Rhoades v. Wikle, 25260.

• Decision Date: 20 December 1971
• Docket Number: No. 25260.,25260.
• Citation: 453 F.2d 51
• Parties: Hubert Dean RHOADES, Bankrupt, Appellant, v. C. Douglas WIKLE, Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

453 F.2d 51 (1971)

Hubert Dean RHOADES, Bankrupt, Appellant, v. C. Douglas WIKLE, Appellee.

No. 25260.

United States Court of Appeals, Ninth Circuit.

December 20, 1971.

William J. Tiernan (argued), of Tiernan & Moneymaker, Los Angeles, Cal., for appellant.

Frances O. Drummond (argued), Los Angeles, Cal., for appellee.

Before DUNIWAY, TRASK and CHOY, Circuit Judges.

CHOY, Circuit Judge:

In this California bankruptcy case, Hubert D. Rhoades appeals an order of the District Court affirming a refusal by the Referee in Bankruptcy to grant a discharge on his voluntary petition of bankruptcy. The discharge was refused on the ground that the bankrupt had "failed to keep or preserve books of account or records, from which his financial condition and business transactions might be ascertained" as required by § 14(c)(2) of the Bankruptcy Act, 11 U.S.C. § 32(c)(2). Neither the referee nor the court felt that "such acts or failures were justified under all the circumstances of the case." We agree and affirm.

Prior to 1968, the bankrupt and his wife, Virginia, both licensed real estate brokers, worked at a neighborhood real estate business known as Rhoades Realty. The business license was issued to Virginia, doing business as Rhoades Realty. She hired the clerical personnel and ran the quotidian office affairs. The bankrupt, who was also a railroad conductor, spent between five and ten percent of his time working at Rhoades Realty listing and selling real estate, receiving commissions. While Virginia ordinarily kept the business records, the bankrupt kept them on at least one occasion when his wife's license was suspended.

After a long period of honest business dealings, Virginia embarked on a series of fraudulent schemes, at least one of which resulted in a California civil judgment against her personally. She deserted her husband in late 1967, disappearing completely. The bankrupt continued the realty business until early 1968, when the pressure of creditors and the burden of straightening out Rhoades Realty's business affairs proved too much. He then filed the present voluntary petition in bankruptcy.

At the threshold lies the issue of whether the bankrupt had a duty to keep business records for Rhoades Realty before his wife deserted him.¹ We find he did have such a duty. First, he was a licensed and active real estate broker, who listed ten properties during 1967 and sold five. He was under a duty, pursuant to California Real Estate Law § 10148 to "retain for three years copies of all listings, deposit receipts, canceled checks, trust records, and other documents executed by him or obtained by him in connection with any transactions for which a real estate broker license is required," and to maintain records of the trust fund accounts which he had to establish under regulations of the California real estate law Commissioner. 10 Cal.Admin.Code §§ 2830 and 2831. As a salesman, the bankrupt was not required to keep records of his transactions; but as a broker, he had a statutory duty to do so. Nor was he freed from that duty by registering with the Real Estate Commissioner as a salesman. Even if the bankrupt had entered into a written agreement with his wife under § 2771(e) of the regulations of the Real Estate Commissioner, contained in Title 10 of the Cal.Admin. Code, recognizing him as her salesman, such an agreement only excused him from maintaining a separate shingle outside their office, not from keeping records and books.

Second, the affairs of Rhoades Realty were run in such a manner that it is impossible to separate the bankrupt's interest from that of his wife or the realty business itself. Trust, commission, and personal funds of both husband and wife were freely commingled with business funds in numerous bank accounts. The sources and disbursements of funds cannot be traced into or out of any of the numerous personal, joint, and nominally business accounts. Virginia and the bankrupt took title to real property as joint tenants. They both had listings as active brokers and listed and made sales. Both received and deposited moneys as brokers, and both had equal and joint control over the various trust, checking, and business accounts. The bankrupt was as much a part of this venture as was Virginia; he...