In re Kerner

| S.D.N.Y. | Oct 9, 1917

LEARNED HAND, District Judge

(after stating the facts as above). This case falls directly under my ruling in Re Maaget, 245 F. 804" court="S.D.N.Y." date_filed="1911-06-20" href="https://app.midpage.ai/document/in-re-maaget-8804921?utm_source=webapp" opinion_id="8804921">245 Fed. 804, and I shall follow it, unless it appears that it has been overruled in Re Rosenthal, 231 Fed. 449, 145 C. C. A. 443. The opinion in that case does not pass upon the point, and I have no means of determining whether it was raised on the appeal. In any event the opinion below does not diverge from In re Maaget, but quotes it with approval, and the case has the distinguishing point that the bankrupt, who could not read or write, may well have supposed the statement to have been* true. I cannot find that any court has decided that, where a bankrupt deliberately chooses to omit a liability for the purchase price of goods still on hand, he has made a true financial statement. Scienter is, of course, a necessary element in the charge, and it would be a defense to show that the bankrupt, however erroneously, supposed that the liability did not in fact exist.

Nothing of the sort is suggested here; the most that by implication can be said to he shown is that he supposed that he need not put the liability into the statement, because a custom exists in the trade to exclude any such. But, while the bankrupt’s error touching the existence of the liability would malee the statement honest and excuse a mete mistake, his error as to his obligation to make a true statement is irrelevant. His duty is to speak the truth, so far as he knows it, and no mistake as’ to the scope of that duty affects the legal consequences of his omission. Hike any other duty, the law imposes it upon him at his risk. The test is honesty in the statement, not in the belief that an honest statement is necessary. It would be as intolerable as it is anomalous to allow men to make financial statements which they know to be false, on the plea that they supposed the recipient was not entitled to honest ones.

Report confirmed; confirmation of composition denied. It would be satisfactory if a ruling upon the point could be obtained from the Circuit Court of Appeals.

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