245 F. 363 | D. Mass. | 1917
The specification of objection based on the failure to keep adequate books of account is disposed of by the referee’s finding.
The specification of objection charging that money was obtained upon statements in writing that were materially false is, upon the findings of the referee and the inferences- to be drawn therefrom, sustained. The learned referee has not found, as I construe his report, that the objecting creditors were merely betting with the bankrupt or his company on the course of prices. He says that:
“It was understood by both parties that these transactions were carried on with the bankrupt as a broker, and as speculative margin accounts, according to the custom of brokers in relation thereto.” (Report, p. 4.)
*364 “The broker, to put himself right in such a case as the one now before us, must show that he has under his control, free from the just demands of other customers, and available for delivery to the particular customer whose case is in question, the stocks of which that customer, upon payment, will be entitled to demand delivery.” Greene v. Gorey, 210 Mass. 536, 548, 97 N. E. 70, 72.
“The bankrupt did not in fact have any other stock of these descriptions at that time available, either in possession or by right of any contract, for ¡delivery to the creditor, if payment had been made by the creditor and demand had been made for the stock.” (Report, pp. 3, 4.)
. After these statements had been made to the creditor, payments to the bankrupt or his company were made by her. Each customer’s account seems to have been treated as an entirety, and not as a series of unrelated purchases or sales of different stocks. Payments made subsequent to the statements must, I think, be regarded as having been procured, in part, at least, by the showing of stock on hand for the customer. This fact is not categorically stated by the learned referee. He says, however:
“The objecting creditors made payments to the bankrupt to be credited on the account, believing that the bankrupt was carrying on margin for them, respectively, the shares of stock recited in the last monthly statement'of accounts as being on hand.” (Report, p. 2.)
The creditor’s belief that the bankrupt had the stocks on hand was undoubtedly one of the inducements to further payments by the creditor.
It does not appear that the bankrupt understood that the statement that stocks were on hand was false. But he knew what the facts were, and he knew what was being represented to the customers; and he cannot escape responsibility for what was said upon the ground that he did not realize the legal effect of the language used. Nor does the fact, if it be so, that the bankrupt’s intention was to buy and deliver shares, if the customer should call for them and pay the balance due, save the statement that shares were on hand from being false.
The false statement, in order to bar discharge, must have been made for the purpose of obtaining money or credits. The creditor’s stocks were being carried on margin. If it became necessary to increase the margin, further payments might be made to the bankrupt or his company by her. In doing so, she would act, as both parties understood, in reliance on the statement. This was one of the reasons why it was made by the bankrupt or his company. It is not necessary that the sole purpose of the statement should have been to obtain money or credits. If that be one purpose, and the statement be knowingly false, it is sufficient to bar a discharge.
Application for discharge refused.
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