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illegality of charging a dollar for storage. Whether the pawnbroker should be satisfied with nine cents interest on a loan that is conceded by all parties might be but a month in duration, that is a matter for the state law. The pawnbroker, as far as this case was concerned, was within his rights. The question as to the contradiction about the witnesses being asked if they wanted extra care, and the pawnbroker stating that they requested extra care, is merely a discrepancy in the testimony to be considered in finding out what happened. The pawnbroker, as far as this case is concerned, had a right to add that dollar, if it was assented to by the soldiers.
Mr. Houghton: I request the court to charge that the fact that Richards or Donahue, or either of them, may have been intoxicated, or partly intoxicated, at the time of the pawning of any clothing, should not prejudice the jury against the defendant.
The Court: It is evidence as to the whole situation both upon the question of their memory and the acts of the defendant.
Mr. Houghton: I further request that, if the jury find that the two coats in question were paid for by Richards and Donahue out of their clothes allowance, the jury should acquit.
The Court: I refuse to so charge.
Mr. Houghton: That if the jury find that the two coats in question were charged up by the government against Donahue and Richards, that they were their own property, and the jury should acquit.
The Court: I refuse to so charge.
Mr. Houghton: If the jury believe that Donahue and Richards stated that they were discharged soldiers, Koplik was under no obligation to ask to see their discharge papers, and the jury should acquit.
The Court: I will charge that he was under no obligation to compel them to produce their discharge papers. The question as to how far a reasonable man would find out about the situation is one the jury will have to determine.
Mr. Houghton: Further, the fact that Donahue and Richards were in uniform was not of itself notice to the defendant that they were in the service of the United States government.
The Court: I will charge that the fact that a man has on a uniform is not conclusive proof that he is actually at that time in the service. I refuse to charge whether it is notice except as I have already explained.
Mr. Houghton: I will also ask your honor to charge that at the time of the arrest of this defendant he was not bound under any law of the United States to make any statement.
The Court: He was not bound, and it is proper to warn a man not to make a statement. What the man does should, of course, be considered by the jury in determining his frame of mind and knowledge of the situation, but it should not be held against him if he keeps quiet.
Mr. Houghton: I will further request the court to charge—I think you have already touched upon it, but I would like to urge my requestthat the defendant must have known at the time that the soldier pledged the garment that he was a soldier of the United States.
The Court: I refuse to charge, except as I have already charged.
Mr. Houghton: I further request the court to charge that the defendant must have known at the time the property was pledged that the property was public property.
The Court: No; I refuse to so charge.
Mr. Houghton: I further request the court to charge that the defendant must have known at the time the pledge was made by the soldier that the soldier had no right to pledge them.
The Court: I refuse to so charge. The defendant took his chances on that.
Mr. Bird: I request that your honor charge that under the law the defendant has no right to accept more than 3 per cent. interest a month on any loan.
The Court: I so charge. If there are no further requests, the jury will retire.
The jury brought in a verdict of guilty, and a sentence of $1,000 fine was imposed, which was paid by the defendant.
In re LEVERTON. (1.)
(District Court, M. D. Pennsylvania. September 4, 1907.)
No. 897, in Bankruptcy.
BANKRUPTCY-STATE EXEMPTION-FRAUDULENT CONCEALMENT OF PROPERTY.
A bankrupt was a general merchant in a small town, carrying an average stock of about $5,000. Within three months prior to his bankruptcy he bought goods to the value of $11,000, which he did not pay for, in addition to those then on hand; and on his bankruptcy his stock invoiced 'at cost price less than $3,500. During such three months not more than $3,000 in money was accounted for, and no proper books showing the business transactions were found. Held, that under the law of Pennsylvania, having fraudulently concealed his property he forfeited his right to his $300 state exemption.
In Bankruptcy. On exceptions to refusal of John W. Codding, referee, to allow the bankrupt his $300 state exemption.
The report of the referee was as follows:
The trustee having filed with the referee a schedule of property designated and set apart, to be retained as exempt by the bankrupt, amounting to $299.75, exception is taken by creditors to the allowance of the exemption for the reason: (1) That the bankrupt fraudulently contracted the indebtedness due them. (2) That he has fraudulently concealed and disposed of certain of his goods, merchandise, and property, for the purpose of putting them beyond the reach of creditors. From the record and evidence taken in the case, it appears that Morris Leverton, at the time the petition in bankruptcy was filed, had been conducting a general mercantile business in Du
shore, Pa., for about twelve years. The first six years he was in partnership with Mrs. Goldstein, & cousin, and the last six years by himself. Dushore has a population of about 1,000. During the time he was in business for himself, he carried a regular stock down to September or October, 1906, of some $5,000. The bankrupt is about 33 years of age, had apparently been successful in business, and until shortly prior to the bankruptcy proceedings had a good financial standing, and he yoems to have been able at the close to get unusual and almost unlimited credit The evidence does not show all the new goods that he purchased during the year 1906, but it does show substantially the new goods that he purchased and received during that year, which he did not pay for. The latter appears from the proofs of claims filed, the indebtedness set forth in his schedules, and the records of the freight and express offices at Dushore.
Of goods, for which claims have been proved, he purchased and received as follows: Prior to August, 1906...
$3,115 00 During August,
1,572 75 During September,
3,410 18 During October,
5,985 63 The purchases for September and October were unusually large for him as appears from the number of shipments and packages which he received during these two months as compared with the corresponding months of 1905. In September, 1906, express,
38 shipments, 38 packages, 918 lbs. freight, 27
5762 In October, 1906, express, 139
3795 freight, 51
In September, 1905,
In October, 1905,
In November, 1905.
In place therefore of the stock of $5,000 wbich he regularly carried Leverton had goods to the amount of $14,385.81 during the last two months of his business.
The petition in bankruptcy was filed October 30, 1906, and a receiver was appointed and took possession of the store November 1st; an adjudication being made November 10th following. When the bankrupt went out of business, there was 57 cents in the bank to his credit, and the stock of goods in his store, which was badly broken up, was appraised at $3,410.01. The appraisers knew the cost marks on his goods, and all new goods which were found were appraised at the cost price.
The total payments made by the bankrupt during the months of September and October were as follows: Cash. General expenses, running house, store etc..
.$ 303 08 Freight and express, estimated at......
200 00 Paid note at Bank.....
150 00 Claims to have paid for gold stock..
1.250 00 Claims to have paid L. Paltrowitz.
This amount, viz., $2,623.17, subtracted from the $14,385.81 of goods which he had in his possession during these two months, leaves $11,762.64 to be accounted for.
The bankrupt did all of his banking business at the First National Bank of Dushore; and his bank account for 1906 was as follows: Balance in his favor, December 29, 1905......
$ 781 24 Deposits. January
414 13 February
145 80 March
1,060 55 April
574 56 May
892 66 June
501 78 July
414 77 August
332 50 September
70 00 October
Checks from January to October...
$5,307 99 5,307 42
$ 57 The last deposit in bank was October 5, 1906.
After deducting, therefore, all general expenses of house, store, advertising, freight, and express, note at First National Bank of Towanda, and what he claims to have paid for gold stock and to Paltrowitz, he should have either in goods or money $11,762.64. The goods left in the store as already stated were appraised at $3,410.01. But, stating this the most favorably to the bankrupt, suppose the goods amounted to $5,000. This deducted from $11,762.64 would leave $6,762.64 of assets entirely unaccounted for. The question is: What has become of it? This puts the matter as favorably to the bankrupt as possible, for it treats the gold stock and the Paltrowitz transactions as actual payments. But they were both disputed and of a suspicious nature. The goods sold to the Kaufmans, not deducting the 10 per cent. discount which he allowed them, amount to $1,490.13; and the goods sold on credit in September and October, according to the ledger, amount to $76.60, making $1,566.73 altogether, although the bankrupt reports no money in his schedules excepting $0.57.
Now, as to his books, bills, receipts and other papers: Two days before the receiver was appointed the bankrupt took these bills, and used them to make up a list of creditors, which he furnished his attorney. He testified that they were all left in the store. But Ira Cott, the receiver, and Charles Heverly, one of the appraisers, swear that they made a thorough search for books and papers, but found absolutely nothing. And the books when finally produced are very unsatisfactory, and the most important ones are not produced at all. It does not seem possible that a business of the character of this one could be carried on with books kept in the manner that the bankrupt alleges his books were kept. A most diligent search was made for the bills, and, after considerable delay, Henry Goodman, the trustee, produced 17 of them; and, strange to say, in every instance the goods on the bills produced have been returned to the shipper. This was no accident. It is hardly possible that there were no original bills outside of these 17, all of which cover goods that had been returned. There was evidence, also, that the bankrupt wholesaled goods to the Kaufmans at a discount of 10 per cent., when he himself received no such discount. These shipments were all made a short time before his failure, and on the face of the transaction he was a heavy loser. Nor have any reasons been assigned for this undue haste and large inadequacy of price. During the month of October, also, many goods were purchased by the bankrupt on a hurry-up order and immediately reshipped to one or the other Kaufman. Many of these goods were also ordered to be shipped by express, instead of freight, which was much more expensive. Unusual goods to carry in a small town, like silk petticoats, of peculiar sizes and of the best silk, were received, and claimed by him to have been left in the store, and yet the appraisers were unable to find them. On October 18th and October 27th he also received three seal jackets costing $40, $38.50, $29.50, respectively. And yet he is utterly unable to tell to whom he sold these jackets two months after they were purchased. There are many circumstances of this character of a
suspicious nature tending to show concealment of property. But enough have been given.
The bankrupt in his examination has been most unsatisfactory, evidencing a disposition to dodge, give evasive answers, and hide behind the statement, “I do not remember.” And this concerning transactions of importance that any ordinary business man would have no trouble in recalling so soon afterwards. It is well settled that a bankrupt is to be allowed the same exemption as provided by the law of the state wherein he resides. But in Pennsylvania, if a debtor conceals his property for the purpose of defrauding his creditors, he forfeits his right of exemption. It was an enactment for the honest poor, and not for the roguish. Authorities to this effect are numerous.
The referee is therefore compelled to find that the bankrupt has concealed his assets for the purpose of defrauding his creditors, and that his exemption must be denied.
The bankrupt filed exceptions.
ARCHBALD, District Judge. The referee has refused to allow the bankrupt his $300 state exemption because of the fraudulent concealment of assets. There can be no question of the propriety of this action if the facts warrant it. In re Yost, 9 Am. Bankr. Rep. 153; In re Alex, 15 Am. Bankr. Rep. 450. The exemption given by the law is intended for the unfortunate, and not the dishonest, debtor. Strouse v. Becker, 38 Pa. 190, 80 Am. Dec. 474; Imhoff's Appeal, 119 Pa. 350, 13 Atl. 279. But the finding of fraud is challenged. And the question is whether the evidence justifies it. A careful consideration of the case satisfies me that it does, and that the referee was entirely right in the disposition made of it. The truth is, notwithstanding the contention of counsel, that the fraud is too glaring to be defended. A small trader, in a country town of about 1,000 inhabitants, enjoying fair credit
, by extraordinary orders far beyond his needs and triple those of previous seasons, in the space of three short months, gets together, in small lots, from all over the country, some $11,000 worth of goods, in addition to those which he had on hand; and then, upon being pressed by creditors, and forced into bankruptcy, turns up with a mere fraction of the stock so secured, the rest having been disposed of in some unexplained way, with practically nothing to show for it. No books are produced to throw light upon the transaction, except some very minor and meager, not to say manufactured, ones; nor, if there were others, as is more than likely, is their disappearance accounted for. Left in the store, says the bankrupt, but the receiver was unable to find them, searching diligently, and that one or two have turned up since in the hands of a friendly trustee does not help the situation. A special cash sale, largely advertised, with extra clerks, conducted night and day, for over three weeks, from which no money is deposited in bank, and no merchandise creditors paid, is a part of the story; while large sales in bulk to convenient relatives at less than cost, and goods shipped away by night, on at least one and probably several occasions, are other features. There are also minor matters of more or less significance, such as expensive and unusual goods purchased and unaccounted for, which do not need to be specifically alluded to.