Spach v. Strauss

• Decision Date: 02 March 1967
• Docket Number: No. 23697.,23697.
• Citation: 373 F.2d 641
• Parties: May SPACH, Trustee in Bankruptcy for the Estate of Robert L. Strauss, Appellant, v. Robert L. STRAUSS, Bankrupt, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

373 F.2d 641 (1967)

May SPACH, Trustee in Bankruptcy for the Estate of Robert L. Strauss, Appellant, v. Robert L. STRAUSS, Bankrupt, Appellee.

No. 23697.

United States Court of Appeals Fifth Circuit.

March 2, 1967.

Robert R. Frank, Miami Beach, Fla., Frank & Strelkow, Miami Beach, Fla., for appellant.

William Manker, Miami, Fla., Manker & Gale, Miami, Fla., for appellee.

Before COLEMAN and DYER, Circuit Judges, and ESTES, District Judge.

COLEMAN, Circuit Judge:

On May 7, 1959, an involuntary petition in bankruptcy was filed against Robert L. Strauss. Hearings were held September 28-29, 1959, for purposes of §§ 3(d)¹ and 21(a)² of the Bankruptcy Act. At the conclusion of the hearings, Strauss was adjudicated bankrupt. A first meeting of creditors was held November 20, 1959. The trustees filed specifications and amended specifications in opposition to the bankrupt's discharge. Testimony on the objections to discharge was presented before the referee on March 31 and April 5, 1960. Testimony given at prior examinations of the bankrupt and his wife was made a part of the record to be considered by the referee. On April 14, 1960, the referee entered his order discharging the bankrupt. Upon petition for review, on December 29, 1960, the District Court issued an order reversing the referee's order of discharge.

Almost five years later, on August 24, 1965, the referee filed amended findings of fact and conclusions of law, and again discharged the bankrupt. These were affirmed by the District Court. The trustee appeals. We affirm.

The provisions of § 14(c) of the Bankruptcy Act,³ relating to discharge, must be construed liberally in favor of the bankrupt. Roberts v. W. P. Ford & Sons, 4 Cir., 1948, 169 F.2d 151. In this case the referee has twice found the bankrupt entitled to discharge. The latter of these conclusions was affirmed by the District Court. This appeal urges as error both the conclusion that Strauss was entitled to discharge and certain subsidiary conclusions, which we deem factual.⁴

The referee in bankruptcy has reasonably broad discretion in granting or refusing a discharge to a bankrupt. When the referee's determination has been approved by the district court, it should not be disturbed on appeal except for the most cogent reasons. Minella v. Phillips, 5 Cir., 1957, 245 F.2d 687, 690.

By confirming the referee's findings the District Court made them his own.

Fed.R.Civ.P. 52(a) precludes reversal on a factual issue unless it is found to be clearly erroneous, Chaney v. City of Galveston, 5 Cir., 1966, 368 F.2d 774. The sole inquiry here, then, is whether the factual issues were resolved erroneously, and clearly so, and whether the discharge in this case amounted to an abuse of discretion.

The referee's amended findings rejected, one by one, the specifications against discharge.

The retention of canceled checks, check stubs, deposit slips and bank statements for ten years was found to be sufficient record keeping to ascertain Strauss' financial condition. Since all of Strauss' assets were disclosed at or before the first meeting of creditors November 29, 1959, it was found that there was no fraudulent concealment.

A difference of some $800,000 in the liabilities admitted by Strauss in his answer to the involuntary petition and those contained in the schedules later filed was satisfactorily explained to the referee as contingent liabilities included on the advice of counsel.

The three thousand odd dollars on deposit in an Atlanta bank were found not fraudulently concealed, for $2,775 was deposited after the date of adjudication, and the existence of the bank account was disclosed by the time of the first meeting of creditors.

There were allegations that the bankrupt swore falsely in the filing of schedules and that there was fraud in his methods of operating through corporations and bank accounts of his wife and secretary. It does not appear that the State Court proceeding in which Strauss said he knew nothing of his wife's affairs was "in or in relation to any bankruptcy proceeding" within the ambit of 18 U.S.C.A., § 152. The referee found that the bankrupt had operated through checking accounts not in his own name for many years, not always under threat of bankruptcy. He found that there was no fraud.

The referee's action in refusing to allow the trustees to amend one specification was not prejudicial, for the whole specification, relating to the Atlanta bank account, was overruled.

Oral argument revealed the intensity of the feelings of the parties, but that has nothing to do with an objective disposition of the appeal. The referee and the district judge, over a period of five years, have wrestled with this matter and have closed the books. Not being able to say that the factual findings were clearly erroneous, and finding no error of law, we decline to revive the controversy.

Affirmed.

1 Whenever a person against whom a petition has been filed alleging the commission of the second, third, or fifth act of bankruptcy takes issue with and denies the allegation of his insolvency or his inability to pay his debts as they mature, he shall appear in court on the hearing, and prior thereto if ordered by the court, with his books, papers, and accounts, and submit to an examination and give testimony as to all matters tending to establish solvency or insolvency or ability or inability to pay his debts as they mature and, in case of his failure so to do, the burden of proving solvency or ability to pay his debts as they mature shall rest upon him.

2 The court may, upon application of any officer, bankrupt, or creditor, by order require...