In re Licht, 17979.

• Decision Date: 10 December 1930
• Docket Number: No. 17979.,17979.
• Citation: 45 F.2d 844
• Parties: In re LICHT.
• Court: U.S. District Court — Eastern District of New York

45 F.2d 844 (1930)

In re LICHT.

No. 17979.

District Court, E. D. New York.

December 10, 1930.

H. & J. J. Lesser, of New York City (Jacob J. Lesser, of New York City, of counsel), for bankrupt.

Samuel B. & Bernard Pollak, of New York City (Julius Davison, of New York City, of counsel), for Magoba Const. Co., Inc.

Yankauer Davidson & Mann, of New York City, for Clarence G. Bachrach and Irving Trust Co.

BYERS, District Judge.

Hearing on exceptions to specifications of objections to discharge of the above-named bankrupt.

Irving Trust Company and Clarence G. Bachrach, trustees of the above-named bankrupt, and Magoba Construction Company, Inc., a creditor, have filed identical specifications in opposition to the discharge of this bankrupt; and the fifth specification only is challenged as being insufficient in law, on the face thereof. It may be paraphrased as follows:

That the bankrupt obtained money and property on credit by making and publishing written, materially false statements respecting his financial condition; and that he was the president and sole stockholder of the corporation known as H. Licht, Inc., in which he had an exclusive pecuniary interest, and from which corporation he withdrew substantial funds, and at all times used the funds of the corporation for his own private uses and purposes, and used the corporation as a cloak and guise for his own individual transactions.

That an allegedly false statement was issued by him in March, 1929, and purported to set forth the financial condition of the corporation, and was issued to a mercantile agency and to another corporation for the purpose of obtaining merchandise on credit from subscribers to the mercantile agency and from the corporation in question.

The statement is said to have been false in that it set forth a net worth on the part of the corporation of above $400,000, whereas there was an actual deficit of substantially that same amount; further that, by virtue of said false statement, "the bankrupt obtained merchandise and property" from the said corporation and from subscribers to the mercantile agency, of the value of over $10,000, "all of which property was sold on credit by said above-mentioned concerns in reliance upon said materially false financial statement."

The bankrupt has, in effect, demurred to the foregoing specification, whereby the truth of the allegations must be taken to have been admitted, for the purposes of this motion.

Section 14b of the Bankruptcy Act, as amended in 1926, provides that, where the bankrupt has "(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), the discharge may not be had.

The argument on behalf of the bankrupt is that the fifth specification is insufficient because there is no allegation therein that the merchandise and property which were obtained upon the financial statement referred to passed to the bankrupt individually, and that there is no allegation that the bankrupt unlawfully used the property or funds of the corporation.

It will be observed that the specification, in terms, asserts that, by virtue of the said statement, the bankrupt obtained the merchandise and property in question.

This would seem to be a clear allegation respecting the receipt by the bankrupt, in his individual capacity, of the said merchandise and property, and thus to meet the criticism advanced on the bankrupt's behalf.

The argument then proceeds upon the theory that the bankrupt's discharge may not be denied because he is said to have made a false financial statement concerning the affairs of the corporation in which he had...