Specification of objection to the discharge of the bankrupt No. IV reads as follows:
“IV. That such application should not be granted because of the following facts, constituting an additional ground which the undersigned charged to be true, namely:
“A. That said bankrupt obtained property consisting of meats and provisions on credit from objecting creditor, Morris & Co., upon a materially false statement in writing made by him to said Morris & Co. for the purpose of obtaining credit from Morris & Co. That said statement in writing was dated August IS, 1914, and executed and signed on that date by said bankrupt, and delivered to Morris & Co. on that date, and in and by such statement said bankrupt falsely and fraudulently for the purpose of obtaining credit from Morris & Co. represented to said Morris & Co. that his merchandise on hand cost five hundred dollars ($500), that he owned accounts all good, amounting to eight hundred dollars ($800), that he had cash on hand in tho First National. Bank of Tally, N. Y., to the amount of one hundred fifty dollars ($150), that he owned real estate of the value of six hundred dollars ($600), that he owed no other debts, aside from four hundred and sixty-one dollars ($461) to Morris & Co., and that he had no liabilities except the debt owed to Morris & Co., amounting to four hundred and sixty-one dollars ($461), and in that said bankrupt represented therein that tho firm conducting said meat market was composed of D. B. Smith’s estate and Benton I>. Smith.
“That said statement was false and known by the bankrupt at the time of the making thereof to be false, in that the merchandise which bankrupt had on hand at that time did not cost to exceed three hundred dollars ($300), in that his outstanding accounts did not amount to eight hundred dollars ($800), in that said bankrupt did not have cash on deposit in the First National Bank of Tully amounting to one hundred and fifty dollars ($150), in that said bankrupt did not own real estate in which his equity was worth the sum of six hundred dollars ($600), and in that said bankrupt had other liabilities and owed other debts than those to Morris & C'o., to wit, Armour & Co., the estate of D, B. Smith, and others, and in that the firm conducting'said market was not composed of D. B. Smith’s estate and Benton D. Smith.
“That said written statement and the representations therein made wore made by said bankrupt to objecting creditor, Mlorris & Co., for the punióse of obtaining credit from Morris & Co., and that Morris & Co. relied upon said statement and the representations therein made, and sold and delivered to said bankrupt thereafter merchandise consisting of meats and provisions of the value of one thousand dollars and upwards, upon which account there remains unpaid tho sum of five hundred and four dollars ($504).”
On or about the 18th day of August, 1914, the now bankrupt filled out, signed, and delivered to the objecting creditor, Morris & Co., a written statement as to his resources and liabilities, of which the following is a copy:
*250 “Aug. 18, 1914.
“Messrs. Morris & Company, Syracuse, N. Y. — Gentlemen: For the purpose of obtaining credit with, you for merchandise which I (we) may now or hereafter purchase of you, and for the purpose of securing an extension of time for the payment of purchases heretofore made, I (we) make the following true and complete statement of my (our) resources and liabilities:
“I (we) conduct a Meat Market
“I (we) keep the following books of account in. my (our) business: Cash book; McCaskey System of bills.
“The firm is composed of D. B. Smith’s estate and Benton D. Smith
“I am (we are) at present located at Tully, N. Y.
“My (our) stock and fixtures are insured for $1,000.00 in Niagara Insurance Company; other property is insured for $1,200.00 in Niagara Insurance Company.
“The above statement, printed and written, is true and correct in every particular, and you may rely upon it as a continuing basis for both present and future credit dealings with me (us), unless and until I (we) hereafter from time to time advise you in writing of any change therein at the time such-changes occur.
“Yours truly, Benton D. Smith..
“Composing the Firm of D. B. Smith & Son.
‘Witnessed by: T. J. Carey.’
The evidence shows, and the special master finds, that at the time the bankrupt made the written statement upon which he obtained credit he was owing other parties as follows: Armour & Co., $144.35; the Cortland Beef Company, about $100; the Bank of Cincinnatus, $129; one A. T. Smith, $57.34; the estate of D. B. Smith, $2,000; and to his wife, $375 — or in all, $2,805.69, unsecured indebtedness. In addition to this he owed a mortgage on his real estate of $1,200. As to this failure of the bankrupt to include in the statement referred to the liabilities referred to the special master says :
“The bankrupt’s testimony in an attempted explanation, of bis omission of the unstated liabilities is unsatisfactory. It discloses great carelessness, amounting to recklessness, and is sometimes contradictory. The representatives of Morris & Co., of Armour, and other adverse witnesses upon the whole commended themselves to me as being reliable and careful concerning their testimony.”
The special master finds that the only real estate the bankrupt ever owned was the parcel mentioned in the financial statement and therein valued at $600, and also finds and reports that it was incumbered by a mortgage of $1,200. The real estate had been recently purchased for $1,525. if the bankrupt in his statement intended to give the value of his equity in the real estate, as he probably did, he had no warrant for placing it above $325. In August or September the bankrupt conveyed
The attorney for the bankrupt contends, among other things, that the misrepresentations in the financial statement referred to consist of omissions, rather than assertions; that is, that there are blanks not filled out, and that these omissions cannot be the basis of a finding that the bankrupt willfully and intentionally made a false statement as tO' his assets and liabilities. But suppose the bankrupt had made no mention, opposite the blanks for stating his liabilities, of the amount of his liabilities — that is, had inserted np figures whatever, and his liabilities in fact had been $2,000, or $4,000 — would not this have been a materially false statement in writing? Would it not have been a representation that he was not owing anything ? He must have known, and he did know, as the special master finds, substantially what his liabilities were, and he deliberately omitted the amount; that is, he did not insert the amount of certain indebtedness opposite the words printed in such statement for the purpose of having such indebtedness, if any, appear. Here by omissions in the statement in writing he willfully and intentionally concealed the greater portion of his indebtedness by failing to state the truth when called upon to do so. In effect he rep1 resented that the other indebtedness mentioned did not exist, when he knew it did exist. In the statement at the foot of the column showing resources the.statement says, “Total resources, $4,190.00.” And at the foot of the column headed liabilities we find, “Total liabilities, $461.-00.” What is this but a statement in writing that his total resources are $4,190, and-that his total liabilities are $461?
The statement was knowingly made, intelligently made, purposely made, for the purpose of obtaining credit, and was materially false, for the reason that it concealed from the creditors extending the credit indebtedness amounting to $2,805.69, or about seven times as much as the liabilities disclosed in the statement. It is inconceivable that this bankrupt, in filling out this statement for the purpose of obtaining credit, inadvertently omitted to include a. statement of his indebtedness which was omitted. If a few items of small amount had been omitted, we might say with reason that the omission was accidental; that is, that the existence of the indebtedness was not present in the mind of the bankrupt at the time he made the statement. But when we come to a statement in writing wherein the bankrupt deliberately foots up and writes in his “total liabilities” as “$461.00,” when in fact to .his knowledge his total liabilities are $3,266.69, and this is accompanied by an exaggeration of the valuation of his resources, so as to make it appear to the party extending the credit that he has resources in excess of his liabilities amounting to some $3,500 when in point of fact his liabilities are equal to, if not in excess of, his resources at the time the statement was made, we have a case where the omissions cannot be attributed to inadvertence or failure of memory.
By section 14b of the Bankruptcy Act it is provided:
“The judge shall hear the application for a discharge and such proofs and pleas as may be made in opposition thereto by the trustee or other parties in interest, at such time as will give the trustee or parties in interest a reason*253 able opportunity to be fully beard, and investigate the merits of tbe application and discharge tbe applicant unless he has * * * (3) obtained money or property on credit upon a materially false statement in writing, made by him to any person or representative for tbe purppse of obtaining credit from such person.” Comp. St. 1913, § 9598.
It is evident here that Smith, the bankrupt, obtained credit of Morris & Co. on a statement in “writing made by him to” Morris & Co., or to the representatives of that company acting in the matter, and which written statement was made for the express purpose of obtaining credit from Morris & Co. for the goods sold and delivered. The statements actually made therein were material. The omissions from the statement were material, and, assuming that the written statement is equivalent to a representation that Smith owed no debts of a material amount other than those set forth in the statement, it was “a materially false statement in writing.” Smith was called upon to state to the best of his ability all of his liabilities and their amount. He stated that he was owing Morris & Co. for merchandise not due $227, and that he was owing Morris & Co. for merchandise past due S234. He was called upon by the blank placed before him, and which he was to answer, to state what he owed on notes, what he owed on chattel mortgages, what he owed to banks, what he owed on judgments, what he owed for wages, what he owed to- relatives or others, what he owed by way of mortgage on real estate, and what he owed to others for merchandise, borrowed money or otherwise. Take, for instance, the printing under liabilities, “Owe on notes.” This was in the nature of a question whether or not he owed anything on notes, and by leaving the space opposite this under the head of “Dollars Cents” blank Smith represented that he owed nothing on notes. He was under obligation to disclose the truth, and was called upon to disclose the truth.
My attention is called to International Harvester Co. of America v. Carlson (C. C. A. 8th circuit) 217 Fed. 736, 133 C. C. A. 430, 33 Am. Bankr. Rep. 178, where it is held that the words “material statement” mean, not a blank, nor an inference from a blank, but a direct statement, either positive or negative, which is false. Conceding that that case was correctly decided on the facts there appearing, and that “material statement” (in writing) is not a blank, nor an inference from a blank, and no one ever supposed it was, in the case at bar we
In my judgment a person makes a willfully false statement when he represents and states in writing, for the purpose of obtaining credit and property, that he has money in bank, when he has drawn and delivered checks which, when presented and paid, will exhaust' such credit, and he knows the fact, and does not disclose that he has drawn and delivered such checks. This court cannot put its seal of approval on such statements and transactions and characterize them as other than willfully false.. The credit is on the books of the bank at the time, but the person making the statement knows that in equity and justice he has transferred it to another. The bankruptcy act was not intended to sanction and permit and condone that species of false statements in writing. It was intended to cover, and in my judgment does cover, them.
The referee, acting as special master, heard the bankrupt and all the witnesses, and has given the matter careful consideration. On going over, the evidence, I arrive at the same conclusion as did the special master, and his report is approved, and there will be an order accordingly, confirming same and denying a discharge.