U.S. Court of Appeals for the Second Circuit
In Re Herzog
July 9, 1941121 F.2d 581
Summary
The court held that the bankrupt partners were not entitled to discharge because their books failed to distinguish partnership transactions and assets from those of a related corporation, preventing creditors from determining the partnership's financial condition and liabilities. Their honesty and lack of intent to conceal information did not justify the inadequate records, particularly because their accountant had warned them of the problem. The district court's order granting discharge was reversed. Clark, Circuit Judge, dissenting, would have affirmed because the books honestly recorded the consolidated business's transactions and the bankrupts should not have been penalized for failing to make legally sophisticated distinctions.