testimony about its financial condition, imposes upon the partnership the burden of proving solvency and ability to pay its debts as they mature. Cf. Standard Outfitting Co. v. Heyker, 6 Cir., 1928, 27 F.2d 229.
Section 3, sub. d of the Bankruptcy Act, 11 U.S.C.A. § 21, sub. d, provides in part as follows:
'Whenever a person against whom a petition has been filed alleging the commission of the * * * fifth act of bankruptcy takes issue with and denies the allegation of his insolvency or his inability to pay his debts as they mature, he shall appear in court on the hearing * * * with his books, papers, and accounts, and submit to an examination and give testimony as to all matters tending to establish solvency or insolvency or ability or inability to pay his debts as they mature and, in case of his failure so to do, the burden of proving solvency or ability to pay his debts as they mature shall rest upon him.' (Emphasis supplied.)
In Collier on Bankruptcy, 14th ed., vol. 1, para. 3.208, pp. 441-442, it is stated:
'If the bankrupt refuses to appear with his books, papers, and accounts for examination, then the burden of proving his solvency at the time of the transfer is shifted to him. It is no excuse that a debtor engaged in business kept no books, or that he has lost them; if he does not keep them or know where they are, the burden will rest on him to show that he was solvent. The statute does not require that the failure to produce books and papers be wilful or contumacious in order to throw upon the bankrupt the burden of proving his solvency; the failure to produce, and the absence of a satisfactory explanation is sufficient. The books, papers and accounts referred to are those material in determining the bankrupt's financial condition at the time of the transfer.' (Emphasis supplied.)
Although the editors were here referring to the application of § 3 sub. d in determining the burden of proof under the second act of bankruptcy, § 3, sub. d applies as well to the fifth act except that the 'books * * * referred to are those material in determining the bankrupt's financial condition at the time * * *' of the appointment of a receiver. Because of the incomplete and unsatisfactory condition of the partnership books, papers and accounts, we think the burden shifted to the partnership and it was incumbent upon the partners to prove that the partnership, or one or both of the individual partners, had liquid assets available to pay partnership debts as they matured. This was not done; the partnership submitted books and one partner testified, but the books and testimony were far from meeting the requirements to avoid the burden imposed by § 3, sub. d.
In the case of In re Cayne Const. Co., D.C.E.D.N.Y.1932, 58 F.2d 664, 665, the court stated:
'The Cayne Construction Company, Inc., failed to produce satisfactory books of account * * *.
'In view of the failure of the bankrupt to produce adequate books of accounts or to account satisfactorily for missing data from which an accurate and independent statement of its condition could be arrived at, the burden to prove solvency rests upon the bankrupts. Bogen & Trummel v. Protter (C.C.A.) 129 F. 533.' (Emphasis supplied.)
In the case of In re Wilson, supra, 16 F.2d at page 178, the court in speaking of the effect of the bankrupt's refusal to, inter alia, produce his books, papers, and accounts and of the consequent shifting of the burden of proof (as herein previously set forth) stated:
'This correctly states that situation, and it follows that upon such refusal the presumption of insolvency attaches, subject to course, to be rebutted by evidence of solvency sufficient to overcome it.' (Emphasis supplied.)
We believe that the unexplained failure of the partnership and the individual partners to maintain and produce at the trial adequate books and accounts, or informative testimony, from which an accurate determination of the financial condition of the partnership as of March 24, 1958, could be made, shifted to the partnership the burden of proving that the partnership had sufficient money available to pay, as of that date, the partnership debts as they matured, and created a presumption of insolvency in the equity sense which in the absence of proof to the contrary by the partnership and its partners was sufficient in itself to justify the special verdict. Indeed, when the partnership decided not to offer any evidence in defense, had an appropriate motion been made, the Referee might well have directed a verdict in favor of the petitioning creditors. In any event, there was sufficient evidence to sustain the jury's verdict.
The Order of the Referee dated November 17, 1960, will be affirmed.