Royal Indemnity Co. v. Cooper

• Decision Date: 12 June 1928
• Docket Number: No. 2713.,2713.
• Parties: ROYAL INDEMNITY CO. v. COOPER. In re COOPER.
• Court: U.S. Court of Appeals — Fourth Circuit

26 F.2d 585 (1928)

ROYAL INDEMNITY CO. v. COOPER.

In re COOPER.

No. 2713.

Circuit Court of Appeals, Fourth Circuit.

June 12, 1928.

Isaac C. Wright, of Wilmington, N. C., for appellant.

R. C. Lawrence, of Lumberton, N. C., for appellee.

Before WADDILL, PARKER, and NORTHCOTT, Circuit Judges.

NORTHCOTT, Circuit Judge.

This is an appeal from a decree entered on December 23, 1927, in the District Court of the United States for the Eastern District of North Carolina, granting a discharge to W. B. Cooper, bankrupt, appellee.

There were two grounds of objections to the bankrupt's discharge filed by the appellant, Royal Indemnity Company — the first being that, in obtaining from the said Indemnity Company a bond to secure deposits of the state of North Carolina in the Commercial National Bank of Wilmington, N. C., the bankrupt filed with appellant a statement of his financial condition on January 1, 1922, which statement was untrue and materially false, and that, upon failure of the bank, a recovery of more than $25,000 had been had upon the bond; the second ground of objection being that the bankrupt, subsequent to the filing of his petition in bankruptcy, transferred, removed, destroyed, and concealed his property with intent to hinder, delay, and defraud his creditors.

The court below referred the matter to a special master, to hear the evidence and report his findings and recommendations, upon the bankrupt's petition for discharge and specifications in opposition thereto. Before the special master made his report, the court below sustained a demurrer to the first specification. The special master reported the finding of fact on the second specification in favor of the bankrupt, and recommended that the discharge be granted, which recommendation the court below approved, and a decree was entered to that effect, from which action this appeal was taken.

In sustaining the demurrer to the first specification, the court below cited as authority the case of In re Ford (D. C.) 14 F. (2d) 848, and held that the obtaining of a bond, even by giving an admittedly false statement, did not constitute, under the Bankruptcy Act (11 USCA), a bar to bankrupt's discharge. Attorneys for appellee also rely upon In re Tanner (D. C.) 192 F. 572.

The application for the discharge was passed upon after the passage of the amendment of 1926 to the Bankruptcy Act, section 6 of which amendment reads as follows:

"(3) * * * Obtained money or property on credit, or obtained an extension or renewal of credit, by making or publishing, or causing to be made or published, in any manner whatsoever, a materially false statement in writing respecting his financial condition." 11 USCA § 32 (b), (3).

This court in Lockhart v. Edel et al., 23 F.(2d) 912, held that there is no vested right in the bankrupt to have the application for discharge passed upon as the law was at the time the suit in bankruptcy was started, or at the time of the application for a discharge was made, but that the application should be considered in the light of the law existing at the time of the action of the court in passing on same. We therefore conclude that, under the pleadings in this case, the trial judge erred in sustaining the demurrer.

It is contended on behalf of the bankrupt that the bond was not obtained for himself, but for a bank in which he was a director, and that, therefore, the first specification in opposition to the discharge was not sufficient to bring the objection within the purview of the statute. In the case of Levy v. Industrial Finance Corporation et al., 48 S. Ct. 298, 72 L. Ed. ___ (decided March 5, 1928), Mr. Justice Holmes says:

"A man obtains his end equally when that end is to induce another to lend to his friend and when it is to bring about a loan to himself. It seems to us that it would be a natural use of ordinary English to say that he obtained...