International Shoe Co. v. Lewine

• Decision Date: 19 January 1934
• Docket Number: No. 7113.,7113.
• Parties: INTERNATIONAL SHOE CO. et al. v. LEWINE.
• Court: U.S. Court of Appeals — Fifth Circuit

68 F.2d 517 (1934)

INTERNATIONAL SHOE CO. et al. v. LEWINE.

No. 7113.

Circuit Court of Appeals, Fifth Circuit.

January 19, 1934.

E. L. Trenholm, of Jackson, Miss., for appellants.

J. Morgan Stevens, of Jackson, Miss., for appellee.

Before BRYAN, SIBLEY, and HUTCHESON, Circuit Judges.

SIBLEY, Circuit Judge.

L. Lewine, an uneducated Russian who obtained American citizenship through military service in the World War, subsequently married and established a business which in 1930 embraced two shoe stores in Jackson, Miss. He made a written statement of financial condition to Brown Shoe Company in April of that year. In August a serious fire occurred in one of the stores. In September he bought of Brown Shoe Company shoes costing several thousand dollars, credit being extended on the faith of the statement. In October he found himself in financial difficulties and offered to return to Brown Shoe Company their unsold shoes, the offer being declined. In December he was unable to go forward in business, and on the advice of representatives of the Brown Shoe Company and of National Association of Credit Men he went into voluntary bankruptcy. Lewine's application for discharge was resisted on a number of grounds, was referred to a master who reported in favor of the discharge, exceptions to the report were overruled by the judge, and the discharge granted. This appeal followed. The three objections to the discharge now insisted on are that no sufficient books were kept, that goods were obtained from Brown Shoe Company on a false written statement, and that no satisfactory explanation has been given of the loss of assets.

As amended in 1926, 11 USCA § 32 (b) provides in part: "The judge shall hear the application for a discharge * * * and discharge the applicant, unless he has * * * (2) destroyed, mutilated, falsified, concealed, or failed to keep books of account, or records, from which his financial condition and business transactions might be ascertained; unless the court deem such failure or acts to have been justified, under all the circumstances of the case; or (3) obtained money or property on credit, or obtained an extension or renewal of credit, by making or publishing, or causing to be made or published, in any manner whatsoever, a materially false statement in writing respecting his financial condition; or * * * (7) has failed to explain satisfactorily any losses of assets or deficiency of assets to meet his liabilities." Respecting the keeping of books the requirement is in the alternative, books or records. There may be records which are not books. It is intended that there be written evidence orderly made and preserved from which the present financial condition of the bankrupt and his business transactions for a reasonable period in the past may be ascertained with substantial completeness and accuracy, to serve as a substitute for or check against his oral statements. The transactions need not be stated in full detail if they are so identified that inquiry can be made about them. The requirement is not rigid, but the judge is allowed to excuse failure whether total or partial if the circumstances justify it. In the present case Lewine himself is incapable of keeping books and for a number of years he employed an assistant cashier in the bank, a man honest and competent, to keep them. The books covered completely the commercial transactions and their accuracy is not questioned, but their completeness is in that there were kept no general ledger accounts, so that a statement of financial condition could not be made from the books alone, and the entries of money transactions did not always indicate the person dealt with. The bookkeeper testified, however, that he could at any time make a statement or give any desired information with the aid of other records kept, especially the annual inventory taken each January and preserved, the invoices of goods a file of which was kept, and the check stubs and canceled checks which were preserved. He did clear up before the master many matters which were questioned. Such a system of books and records is not ideal or desirable, but the judge was justified in considering its deficiencies to be excusable. The lack now most insistently urged is that there was no record of the bankrupt's real estate, of the furniture and fixtures, nor of his indebtedness to the bank. It is testified, however, that the furniture and fixtures appeared in the annual inventories. The real estate holdings would appear from the bankrupt's deeds, and bank debts could be ascertained by a natural and simple inquiry at the bank. The real estate, indeed, was mainly the leases on the stores. Every creditor knew or could learn about the stores and the fixtures in them with which business was being daily done. Omission to record these matters by a bookkeeper with no bad motive suspected ought not to deprive an honest bankrupt of his discharge. Part of the records kept, notably the last inventory and some of the checks stubs and canceled checks, were burned in the fire and in this sense not...