In re Perlmutter

• Decision Date: 30 April 1919
• Citation: 256 F. 862
• Parties: In re PERLMUTTER et al.
• Court: U.S. District Court — District of New Jersey

256 F. 862

In re PERLMUTTER et al.

United States District Court, D. New Jersey.

April 30, 1919

Heyman & Heyman, of Jersey City, N.J., for objecting creditors.

Mark Townsend, Jr., of Jersey City, N.J., for bankrupts.

RELLSTAB District Judge.

The special master, to whom was referred the objections to granting discharges to the individual bankrupts, Joseph Perlmutter and Harry Perlmutter, recommends that the objections be dismissed and the discharges granted. Of the assigned objections to granting the discharges, it is necessary to refer to only two. These are based upon clauses 3 and 4, respectively, of section 14b of the Bankruptcy Act (Act July 1, 1898, c. 541, 30 Stat. 550 (Comp. St. Sec 9598)). The acts enumerated in these clauses, the committing of which works a denial of the bankrupt's discharge, are civil in their nature and do not require for their establishment evidence beyond a reasonable doubt; a clear preponderance of the evidence is sufficient to prove them. United States v. Regan, 232 U.S. 37, 34 Sup.Ct. 213 58 L.Ed. 494; Troeder v. Lorsch (C.C.A. 1) 150 F 710 80 C.C.A. 376, 17 Am.Bankr.Rep. 723; Klein v. Powell (C.C.A. 3) 174 F. 640, 98 C.C.A. 394, 23 Am.Bankr.Rep. 494; Garry v. Jefferson Bank (C.C.A. 5) 186 F. 461, 108 C.C.A. 439, 26 Am.Bankr.Rep. 511; In re Howden (D.C.) 111 F. 723, 7 Am.Bankr.Rep. 191; In re Greenberg (D.C.) 114 F. 773, 8 Am.Bankr.Rep. 94; In re Leslie (D.C.) 119 F. 406, 9 Am.Bankr.Rep. 561; In re Atlas (D.C.) 219 F. 783, 34 Am.Bankr.Rep. 44; In re Brincat (D.C.) 233 F. 811, 37 Am.Bankr.Rep. 587; In re Garrity, 247 F. 310, 159 C.C.A. 404, 40 Am.Bankr.Rep. 664.

As to the objection based on clause 3: It is charged that the bankrupt firm obtained a loan of $5,000 from the New Jersey Title Guarantee & Trust Company upon a materially false statement in writing, dated February 28, 1916, made by Joseph Perlmutter on behalf of such firm, for the purpose of obtaining that money from the Title Company. It is conceded that Joseph Perlmutter, on behalf of the firm, rendered a statement in writing, which was untrue in failing to state the firm's indebtedness to Elizabeth Perlmutter and to Eva Perlmutter, the former the wife of Joseph, and the latter the sister of both Joseph and Harry, Perlmutter. This indebtedness, representing loans made to the firm, aggregated $8,800 principal, besides several years' accrued interest, of which principal there was owing to Joseph's wife $7,000 and to his sister $1,800. On behalf of these bankrupts it is contended that the Title Company did not rely upon the statement in making the loan, and that it was not willfully and knowingly false.

The master did not make any finding as to the first proposition, and as to the second he held that the objecting creditors had not borne the burden of proof cast upon them, and had not proved that the statement was knowingly false.

As to the first of these contentions: It is sufficient to say that the evidence clearly establishes that the Title Company relied upon the statement in making the loan, and that if it had known that the bankrupts owed the sums in question, the loan would not have been made.

As to the second contention: Both partners knew that the firm owed their sister, Eva, and Joseph's wife the sums stated, and that it had paid interest thereon for a number of years. The statement of the firm's financial condition was made for the purpose of securing a loan from the Title Company following an unsuccessful effort by Joseph, on behalf of the firm, to secure a loan of $5,000 from the First National Bank of Jersey City, with whom the firm for many years had done its banking business. This statement was prepared by the firm's bookkeeper at Joseph's request and while the latter was at the office of an attorney at law, to whom he had been referred by an officer of that bank, and whose aid he had solicited in securing the loan after he had made the unsuccessful effort just referred to, and after this attorney had had an interview with an officer of the Title Company. Upon the receipt of such statement, and after talking it over with this attorney, and at the latter's suggestion, the value of the real estate was reduced from $150,000 to $110,000. The statement was thereupon redrawn and signed by Joseph and forwarded by the attorney to the Title Company, who then made the loan in question.

This financial statement expressly distinguishes between the firm's merchandise and loan creditors. As to the former, it gave no names and stated the amount due them in gross; but as to the latter, it gave the names of each, with the amount due them, respectively, and, as noted, it failed to include the names of the sister and Joseph's wife and the amounts due them.

The discharge authorized by the Bankruptcy Act is not for all bankrupts. It is expressly withheld from those whose conduct brings them within the provisions of section 14 of the Bankruptcy Act.

In Gilpin v. Merchants' National Bank (C.C.A. 3) 165 F. 607, 91 C.C.A. 445, 20 L.R.A. (N.S.) 1023, 21 Am.Bankr.Rep. 429, it was held by the Circuit Court of Appeals of this circuit that the word 'false,' used in clause 3 of that section, 'means more than merely erroneous or untrue, being used in its primary legal sense as importing an intention to deceive, and such a statement, in order to constitute a bar to a discharge, must have been knowingly and intentionally untrue. ' This narrower meaning here given to the word 'false' has been uniformly adopted by the federal courts. Of the later cases so holding, I note the following: Aller-Wilmes Jewelry Co. v. Osborn (C.C.A. 8) 231 F. 907, 146 C.C.A. 103, 36 Am.Bankr.Rep. 714; Firestone v. Harvey (C.C.A. 6) 174 F. 574, 98 C.C.A. 420, 23 Am.Bankr.Rep. 468; Doyle v. First National Bank (C.C.A. 4) 231 F. 649, 145 C.C.A. 535, 36 Am.Bankr.Rep. 331; In re Augspurger (D.C.) 181 F. 174, 25 Am.Bankr.Rep. 83; In re Arenson (D.C.) 195 F. 609, 28 Am.Bankr.Rep. 113; In re O'Callaghan (D.C.) 199 F. 662, 29 Am.Bankr.Rep. 304; In re Stafford (D.C.) 226 F. 127, 35 Am.Bankr.Rep. 747; In re Smith (D.C.) 232 F. 248, 37 Am.Bankr.Rep. 230; In re Landersman (D.C.) 239 F. 766, 38 Am.Bankr.Rep. 685.

In the Gilpin Case the bankrupt had signed the statement (a printed blank) before it was filled in, and directed his bookkeeper to complete it and send it to the bank. This the bookkeeper did, indorsing on the filled-in statement the word 'approximate.' There was no evidence that the bankrupt ever saw it after he had signed it in blank, or that he was thereafter interrogated in regard thereto.

It is to be observed that in the Gilpin Case the word 'approximate,' indorsed on the filled-in blank, tended to negative that the statement was intended to be accurate, and further that, unless the bankrupt was to be held responsible for what his bookkeeper did within the scope of his authority and in response to a duty he imposed upon him, the bankrupt could not be held to have issued the statement in the form that it was delivered to the bank. In both of the recited particulars that case differs from the instant one. The Perlmutter statement was signed by Joseph after it was revised by his attorney, with whom he had discussed it, and there was nothing on its face or in the letter transmitting it to the Title Company that would suggest that it was not to be taken as a true statement of the firm's financial condition.

As to the proof of intention: A rational being is presumed to intend the natural and probable consequences of his words and conduct, and Joseph Perlmutter, in issuing the statement, is presumed to have intended the effect it produced upon the Title Company. The latter had a right to assume that the statement was true, and, as it parted with its money on the strength of the statement, the person responsible for the untruth, in the absence of proof showing the contrary, will be presumed to have intended to hide from the lender the firm's true financial condition. In re Goldich (D.C.) 164 F. 882, 21 Am.Bankr.Rep. 249; In re Schachter (D.C.) 170 F. 683, 22 Am.Bankr.Rep. 389; In re Augspurger, supra; In re Miller (D.C.) 192 F. 730, 27 Am.Bankr.Rep. 606; In re Arenson, supra; In re Simon (D.C.) 201 F. 1004, 29 Am.Bankr.Rep. 808; In re Janavitz (C.C.A. 3) 219 F. 876, 135 C.C.A. 546, 34 Am.Bankr.Rep. 105; In re Arnold (D.C.) 228 F. 75, 35 Am.Bankr.Rep. 740; In re Josephson (D.C.) 229 F. 272, 36 Am.Bankr.Rep. 505; In re Landersman, supra; In re Amster (D.C.) 249 F. 256, 41 Am.Bankr.Rep. 249. When the objecting creditors showed that this statement was untrue in a material respect, that the bankrupts had obtained money from the bank on the credit of it, and that its untruthfulness related to a subject within the knowledge of Joseph who gave currency to the untruth, they had made a prima facie case disentitling him to a discharge. Had the proofs closed with this showing of facts, they and the inferences arising therefrom would have necessitated the denying of a discharge to Joseph. Kelly v. Jackson, 31 U.S. (6 Pet.) 622, 8 L.Ed. 523; Lilienthal's Tobacco v. U.S., 97 U.S. 237, 266, 24 L.Ed. 901; In re Greenberg, supra; In re Arenson, supra.

Was this prima facie case displaced or impaired? From the other testimony it appears that these claims of Elizabeth and Eva Perlmutter were of many years' standing; that they had from their beginning been carried as liabilities on the firm's books and the trial balances which were frequently made; but that their names, as creditors, or the amounts due them, were never mentioned in the two financial statements which the firm gave to the Mercantile Agency, and which were signed by Joseph Perlmutter. These mercantile statements were dated, respectively December 31, 1915, and January 1, 1917. Why include the wife and sister, as creditors, in...