Then the bankrupt petitioned to reopen and reargue the matter. This petition was denied on January 3, 1925, but the referee again reduced the amount to be turned over to the sum of $32,779.74. In his decision on this motion to reopen and reargue he concluded as follows:

"After considering the matter from every angle, I have decided that there is enough doubt upon this subject to credit the respondent with the benefit of this doubt. In other words, although his books fail to show the situation, I find it may nevertheless be true. I must therefore credit the respondent with an additional loss of 122 cents per pound on 52,157 pounds. This would give a total of $6,519.63; such amount should be deducted from the amount of $39,299.37 as previously found by me. An order may be submitted herein, denying the motion of the respondent to reopen this hearing, and directing the respondent to turn over to the trustee herein the sum of $32,

779.74."

And an order was entered as follows: "Ordered and adjudged, that the said respondent, Herbert Magen, within five days after the service upon him of a certified copy of this order, be and he hereby is directed to turn over and deliver to William R. Bayes, the trustee in bankruptcy herein, the said silk and cotton yarn of the value of $32,779.74, or, at the option of the respondent, in lieu of the said merchandise, to pay to the said trustee, within the said period of five days, the sum of $32,779.74 in cash."

This order was filed on January 13, 1925, in the referee's office and in the office of the clerk of the District Court on January 31,

1925.

On January 22, 1925, the bankrupt pe

titioned the District Court to review the or

der. And on March 2, 1925, the District Judge handed down a brief opinion, affirming the referee's order, which concluded as follows:

"The record reveals that a bold and outrageous fraud has been perpetrated.”

And on March 9, 1925, the order of the District Judge was filed in the clerk's office. It ordered that:

"The said turn-over order of said referee, dated January 13, 1925, be and the same hereby is in all respects affirmed."

Samuel Evans Maires and Thomas W. Maires, both of Brooklyn (Harrington Put

Shaine & Weinrib, of New York City (Maurice L. Shaine, of New York City, of counsel), for trustee-respondent.

Before ROGERS, HOUGH, and MANTON, Circuit Judges.

ROGERS, Circuit Judge (after stating the facts as above). The present bankrupt corporation appears to have been organized in May, 1920. From that time to February 24, 1924, it was engaged in manufacturing braids, laces and narrow fabrics. During the whole of the period from the date of its organization to February 25, 1924, the date of the bankruptcy, the petitioner was stockholder in the corporation, was the treasurer and sole manager in control of its busi

ness.

a

The period involved in the turn-over order begins November 1, 1923, and ends February 25, 1924, when the petition in involuntary bankruptcy was filed. The respondent charged petitioner with the bankrupt's purchases of yarn as shown by its books during this period, and credited him with all sales according to the books of the corporation, and also with all merchandise on hand at the time of the bankruptcy.

The testimony adduced before the referee on the application for the turn-over order shows that, without taking into consideration any profits that may have been earned or losses that may have been sustained on such sales, there was an actual deficiency during this period of less than four months, according to the bankrupt's books, of more than $91,798.15. The net purchase of yarn is

shown to have been $223,213.02. The sales

of yarn were $62,237.85. The sales of manufactured products were $24,184.51. The inventory of merchandise on hand was $131,

414.87. This showed the total credits of

$131,414.87, and deducting this sum from the net purchases of yarn, above stated as amounting to $223,213.02, left a deficiency unaccounted for of $91,798.15. And it is to be observed that this result takes no account of the merchandise on hand at the beginning of the period in question. And it is also to be noted that the petitioner did not question the accuracy of the bankrupt's

books. On his cross-examination he testified: "I know the books were right."

The management and conduct of the business was in his hands alone. No purchases were placed upon the bankrupt's books unless he personally initiated the bills therefor, and no bills for sales were issued and

duplicates thereof retained as part of the records of the bankrupt unless he placed his 0. K. thereon. All purchases of yarn were made by him. All sales were made under his supervision, and the sales of yarn were all made by him personally. He also made the inventory of the merchandise on hand and at dyers at the time of the bankruptcy.

It is interesting that from January 1, 1921, to November 1, 1923, the bankrupt's purchases were about $100,000, or less than one-half of what they were during the four months prior to bankruptcy. In that period, which was really less than four months, the purchases were at least 20 times more than they were during any similar period of the bankrupt's existence, and, as the referee has found, they "were out of all proportion to the needs of the bankrupt's business." The findings are amply justified, for it appears that the sales of manufactured products in this four-months period were only $24,184.51. The bankrupt paid out for labor in the manufacture of the goods in this same period the sum of $7,715.14, and it also appears that prior to this same period the bankrupt had not sold any yarn, but whatever yarn it used in its business. But during the period under consideration the sales of yarn which this manufacturing corporation made, according to its books, were five times more than the amount of yarn it used in the manufacture of the products it sold.

The sales of yarn may be classified as itemized and unitemized. The itemized sales are those where the grade, poundage and price per pound are disclosed. The unitemized sales are those which do not give the particulars above mentioned, but merely show that "a lot" was sold. And the unitemized sales are subdivided into two parts: One comprises those where the name of the purchaser is disclosed and is known, and the other where the purchaser's name purports to be given, but of whose whereabouts the petitioner, Magen, testified that he knows nothing.

The trustee charges that some of these unitemized sales were fictitious. These

"sales" are as follows: Jacob Jeremiah Kasselmanheim.... $ 5,155.97 Lapedis Lagasowitz 13,875.30 H. Lapser 4,453.41

sion of the referee was that the bankrupt was not a victim of imperfect bookkeeping, but that he planned the entries in his books and records and the alleged sales so as to enable him to conceal his property, and that the amount of his property which he concealed amounted to $32,779.74. He accordingly entered the order directing him within five days after the service of the order to turn over and deliver to the trustee in bankruptcy the sum of $32,779.74 in cash, or, at his option, silk and cotton yarn of that value; and this order was confirmed by the District Judge, who was satisfied that "a bold and outrageous fraud” had been perpetrated.

[1] If a bankrupt is shown to have purchased large amounts of property within a short period prior to his bankruptcy, and has only a nominal amount in his possession at the time of his bankruptcy, and is unable or unwilling to explain what he has done with it, it is not unreasonable to infer that he has it in concealment. As proof of a fact the law permits inferences from other facts, and there arises a presumption of fact, which is a reasonable and natural inference of the existence of one fact from the proof of some other fact established by direct evidence. [2] The law relating to turn-over orders is pretty well established in this circuit. In 1900 this court decided In re Schlesinger, 102 F. 117, 42 C. C. A. 207. In that case the referee found no definite property or money in the possession of the bankrupt. He therefore refused to enter a turn-over order. The District Court reversed his decision, inasmuch as it appeared that upwards of $10,000 had been unaccounted for by the bankrupt. It therefore held that it was still in his possession or control. But to avoid any question of doubt the court fixed the amount to be turned over at $6,500. The case was brought into this court upon a petition to review and the order of the District Court was affirmed. Judge Shipman, writing for the court, said:

"If we had power to review the correctness of the finding that the testimony was such as to satisfy one beyond a reasonable doubt that the money was in the possession or under the control of the bankrupt, and mindful of the importance of observing caution in the investigation, we should have no hesitation in affirming the finding of fact. It is not denied that clause 13 of section 2 of the Bankrupt Act [Comp. St. § 9586] authorizes the court of bankruptcy to 'enforce obedience by bankrupts, officers, and other persons to all lawful orders, by fine or

ty to cover up property. I believe the amount of such property is at least $39,299.37. An order may be submitted in conformity with this memorandum."

Then the bankrupt petitioned to reopen and reargue the matter. This petition was denied on January 3, 1925, but the referee again reduced the amount to be turned over to the sum of $32,779.74. In his decision on this motion to reopen and reargue he concluded as follows:

"After considering the matter from every angle, I have decided that there is enough doubt upon this subject to credit the respondent with the benefit of this doubt. In other words, although his books fail to show the situation, I find it may nevertheless be true. I must therefore credit the respondent with an additional loss of 122 cents per pound on 52,157 pounds. This would give a total of $6,519.63; such amount should be deducted from the amount of $39,299.37 as previously found by me. An order may be submitted herein, denying the motion of the respondent to reopen this hearing, and directing the respondent to turn over to the trustee herein the sum of $32,

779.74."

And an order was entered as follows: "Ordered and adjudged, that the said respondent, Herbert Magen, within five days after the service upon him of a certified copy of this order, be and he hereby is directed to turn over and deliver to William R. Bayes, the trustee in bankruptcy herein, the said silk and cotton yarn of the value of $32,779.74, or, at the option of the respondent, in lieu of the said merchandise, to pay to the said trustee, within the said period of five days, the sum of $32,779.74 in cash."

This order was filed on January 13, 1925, in the referee's office and in the office of the clerk of the District Court on January 31,

1925.

On January 22, 1925, the bankrupt petitioned the District Court to review the or

der. And on March 2, 1925, the District Judge handed down a brief opinion, affirming the referee's order, which concluded as follows:

"The record reveals that a bold and outrageous fraud has been perpetrated."

And on March 9, 1925, the order of the District Judge was filed in the clerk's office. It ordered that:

"The said turn-over order of said referee, dated January 13, 1925, be and the same hereby is in all respects affirmed."

Samuel Evans Maires and Thomas W. Maires, both of Brooklyn (Harrington Put

nam, of New York City, of counsel), for petitioner.

Shaine & Weinrib, of New York City (Maurice L. Shaine, of New York City, of counsel), for trustee-respondent.

Before ROGERS, HOUGH, and MANTON, Circuit Judges.

ROGERS, Circuit Judge (after stating the facts as above). The present bankrupt corporation appears to have been organized in May, 1920. From that time to February 24, 1924, it was engaged in manufacturing braids, laces and narrow fabrics. During the whole of the period from the date of its organization to February 25, 1924, the date of the bankruptcy, the petitioner was stockholder in the corporation, was the treasurer and sole manager in control of its busi

ness.

a

The period involved in the turn-over order begins November 1, 1923, and ends February 25, 1924, when the petition in involuntary bankruptcy was filed. The respondent charged petitioner with the bankrupt's purchases of yarn as shown by its books during this period, and credited him with all sales according to the books of the corporation, and also with all merchandise on hand at the time of the bankruptcy.

The testimony adduced before the referee on the application for the turn-over order shows that, without taking into consideration any profits that may have been earned or losses that may have been sustained on such sales, there was an actual deficiency during this period of less than four months, according to the bankrupt's books, of more than $91,798.15. The net purchase of yarn is shown to have been $223,213.02. The sales of yarn were $62,237.85. The sales of manufactured products were $24,184.51. The inventory of merchandise on hand was $131,

414.87. This showed the total credits of $131,414.87, and deducting this sum from the net purchases of yarn, above stated as amounting to $223,213.02, left a deficiency unaccounted for of $91,798.15. And it is to be observed that this result takes no account of the merchandise on hand at the

beginning of the period in question. And it is also to be noted that the petitioner did not question the accuracy of the bankrupt's books.

On his cross-examination he testified: "I know the books were right."

The management and conduct of the business was in his hands alone. No purchases were placed upon the bankrupt's books unless he personally initiated the bills therefor, and no bills for sales were issued and

duplicates thereof retained as part of the records of the bankrupt unless he placed his 0. K. thereon. All purchases of yarn were made by him. All sales were made under his supervision, and the sales of yarn were all made by him personally. He also made the inventory of the merchandise on hand and at dyers at the time of the bankruptcy.

It is interesting that from January 1, 1921, to November 1, 1923, the bankrupt's purchases were about $100,000, or less than one-half of what they were during the four months prior to bankruptcy. In that period, which was really less than four months, the purchases were at least 20 times more than they were during any similar period of the bankrupt's existence, and, as the referee has found, they "were out of all proportion to the needs of the bankrupt's business." The findings are amply justified, for it appears that the sales of manufactured products in this four-months period were only $24,184.51. The bankrupt paid out for labor in the manufacture of the goods in this same period the sum of $7,715.14, and it also appears that prior to this same period the bankrupt had not sold any yarn, but whatever yarn it used in its business. But during the period under consideration the sales of yarn which this manufacturing corporation made, according to its books, were five times more than the amount of yarn it used in the manufacture of the products it sold.

The sales of yarn may be classified as itemized and unitemized. The itemized sales are those where the grade, poundage and price per pound are disclosed. The unitemized sales are those which do not give the particulars above mentioned, but merely show that "a lot" was sold. And the unitemized sales are subdivided into two parts: One comprises those where the name of the purchaser is disclosed and is known, and the other where the purchaser's name purports to be given, but of whose whereabouts the petitioner, Magen, testified that he knows nothing.

The trustee charges that some of these unitemized sales were fictitious. These "sales" are as follows:

Jacob Jeremiah Kasselmanheim...
Lapedis Lagasowitz

$ 5,155.97 13,875.30 4,453.41

$23,484.68

The referee found that Magen had not truthfully explained or accounted for the merchandise alleged to have been sold to these three men, and that he had not accounted for other merchandise. The conclu

sion of the referee was that the bankrupt was not a victim of imperfect bookkeeping, but that he planned the entries in his books and records and the alleged sales so as to enable him to conceal his property, and that the amount of his property which he concealed amounted to $32,779.74. He accordingly entered the order directing him within five days after the service of the order to turn over and deliver to the trustee in bankruptcy the sum of $32,779.74 in cash, or, at his option, silk and cotton yarn of that value; and this order was confirmed by the District Judge, who was satisfied that "a bold and outrageous fraud” had been perpetrated.

[1] If a bankrupt is shown to have purchased large amounts of property within a short period prior to his bankruptcy, and has only a nominal amount in his possession at the time of his bankruptcy, and is unable or unwilling to explain what he has done with it, it is not unreasonable to infer that he has it in concealment. As proof of a fact the law permits inferences from other facts, and there arises a presumption of fact, which is a reasonable and natural inference of the existence of one fact from the proof of some other fact established by direct evidence. [2] The law relating to turn-over orders is pretty well established in this circuit. In 1900 this court decided In re Schlesinger, 102 F. 117, 42 C. C. A. 207. In that case the referee found no definite property or money in the possession of the bankrupt. He therefore refused to enter a turn-over order. The District Court reversed his decision, inasmuch as it appeared that upwards of $10,000 had been unaccounted for by the bankrupt. It therefore held that it was still in his possession or control. But to avoid any question of doubt the court fixed the amount to be turned over at $6,500. case was brought into this court upon a petition to review and the order of the District Court was affirmed. Judge Shipman, writing for the court, said:

The

"If we had power to review the correctness of the finding that the testimony was such as to satisfy one beyond a reasonable doubt that the money was in the possession or under the control of the bankrupt, and mindful of the importance of observing caution in the investigation, we should have no hesitation in affirming the finding of fact. It is not denied that clause 13 of section 2 of the Bankrupt Act [Comp. St. § 9586] authorizes the court of bankruptcy to 'enforce obedience by bankrupts, officers, and other persons to all lawful orders, by fine or

given the bankrupts to make the necessary explanation, and point out with some approximate accuracy the disposition of so large an amount of goods within so short a space of time."

The court disposed of the objection arising from the fact that imprisonment for debt had been abolished by declaring that the order was not for the payment of a debt, but for the delivery by the bankrupt of the assets of his estate to his trustee in bankruptcy. "He was not indebted to the trustee. The money was a part of his assets and estate, which had by operation of law become vested in the trustee."

In 1905 this court decided In re Levy, 142 F. 442, 73 C. C. A. 558. The question came up on petition to review a turnover order. At the time of the filing of the involuntary petition in bankruptcy it appeared from the books of the bankrupts that there should have been on hand at the time the petition was filed a balance in goods or cash of $18,921.87. The value of the goods on hand amounted to only $6,000, and the value of goods unaccounted for was $12,921.87. The referee declined to order this amount turned over to the trustee, holding that the showing on the books at most raised an inference that the property was in the hands of the bankrupts. The District Judge refused to confirm the order and said:

"The question is whether it is sufficient for the bankrupts to state that they have not the property. If they have not the property, they should tell what they did with it. If they cannot do this, the court would be justified in finding that they still had it. Their books, kept for the very purpose of showing what they have or have not, state that they have this balance. The record is their own. If it is not complete, let them complete it. Their own written books, to the effect that they have $12,921.87, is better than their generalization that they have none of it. If it were sufficient for a bankrupt to deny generally, in the face of his own books, the suppression of assets would be un

When the matter went back to the referee the bankrupts failed to make any explanation of what they had done with the property. A turn-over order was made by the referee, the District Court approved, and this court affirmed.

In 1906, in Re Weinreb, 146 F. 243, 76 C. C. A. 609, there was a shortage of assets of $60,000 for which the bankrupts did not satisfactorily account. On their examination they were asked as to certain sums they had drawn out of the bank in cash and which aggregated $18,200. At first they refused to answer questions concerning it, but subsequently gave a story in which they undertook to account for it. District Judge Holt considered the story as extremely improbable. He said: "It is precisely the kind of story which bankrupts would tell, who had been engaged in the diamond business, and had been planning a fraudulent bankruptcy, and had drawn $18,000 in cash just before their bankruptcy, for the purpose of concealing it from their creditors. I cannot avoid the conclusion that their story is an entire fabrication, and that the bankrupts have this money concealed from their creditors, and that they should be ordered to pay it to the trustee." And he entered an order directing them to turn over to the trustee $18,200, which they had drawn out of the bank in cash between July 11th and July 20th.

The matter came into this court on a petition to revise, and it was affirmed.

In 1909 the court decided In re Stavrahn, 174 F. 330, 98 C. C. A. 202, 20 Ann. Cas. 888. In that case the doctrine is stated by Judge Lacombe that, if it is shown that the bankrupt was in the actual possession of a particular sum of money a few months before the turn-over order, it was incumbent on him to give some reasonable explanation as to why it was that he did not turn it over in compliance with the order requiring him so to do. In that case his sole averment was: "That the reason your deponent has not turned over said sum is because he has no such sum in his possession or under his control, directly or indirectly, and has no means whatsoever of obtaining said sum of money." And this court said that his averment "is too bald and indefinite to have any persuasive force."

In 1912 the court decided In re Weber,