In re Slohm, 21790

• Decision Date: 12 March 1935
• Docket Number: 21791.,No. 21790,21790
• Parties: In re SLOHM (two cases).
• Court: U.S. District Court — Western District of New York

10 F. Supp. 351

In re SLOHM (two cases).^*

Nos. 21790, 21791.

District Court, W. D. New York.

March 12, 1935.

LeRoy Stein, of Elmira, N. Y., for bankrupt.

Henry & Denton, of Elmira, N. Y., for objecting creditor.

KNIGHT, District Judge.

Objections to the discharge of the above-named bankrupts were filed by the First National Bank & Trust Company of Elmira, N. Y. Two grounds of objection, the second applying only to Isaac H. Slohm, Jr., were stated, namely: 1. That subsequent to the first day of the four months immediately preceding the filing of the bankruptcy petition herein, and with intent to hinder, delay, and defraud their creditors, the bankrupts transferred, removed, and concealed and permitted to be removed and concealed certain of their property, to wit, their interest in a partnership firm known as Select Arts Studios; and 2, that on or about the 31st day of January, 1932, for the purpose of obtaining credit from the above-mentioned creditor, the bankrupt Isaac Slohm made and delivered to the creditor a statement in writing, signed by him, of his financial condition; that this creditor, relying on said statement, extended additional credit and advanced money to said bankrupt; that said statement was materially false.

The referee has found, with respect to the first objection, that the bankrupts were not guilty of any intent to hinder, delay, or defraud their creditors, and that there was no such removal, concealment, or transfer of property as under the act (section 14 11 USCA § 32) to bar their discharge. The bankrupts and Mrs. Slohm's sister and brother-in-law were partners in the Select Arts Studio, a card business, which at the time of bankruptcy was indebted substantially beyond the value of its assets. However, within four months prior to the filing of their petitions, bankrupts secured the sum of $100 for the surrender of their interest in the business. The objecting creditor was advised of the sale prior to its consummation, and shortly after the sale the transfer was recorded in the office of the clerk of the county of Chemung. The trustee made no effort to set aside the transfer. There is nothing in this transaction to suggest that the bankrupts transferred property of great value in lieu of small payment. In fact, it appears that they received for their interest considerably more than its book value. Had the interest of the bankrupts in the partnership come into the hands of the trustee, it is exceedingly unlikely that anything could have been realized from it. It is impossible to find in this transfer any intent to defraud creditors, and the decision of the referee thereon is approved. This being the only objection to the discharge of Mamie Baker Slohm, her discharge is granted.

The statement of Isaac Slohm is alleged to be false in two respects. The first of these is the item of accounts payable, set forth in the amount of $6,874.71. The books of the bankrupt contain a balance sheet showing accounts payable in the amount of $16,165.08. Bankrupt explains this discrepancy by stating that $4,248.52 was deducted from the aforesaid amount because it was owing to the wife, and it was thought that it would never have to be repaid. The sum of $2,701.81, owing to bankrupt's son, was deducted for the same reason. It should be noted, however, that an entry of $714.72 back interest was made on the account shortly prior to the filing of the petition, and a claim, upon which a dividend was paid, was filed on behalf of the son. It thus appears that, both before and after the making of this statement, the bankrupt considered the account as payable. The deduction of the amount owing to the wife was improper despite the testimony that bankrupt and his wife no longer considered it an account payable but had merely neglected to charge it off on the books. In re Rosenfield (D. C.) 1 F. Supp. 924; Josephs v. Powell & Campbell (C. C. A.) 213 F. 627; In re Miller (D. C.) 192 F. 730. The omission of these liabilities from the statement was clearly material. The deduction of $2,340.04 which Mrs. Slohm testified was erroneously included in the total of accounts payable in the balance sheet is satisfactorily explained by her testimony, and was entirely proper. The largest item was an account in favor of Stern, Slohm & Baker, which apparently resulted from withdrawal of funds invested in Stern, Slohm & Baker, and consequently no repayment was necessary.

The other item cited as false is the entry of "Paid in Life Insurance $10,675.00." Bankrupt testified that this item was intended to show premiums paid and not the cash surrender value. In fact, he stated that he did not know that there was any paid-in value. Bankrupt included it in the statement because he wanted to show where the money went to. No other items were included in the statement, however, to indicate how the balance of his income was spent. The cash surrender value of the policies was approximately $2,000.

The referee has found that the statement as to life insurance is immaterial,...