Koufman v. Sheinwald, 3112.

• Decision Date: 23 May 1936
• Docket Number: No. 3112.,3112.
• Citation: 83 F.2d 977
• Parties: KOUFMAN v. SHEINWALD.
• Court: U.S. Court of Appeals — First Circuit

83 F.2d 977 (1936)

KOUFMAN v. SHEINWALD.

No. 3112.

Circuit Court of Appeals, First Circuit.

May 23, 1936.

Martin Witte, of Boston, Mass., for appellant.

Jacob Wasserman, of Boston, Mass. (Arthur Theise Wasserman and Wasserman & Wasserman, all of Boston, Mass., on the brief), for appellee.

Before BINGHAM, WILSON, and MORTON, Circuit Judges.

BINGHAM, Circuit Judge.

This is an appeal by the bankrupt from an order of the District Court for Massachusetts, denying his petition for a discharge on the third and fifth specification of objections of the creditor, there being eight objections in all, the remaining six not being sustained.

The creditor's third objection in his specification of objections is as follows:

"3. For the reason that, with the intent to conceal his true financial condition, he has destroyed, mutilated, falsified, concealed or failed to keep books of account or records from which such financial condition and business transactions might be ascertained."

The fifth objection is:

"5. For the reason that he has failed to explain satisfactorily any losses of assets or deficiencies of assets to meet his liabilities."

Section 14b (2) of the Bankruptcy Act is the one under which the third objection was drawn, and since 1926 (11 U.S.C.A. § 32 (b) (2) has provided:

"(b) The judge shall hear the application for a discharge and such proofs and pleas as may be made in opposition thereto by the trustee or other parties in interest, at such time as will give the trustee or parties in interest a reasonable opportunity to be fully heard; and investigate the merits of the application 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."

Prior to its amendment in 1926, clause (2) of section 14b, 11 U.S.C.A. § 32 (b) (2), read:

"(2) with intent to conceal his financial condition, destroyed, concealed, or failed to keep books of account or records from which such condition might be ascertained."

And prior to 1903 clause (2) read:

"(2) with fraudulent intent to conceal his true financial condition and in contemplation of bankruptcy, destroyed, concealed, or failed to keep books of account or records from which his true condition might be ascertained." (11 U.S.C.A. § 32 note)

It thus appears that the word "fraudulent," the word "true" preceding the words "financial condition," and the words "and in contemplation of bankruptcy" were omitted in the amendment of 1903, and the words "with intent to conceal his financial condition" were omitted in the act of 1926, the act in force when the specifications of objections here under consideration were filed.

Such being the case, the words "with intent to conceal his true financial condition," which the third specification contained, are in legal effect stricken out.

The District Court sustained this specification of objection, the master in his report having made a general finding to the effect "that the objecting creditor has proved by a reasonable preponderance of the evidence that the bankrupt failed to keep books of account or records from which his financial condition and business transactions might be ascertained, and that, under all the circumstances of the case, taking into account particularly the magnitude and complexity of the bankrupt's affairs, such failure was not justified."

The master in making this finding and the District Court in approving it as a ground for denying the bankrupt's discharge evidently proceeded on the basis that the creditor's third specification of objection was restricted to the provisions of the act as it now stands. This appears from the master's report where he refused to find "whether the bankrupt failed to keep reports during the period from January, 1931, to the date of his bankruptcy with intent to conceal his financial condition, because under the Bankruptcy Act, as amended in 1926, it is immaterial what the intention of the bankrupt was in this regard." As the amendment of 1926 rendered the intent-to-conceal clause of the specification immaterial, the master was authorized to disregard it and treat the specification in this respect as restricted to the provisions of the act of 1926. Thus restricted, we see no reason why the findings of the master, affirmed by the District Court, do not sustain this specification.

In addition to the general finding above set out, the master made two subsidiary findings: (1) That the bankrupt kept "no records from which his financial condition and business transactions might be ascertained subsequent to January, 1931" (or for more than seven months preceding the filing of his petition in bankruptcy, October 3, 1931); and (2) "that such records as were kept prior to January, 1931, were not sufficient to enable one to ascertain his true financial condition and business transactions."

The general finding is based upon both of the subsidiary findings above set out; not upon the last one alone, as counsel for the appellant would have us believe. It is a comprehensive finding that meets every requirement of the statute. The subsidiary findings are not inconsistent with it but are in accord with and support it, and, the evidence not being before us in this record, we are not at liberty to question it.

The master in his general finding in effect ruled that the burden of proof, under this specification of objection, was on the objecting creditor, for in the above finding he states "that the objecting creditor has proved by a reasonable preponderance of the evidence that the bankrupt failed to keep books of account or records from which his financial condition and business transactions might be ascertained." He not only ruled that the burden of proof was on the objecting creditor, but that a reasonable preponderance of the evidence was essential to maintain that burden.

In Shanberg v. Saltzman (C.C.A.) 69 F.(2d) 262, 263, it is pointed out that the degree of proof required is "a fair preponderance of the evidence," whether the burden is upon the objecting creditor or the bankrupt. But that case holds that under the provisions of section 14 of the Bankruptcy Act 11 U.S.C.A. § 32, as it now stands, the burden of proof is on the bankrupt, the objector having shown "to the satisfaction of the court that there are reasonable grounds for believing that the bankrupt committed any of the acts which, under section 14 (b) * * * would prevent his discharge."

In this case it appears that the objector has not only shown to the satisfaction of the court below that there were reasonable grounds...