212 F. 784 | W.D. Wash. | 1914
This matter is before the court upon the exceptions of certain creditors to the special master’s report, recommending that the creditors’ objections to the bankrupts’ discharge be not allowed, with costs against the creditors. The character of the issue is fully disclosed by the master’s report.
“The proof shows that the bankrupts made statements to the Bradstreet Company and R. G. Dun & Co. as to their financial condition. These statements were materially false, in that they did not own real estate to the amount mentioned in these statements to the mercantile agencies. In one of these statements the bankrupts listed notes and accounts receivable, actual value, at $5,000. This also was false. On November 21, 1911, the bankrupts made -a statement entitled ‘Confidential Statement made to Western Hardware & Metal Company, Seattle, Washington, by Hoquiam Hardware & Supply Company.’ This statement was materially false, in .that the bankrupts did not own real estate (store building and lot) of the value of $2,500. The testimony of the bankrupts shows that the statement to the Western Hardware & Metal Company, of Seatle, Wash., was made for the purpose of obtaining credit, and that credit was actually obtained from the Western Hardware & Metal Company after this statement had been furnished. There is no evidence that the statements furnished the mercantile agencies, R. G. Dun & Co. and the Bradstreet Company were furnished by the bankrupts with a view of obtaining credit, or that any credit was ever actually extended to the bankrupts on the basis of these false statements. The Western Hardware & Metal Company is not one of the .objecting creditors in this proceeding. The only question with respect to false statements is whether or not the making of a false statement to a mercantile -agency is a bar to a discharge, and whether or not the making of a false statement to an individual, with a view to obtaining credit, and on which credit was actually subsequently extended, is such a matter as can be taken advantage of by other creditors, where the creditor to whom the statement was made makes no objection to the'granting of the discharge. The act prevents a discharge where any bankrupt has obtained property on credit from any person upon a materially false statement in writing, made to such person for the purpose of obtaining such property upon credit.
“In re Foster (D. C.), reported in 186 Fed., at page 254, definitely decides that the furnishing of a false statement to a mercantile agency is not such a statement as was contemplated by the provision of the Bankruptcy Act just referred to, and in conclusion of his findings, Referee West in that case made use of the following language:
“ ‘It is indeed unfortunate that a bankrupt may make false statements of his financial condition to a mercantile agency, and that a creditor, relying upon the faith of such a statement, may not succeed in defeating a discharge because of such a statement, but such is the law.’
“As to the report furnished the Western Hardware & Metal Company, I find that while that statement was materially false, and was such a statement as would fall within the provisions of the Bankruptcy Act before referred to, the only creditor in a position to take advantage of this false statement is the creditor to whom it was made, and who relied thereon and extended the credit; and, inasmuch as the Western Hardware & Metal Company is not a party to this proceeding as an objecting creditor, this ground of objection is not available to the objecting creditors, and that specification must be denied.”
The objecting creditors rely upon the following authorities: In re Harr (D. C.) 143 Fed. 421; In re Shaffer (D. C.) 169 Fed. 726; Gilpin v. Nat’l Bank, 165 Fed. 607, 91 C. C. A. 445, 20 L. R. A. (N. S.) 1023; Talcott v. Friend, 179 Fed. 676, 681, 103 C. C. A. 80, affirmed 228 U. S. 27, 33 Sup. Ct. 505, 57 L. Ed. 718; Loveland on Bankruptcy (4th Ed.) vol. 2, 1323, § 730; Act of 1903, § 14, Subd. 3.
The Bankruptcy Act of 1898 contained no provision touching this question. The act of 1903 provided:
“The judge shall * * * discharge the applicant (the bankrupt) unless he has * * * (3) obtained property on credit from any person upon a materially false statement in writing made to such person for the purpose of obtaining such property on credit. * * * ” Act Feb. 6, 1903, e. 487, § 4, 32 Stat. 797 (U. S. Comp. St. Supp. 1911, p. 1496).
The act of 1910 provides:
“ * * * (3) obtained money or property, on credit upon a materially false statement in writing, made by him to any person or his representative for the purpose of obtaining credit from such person. * * * ” Act June 25, 1910, c. 412, § 6, 36 Stat. 839 (ü. S. Comp. St. Supp. 1911, p. 1496).
In re Burke, Fed. Cas. No. 2,157, 4 Fed. Cas. page 731, was one construing a provision of Act March 2, 1867, c. 176, 14 Stat. 517, and is therefore of a less controlling character than the foregoing.
The specifications were filed October 20, 1913. No objection was made to the sufficiency of the verification until the beginning of the taking of testimony, December 2, 1913, upon which objection it was agreed by the attorneys for the bankrupts and the objecting creditors
The special master’s report is disapproved, as above indicated, and the discharge and costs will be denied. Leave will be denied the Western Hardware & Metal Company to now file its objection to discharge.