Jones v. Gertz, 2266.

• Decision Date: 17 July 1941
• Docket Number: No. 2266.,2266.
• Citation: 121 F.2d 782
• Parties: JONES v. GERTZ et al.
• Court: U.S. Court of Appeals — Tenth Circuit

121 F.2d 782 (1941)

JONES v. GERTZ et al.

No. 2266.

Circuit Court of Appeals, Tenth Circuit.

July 17, 1941.

Lee Olwell, of Seattle, Wash. (W. David McClain and Edwin A. Williams, both of Denver, Colo., and Eli E. Dorsey, of Seattle, Wash., on the brief), for appellants.

Erl H. Ellis, of Denver, Colo. (Max D. Melville and Fred M. Winner, both of Denver, Colo., on the brief), for appellee Mitchell.

Before HUXMAN and MURRAH, Circuit Judges, and KENNAMER, District Judge.

HUXMAN, Circuit Judge.

Lester Lee Jones¹ filed his petition in bankruptcy in the District Court of the United States for the District of Colorado. The only assets listed by him were household goods of the value of $50, and architect tools of the value of $50. Both items were claimed as exempt property. He listed liabilities totaling more than $6,000. When he filed his application for discharge, the principal creditor Ben F. Mitchell,² objected to his discharge on the ground that he had falsely and fraudulently concealed assets and refused to list them, for the purpose of hindering and delaying his creditors. The referee denied the discharge. Upon petition for review, the District Judge affirmed the decision of the referee. The bankrupt has appealed.

There is no dispute in the evidence, and the question is rather one of the legal implications to be drawn from the facts. Neither is there any disagreement on the applicable legal principles. The bankrupt is entitled to have the Bankruptcy Act, 11 U.S.C.A. § 1 et seq., liberally construed in his favor and is entitled to a discharge unless it clearly appears that he has committed some act which precludes this right. The burden of proof is on the objecting creditor to establish a corrupt motive or intent. When a prima facie case has been made by one objecting to a discharge, then the burden of proceeding shifts to the bankrupt to clear himself of the charge established by such prima facie showing. These principles are generally accepted, and need no citations of authorities to sustain them.

The bankrupt and appellee had an agreement whereby appellee was to procure contracts for architectural services on Public Works Administration construction projects. The work was to be done by bankrupt and the fees were to be divided one-third to bankrupt and two-thirds to appellee. They succeeded in securing a number of such contracts on which the bankrupt was engaged. He became unable to complete them because he did not have sufficient funds to pay his actual and necessary expenses incurred in traveling from place to place to supervise the work on the contracts. As a result, he relinquished all of the contracts, and the authorities employed other architects who supervised and completed the balance of the work, for which they received their compensation.

The referee found that the bankrupt concealed two assets, the sum of $461.27 due him from Adams County, and the further sum of $95, due from the city of Walden, both sums arising from jobs procured pursuant to the contract between bankrupt and appellee.

The bankrupt filed his petition on August 22, 1939, and was adjudged a bankrupt on August 28, 1939. He did not list any choses in action among his assets. He filed several amendments to his schedule of liabilities. We need to note only the one of September, 1939, wherein he listed an obligation to the National City Bank of Denver, of $350, secured by an assignment of moneys due from the Adams County contract. The assignment was dated August 23, 1938.

The only evidence offered by appellee to support the charge that the bankrupt concealed assets with intent to defraud the creditors was in relation to these two sums found due on the Adams County and the Walden City contracts, and the fact that the bankrupt failed to list them. Standing alone and unexplained, this is sufficient to raise a presumption of fraud on the part of bankrupt and shift the burden to him to clear himself thereof.

In explanation of why he did not list these choses in action, the bankrupt established that he had given an assignment of funds due from the Adams County contract to the bank, in the sum of $350; that he had also given a further assignment on this fund in the sum of $200 to a finance credit corporation. While there is some question of the status of the debt of $200 for which the assignment was given to the finance corporation, there is no doubt that the assignment was given and outstanding at the time he filed his schedules. The corporation claimed that the debt had not been paid and that the assignment was valid and outstanding. From this it would appear that he actually had nothing coming from the Adams County contract when he filed his schedule...