Albinak v. KuhnAlbinak v. Kuhn
The appellant was adjudicated a bankrupt on March 25, 1943, following his petition for arrangement under Chapter XI,
Prior to the filing of his petition in bankruptcy the appellant wаs engaged in the manufacture of jigs and tools for approximately 2 years, and had received a large volume of orders for war products. Because of limited capital he found it necessary to hypothecate his invoices with finance companies in order to obtain money sufficient to meet payrolls. He made an arrangement with the Manufacturers Trading Corporation of Cleveland, Ohio, whereby it would purchase accounts then held by another investment company and discount additional accounts. On October 21, 1942, the bankrupt assigned to the Trading Company 96 invoices covering separate and distinct transactions with 19 of his customers, listing debts purporting to be due and owing to him from them, totaling upwards of $60,000. At a later date he made a second assignment which also listed a large number of invoices and accounts purporting to be due him. At the time of the execution of the contract he submitted a written statement purporting to be a true balance sheet of his assets and liabilities аs of September 30, 1942, this balance sheet being, by reference, made a part of the original contract and subsequent assignments. The balance sheet is not made part of the record though it is alleged by the objectors to discharge that it was false and untrue, and that its falsity was not denied by the bankrupt.
The assignment of accounts is, however, presented on appeal by supplemental recоrd, and the first assignment, in addition to listing the 96 debts owing to the bankrupt, recites that for the express purpose of inducing the Trading Corporation to part with its money and to purchase the accounts from the assignor, the assignor covenants and warrants that the financial statements, invoices, orders, proofs of delivery, and other documents submitted to the assignee, and which are made a part of the assignment, are absolutely true and genuine; that the goods described in and covered by such invoices and statements of account were manufactured strictly in accordance with the specificatiоns of the purchasers, were not on consignment, were shipped to the purchasers on bona fide orders, not in any way, cancelled, countermanded or altered; that the accounts were without set-offs; that the purchasers are indebted to the assignor in accordance with the invoices; that the goods had not been previously conveyed, sold or pledged; that the title to the accounts had not been wholly or partially transferred; that no one had acquired any lien, right, or title to them; that the purchasers had not paid any part or all of the purchase price of the gоods, nor returned the merchandise; that all collections received or credits allowed upon any of the accounts had been duly credited to the accounts of the respective customers, and, finally, that the assignor, as well as the purchasers on said accounts, are solvent.
The specifications in objection to discharge also recited that on February 2, 1942, the bankrupt contracted for the purchase of a new home in an amount in excess of $20,000, and took title to the property in himself and wife, creating an estate by the entireties; that he did so in order to placе the property beyond the reach of his creditors, since under Michigan law such an estate is not subject to the debts of either spouse separately; that in furtherance of this same purposе he executed a quitclaim deed of his interest in the said property to his wife on May 14, 1942, withheld from record until October, and that the final payment on the purchase price of the property was mаde after an audit of the books of the bankrupt had shown him to be insolvent.
It is, in our view, entirely immaterial to the issue here involved, that the bankrupt quit-claimed his interest in the property to his wife either in May or in Octоber. Under Michigan law a title validly residing in husband and wife may not involuntarily be sold or encumbered for the debts of either. Turner v. Davidson,
In reference to the other specification of objection we reach a contrary conclusion. Section 14 of Chapter 3 of the Bankruptcy Act,
“The court shall grant the discharge unlеss satisfied that the bankrupt has * * * (3) obtained money or property or credit * * * by making or publishing or causing to be made or published in any manner whatsoever, a materially false statement in writing respecting his finanсial condition * *
The question before us is whether the several assignments of accounts with their respective warranties and covenants already recited, constitute materially false statements in writing respecting the bankrupt’s financial condition. That material statements therein contained were false, is, on the appeal, conceded, and the referee found that many accounts were listed in the assignments which had, prior to their date, been collected and the money otherwise used; that other accounts were therein listed which were not due and owing, because the merchandise ordered had not yet been manufactured or delivered. The argument is made that these assignments, notwithstanding their covenants, do not constitute a financial statement, implying, of course, that a finanсial statement is a term of art and purports to be a complete statement of assets and liabilities by which the precise financial worth of the person making the statement can be determined. However, the statute does not use the phrase “financial statement.” It refers to a false statement respecting financial condition, made or published “in any manner whatsoever.” The argument is, we think, tenuous, that a written statement listing as assets accounts which have no existence whatsoever, running into many thousands of dollars and including practically all of the receivables of the assignor, are not statements respecting the maker’s financial condition.
But be that as it may, the assignments warrant and covenant that at their date the assignor was solvent, and so, however persuasive may be the rеasoning that a false statement of receivables is not a statement of financial condition, a warranty of solvency can be and is nothing else. That the representation as to the bankrupt’s sоlvency was false, the record provides no room for dispute. The first assignment is dated October 21, 1942; the second assignment is not in the record but was made later, and is not reprinted because substantially in terms idеntical with the first assignment. The referee found, unequivocally, that a complete audit of the bankrupt’s business, made by certified public accountants, showed the bankrupt to be insolvent as of the month of August, 1942. Neither the audit nor other evidence upon Vhich this finding was based, is by the appellant produced of record, and in-no respect does his brief challenge the finding. We accept it as conclusivе and final.
No cases have been cited to us, and none has been found by careful examination, which confines a statement respecting one’s financial condition as limited to a detailed statement of assets and liabilities. The appellant relies heavily upon Johnston v. Johnston, 4 Cir.,
The judgment is affirmed.
Notes
Erroneously cited in briefs of both litigants, requiring the court to undertake an independent search.