In re Wellin

• Decision Date: 28 January 1943
• Docket Number: No. 8064.,8064.
• Citation: 132 F.2d 262
• Parties: In re WELLIN. WELLIN v. WICK.
• Court: U.S. Court of Appeals — Seventh Circuit

132 F.2d 262 (1942)

In re WELLIN WELLIN v. WICK.

No. 8064.

Circuit Court of Appeals, Seventh Circuit.

December 15, 1942.

Rehearing Denied January 28, 1943.

Samuel L. Cohen and Morris K. Levinson, both of Chicago, Ill., for appellant.

Harry S. Greenstein, of Chicago, Ill., for appellee.

Before SPARKS, MAJOR and MINTON, Circuit Judges.

MAJOR, Circuit Judge.

This appeal is from an order of the District Court, entered May 25, 1942, denying to appellant a discharge in bankruptcy. An objection was filed by a creditor on the ground that the bankrupt "has failed to keep and preserve books of account or records from which his financial condition might be ascertained and which would disclose his various business transactions prior to the filing of his petition in bankruptcy." The matter was referred to a Referee who, after hearing the testimony of witnesses and arguments of counsel, made certain findings and ordered that the discharge be denied. Upon petition for review, the District Court, by the order appealed from, sustained the order of the Referee.

The findings of the Referee are as follows:

"That Ezra Wellin, Bankrupt, owned and operated the business known as Wellin Auto Body Company, located at 713 South Damen Avenue, Chicago, Illinois, for approximately twenty (20) years prior to the filing of the petition in bankruptcy herein by him; that in connection with the operation of said business, he purchased supplies and materials on credit and extended credit on his own accounts; that the said Ezra Wellin, Bankrupt, also owned and operated the real estate at 713 South Damen Avenue consisting of a two (2) story brick building; that the business conducted by the bankrupt known as Wellin Auto Body Company occupied the entire first floor of said premises; that at the time of the filing of the petition in Bankruptcy herein, the said bankrupt was indebted in the amount of approximately Ten Thousand Dollars ($10,000) for goods, wares and merchandise, supplies and materials purchased by him from time to time in connection with the operation and management of his said business and for money had and received; that the said Ezra Wellin, Bankrupt, failed to keep and preserve books of account or records from which his financial condition might be ascertained and which would disclose his various business transactions prior to his filing his petition in bankruptcy."

There is, as pointed out by appellant in his brief, the testimony of the bankrupt that most of his business was on a cash basis, that is, he collected cash for services rendered and paid cash for materials and merchandise received, and that he kept track of what he owed by sticking bills on the wall of his shop. The testimony of the bankrupt, however, is not inconsistent with the findings as made by the Referee.

Section 32, (sub. c), 11 U.S.C.A., authorizing discharges in bankruptcy, so far as here material provides: "The court shall grant the discharge unless satisfied that the bankrupt has * * * (2) failed to keep or preserve books of account or records, from which his financial condition and business transactions might be ascertained, unless the court deems such acts or failure to have been justified under all the circumstances of the case." There is no doubt in the instant case but that appellant failed to keep books. It is not contended otherwise, so the only question presented by the record is whether the District Court erred in sustaining the Referee's conclusion that such failure was not "justified under all the circumstances of the case."

Appellant cites a number of cases to the effect that the law should be liberally construed in the interest of a bankrupt, uneducated and without business experience, where there is no intent to violate the bankruptcy act. Spies v. Sytsma, 8 Cir., 56 F. 2d 520, In re Horwitz, 7 Cir., 92 F.2d 632, Hedges v. Bushnell, 10 Cir., 106 F.2d 979, and Newman v. Burnham, 6 Cir., 126 F.2d 336. These cases, however, furnish no support to appellant's contention that we as a reviewing court should reverse the finding and conclusion of a Referee sustained by the District Court.

In the Spies case, the order denying discharge was affirmed, the court on page 522 of 56 F.2d stating: "This question, of the right to discharge being addressed to the sound discretion of the trial judge, his decision will not be disturbed except in clear case of abuse of that discretion, or obvious mistake of law."

In the Horwitz case (a decision of this Court), the Referee reported favorably to the bankrupt's discharge, which report was overruled by the District Court and the discharge denied. This Court reversed, agreeing with the Referee, who had heard the testimony and had had the opportunity of observing the witnesses.

In the Hedges case, it is also pointed out that the Referee heard the evidence and recommended a discharge. The District Court, on review, without hearing any additional evidence, reversed the decision and denied the discharge. Here again the order of the District...