United States v. Shoemaker

• Decision Date: 16 January 1953
• Docket Number: No. 2334 and 2406.,2334 and 2406.
• Citation: 110 F. Supp. 898
• Parties: UNITED STATES v. SHOEMAKER et al.
• Court: U.S. District Court — Eastern District of Arkansas

110 F. Supp. 898

UNITED STATES v. SHOEMAKER et al.

Nos. 2334 and 2406.

United States District Court E. D. Arkansas, W. D.

January 16, 1953.

James T. Gooch, U. S. Atty., Little Rock, Ark., R. D. Smith, Jr., Asst. U. S. Atty., Little Rock, Ark., for plaintiff.

E. M. Arnold, Little Rock, Ark., U. A. Gentry, Little Rock, Ark., for defendants.

TRIMBLE, Chief Judge.

This cause came on for trial and the Court, having heard the evidence and considered the stipulation of the parties, finds the facts and states the conclusions of law as follows:

Findings of Fact

1. This is an action by the United States of America against Elizabeth F. Shoemaker and Audria Hart, citizens of Arkansas, and Checker Cab & Baggage Company, Yellow Cab Company, Inc., and Yellow Cab Building Company, Inc., corporations, to collect delinquent income and excess profits taxes adjudged to be due by the Tax Court of the United States.

2. The parties on December 15, 1952, entered into and filed with the Court stipulation of facts, which is now a part of the record in this case. The Court now adopts and makes this stipulation and the facts set out therein a part of this finding of facts.

3. The Court makes the exhibits to the stipulation of facts a part of the finding of facts.

4. From the stipulation of facts and the testimony of witnesses ore tenus before the Court, it is a fact that the defendant, Audria Hart, and Elizabeth F. Shoemaker, her sister, and the corporate defendants herein,

(a) Had no regular bank account through which the funds coming into the business were deposited as is usual in operations as extensive as were being conducted here.

(b) Had no adequate records through which the transactions of the businesses were set up so that they might be examined by proper authorities, or from which adequate reports could be made in keeping with usual and ordinary business practices.

(c) Did their business in an unusual manner, through the use of lock boxes in which money was placed without making any record thereof, and from which money was withdrawn, without a record of when, how and for what purpose it was done.

(d) Elizabeth F. Shoemaker and Audria Hart, here sister, maintained joint bank accounts on which both or either of them could draw, and maintained joint lock boxes to which either or both had access.

5. Audria Hart, when a witness in her own behalf, could not or did not explain when, whence or from whom she got the stock certificates which allegedly secured her loans, nor could she tell when or how the mortgage came into her possession. She did not have the mortgage recorded and could not explain why the notation on the mortgage required it to be returned to her sister, Mrs. Shoemaker, after recordation.

6. Her account of the source or sources from which she claims to have secured the moneys for these loans is not credible. She testified that her husband was a bookkeeper residing in Pine Bluff, Arkansas, and that he died in 1927. She testified that there was a will which was probated, and that this will left her the major part of the estate. She also testified that her husband had a very considerable sum of money in a lock box which she received, and that "When everything was sold," she was able to leave Pine Bluff, Arkansas, for Tulsa, Oklahoma, with about $80,000, "Plus Pullman tickets for herself and her mother." She also testified that she did not file an inventory of this money in the probate proceedings. That there were some other assets about which she was indefinite, but that there was a home on which there was a mortgage; that she did not make any further payments on this home but left town with the money in a handbag. She says that since 1927 she has kept this money in lock boxes in different towns where she has lived. None of this testimony is supported by record or parole evidence.

7. The court finds that Audria Hart has not brought in any credible evidence to support her contention that she made these large loans to her sister, Mrs. Shoemaker, and the corporate defendants.

8. Her claim that she placed a mortgage on her home for money is supported by some corroborating testimony, but that she loaned this money to her sister and the corporate defendants is unsupported by credible evidence.

9. The Court finds that the defendants, Elizabeth F. Shoemaker, Yellow Cab Company, Inc., and Checker Cab & Baggage Company, are now insolvent and were insolvent upon the date of the execution of the mortgage to the defendant, Audria Hart, and the delivery to her, if any, of the certificates of stocks by her sister, Mrs. Elizabeth F. Shoemaker.

10. From all the facts in the case, the Court finds that the mortgage executed by the corporate defendants and Elizabeth F. Shoemaker, to her sister, defendant Audria Hart, and the delivery to Audria Hart of the certificates of stock, if any such delivery took place, was fraudulent and void as to existing creditors, and that the United States of America was an existing creditor at that time.

Memorandum

The defendants in their brief state the issue here to be: "The only remaining question for determination by the Court is whether there was consideration for the note, mortgage and pledge executed as set out in the stipulation. This is the only issue covered, or which properly should have been covered by the oral testimony." With this statement of the issue the Court quite agrees.

The validity of the mortgage as between the defendant, Audria Hart, and the plaintiff, United States of America, in this proceeding, is controlled by the statutes of Arkansas and the decisions of the Supreme Court of Arkansas.

It having been alleged that the mortgage was in fraud of creditors, the burden in the first instance is upon the plaintiff to show that the execution and delivery of this mortgage was attended by highly suspicious circumstances, and that the course of dealings between the parties to the mortgage was unusual and were not such as to be expected in bona fide transactions between ordinary businessmen, and that it is quite likely that the mortgage was executed for the fraudulent purposes of hindering and delaying creditors. This is particularly true where the dealing is between close kin and the relationship as close as the defendant, Audria Hart, testifies, and when such circumstances are shown the burden of proof is then upon the defendants to prove the transaction was based upon a valid consideration, and they must prove the bona fides of the entire transaction.

In the case of Wilks v. Vaughan, 73 Ark. 174, 179, 83 S.W. 913, 914, the Supreme Court of Arkansas, had before it a case in point. There it is said:

"The conveyances were all made after the debt was incurred to the bank, and only a short time before judgment thereon, some a few days, and the farthest less than three months. Wilks was practically denuded of all his property after they were made. Were they fraudulent as to the bank, and, through it, to these appellees? It must be said in fairness to Wilks that plausible, and in some instances almost convincing, explanations of these transfers are made. It is thoroughly settled in equity jurisprudence that conveyances made to members of the household and near relatives of an embarrassed debtor are looked upon with suspicion and scrutinized with care, and when they are voluntary they are prima facie fraudulent, and, when the embarrassment of the debtor proceeds to financial wreck, they are presumed conclusively to

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