In re Young
| Decision Date | 05 December 1923 |
| Docket Number | 2138. |
| Citation | 294 F. 1 |
| Parties | In re YOUNG. v. EBY. ABRAMS |
| Court | U.S. Court of Appeals — Fourth Circuit |
Philip B. Perlman, of Baltimore, Md. (Marbury & Perlman, of Baltimore, Md., on the brief), for appellant.
C Arthur Eby, of Baltimore, Md. (J. Henry Baker and Charles E Orth, both of Baltimore, Md., on the brief), for appellee.
Before WOODS, WADDILL, and ROSE, Circuit Judges.
The appeal is from a decree of the District Court, affirming the report of the referee and disallowing the claim of Michael A. Abrams for $2,000 against the bankrupt estate of Frank M. Young. The facts set out in the report of the referee are not in dispute. For the purposes of the appeal they may be somewhat condensed.
Beginning probably in the early part of 1919, and continuing until bankruptcy in October, 1922, Young conducted in Baltimore a 'blind pool.' He induced customers to pay to him for this enterprise various sums of money. For each payment he issued a receipt, providing that the amount was to be placed to the credit of the customer 'in an account opened and managed by me, for the purpose of buying and selling any securities traded in on the New York Stock Exchange. ' Young was to have as compensation for his 'management' of the account 'one-third of the net profits produced' to the customer; settlements to be made monthly. The customer was to have the right to 'withdraw all or any part of his account upon 30 days' written notice,' to be given on the 1st day of a calendar month. The receipt contained provisions that funds withdrawn should not participate in profits. As each new payment was made by a customer, the former receipt was canceled, and a new receipt issued for the aggregate amount. By August 1, 1919 Young had obtained from customers $193,400. The amount increased steadily from month to month, until by October, 1922, his liability had increased to $4,061,750, and his customers numbered more than 5,000. This increase in receipts was caused in part by the fact that Young, in the early part of 1920, paid commissions to any of his depositors who secured new customers. These commissions at first were 10 per cent on the amounts secured, but were gradually reduced to 3 per cent. During the same period from August, 1919, to October 13, 1922, he paid out to his customers, as 'profits' $2,791,274.05, and from October, 1919, to October 13, 1922, he paid on withdrawals of principal $1,309,500, of which $229,100 was withdrawn during the month of September, 1922, and $412,650 from October 1 to October 13, 1922.
In the year 1920 Young's losses aggregated $419,300.35; in 1921, $21,823.42. In the year 1922, to October 13th, he made an apparent profit of $3,726.52. The net result of his tradings for the period from January 1, 1920, to October 13, 1922, was a loss of $437,397.25. During the year 1920, when his losses in tradings amounted to more than $400,000, he paid to his customers 'profits' at the rate of 58.41 per cent., aggregating $544,726.09; for the year 1921, when his losses amounted to nearly $22,000, he paid to his customers as 'profits' $883,586.69, at the rate of 44.92 per cent.; and for the year 1922 to October 13th, when his trading profits were nearly $4,000, he paid to his customers the sum of $1,268,661.27, at the rate of 37.25 per cent. For the period from January 1, 1920, to October 13, 1922, he paid to his customers as 'profits' a total sum of $2,696,974.05, when for that period his tradings resulted in a net loss of $437,397.25; so that whatever so-called profits he paid out were taken from the principal sums deposited by his customers.
From time to time false statements were sent each customer, showing on their face large profits to his credit. Separate accounts were actually kept with customers for a short time, but they were soon discontinued, and payments of all customers were put into a single fund, from which monthly payments, falsely credited as profits, were made. In this condition of the account, it is impossible to say that any particular customer was entitled at any time to the credit of a single dollar of profit. The bankrupt estate is sufficient to pay but a very small per cent. of the undisputed claims.
Abrams' payments into the pool were as follows:
April 12, 1919 . . . $ 400.00
July 14, 1919 . . . 300.00
December 30, 1919 . . . 300.00
July 31, 1920 . . . 1000.00
November 29, 1920 . . . 500.00
November 14, 1921 . . . 1000.00
January 16, 1922 . . . 500.00
Before March 23, 1923, Abrams had received as profits $2,283.02. On that date he withdrew $2,000 of his supposed...
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In re Independent Clearing House Co.
...In support of his theory, the trustee relies primarily on three cases, Rosenberg v. Collins, 624 F.2d 659 (5th Cir.1980), Abrams v. Eby, 294 F. 1 (4th Cir.1923), and Larrimer v. Feeney, 411 Pa. 604, 192 A.2d 351 (Pa.1963). Three additional cases deal with the issue of liability under these ......
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Cunningham v. MERCHANTS'NAT. BANK, 1703.
...thief. It may be that that kind of business has now become so extensive as to make such application necessary and desirable. Cf. In re Young (C. C. A.) 294 F. 1. Traditionally, bankruptcy was honest — but unfortunate — traders' law. Its extension to careers like Ponzi, with the resultant st......
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In re Taubman, Bankruptcy No. 3-89-01642
...for the principle that equality is equity." Principles of equity were likewise approved by the Fourth Circuit in Abrams v. Eby (In re Young), 294 F. 1 (4th Cir.1923). In Young, the bankrupt induced several thousand people to invest their money with him in a "blind pool." The bankrupt, Young......
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