In re Little

• Decision Date: 27 June 1933
• Docket Number: No. 438.,438.
• Parties: In re LITTLE. LITTLE v. COMMERCIAL BILL CORPORATION.
• Court: U.S. Court of Appeals — Second Circuit

65 F.2d 777 (1933)

In re LITTLE.

LITTLE v. COMMERCIAL BILL CORPORATION.

No. 438.

Circuit Court of Appeals, Second Circuit.

June 27, 1933.

Latson & Tamblyn, of New York City, for appellant.

Maxwell M. Schenkel, of New York City (Benjamin K. Mirsky, of New York City, on the brief), for appellee.

Before MANTON, SWAN, and CHASE, Circuit Judges.

SWAN, Circuit Judge.

In opposition to the bankrupt's petition for a discharge, the appellee filed amended specifications of objection predicated upon subdivision 3 of section 14b of the Bankruptcy Act, as amended in 1926, 44 Stat. 663, § 6, 11 USCA § 32 (b), subd. 3. This precludes the granting of a discharge to a bankrupt, if he 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."

The objecting creditor charged that the bankrupt obtained from it a loan of $12,000 by falsely and fraudulently representing in writing that he was the president of a duly organized corporation known as Flatbush School, Inc., which owned certain specified assets and had a surplus of some $60,000, whereas in fact there was no such corporation, it had no assets or surplus, and the bankrupt was not its president.

It may well be doubted whether the specifications were sufficient in law. Taken literally, none of the statements alleged to be false relates to the bankrupt's financial condition, as it clearly must under the terms of the statute. In re Current, 63 F.(2d) 640, 641 (C. C. A. 7); Levy v. Industrial Finance Corp., 276 U. S. 281, 283, 48 S. Ct. 298, 72 L. Ed. 572. Cf. In re Licht, 45 F.(2d) 844 (D. C. S. D. N. Y.); In re Adams, 44 F.(2d) 670 (D. C. N. D. Tex.). But in any event there was no fraud in the respects charged, for the District Court held that the creditor knew before making its loan that Flatbush School, Inc., had not yet been incorporated and that the statement related to assets which the bankrupt proposed to transfer to it as soon as incorporation could be effected. The record amply supports that finding.

A discharge may be denied only upon a ground covered by the specifications of objection. In re Feinsilver, 24 F.(2d) 408 (C. C. A. 2); In re Russell, 52 F.(2d) 749 (D. C. N. H.). Apparently the court below treated Exhibit 1, the "consolidated balance sheet" of the proposed corporation, as being also a financial statement of the bankrupt, and the charge that the corporation did not have the stated surplus as a charge that Little did not. The order appealed from sustains "the specification in the objections that said bankrupt misrepresented his financial condition." Assuming that the specifications may be so construed, we do not find any proof that Exhibit 1 was false and fraudulent.

When the creditor rested, it had attempted to prove only that there was no such corporation as Flatbush School, Inc., and that it had advanced its money in ignorance of such fact. When witnesses for the bankrupt took the stand, it was developed that there were overdue taxes upon land listed in Exhibit 1 and defaults in mortgage interest and amortization instalments. All these liabilities, however, were included in the items of "accounts payable (school)" and "mortgages." The appellee argues vehemently that the failure to classify these arrears separately made the statement fraudulently false. We think not. The statement was prepared by...