claim that the bankrupt has failed to reasonably furnish information concerning the disposition of the proceeds of this sale, I think this ground for a denial of discharge has not been established. The manner and purpose of the dispersal of the funds were reasonably explained although precise records were not kept.

The only substantial ground for objection is denominated ground 1 in the original objections and was amended as such to conform to proof at the trial. This objection as so amended reads:

"1. Violated 11 U.S.C.A. 32 c (4), in that subsequent to the 1st day of the 12 months immediately preceding the filing of her petition in bankruptcy, to wit, on or about Dec. 17, 1965, she sold, transferred and assigned all of her property in Marie Antoinette Professional Cosmetics, including her alter ego company, Beauty Aid Distributors, with intent to hinder, delay or defraud her creditors, by sale on said date to Sam Logan Jr., dba Ramada Beauty Salon, of her trademark, `Marie Antoinette', her goodwill therein, her furniture, fixtures, formulas and laboratory connections for $2,500.00, and her entire stock of inventory for $1,000.00, all in violation of the Bulk Sales and Fraudulent Conveyances Act then in effect in the State of Utah, particularly Sections 25-1-8, 25-2-1 and 25-2-2, Utah Code Annotated 1953 as amended, by failing to provide said buyer with a Bulk Sales Affidavit in the manner and form required by Sec. 25-2-1, UCA 1953 aforesaid, and by said bankrupt knowingly, fraudulently and willfully omitting from an insufficient and improper Bulk Sales Affidavit supplied to said buyer the names, addresses and indebtedness of all of her creditors, particularly the name, address and indebtedness of this objector, who was a general and business creditor of said bankrupt at the time of said sale, all in violation of the Bulk Sales and Fraudulent Conveyances Act of Utah aforesaid, whereby said buyer failed to notify at least 5 days prior to such purchase, bankrupt's creditors, and failed to cause such $3,500.00 purchase money to be applied ratably, except as to priorities provided by law, to the payment of the bona fide claims of bankrupt's creditors, whereby said bankrupt did delay, hinder and defraud this objecting creditor and other creditors of bankrupt and put her assets beyond their reach."

With the qualifications hereinafter noted I find this assignment substantially borne out by the preponderance of the evidence. Although the general rule is to the contrary, Anno. 84 A.L.R. 1406, I accept the bankrupt's testimony that she understood that the creditors to be listed pursuant to the Sales of Merchandise in Bulk Act of the State of Utah were business creditors. Assuming this, however, it was clear from the bankrupt's testimony that she was advised and clearly understood that all business creditors should be listed in the affidavit filed pursuant to the Act. On the question of whether the objector was in fact a business creditor, the testimony of the objector and the bankrupt is in sharp conflict.

The objector testified to facts which if accepted would not only establish clearly that she was a business creditor, but also that the bankrupt could have been under no possible misunderstanding on the point. The purpose of the request for the loan and the loan itself, together with all of the other circumstances related by the objector, were related to the bankrupt's business, and the evidence rather clearly demonstrated circumstantially that the funds were used primarily in the business.

As opposed to the testimony of the objector, the bankrupt generally asserted that the objector was not a business creditor. Her testimony was far from convincing in this respect however. On the other hand, the circumstances giving rise to the indebtedness to which she testified failed to supply any reasonable explanation for the loan in question except in reference to its business necessity.

I am of the opinion, therefore, and so find, that the...