In re Cox

• Decision Date: 25 August 1965
• Docket Number: No. 2296.,2296.
• Citation: 244 F. Supp. 430
• Parties: In the Matter of Clarence Christman COX, Bankrupt.
• Court: U.S. District Court — Western District of Missouri

244 F. Supp. 430

In the Matter of Clarence Christman COX, Bankrupt.

No. 2296.

United States District Court W. D. Missouri, Central Division.

August 25, 1965.

Don C. Carter, Sturgeon, Mo., for bankrupt.

Irving Achtenberg, Kansas City, Mo., Carroll N. Bryson, Centralia, Mo., Roger D. Hines, Columbia, Mo., for trustee and creditors.

JOHN W. OLIVER, District Judge.

The Referee's Certificate covers two petitions for review filed in the above case. In the first petition, the bankrupt seeks a review of that portion of the Referee's order of September 25, 1964 that sustained Specification 7 of the objections to discharge filed by The First National Bank of Centralia, Missouri.

The Trustee's petition seeks a review of that portion of the Referee's order that overruled the Trustee's objections to discharge. In its brief in this Court, the Trustee states that he is "content so long as any one specification filed by either the Trustee or the First National Bank of Centralia is sustained and the discharge denied."

Counsel for all parties expressly waived a further hearing in this Court and agreed that we should rule this case on the record made before the Referee. Our study of that record convinced us that there is no reason to require, on our own motion, further evidence pursuant to the power vested by General Order in Bankruptcy No. 47.

Because we shall determine that the findings of fact made by the Referee are not clearly erroneous, and because we shall also determine that the Referee properly applied the law, all to the end that the Referee's order will be adopted, it will not be necessary to rule the Trustee's petition for review.

The Referee's finding of fact and conclusions of law were carefully and fully set forth in a 46 page memorandum opinion. In regard to Specification 7 of the objections filed by The First National Bank of Centralia, the Referee stated:

In specification 7 of the Objections to Discharge filed by the First National Bank, Centralia, Missouri, it is alleged that "bankrupt has failed to list the names, addresses and amounts due and owing all of his creditors; that, on the contrary, he has failed to list a number of his creditors, among them the Hallsville State Bank on a promissory note in the amount of $2,300.00 executed on or about January 31, 1961."

After directing attention to Section 7, sub. a(8) and Section 14, sub. c(1) of the Bankruptcy Act, the Referee set forth the oath sworn to by the bankrupt in regard to Schedule A, the schedule in which a "Statement of All debts of Bankrupt" was required by law. The Referee then stated:

Nowhere in this Schedule A is the Hallsville State Bank listed as a creditor. Further, there is no reference to the bank in any of bankrupt's schedules, petition in bankruptcy or statement of affairs, except that it is named, in answer to Question 7a of the Statement of Affairs, as a bank in which bankrupt and his wife, Hattie J. Cox, maintained a joint account within the 2-year period preceding bankruptcy.

The failure to list or schedule all creditors, if knowingly and fraudulently done, is grounds for denying a discharge under Sec. 14, sub. c(1), supra. Stim v. Simon, (2 Cir., 1960) 284 F.2d 58; In re Schnabel, (D.C.Minn.1945) 61 F.Supp. 386; see also Jackson v. Menick, (9 Cir. 1959) 271 F.2d 806; In re Haydu, (D.C.N.Y.1952) 105 F.Supp. 859.

The following findings of fact were made by the Referee:

The evidence shows, and I find the facts to be:

On February 2, 1961, bankrupt and his wife, Hattie J. Cox, executed and delivered to The State Bank of Hallsville, Hallsville, Missouri, their demand promissory note for $2,300.00, bearing interest at 6% per year (Cred.Exh. 4, Tr. 200, 202; Tr. 106; R. 87). $2,300.00 was due upon the principal amount of the note at bankrupcty. The debt is not scheduled by bankrupt as one of his debts in his Schedule A, filed on March 10, 1961 at the time of the filing of the petition in bankruptcy (Tr. 105; see also Schedule A, Objectors' Exh. 3, R. 23).

This note was executed as the manifestation of a loan from the payee bank so that 9 head of Santa Gertrudis cattle, and 5 of such calves, could be purchased at a foreclosure sale being held on January 30, 1961, by the First National Bank of Mexico (Tr. 22, 23, 104, 105). Previously, these head of cattle and calves had been owned by bankrupt's son, Thomas T. Cox, who had financed the purchase of the Santa Gertrudis herd through the said First National Bank of Mexico, bankrupt having executed with his son a $10,000.00 note as a manifestation of that cattle loan (Tr. 22, 23,

85, 104, 125; R. 61-66, 95, 96, 103, 104).

Bankrupt made no claim of interest in these cattle testifying at the first meeting of creditors that his wife owned the cattle (Tr. 8, 21). To purchase the cattle, bankrupt's wife drew a check on January 31, 1961, for $2,290.00 on The State Bank of Hallsville (Exh. 11-A; R. 42-44, R. 86, 87), the payment of which was made out of the proceeds of a loan of $2,300.00 made by that bank for that purpose (R. 44, 87; Tr. 105, 106, 114, 132); the note of February 2, 1961, previously referred to is the evidence of that loan (R. 44, 87; Tr. 105, 106, 114, 132). Bankrupt and his wife both signed this note (Cred.Exh. 4, Tr. 200, 202). Since the purchase, the cattle have been feeding on pasture (Tr. 129), Mrs. Cox letting the "cattle pay for themselves" (Tr. 134).

Previous to this transaction, Mrs. Cox did not, during her marriage to the bankrupt, own any cattle except for one milk cow (or maybe two) which she owned from time to time. She brought one to the marriage, and replaced it from time to time as need occasioned. (R. 46; Tr. 121, 122, 125, 134).

After quoting particular testimony, the Referee continued as follows:

Bankrupt and his wife have been married for 43 years (Tr. 128); for the last 7 or 8 years, she's been "a sick woman, and I am not capable of doing anything on the farm" (Tr. 134). She categorized bankrupt as "the manager of the farm" (Tr. 134). She doesn't "know a thing about their business any more on the farm," no longer participates in any of the farming transactions, doesn't purchase crops or pay bills, and has no interest in the farming business except that of a housewife (Tr. 128). She doesn't draw checks for farm transactions (Tr. 129). She didn't know that a new checking account in the State Bank of Hallsville had been opened (Tr. 130) — all she knew was that she borrowed money from the bank to buy the cattle (Tr. 130). She made no claim to any interest in any of the farm equipment (Tr. 130, 131).

The Referee quoted the bankrupt's attempted explanations made of record for his failure to schedule The State Bank of Hallsville as a creditor, and then stated that:

Thus, the evidence clearly shows that bankrupt was indebted at bankruptcy to The State Bank of Hallsville on the note dated February 2, 1961, and that he failed to schedule the liability on his Schedule A. Was the omission knowingly and fraudulently made, or done? I believe that it was.

* * * * * *

The evidence shows that the debt to The State Bank of Hallsville was contracted some one month and ten days prior to bankruptcy; that its manifestation, in the form of the note, was executed only one month and eight days prior thereto; and that, save for the debt described in bankrupt's Schedule A-2 as the debt due Cottle Implement Co., Columbia, Missouri, it is the most newly created of all of bankrupt's liabilities. Further, as previously pointed out, the debt results from a transaction by which 14 head of Santa Gertrudis cattle were purchased prior to bankruptcy, either by bankrupt, or his wife, under circumstances which warrant a painstaking and thorough inquiry by bankrupt's creditors (or the trustee in bankruptcy in their stead) into the question of the exact nature of bankrupt's interest in those cattle. Bankrupt, and his wife, too, would have a trier of fact believe that the wife purchased those cattle, although by her own testimony her illness has prevented her taking any active interest in the farm's management or operation within the seven or eight years prior to bankruptcy, and although she had never purchased cattle theretofore, even while hale and healthy, save for one-or-two milk cows which she owned from time to time during the marriage.

I believe that bankrupt failed to schedule the debt to the bank to prevent, or obstruct, an inquiry by his creditors and the court into the cattle transaction; this, I think, is the only fair inference to be drawn from all of the evidence. True, he did not succeed; nor did the bankrupt in the Aronofsky Aronofsky v. Bostian case, supra, 133 F.2d 290; as did not the bankrupt in the Willoughby Willoughby v. Jamison case, supra 103 F.2d 821.

Bankrupt, when asked several times why the debt was not scheduled, either didn't know why it wasn't listed, or said it wasn't because his wife owed the money and that there wasn't any equity in the cattle. These purported explanations are none at all. And, bankrupt's failure to schedule the debt in his Schedule A, which is verified, constitutes under the circumstances, in my opinion, the making knowingly and fraudulently of a false oath in or in relation to a bankruptcy proceeding. See also Stim v. Simon, supra (284 F.2d 58), and Jackson v. Menick, supra, (271 F.2d 806).

Accordingly, Specification 7 of the Objections To Discharge filed by The First National Bank, Centralia, Missouri, is to be sustained by the order being prepared this date for filing and therefore, bankrupt's discharge will be denied.

In this Court the bankrupt argues that "the meager evidence" in this case is insufficient "to prove any offense committed by the bankrupt." The bankrupt also argues that "the evidence showed conclusively that he the bankrupt had no reason whatsoever to have omitted the Bank of Hallsville as a creditor in his Schedules * * *". Those arguments, of course, are made on the faulty assumption that it is our duty to try this...