concealed, and prevented from coming to their assignee herein, property to the value of $7,762.22, belonging to the said estate, and thereupon ordered the bankrupts to pay said sum to the assignee on or before the 8th day of September, 1875." The bankrupts, on the 8th day of December, A. D. 1875, filed their petition in this court for a review of the said order. An answer to this petition was filed by the assignee, and the matter, by stipulation and agreement, was to be heard in the circuit court upon the same proofs upon which it was determined by the district court. By consent, the case was, at the March term, 1876, of this court, referred to S. D. Thompson, Esq., one of the masters in chancery in this court, to report upon the law and the facts. The master has filed an elaborate report, in which he states that he has given to the case a thorough examination, and seems to be of opinion that the finding of the district court against the bankrupts was for a sum too small instead of too large, but as the assignee had prosecuted no proceedings for review, he recommends an affirmance of the order below, with costs, against the bankrupts. Exceptions were taken by the bankrupts to the master's report, on the single ground that it is not sustained by the proofs, and on these exceptions the cause was submitted to the court. N. Meyers, for the bankrupts. A. Binswanger, for the assignee. DILLON, Circuit Judge. It is an admitted fact that at cost price the bankrupts had on hand, on January 1, 1873, goods to the amount of $41,740.61. They failed in November of that year. Between January 1, 1873, and their failure, they purchased goods to the amount of $81,589.53, making stock to be accounted for $123,330.14. These sums are shown by the bankrupts' books. The books show sales, for cash and on credit, during this period, to the amount of $72,503.95, at sale prices. If sold without loss or profit, the bankrupts ought to have had In re Peltasohn. on hand at their failure, goods to the amount of $50,826.19. The amount actually turned over by the bankrupts to the estate in bankruptcy was $16,500 at cost price, or, including fixtures, $18,000. The difference, viz., $34,326.19, or, if fixtures be deducted, $32,826.19, is to be accounted for. The bankrupts attempt to account for this large deficit by showing a great decline in the value of goods of this character between January 1 and November 1, and that they had to sell at great loss. Undoubtedly, the old stock-that is, the stock on hand January 1-was not worth its cost price, and sales from that were made, on the average, greatly below cost; but it is very doubtful whether there was much, if any, loss-as as likely, indeed, that there was a profit-on the goods sold from the new purchases. On the whole, I am not satisfied with the explanations offered for this large and striking deficit, and I think the district court and the master were well justified in reaching the conclusions they did. Certain circumstances, pregnant with suspicion, strongly support this conclusion. I mention these without dwelling upon them. The change, during the time they had a bookkeeper, of their system of bookkeeping from double to single entry; the loss or non-production of two important books-"bills receivable and payable," and the "stock or sales book,"—by no means satisfactorily accounted for; the alleged increase by one-half of family expenses during 1873, and taking money therefor, without any real increase being shown; the alleged sending of money to Europe to poor relations, and payments to a relative in this country, not otherwise shown to be true than by the unsupported statement of the bankrupts-this at a time when they were claiming to be anxious to reduce expenses, and when they were embarrassed; and particularly the statement of Peltasohn, that his wife had $5,000 or $6,000, and had had since 1871, or before that, which she kept in her house in bank-bills and had never invested—the profits, as he alleged, of business which she had conducted on her own account, and which I must say, under the circumstances, is very improbable; and the further fact that since In re Peltasohn. the bankruptcy the bankrupts have gone into business as the professed agents of their wives. In short, such a case was made against the bankrupts as to call upon them to explain these circumstances of suspicion, and they have not done so. They were not even examined as witnesses on their own behalf in the district court. The exceptions to the master's report should be disallowed, and an order should be here entered affirming the order of the district court, with costs, and that a mandate go to the district court to proceed with the execution of the order complained of, the same as if the petition for review thereof had not been brought. ORDERED ACCORDINGLY. NOTE. The foregoing opinion, when published in the Central Law Journal, was accompanied by the following note, written by Mr. Frank, which we here insert: "The opposition to the bankrupt law, as it now stands, has come from the creditor-class, and there is, perhaps, but little doubt that the reasons for the opposition are substantial; yet, if the creditors of an estate would urge those provisions of the statute which will secure them their rights, in all proper cases, except in case of composition proceedings, the act would certainly not be without efficacy. The provisions referred to are sections 5110, 5132, and 5104 of the Revised Statutes of the United States. "In re Salky v. Gerson, 11 Nat. Bankr. Reg. 515, S. C. 7 Chicago Legal News, 195, Judge DRUMMOND held, affirming Judge BLODGETT's decision in the same case, 11 Nat. Bankr. Reg. 423, under the provision of section 5104, Revised Statutes United States, section 26 of the act of 1867, that the court had authortiy to imprison bankrupts for failure to give a satisfactory account and make a full disclosure respecting their property. The counsel for the debtors there contended that if the answers to the inquiries concerning their property were untrue, the creditors might resort to a criminal prosecution. The court replied that criminal prosecution does not pay the claims of the creditors. "In re Jacobi, unreported, Judge CALDWELL committed to jail, at Little Rock, Arkansas, a bankrupt for not paying over to her assignee the sum of about $12,000, a deficit of that amount not having been by her satisfactorily accounted for. The bankrupt, after being imprisoned for some time, was taken before Circuit Judge DILLON, at Davenport, Iowa, on a writ of habeas corpus, who modified the order of the district court as Paret v. Ticknor. to the amount to be paid over, as not having been satisfactorily explained, and remanded the bankrupt. "The case of Peltasohn, above reported, is only one of many where creditors have been imposed upon by bankrupts, because the bankrupts supposed the act to be a shield for their fraudulent contrivances, and the court clearly lays down the rule as to how a true account ought to appear; and in the absence of such an account, to what the act subjects the bankrupts." JOHN PARET v. MYRON TICKNOR et al. A composition at twenty-five cents on the dollar was effected under section 17 of the act of June 22, 1874 (Stats. at Large, Vol. 18, part 3, p. 178). In the statement of liabilities presented to creditors' meeting plaintiff's claim was represented as fully secured by deed of trust on real estate worth more than the amount of the debt. Plaintiff, being also an unsecured creditor, attended the composition meeting, but did not in any way participate in it, nor dissent from the representation there made as to the value of his security. Long after the composition had been recorded and carried out by the debtors, plaintiff sold the real estate under the deed of trust, and a large deficit was left unpaid. In an action to recover such deficit: Held-1. The composition did not, per se, extinguish plaintiff's claim, but that he was entitled to twenty-five per cent of final deficit, no matter when ascertained. 2. Quære, whether this result would have been changed, even if, in the course of the composition proceedings, the bankruptcy court, at the instance of all the parties, had caused the security to be appraised, and had decided it to be ample to cover the debt? (Before MILLER and DILLON, JJ.) Bankruptcy.- Composition.-Effect as to Secured Claims. Bankruptcy.-Composition. Defendants THE case was as follows: Action on notes. pleaded in bar that they had effected a composition in bankruptcy, in manner provided by act of congress; that plaintiff was duly notified of the various meetings and attended the same; that in the statement of liabilities, plaintiff's claim was represented, as plaintiff knew, as fully secured by deed of trust on real estate worth more than the amount of debt; that plaintiff Paret v. Ticknor. did not dissent or object to such valuation, but acquiesced therein; and that it took all their unpledged assets to pay the composition to the unsecured creditors. Plaintiff demurred to the answer. John R. Shepley and Henry M. Post, for plaintiff, cited: In re Bestwick, 2 Chancery Div. Law Reports, 485, affirming same case, 1 Ch. D. 702. Nathaniel Meyers, for defendants, claimed that the provisions of the English composition act (32, 33 Victoria, Law Journal Statutes, 1869-70, p. 287), under which in re Bestwick was decided, differed materially from the act of congress, and cited also in re J. L. Lytle & Co. 14 Nat. Bankr. Reg. 457; in re Becket, ib. 201, and in re Comstock, 4 Cent. Law Jour. 145. MILLER, Circuit Justice, orally delivered the opinion of the court, in substance as follows: Paret was a creditor of Ticknor & Co., against whom proceedings were instituted in bankruptcy. Those proceedings resulted in a composition, under the statute on the subject, by which Ticknor & Co. agreed to pay to their creditors a certain percentage of their debts-twenty-five per cent. Paret was named in the schedule of their creditors, and had notice of the meeting of creditors on this proposition. Ticknor & Co. stated in this schedule that Paret was a fully secured creditor. To this Paret seems to have made no reply in any way, and to have made no objection or given any consent to the compromise. After this, Paret sold the real estate which was the security for his debt, and there remained a considerable balance unpaid of the debt. He brings this suit to collect that balance. It is contended by his counsel that he is entitled to recover all of the debt that was not covered by the sale of the property which was his security. It is contended by counsel for Ticknor & Co. that they were fully discharged by the composition proceedings of any claim on account of that debt. We are of opinion that the law of the case lies between them. |