Opinion
November 16, 1951.
January 7, 1952.
Property — Ownership — Proof — Evidence — Circumstantial — Fraudulent withdrawal of receipts of company — Alleged finding in home of employe — Escheat.
In a proceeding for the escheat of a specified sum of money, in which it appeared that A claimed to have found money in the form of paper currency of various denominations in a carton in the cellar of his home; that A had been employed as a bookkeeper by a dairy corporation, whose officers were his brothers-in-law; and in which there was circumstantial evidence that established that there had been a systematic withdrawal of cash receipts by one of the dairy company officers with the assistance of A, and that the dairy company had become bankrupt; it was Held that the res was a part of the bankrupt estate of the dairy company.
Before DREW, C. J., STERN, STEARNE, BELL, LADNER and CHIDSEY, JJ.
Appeal, No. 208, Jan. T., 1951, from decree of Court of Common Pleas No. 5 of Philadelphia County, Dec. T., 1947, No. 1313, in Appeal of Commonwealth of Pennsylvania, in re Escheat of $92,800. Decree affirmed; reargument refused February 14, 1952.
The facts are stated in the opinion, by ALESSANDRONI, J., of the court below, as follows:
This is a proceeding for the escheat of $92,800. The facts alleged in the petition of the escheator and the legal effect of the averments are set forth in the opinion of Mr. Justice JONES, sub nominee Escheat of $92,800, 361 Pa. 51. Pursuant to the order made therein, the court proceeded to take testimony and receive all evidence offered by parties in interest in order to adjudicate the issues involved. As a result of the extended hearings, our inquiry is narrowed to a determination of whether all or any part of this res is an asset of the bankrupt estate of Victor Dairies, Inc., or an asset of the estate of Anthony Joseph Hillop, deceased, or is without a lawful or rightful owner as averred in the petition, and thus subject to escheat.
Upon a consideration of the pleadings and the evidence offered in support thereof, the court makes the following
Findings of Fact1. On March 10, 1947, Benjamin Lieberman revealed the existence of a corrugated carton or box, securely tied with cord and containing paper currency of the United States of America in various denominations, totaling $92,800, which he claimed to have found in the cellar of premises 2131 South Fourth Street, Philadelphia, a dwelling owned by his wife in which he had lived with her continuously for more than twenty years.
2. The circumstances surrounding the disclosure and the alleged finding conclusively demonstrate that the carton or box had been voluntarily and intentionally placed where it was found.
3. The res has been since March 10, 1947 and still is in the protective custody of the Director of Public Safety of the City of Philadelphia to whom it was surrendered voluntarily by Benjamin Lieberman and Jessie, his wife, and by whom shortly after March 10, 1947 it was placed in a sealed safety deposit box in the Tradesmen's National Bank and Trust Company.
4. The Director of Public Safety of the City of Philadelphia claims no interest in said res and holds the same in a fiduciary capacity as trustee, bailee or depositary.
5. On March 20, 1947, while the res was in the protective custody of the Director of Public Safety, the Secretary of Revenue of the Commonwealth of Pennsylvania duly appointed B. Graeme Frazier, Jr. escheator of said property.
6. Benjamin Lieberman and Jessie, his wife, have disclaimed of record any right to said res as owners or finders and have chosen for' themselves the status of informers.
7. Due notice of the pendency of these proceedings has been given to all parties who have entered any claim or asserted any right to the fund.
8. No part of said fund is an asset of the Estate of Anthony Joseph Hillop, Deceased.
9. The said res is an asset of the bankrupt estate of Victor Dairies, Inc., of which Theodore O. Rogers is the duly appointed and qualified trustee in bankruptcy.
10. No part of said res is without a lawful or rightful owner, and accordingly no escheat has occurred.
DiscussionThere is no direct evidence establishing ownership of this fund or trust res that is worthy of belief, and experience would indicate that direct evidence was not likely or probable in such an extraordinary and unique event. A fact can be established, however, by circumstances, and this type of evidence has been the subject of a classical comment by Chief Justice GIBSON. In Commonwealth v. Harman, 4 Pa. 269, 272, he said: "It (circumstantial evidence) is, in the abstract, nearly, though perhaps not altogether, as strong as positive evidence; in the concrete, it may be infinitely stronger. A fact positively sworn to by a single eyewitness of blemished character, is not so satisfactorily proved, as is a fact which is the necessary consequence of a chain of other facts sworn to by many witnesses of undoubted credibility."
In Warren v. Ulrich, 130 Pa. 413, where a roll of money was found concealed about a cesspool, it was circumstantial evidence which sustained the finding that the money belonged to a decedent who had hidden it there. The evidence showed that the decedent was not in the habit of depositing money in the bank and on occasions had hidden sums of money about his premises.
In determining whether circumstantial evidence has established the fact in issue, it is well settled that mere conjecture is not sufficient. It is necessary that the surrounding facts and circumstances, and the inferences logically deducible therefrom, must so preponderate in favor of the basic proposition to be established as to exclude any equally well supported belief in any inconsistent proposition. DeReeder et al. v. Travelers Insurance Co., 329 Pa. 328, 334; Polk v. Steel Workers Organizing Committee et al., 360 Pa. 631.
As a trier of fact we are restricted to the record, but we cannot divorce ourselves from the lessons of human experience in determining the inferences that are logically deducible from the facts.
The trustee in bankruptcy of Victor Dairies, Inc., as a claimant, presented a chain of events the necessary consequence of which establish the fact in issue. This "chain of other facts" is attested to by many witnesses of undoubted credibility. They were men and women from almost every walk of life, accountants, laborers, the chairman of a board of a large oil company, office workers, a housewife, and a government official, none of whom had any interest, any bias, or hope of gain. The escheator's case rests primarily, if not exclusively, upon the testimony of Benjamin Lieberman, which is not only incredible because of its inconsistency with human experience, but also because this man did not tell the truth and concealed direct evidence of the fact in issue.
To avoid that claimants and witnesses might be influenced a priori by inspection of the carton or box, we refused to permit an inspection prior to the close of the testimony. On July 5, 1950 a hearing was held in the safe deposit rooms of the Tradesmen's National Bank and Trust Company where the contents were examined. Subsequently, the claimants were given another opportunity, on September 28, 1950, to see if further evidence would be offered on the subject of identification growing out of this inspection. The currency, however, was never seen by the witnesses who testified on behalf of the claimant, the trustee in bankruptcy for Victor Dairies, Inc. Examination of the currency disclosed that it consisted only of ten-, twenty-, and fifty-dollar bills. $20,800 was in fifty-dollar bills; $69,880 was composed of twenty-dollar bills; and the balance of the fund consisted of ten-dollar bills. Some of the bills contained notations of names and addresses.
The only persons who knew the denominations of this currency were Lieberman, his wife, and the Police Department, so that there is no doubt in the mind of this court that the witnesses on behalf of the claimant, Victor Dairies, Inc., testified in advance without the benefit of such knowledge or information.
It is not mere coincidence that the trustee in bankruptcy produced four disinterested persons who were employees of Cooklyn Dairies at various times between July of 1943 and March of 1947, during which period of time Lieberman was also an employee, whose testimony conclusively established that for an extended period of time Lieberman had issued a standing order to the cashier and relief or temporary cashiers, as well as the other clerical employees in the office, to turn over to him all ten-dollar, twenty-dollar, or fifty-dollar bills received at the office of Cooklyn Dairies in the course of its business and would take from his pocket bills of smaller denominations in exchange therefor. The testimony firmly established that at all times he had a considerable sum of cash on his person in denominations of less than ten dollars. Moreover, it appears that Lieberman arrived at the office on Monday mornings when payroll was made with a large number of bills of small denominations wrapped in a newspaper and proceeded to make up the payroll for Cooklyn Dairies out of that sum. He also prepared a schedule of required denominations for payroll which he gave to his employer for the purpose of securing funds from the bank later in the day. The teller of the bank recalled that the denominations requested included fifty-dollar bills, which, she said, was quite unusual in her experience in supplying various businesses with currency for payrolls. This money that was brought from the bank by Lieberman's employer was then handed to him, although the payroll was substantially composed before the funds arrived from the bank. Lieberman's explanation of this conduct and his attempt to extricate himself from its implications was unworthy of belief and utterly destroyed not only by the direct testimony but as well by the rebuttal testimony of the witnesses.
So we find the man who had systematically collected ten-, twenty-, and fifty-dollar bills for an extended period of time prior to March 10, 1947 allegedly discovered $92,800 in currency composed of bills of only those denominations in the cellar of his conventional Philadelphia row house.
The question naturally arises as to the source of the money used by Lieberman in exchange for these bills of larger denominations. Lieberman, it is admitted, is a man of modest earnings and has always been a man of modest circumstances. He lived in a small home for more than twenty years. This home was the property of his wife, who had inherited it from her parents. He was a bookkeeper who had earned approximately $50 a week even in the period preceding and during the war. He did not take this money from Cooklyn Dairies while he acted as its bookkeeper and he was not engaged in any separate business, whether legal or illegal. The Federal Bureau of Investigation, the Bureau of Internal Revenue, the Office of Price Administration, as well as the Philadelphia Police Department, thoroughly investigated Cooklyn Dairies to see if this money could be traced to its business or to a related black market activity. Such investigations proved fruitless.
The circumstances of the alleged finding disclose that the money was neatly tied and placed in this carton, which was found within a few feet of the coal burning heater in the cellar of Lieberman's home. The cellar was relatively well maintained and orderly, although there was a small window leading to the street which was accessible. The detectives who arrived at the scene shortly after the alleged finding established that this box could not have been in the position in which it was alleged to have been found for any material length of time because of the absence of necessary accumulation of coal dust. Lieberman said he stumbled upon it by accident in looking for an electric light bulb and would have us believe that he had not been in the cellar of his home for many years. He said that his wife was the only one who went to the cellar, as she attended to the heater.
The reaction of both Lieberman and his wife on March 10, 1947 was not normal. Mrs. Lieberman became hysterical and wanted to burn this money, possibly fearing it as a modern Pandora's box in disguise. She appears to be an ordinarily attentive housewife who had kept the property tidy and neat, and it is rather strange that she never saw this box in cleaning the cellar. The cellar area was not so large and the strange box so inconspicuous as to remain unseen for any period of time. The first person to be notified was Mrs. Lieberman's brother, who advised calling his friend, a member of the detective bureau of the local district. Even after the shock of the so-called finding had passed, the natural acquisitive nature of the person never asserted itself. His right as a finder was forfeited. These facts, as well as those already reviewed and those that follow, as well as his demeanor on the stand, convinced us that Lieberman had concealed deliberately the direct evidence concerning the ownership of this currency. We are convinced that the box and its contents were placed in the position where it was allegedly discovered by Lieberman, and we are further convinced that the source of this fund was the assets of Victor Dairies, Inc.
Mrs. Lieberman's brother was Morris Caplan. He and his brothers had been engaged in the operation of dairies and Victor Dairies, Inc. was the last of a series of bankruptcies, beginning with Quaker Dairies, then Victor Dairies, then Penn-Victor Dairies, and finally this particular bankrupt corporation, Victor Dairies, Inc. This last corporation was organized in 1936 and was the end product of a corporate re-organization growing out of the bankruptcy of Penn-Victor Dairies. It was re-organized by the same counsel that represented the trustee in bankruptcy at its demise approximately seven years later. Lieberman was its bookkeeper, and its records, consisting of its cash book, journal and ledger, show an intentional manipulation of funds. No bookkeeper, however incompetent — and there is no evidence that Lieberman is incompetent in his trade or occupation, — could be guilty of such manifest irregularities.
When we examine the circumstances of the rebirth of this dairy company we find the answer. Morris Caplan had a benefactor in the late William H. Potts, a man whose estate is reputed to have been worth approximately ten millions of dollars. Potts in his lifetime ran a model dairy farm and sold the milk produced on that farm to the various dairy companies run by Caplan. The re-organization of the last company was financed by funds supplied by Potts, and although Caplan and his brothers appeared as the officers, directors and owners of the capital stock, it is conceded that all the stock was endorsed to Potts and that he owned the company lock, stock and barrel, and that he permitted the Caplans to draw compensation by way of salaries and to act as managers. It was obvious that the Caplans had no incentive by way of prospective capital gains if the business prospered or in the payment of dividends. Their only legitimate source of gain would be the generosity of Potts in increasing their management fees or salaries.
There is direct evidence, consisting of the records of Mr. Potts, to show that he advanced a net sum of $128,181.05 to the business from July 1, 1936 to August 5, 1941, none of which was ever repaid to him or to his estate except a single payment on account, which does not appear on the company's records, made on July 31, 1936 in the sum of $3,837.37. The net balance of cash advanced which remained unpaid was therefore $124,343.08. Mr. Potts considered these as loans made at five per cent interest which he accrued but which remained unpaid in the sum of $25,447.29.
He also maintained a record of milk sold to Victor Dairies which was not paid for, as follows: milk at nine cents per quart, $19,254.86, with interest thereon at five per cent, $1,646.95; milk sold at six and one-half cents per quart, $2,136.88, with interest thereon at five per cent, $10.85. The total of all debts to Mr. Potts, including money loaned, and interest thereon, and milk sold and interest thereon, which was never repaid was $172,840.51, as of November 1, 1941.
The books of account do not show any indebtedness to Potts, nor are there proper entries into the capital accounts of the registered owners of the stock. The original sum of $32,000, which was advanced by Potts on July 17, 1936 was apparently used to acquire the assets of the bankrupt predecessor, Penn-Victor Dairies, and we do find two entries, totaling $32,000 on the books unrelated to the actual events. The first shows assets acquired of $21,354.43, and cash in bank of $10,645.47. The balance of the sums advanced by Potts are either not recorded at all or can be traced to such entries as "Accounts Receivable Wholesale, "Paid in Surplus," or "Personal Account of Morris Caplan".
Except for one transaction of $3,000, all sums received from Potts were entered deliberately in a false manner in order to conceal the sums, which we are convinced passed through the business and into the possession of Caplan through his perhaps unwilling confederate, namely, Lieberman, his brother-in-law.
An analysis of the income tax returns of this business, where we would expect losses in its operation to be stated in as large amounts as possible, shows that for the entire period of its existence the net loss was $31,988.25. The major portion of this loss consisted of a bookkeeping charge of depreciation in the amount of $30,122, so that the actual operating loss as disclosed from the income tax returns was negligible.
When we attempt to reconcile the accounts, either on a net worth basis or on any other manner, we are met by a maze of inconsistencies, but it is obvious that $124,343.68 advanced by Potts was never set up as a liability, the business sustained no serious operating losses, and yet it became hopelessly insolvent independently of this liability to Potts within a very short time.
This is corroborated by a comparison of the balance sheet in 1936 when the business was started. Then the assets were set forth as $67,476.61, the liabilities as $18,546.61, leaving a net worth of $48,930. At the end of 1942 the net worth had decreased approximately $11,000, after charging off depreciation and the figures show assets of $66,722.34, liabilities of $28,886.87, and a net worth of $37,835.47.
It is admitted that when this company went into bankruptcy on July 6, 1943 proofs of claim were filed in the approximate sum of $176,000. It is further admitted that at no time did this company ever show more than a nominal sum in cash, in spite of the $124,343.68 poured into it by Mr. Potts. For example, in 1938, there was only $1,200, in 1939, approximately $1,700, in 1940, less than a hundred dollars, in 1941, about $150, and in 1942, an overdraft. Where did the huge sums of money received from time to time from Mr. Potts finally come to rest? The inescapable conclusion is that the sums of money advanced by Potts found their way into erroneous accounts to cover a steady and constant withdrawal from current receipts by Caplan and his brother-in-law. The sums received in the operation of the business from the milk drivers in their collections, bills of small denominations, were being systematically siphoned into the possession of Caplan and Lieberman and constituted the source of the small bills which Lieberman in later years, exchanged for the 10's, the 20's and the 50's now in issue.
Let us examine some examples of the books of account which a certified public accountant characterized as wide open for manipulation. The testimony shows that Caplan and his confederates could dispose of cash receipts as they pleased. On February 7, 1939 Mr. Potts advanced $7,200. The books of account show receipts of $7,825.97, less a credit of Accounts Receivable Wholesale, and Accounts Receivable Retail, in the sum of $625.97, leaving a balance of $7,200, which was not credited in any place. Later in the month, on the 28th of February, the total receipts are $710.47, but Accounts Receivable Wholesale and Retail, and a return check item of $8.20 total in the aggregate $7,910.47, leaving a difference of $7,200, which found its way as a credit into Accounts Receivable Wholesale. Therefore Mr. Potts's money actually appeared as a receipt of Accounts Receivable Wholesale. Since these accounts were paid with money that had been loaned to the business, or if we consider it a capital contribution, then someone had to receive the collections which were actually made from customers. At least $33,000 of Potts's money can be traced directly in this one fashion.
An analysis of the personal account of Morris Caplan and his brother shows that within the last few years of the business, sums aggregating $29,384.02 and $41,823.16 passed through their personal accounts respectively, even though their drawings from the business were in small amounts.
There is also an interesting account which covered cash admittedly received from sales which was not deposited in the bank. This started in 1936 in small amounts and became progressively higher each year until the shortage or difference between the amounts collected and the amounts not deposited was $138,550.40 in the year 1941 alone. The explanation offered by Lieberman can only partially explain these large amounts. It appears that the business collected each year, from 1937 to 1940, cash in an amount in excess of $350,000, and for the period from 1936 to the end of 1941, total cash receipts were approximately $2,000,000. He attempted to show that the difference between the cash collected and the cash deposited in the bank in this period of almost a quarter of a million dollars was attributable to the "bouncing checks" of Victor Dairies, Inc., which caused dairy men to demand cash.
We are also confronted with the testimony and the evidence produced by the Milk Market Administrator for this area, whose auditors uncovered manipulative practices of this company even before its bankruptcy. Their investigation convinced them that there was fraud when this outrageous bankruptcy occurred and thereafter the staff was alerted to watch for the possibility of hidden assets in connection with Victor Dairies, Inc.
We note in passing that Caplan's testimony that some of the money received from Potts was used for permanent improvements is an untruth because we have direct testimony of persons who worked at the plant that there were no improvements during the period from 1936 to 1943, and the financial statement of the company failed to disclose an appreciable increase in fixed assets during that period.
The record is replete with other examples showing debits to Accounts Receivable and Credits to Good Will, as well as debits to Morris Caplan and credits to Paid in Surplus, extensive exchange items, and the crediting of Accounts Receivable Wholesale without any explanation.
We are convinced from the record that the only logical inference and the only facts that are consistent with the evidence is a systematic withdrawal of cash receipts by Caplan with the assistance of Lieberman. These bills were in small denominations and can be traced to the currency now in the custody of the Director of Public Safety. It is significant to note that the benefactor, William H. Potts, died on June 1, 1943, and had been apparently less generous with his capital contributions in the last year or two of his life. Victor Dairies, Inc. served no useful purpose as a conduit after Mr. Potts's death, and on July 6, 1943 it went into bankruptcy. The insolvency was hopeless, and from the records and the audit made by the accountant for the trustee at that time, it would appear that no diligent effort was made to press for an explanation of what was clearly a fraudulent bankruptcy. The Milk Administrator testified that his staff at that time was quite restricted and the duties of the office so great because of the war that they could not carry on a more thorough investigation to confirm their conviction that a large sum of money had been secreted in this bankruptcy.
There is clearly a chain of facts, the necessary consequence of which establishes the fact in issue to the exclusion of any equally supported belief of an inconsistent proposition. From the very unique inception of this alleged finding to the various terminal points of the spokes of this web of circumstantial evidence, there is only one conviction and one logical deducible conclusion that can be drawn. The motives are clear, the purpose to be accomplished is evident, and the method adopted rises to the surface in spite of the deliberate attempt to throw a blanket of concealment over the nefarious activities of the actors. This money, this currency of the denominations set forth, did not spring from nowhere and was not intentionally placed in the cellar of Lieberman's home by persons unknown. It is not without a lawful or rightful owner, but it can be directly traced to hidden assets systematically withdrawn and secreted from the bankrupt estate.
There is one other claim upon which evidence has been offered and that is the claim of the Hillop Estate. Mrs. Hillop, the widow of Anthony Joseph Hillop, testified that she married the decedent on April 12, 1932, shortly after he was released from prison and that he was murdered on June 6, 1932. She said that her husband on the day before his death placed a carton containing $110,000 in a trap door in the ceiling of the second floor of the house of a Benjamin Lieberman, 2131 South Fourth Street, Philadelphia. She described the box and the contents and the denominations of the bills, which description is completely inconsistent with the actual fact established by the finding. She related attempts to get this money from Lieberman and admitted that the man she knew as Benjamin Lieberman was about sixty-five years of age and certainly not the same Benjamin Lieberman in this proceeding. We find that the claim of this estate is supported only by the testimony of the widow which we conclude is totally unworthy of belief.
Conclusions of Law1. The sum of $92,800 in United States currency, which is the subject of this proceeding, was in the possession of the Director of Public Safety of the City of Philadelphia, in a fiduciary capacity as trustee, bailee, or depositary at the time of the filing of the petition in escheat.
2. This currency is the property of the bankrupt estate of Victor Dairies, Inc. and should be awarded to Theodore O. Rogers, duly appointed trustee in bankruptcy of said estate.
3. The evidence fails to establish that the said currency is without a lawful or rightful owner or is the asset of the Estate of Anthony Joseph Hillop, Deceased.
Exceptions to adjudication dismissed and final decree entered awarding fund to claimant trustee in bankruptcy. Commonwealth appealed.
B. Graeme Frazier, Jr., with him Frazier Frazier, for appellant.
Raymond J. Broderick, for appellee.
The Court being equally divided in opinion, the case is affirmed on the opinion of Judge ALESSANDRONI, of the lower court.