In re Helfgott

S.D. New York

In re Helfgott

245 F. 358, 1917 U.S. Dist. LEXIS 971

CourtDistrict Court, S.D. New York

DecidedOctober 3, 1917

StatusPublished

Cited by2 cases

This text of 245 F. 358 (In re Helfgott) is published on Counsel Stack Legal Research, covering District Court, S.D. New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook

In re Helfgott, 245 F. 358, 1917 U.S. Dist. LEXIS 971 (S.D.N.Y. 1917).

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Opinion

LEARNED HAND, District Judge

(after stating the facts as above). The only issue open is whether the loans by the bankrupt’s father were fictitious. If they were genuine, there is no adequate reason to suppose that the method of keeping the books and records was with fraudulent intent, under section 14b(2). It must be conceded, moreover, that, if the loan was genuine, the bankrupt’s apathy about the sale and ruin of his business might have arisen from a desire to let his father get back his money out of a business from which he knew that he would never receive a cent anyway, and that his father’s apparently harsh conduct would not have ruined a business which could ever have been successful, because at any reasonable valuation the bankrupt was insolvent.

[1] Nevertheless the loan was between near relatives, a circumstance at which bankruptcy courts always look with suspicion, and concededly it was not entered in any contemporaneous permanent record, although one existed proper for the case. Moreover, the entry of the whole items about January 1, 1915, and very shortly before the action was commenced, and the supposed destruction of the slips, is a sinister circumstance. If the bankrupt had in fact at that time desired to make more permanent evidence of a real loan, apprehending some question of its authenticity, why should he have destroyed the original slips which would have gone far to corroborate it? Is it not more probable [360]*360that the entry, made after the supposed demand for payment, was in fact a blind for a fraudulent conveyance? The whole story fits perfectly with a prepared plan to make way with the assets for the benefit of the father or the son or both.

On the other hand, the father was in no position to advance $500 in less than four months. He disclaimed any savings, and took recourse to a common enough device in such cases of a story about pawning jewelry. Yet, even upon his own statement, the value of his jewelry was only $300 or $400, upon which it is impossible to suppose that he could raise more than $200 or $250. This, coupled with an alleged loan of $100 from one Sam Sukowsky, is all that he tries to account for. His total earnings from September 15th to December 30th were at most not more than $240, and it is incredible that out of these he could have made up tire difference of $150 and lived with his wife for $90.

[2] The master found that the sale was fraudulent, a conclusion impossible, if it was only a preference, and further said that he was not satisfied that any loan had ever been made. His attention was apparently not drawn to the point that the entry in the ledger might be a failure to keep books under section 14b(2), as the necessary consequence of that conclusion. That question arises, once the loan is found to have been fictitious, as I find it to be. The making of false entries in the books is, of course, a failure to keep true books of the most glaring sort, and only from true books can the bankrupt’s financial condition be ascertained. In this case the bankrupt’s intent was to conceal his financial condition by these false entries, because he expected to use them in support of his fraudulent effort to do away with his property.

Therefore it follows that the second specification was sustained. As in most such cases, there is no direct evidence of the fact; but the proof is more than mere suspicion, and there is .small doubt that the whole scheme was an artifice to defraud creditors, of which the ledger entry was a part.

Discharge denied, on the second specification, with costs.

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LEARNED HAND, District Judge

(after stating the facts as above). The only issue open is whether the loans by the bankrupt’s father were fictitious. If they were genuine, there is no adequate reason to suppose that the method of keeping the books and records was with fraudulent intent, under section 14b(2). It must be conceded, moreover, that, if the loan was genuine, the bankrupt’s apathy about the sale and ruin of his business might have arisen from a desire to let his father get back his money out of a business from which he knew that he would never receive a cent anyway, and that his father’s apparently harsh conduct would not have ruined a business which could ever have been successful, because at any reasonable valuation the bankrupt was insolvent.

[1] Nevertheless the loan was between near relatives, a circumstance at which bankruptcy courts always look with suspicion, and concededly it was not entered in any contemporaneous permanent record, although one existed proper for the case. Moreover, the entry of the whole items about January 1, 1915, and very shortly before the action was commenced, and the supposed destruction of the slips, is a sinister circumstance. If the bankrupt had in fact at that time desired to make more permanent evidence of a real loan, apprehending some question of its authenticity, why should he have destroyed the original slips which would have gone far to corroborate it? Is it not more probable [360]*360that the entry, made after the supposed demand for payment, was in fact a blind for a fraudulent conveyance? The whole story fits perfectly with a prepared plan to make way with the assets for the benefit of the father or the son or both.

On the other hand, the father was in no position to advance $500 in less than four months. He disclaimed any savings, and took recourse to a common enough device in such cases of a story about pawning jewelry. Yet, even upon his own statement, the value of his jewelry was only $300 or $400, upon which it is impossible to suppose that he could raise more than $200 or $250. This, coupled with an alleged loan of $100 from one Sam Sukowsky, is all that he tries to account for. His total earnings from September 15th to December 30th were at most not more than $240, and it is incredible that out of these he could have made up tire difference of $150 and lived with his wife for $90.

[2] The master found that the sale was fraudulent, a conclusion impossible, if it was only a preference, and further said that he was not satisfied that any loan had ever been made. His attention was apparently not drawn to the point that the entry in the ledger might be a failure to keep books under section 14b(2), as the necessary consequence of that conclusion. That question arises, once the loan is found to have been fictitious, as I find it to be. The making of false entries in the books is, of course, a failure to keep true books of the most glaring sort, and only from true books can the bankrupt’s financial condition be ascertained. In this case the bankrupt’s intent was to conceal his financial condition by these false entries, because he expected to use them in support of his fraudulent effort to do away with his property.

Therefore it follows that the second specification was sustained. As in most such cases, there is no direct evidence of the fact; but the proof is more than mere suspicion, and there is .small doubt that the whole scheme was an artifice to defraud creditors, of which the ledger entry was a part.

Discharge denied, on the second specification, with costs.

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245 F. 358, 1917 U.S. Dist. LEXIS 971, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-helfgott-nysd-1917.

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