United States v. Fraidin

• Decision Date: 27 October 1945
• Docket Number: No. 20562.,20562.
• Citation: 63 F. Supp. 271
• Parties: UNITED STATES v. FRAIDIN et al.
• Court: U.S. District Court — District of Maryland

63 F. Supp. 271

UNITED STATES v. FRAIDIN et al.

No. 20562.

District Court, D. Maryland.

October 27, 1945.

Bernard J. Flynn, U. S. Atty., of Baltimore, Md., for plaintiff.

Wilfred T. McQuaid, of Baltimore, Md., for defendants.

COLEMAN, District Judge.

The question here presented is whether a certain prosecution for an offense under the Bankruptcy Act is barred by limitations.

The defendants, six in number, one of whom, David Fisher, was adjudicated a bankrupt by this Court on June 28, 1938, were indicted on February 27, 1945, under the provisions of Section 29, sub. b, of the Bankruptcy Act as amended, 11 U.S.C.A. § 52, sub. b, for unlawfully concealing assets from the receivers, and subsequently from the trustee of Fisher's estate in bankruptcy. The bankrupt has never been granted a discharge, nor did he ever apply for one.

Specifically, the indictment alleges that the defendants "beginning on or about the 28th day of June, 1938, and continuously thereafter, up to and including the date of the filing of this indictment, at Baltimore, * * *, did unlawfully, knowingly, wilfully, feloniously and fraudulently conceal from Louis J. Sagner and Jack L. Medwedeff, the Receivers, and from Jack L. Medwedeff, the Trustee, of the estate in bankruptcy of the said David Fisher, individually and trading as Federal Sales Company as aforesaid, a large amount of personal property belonging to the said estate of the said David Fisher, individually and trading as Federal Sales Company as aforesaid, then in bankruptcy, to wit: certain goods, wares, merchandise and moneys, the same being a part of the stock of goods and proceeds thereof held by the said David Fisher, individually and trading as Federal Sales Company as aforesaid, a more particular description of which is to the Grand Inquest aforesaid unknown, and hence cannot be given, by reason of the fact that the same were concealed as aforesaid and are still concealed; * * *."

Two of the defendants filed petitions for a bill of particulars, alleging that they intended to plead limitations in bar of the prosecution under the indictment, but that in order to do so, they must be advised more particularly of the acts, dates and nature of the concealment alleged in the indictment. The Government answered these petitions asserting, among other things, that the concealment of assets as set forth in the indictment occurred at the time the involuntary petition in bankruptcy against Fisher was filed, namely, June 28, 1938. Thereupon, these two defendants filed pleas of limitations to the indictment on the ground that it had been found by the Grand Jury more than three years after the commission of the alleged offense. Full argument of counsel has been heard on these pleas, and the sole question now before the Court is whether prosecution under the indictment is barred by limitations.

The provisions of the Bankruptcy Act which are in issue are contained in Section 29, sub. d, of that Act as amended by the Act of June 22, 1938, commonly known as the Chandler Act, 11 U.S.C.A. § 52, sub. d, which is as follows: "A person shall not be prosecuted for any offense arising under this title unless the indictment is found or the information is filed in court within three years after the commission of the offense: Provided, That the offense of concealment of assets of a bankrupt shall be deemed to be a continuing offense until the bankrupt shall have been finally discharged, and the period of limitations herein provided shall not begin to run until such final discharge."

Summarized, the Government contends that prosecution is not barred under the provisions of the Bankruptcy Act just quoted because (1) a statute of limitations is purely an act of grace on the part of Congress and, therefore, if Congress sees fit to increase the time limit within which prosecutions may be had, or even to remove completely all limitation, Congress does not thereby take away from the one sought to be prosecuted a right of which he may not constitutionally be deprived, even though — as is true in the present case because the Chandler amendments did not become effective until September 22, 1938, — the change made in the statutory time limit became effective after the date of the alleged offense, since it is not an ex post facto law within the constitutional meaning and use of that phrase because the three year bar of the statute as it stood before amendment had not run in favor of the defendant at the time of the amendment; and (2) the proviso in question does not constitute ex post facto legislation with respect to the instant case, by defining the offense of concealment of assets as a continuing one, because it has not changed the ingredients of the offense, or altered the situation of the accused to their disadvantage.

As opposed to the Government's position, counsel for the defendants assert: (1) that the provisions of the Bankruptcy Act just quoted, making the offense of concealment of the assets of a bankrupt a continuing offense until the bankrupt shall have been finally discharged, is ex post facto legislation when applied to a charge of concealment in a bankruptcy proceeding which has occurred prior to the effective date of the Chandler Act amendment; (2) that the offense of concealment charged in the present indictment occurred, if at all, more than three years before the filing of the indictment on February 27, 1945, and, therefore, the prosecution is barred by the very terms of the statute as it stood before amendment, that is, without the proviso, because the amendment is not applicable to the present case, the bankrupt's adjudication having occurred, and the first meeting of his creditors having been held, prior to the effective date of the amendment, namely, September 22, 1938; and (3) that since, by the proviso in the Chandler Act amendment, the period in which an indictment could be brought for concealment of assets against this defendant might run indefinitely because this bankrupt can never obtain a discharge, the statute is, for this reason, invalid.

The facts with respect to the failure of the bankrupt, one of the defendants, David Fisher, to obtain a discharge are as follows: He never applied for a discharge, although having been adjudicated a bankrupt on June 28, 1938, he was obligated, under the law as it then stood, to file an application, if he desired a discharge, within twelve months thereafter, the only extension of this time limit being covered by the further provision that "if it shall be made to appear to the judge that the bankrupt was unavoidably prevented from filing it his application for a discharge within such time, it may be filed within but not after the expiration of the next six months." Bankruptcy Act, Sec. 14, sub. a, 11 U.S. C.A. § 32, sub. a. Since the bankrupt, as just stated, never made any application, any right to a discharge which he might have had under the law before the Chandler amendment, became forever foreclosed by operation of law on December 28, 1939. Armstrong v. Norris, 8 Cir., 247 F. 253; In Re Moore, 2 Cir., 36 F.2d 429.

The first question, therefore, to be determined is whether the discharge provisions of the old law, or those of the amendatory Act, apply.

The Chandler amendment, Section 6 (b), 11 U.S.C.A. § 1 note, provides that "Except as otherwise provided in this amendatory Act, the provisions of this amendatory Act shall govern proceedings so far as practicable in cases pending when it takes effect; but proceedings in cases then pending to which the provisions of this amendatory Act are not applicable shall be disposed of conformably to the provisions of said Act approved July 1, 1898, and the Acts amendatory thereto and supplementary thereto." Applying this provision to the facts in the present case, it is true that the bankrupt estate of David Fisher was still being administered on September 22, 1938, the effective date of the amendatory Act, and in fact the proceeding was not finally closed until July 7, 1941. However, the first and only meeting of the bankrupt's creditors was held on July 28, 1938, that is, prior to the effective date of the amendment. Under these circumstances can it be said that it is "practicable" to have the amendatory Act govern the matter of discharge?

It has been held that where the maximum time allowed for filing an application for discharge, under the law prior to the amendatory Act, has expired before the effective date of that Act, the bankrupt is precluded from a discharge thereafter. In re Cederbaum, D.C., 27 F.Supp. 1014. In the present case, such maximum time had not expired. However, we are of the opinion that this fact is not controlling, and that since not only had both the adjudication and the first meeting of creditors antedated the effective date of the amendatory Act, but the bankrupt has made no attempt whatsoever to obtain a discharge under either the law as it stood at the time he was adjudicated a bankrupt (June 28, 1938), and when the first meeting of his creditors was held (July 28, 1938), or after the amendment, it would not be "practicable" but on the contrary, highly impractical to say in a distinct proceeding such as the present one, — not in the bankruptcy court at all, — that the amendatory Act should be treated as nevertheless applicable in determining the rights of third parties. This conclusion finds support in the adoption by the District Court for the Southern District of New York of a local Bankruptcy Rule (No. 19) pursuant to which the amendatory Act does not apply in cases where adjudication, without more, has occurred before the effective date of the amendatory Act. See In re Cederbaum, supra.

There are a number of cases holding that where the bankrupt's right to apply for discharge has not been barred by the provisions of the old Act at the time when the amendatory Act became effective, as was true in the present case, it was "practicable" and therefore obligatory to...