In re Slocum, 30.

CourtUnited States Courts of Appeals. United States Court of Appeals (2nd Circuit)
Citation22 F.2d 282
Docket NumberNo. 30.,30.
PartiesIn re SLOCUM. Appeal of LEDERER et al.
Decision Date01 November 1927

Francis B. Wood, of New York City (Isidor Enselman and H. H. Nordlinger, both of New York City, of counsel), for appellants.

Edward K. Nicholson, of Bridgeport, Conn., for bankrupt, appellee.

Before MANTON, L. HAND, and SWAN, Circuit Judges.

SWAN, Circuit Judge.

Section 14 (b) of the Bankruptcy Act (11 USCA § 32) declares that the judge shall investigate the merits of the application and discharge the applicant "unless he has (1) committed an offense punishable by imprisonment as herein provided"; (2) or done certain other things not material to the present controversy. The words descriptive of an offense which will preclude a discharge refer to section 29 (11 USCA § 52). Paragraph (b) of that section provides:

"(b) A person shall be punished, by imprisonment * * * upon conviction of the offense of having knowingly and fraudulently (1) concealed * * *; or (2) made a false oath or account in, or in relation to, any proceeding in bankruptcy. * * *"

The false oath relied upon by the objecting creditors consisted in testimony given by the bankrupt upon his examination before the referee at the first meeting of his creditors. Such examination is a "proceeding in bankruptcy," within the meaning of section 29 (b), and a bankrupt who has knowingly and fraudulently made a false oath respecting a material fact at the first meeting of creditors is not entitled to a discharge. In re Gaylord, 112 F. 668 (C. C. A. 2); In re Zoffer, 211 F. 936 (C. C. A. 2).

Several grounds of objection were specified by the creditors, but only two were sustained by the special master. One of them alleged that the bankrupt had falsely sworn that he had not purchased any shares of National Tin stock from one Lederer; the other that he had falsely sworn that in 1919 he did not receive any salary from the Corbett Company. The master's report stated:

"As to objection (a), I am fully satisfied that the bankrupt did buy National Tin stock from Lederer and gave notes in payment for same, and that this stock, or the major part of it, was afterwards sold. Whether Adelson was the one who really benefited by the transaction, or whether the estate would be any better off if the bankrupt had testified fully, honestly and frankly, I am not prepared to say; but at any rate the trustee and creditors were entitled to the information which I feel sure the bankrupt possessed, but failed to disclose on examination.

"The same is true as to the matter of salary paid by the Corbett Company. * * * And in stock transactions and the Corbett Company salary matters I find that the bankrupt knowingly and fraudulently made a false oath, and rendered a false account in relation to this proceeding, and in my opinion is not entitled to a discharge, and I therefore recommend that his petition for discharge be denied."

The matter having been re-referred to the master to take further testimony, he filed a supplemental report, in which he adhered to his former findings and recommendation. Exceptions to the master's report were sustained by the District Court, and a discharge granted. From the court's opinion it appears that he considered the evidence insufficient to support the finding that the bankrupt had deliberately sworn to an untruth.

We do not think it necessary to recite in extenso the evidence. In brief, it appears with reference to the Tin stock that the bankrupt testified positively that he never purchased any of the stock. Lederer testified positively that the bankrupt and one Adelson came to his office to borrow money; that he refused to lend money, but offered to sell Tin stock on credit, taking their notes for the purchase price; that the bankrupt thereupon wrote out his note for $2,500, which Adelson indorsed, and in exchange for this Lederer gave them a "street certificate" for $2,500 worth of stock; whether Adelson or the bankrupt took possession of the certificate he did not recall; that afterward Adelson brought other similar notes and received other similar certificates. The bankrupt admitted that Lederer received the notes, but offered a different explanation as to when and for what consideration they were given to him. Obviously the master did not credit his explanation.

With respect to the salary matter, there was also a direct conflict of testimony. When the bankrupt was asked if he was sure he never received a salary of any considerable amount from the Corbett Company, he replied, "I know I did not." Mr. Corbett, the secretary and treasurer of the corporation, testified that from about April, 1919, till October or November of the same year, he drew monthly salary checks of $500 to the order of the bankrupt. One such check he remembered handing to him. The others were left in the company's office, with instructions to a clerk to deliver them. The checks were all paid through the bank, and the bank account was balanced. He did not remember how the checks were indorsed. The canceled checks and other records of the corporation had disappeared. The instructions to pay the bankrupt a salary were given the treasurer by the president, Mr. Nixon. It was stipulated that Mr. Nixon, if called, would have testified that he gave the treasurer such instructions, and that the reason for the salary was that they wanted Mr. Slocum to act as a watchdog over Mr. Adelson to keep the expenses down. After Mr. Corbett's testimony was given, the bankrupt testified that he did not recall receiving any such checks.

From the foregoing it is apparent that whether the bankrupt intentionally testified falsely regarding the matters in dispute turns entirely upon the credibility of the witnesses. The special master, who heard them and saw them, is better qualified to determine this issue than is the District Judge, or this court from the printed record. Hence the rule has become established that, when the action of the special master or referee is based upon conflicting testimony which involves the credibility of witnesses, his findings ought to be accepted, unless it appears that he has made a plain mistake; and particularly is this true where the motive and intent of the bankrupt becomes material. Ohio Valley Bank v. Mack, 163 F. 155, 158, 24 L. R. A. (N. S.) 184 (C. C. A. 6); Baker v. Bishop-Babcock-Becker Co., 220 F. 657, 658 (C. C. A. 4); Bank of Commerce v. Matthews, 257 F. 292, 294 (C. C. A. 7); Id.,...

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