256 F. 862 | D.N.J. | 1919
As to the objection based on clause 3: It is charged that the bankrupt firm obtained a loan of $5,000 from the New Jersey Title Guarantee’ & Trust Company upon a materially false statement in writing, dated February 28, 1916, made by Joseph Perlmutter on behalf of such firm, for the purpose of obtaining that money from the Title Company. It is conceded that Joseph Perlmutter, on behalf of the firm, rendered a statement in writing, which was untrue in failing to state the firm’s indebtedness to' Elizabeth Perlmutter and to Eva Perlmutter, the former the wife of Joseph, and the latter the sister of both Joseph and Harry, Perlmutter. This indebtedness, representing loans made to the firm, aggregated $8,800 principal, besides several years’ accrued interest, of which principal there was owing to Joseph’s wife $7,000 and to his sister $1,800. On behalf of these bankrupts it is contended that the Title Company did not rely upon the statement in making the loan; and that it was not willfully and knowingly false.
The master did not make any finding as to the first proposition, and as to the second he held that the objecting creditors had not borne the burden of proof cast upon them, and had not proved that the statement was knowingly false.
As to the first of these contentions: It is sufficient to say that the evidence clearly establishes that the Title Company relied upon the statement in making the loan, and that if it had known that the bankrupts owed the sums in question, the loan would not have been made.
As to the second contention: Both partners knew that the firm owed their sister, Eva, and Joseph’s wife the sums stated, and that it had paid interest thereon for a number of years. The statement of the firm’s financial condition was made for the purpose of securing a loan from the Title Company following an unsuccessful effort by Joseph, on behalf of the firm, to secure a loan of $5,000 from the First National Bank of Jersey City, with whom the firm for many years had done its banking business. This statement was prepared by the firm’s bookkeeper at Joseph’s request and while the latter was at the office of an attorney at law, to whom he had been referred by an officer of that bank, and whose aid he had solicited in securing the loan after he had made the unsuccessful effort just referred to, and after this attorney had had an interview with an officer of the Title Company. Upon the receipt of such statement, and after talking it over with this attorney, and at the latter’s suggestion, the value of the real estate was reduced from $150,000 to $110,000. The statement was thereupon redrawn and signed by Joseph and forwarded by the attorney to the Title Company, who then made the loan in question.
The discharge authorized by the Bankruptcy Act is not for all bankrupts. It is expressly withheld from those whose conduct brings them within the provisions of section 14 of the Bankruptcy Act.
In Gilpin v. Merchants’ National Bank (C. C. A. 3) 165 Fed. 607, 91 C. C. A. 445, 20 L. R. A. (N. S.) 1023, 21 Am. Bankr. Rep. 429, it was held by the Circuit Court of Appeals of this circuit that the word “false,” used in clause 3 of that section, “means more than merely erroneous or untrue, being used in its primary legal sense as importing an intention to deceive, and such a statement, in order to constitute a bar to a discharge, must have been knowingly and intentionally untrue.” This narrower meaning here given to the word “false” has been uniformly adopted by the federal courts. Of the later cases so bolding, I note the following: Aller-Wilmes Jewelry Co. v. Osborn (C. C. A. 8) 231 Fed. 907, 146 C. C. A. 103, 36 Am. Bankr. Rep. 714; Firestone v. Harvey (C. C. A. 6) 174 Fed. 574, 98 C. C. A. 420, 23 Am. Bankr. Rep. 468; Doyle v. First National Bank (C. C. A. 4) 231 Fed. 649, 145 C. C. A. 535, 36 Am. Bankr. Rep. 331; In re Augspurger (D. C.) 181 Fed. 174, 25 Am. Bankr. Rep. 83; In re Arenson (D. C.) 195 Fed. 609, 28 Am. Bankr. Rep. 113; In re O’Callaghan (D. C.) 199 Fed. 662, 29 Am. Bankr. Rep. 304; In re Stafford (D. C.) 226 Fed. 127, 35 Am. Bankr. Rep. 747; In re Smith (D. C.) 232 Fed. 248, 37 Am. Bankr. Rep. 230; In re Landersman (D. C.) 239 Fed. 766, 38 Am. Bankr. Rep. 685.
In the Gilpin Case the bankrupt had signed the statement (a printed blank) before it was filled in, and directed his bookkeeper to complete it and send it to the bank. This the bookkeeper did, indorsing on the fillcd-in statement the word “approximate.” There was no evidence that the bankrupt ever saw it after he had signed it in blank, or that he was thereafter interrogated in regard thereto.
It is to be observed that in the Gilpin Case the word “approximate,” indorsed on the filled-in blank, tended to negative that the statement was intended to be accurate, and further that, unless the bankrupt wan to be held responsible for what his bookkeeper did within the scope of his authority and in response to a duty he imposed upon him, the bankrupt could not be held to have issued the statement in the form that it was delivered to the bank. In both of the recited particulars that case differs from the instant one. The Perlmutter statement was signed by Joseph after it was revised by his attorney, with whom he had discussed it, and there was nothing on its face or in the letter transmitting it to the Title Company that would suggest that it was not to be taken as a true statement of the firm’s financial condition.
Was this prima facie case displaced or impaired? From the other testimony it appears that these claims of Elizabeth and Eva Perlmutter were of many years’ standing; that they had from their beginni»g been carried as liabilities on the firm’s books and the trial balances which were frequently made; but that their names, as creditors, or the amounts due them, were never mentioned in the two financial statements which the firm gave to the Mercantile Agency, and which were signed by Joseph Perlmutter. These mercantile statements were dated, respectively December 31,1915, and January 1, 1917. Why include the wife and sister, as creditors, in the trial balances, and not in the financial statements issued to the mercantile agency ? Honest dealing would require that they be inserted in the financial statements, whether they were included in the trial balances or not. Neither Joseph nor Harry Perlmutter needed to be reminded by the trial balances of the existence of their indebtedness to their sister and Joseph’s wife. Facts of that character would never be forgotten by a normal being thus related to creditors. But the inclusion of the amount of the indebtedness owing to them would be necessary in a financial statement issued to a mercantile agency, if it, or those for whose interest such statement was being sought, were to have knowledge of the actual financial condition of the bankrupt firm.
How came the bookkeeper to include these debts in the trial balances and to exclude them from the financial statements? He testified that these debts were in existence and appeared on the books in 1913, when he entered the bankrupt firm’s employ, and that Joseph’s wife and sister were carried as creditors on the books, down to the institution of
What does Joseph say about these omissions? With reference to the statements issued to the Mercantile Agency; He says that they were made by the bookkeeper on his order, that he did not compare them with the books, and that he signed them, not knowing them to be untrue, and without any intent “to give out a false or untrue statement.”
As to the one sent to the Title Company: At first, though admitting that he signed the statement, Joseph disclaimed any knowledge as to when it was drawn, the purpose for which it was given, that he had any attorney at that time, or that he gave it to any one to give to the Title Company. Subsequently lie recalled that, while he was at the office oí the attorney before mentioned (who has since deceased) and to whom he had been referred by an officer of the First National Rank of Jersey City, he telephoned to the firm’s bookkeeper to make such statement; that this attorney went over it and made him cut down the real estate value; that it was then rewritten by the attorney’s stenographer, and that, after lie had the attorney add to the statement that he (Joseph) “still valued the property at $150,000, which he had cut down to $110,000, or something like that,” he signed it and left it with him. He further said that he did noc know then (at the time of testifying) whether his wife’s or sister’s indebtedness was shown on that statement or not; that lie assumed that the bookkeeper had put down everything that was on the hooks and that the statements so furnished him were correct; that he never gave a thought to the indebtedness due his wife and sister when he made the statement that went to tile Title Company, and that they were not left out willfully, and that he had no intention of deceiving the Title Company or any one else.
Reverting to this particular financial statement, we note that there was set before Joseph, not a statement showing the liabilities in gross, as was the case in the financial statements rendered to the Mercantile Agency, but one that was itemized, giving the names of the loan creditors and the amounts due them respectively. A glance at the list of these creditors seemingly ought to have brought home to him the fact that the names of his near relatives, as loan creditors, were not included.
But, if that did not do it, how can we escape the conclusion that the absence of these names must have come to his knowledge during the time this statement was considered by him and his attorney, and from which it emerged in the amended form that it reached the Title Company’s hands? In its amended form the statement showed only a net worth of $12,800. If the omitted indebtedness, with accrued interest, had been added, this net worth would have been practically eliminated, and the statement as a basis for credit useless.
Thus environed, Joseph’s disclaimer of any intention to deceive the Title Company, lacking corroboration, is valueless. As was said by this court in Re Arenson, supra, in regard to a like disclaimer: “It is a defense at the command of any one, and, in the absence of corroborating circumstances, is entitled to little weight.” The Title Company was entitled to a true statement, and Joseph, in the absence of convincing evidence that the omission of his wife’s and sister’s indebtedness from the statement in question was unintentional, must be held to have intended to conceal from this prospective lender a knowledge of such indebtedness, and also all the consequences normally flowing from such deception.,
The petition in bankruptcy was filed on August 3, 1917, and on the 6th of that month both Harry Perlmutter and his brother, Joseph, filed separate admissions of inability to pay their debts, either as individuals or copartners, and consented to be adjudged bankrupts on that ground. The firm’s books show, and Harry Perlmutter admitted, that on the 1st day of August, 1917, he withdrew approximately the sum of $1,700 from the funds of the firm. Pie testified that he had previously loaned that amount to the firm, and that he paid a gambling debt with it. No contention is made in Harry’s behalf that he had a right to withdraw that sum from the firm’s funds, and as the firm was a co-partnership, of which he was one of the copartners, it is immaterial whether he had previously loaned that amount to it or not. As the firm at that time was insolvent, that sum, as well as other funds and property of the firm, should have been kept for the payment of the firm’s debts.
On August 2, 1917, the day following the withdrawal of this money, a bill was filed in the New Jersey Court of Chancery against Harry Perlmutter by his brother Joseph, and a receiver was appointed on that day to take charge of the copartnership property. The filing of this bill was due in part to the firm’s financial difficulties and in part to differences that then existed between these brothers. Seemingly the application for a receivership was the result of an understanding between them; but, whether that is so or not, it is clear that Harry knew that such application was to be made before he withdrew the money in question.
The burden of overcoming a prima facie case is not satisfied by such evidence. To hold otherwise would be to put a burden on the objecting creditors generally impossible for them to carry and to put them at the mercy of any unscrupulous debtor’s say-so. In re Leslie, supra. In the Nisenson Case and the cases cited therein at page 916, viz. Schweer v. Brown (C. C. A. 8) 130 Fed. 328, 64 C. C. A. 574, 12 Am. Bankr. Rep. 178, In re Lasky (D. C.) 163 Fed. 99, 20 Am. Bankr. Rep. 729, and In re Henderson (D. C.) 130 Fed. 385, 12 Am. Bankr. Rep. 351, and in the later cases of In re Silverman (D. C.) 206 Fed. 960, 30 Am. Bankr. Rep. 798, and In re Vyse (D. C.) 220 Fed. 727, 34 Am. Bankr. Rep. 378, the courts were concerned with “turn-over” orders. Yet even in these cases, admittedly requiring stronger proof to sustain such orders than is necessary in proceedings to withhold the bankrupt’s discharge, because of the drastic means that might be invoked to enforce the “turn-over” orders (imprisonment for contempt), the uncorroborated testimony of the bankrupt that he had gambled the money away, and therefore was unable to comply with such orders, was deemed insufficient to set them aside.
The prima facie case made against Harry Perlmutter has not been overcome, and he also is denied his discharge.