In re Shoesmith
| Decision Date | 03 January 1905 |
| Docket Number | 1,096. |
| Citation | 135 F. 684 |
| Parties | In re SHOESMITH. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Eugene Garnett, for appellant.
Elmer D. Brothers, for appellee.
Before JENKINS, GROSSCUP, and BAKER, Circuit Judges.
Upon a petition and answer in a petition in involuntary bankruptcy charging insolvency and conveyances of property with intent to hinder, delay, and defraud creditors, the issue was referred for hearing. The referee reported that the conveyances were fraudulent as to creditors, that Shoesmith was insolvent, and recommended an adjudication of bankruptcy.
The financial condition of the alleged bankrupt was thus scheduled by the referee:
| Assets. | |
| 1. Cash, part of proceeds of real estate sold | $4,500 00 |
| 2. Stock in Iowa-Louisiana Land & Lot Company | 1,000 00 |
| 3. Seat on Open Board of Trade | 500 00 |
| 4. Grain and stock on farm ............................... | 1,500 00 |
| 5. Tender in hands of W. N. Cronkrite ....................... | 22 50 |
| 6. One-half rents of foreclosed property during redemption period ..................................... | 39 41 |
| --------- | $7,561 91 |
| 7. Deduct cash concealed ............................................. | 4,500 00 |
| ---------- | |
| $3,061 91 |
| Liabilities. | |
| 1. Miscellaneous small debts sworn to by himself ........ | $ 629 85 |
| 2. Judgement of the Meyer Company ........................ | 1,825 25 |
| 3. State Bank of Freeport on note signed by Shoesmith ....... | 50 00 |
| 4. State Bank of Freeport on note indorsed by Shoesmith .. | 4,700 00 |
| 5. Note secured by mortgage on farm ...................... | 5,000 00 |
| --------- | $12,205 10 |
| ---------- | |
| Leaving an insolvency of ..................................... | $ 9,143 19 |
Upon exceptions to the report, the court found that Shoesmith had disposed of his property with intent to defraud his creditors as charged, but found that he was not insolvent at the date of filing the petition, and thereupon dismissed the petition.
The opinion of the court below, exhibited in the record, discloses that it disagreed with the referee with respect to his statement of assets and liabilities in two particulars: (1) In deducting from the assets item No. 7, 'Cash concealed, $4,500'; (2) in including in the liabilities item No. 5, 'Note secured by mortgage on farm, $5,000'-- and, restating the account accordingly, finds Shoesmith to be solvent to the extent of $356.81, taking, however, no notice of the exemptions allowed by the statutes of Illinois (Starr & C. Ann. St. 1896, vol. 2, p. 1887, c. 52, par. 13) of $400, Shoesmith being a married man, entitled to such exemption. This appeal by the creditors from the decree dismissing the petition presents for consideration the question of the financial condition of Shoesmith.
It is to be observed that under the bankruptcy law of July 24, 1897, c. 541, 30 Stat. 544 (U.S.Comp.St. 1901, p. 3418), where an act of bankruptcy shall have been committed by a debtor, as specified in section 3a of the act (30 Stat. 546 (U.S.Comp.St. 1901, p. 3422)), the burden of proving solvency rests upon the alleged bankrupt. Section 3c, 30 Stat. 547 (U.S.Comp.St. 1901, p. 3422). It was therefore incumbent upon Shoesmith, the court below and the referee having found that he had disposed of his property with intent to hinder, delay, and defraud his creditors, to clearly show to the court that the aggregate of his property at a fair valuation was sufficient in amount to pay his debts, exclusive of any property which he had conveyed, concealed, or removed, or permitted to be concealed or removed, with intent to defraud, hinder, or delay his creditors. Section 1, subd. 15, 30 Stat. 544 (U.S.Comp.St. 1901, p. 3419). A careful scrutiny of the testimony of Shoesmith exhibits an indisposition to disclose his real condition, but we need concern ourselves only with the two items in respect of which the court below disagreed with the referee. Possibly even this might be unnecessary, since upon the showing, as determined by the court, if we take into account the exemptions to which under the law Shoesmith was entitled, and which could not be appropriated to the payment of his debts, he would still be insolvent by a small amount. We are disposed, however, to waive that objection.
The first question to be considered has respect to the deduction by the referee from the assets stated of $4,500, being item No. 7. This is the same item as No. 1, being the proceeds which Shoesmith stated he had on hand at the date of the filing of the petition, as part of the $6,000 received from his brother upon the fraudulent conveyance to him of lands. The question is whether that sum was concealed with intent to hinder, delay, or defraud creditors. If it was, then, by the express terms of the act, it should not be considered in marshaling the assets of the estate to ascertain whether there is sufficient property to pay the debts. At the threshold of this inquiry we are confronted by the fact found both by the court below and the referee, that the sum was derived from conveyances of property made with intent to hinder, delay, and defraud creditors. Indeed, the answer does not deny the fraudulent intent of the conveyances. It denies insolvency, and denies merely that the conveyance was an act of bankruptcy. It does not deny that the conveyance was fraudulent, but in legal effect only asserts that, because Shoesmith was solvent, the conceded fraudulent act was not an act of bankruptcy. Thus this money was received in pursuance of a scheme to hinder, delay, and defraud creditors, and with the purpose that it should not go to the payment of debts. It was received in cash several months prior to the filing of the petition, and at a time when a suit against him was about to be brought to trial, in which suit a judgment was rendered in favor of a creditor. It is conceded that he had $4,500 of this money at the time of the filing of this petition. He had retained it for several months. He does not inform the court where or how it was kept, but declares that since the filing of the petition he had invested it in distant states. We think the money was concealed within the meaning of the statute, and, by force of...
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