In re Sussman

• Decision Date: 30 January 1950
• Citation: 88 F. Supp. 230
• Parties: In re SUSSMAN.
• Court: U.S. District Court — Southern District of New York

88 F. Supp. 230

In re SUSSMAN.

United States District Court S. D. New York.

January 30, 1950.

Herman G. Robbins, Brooklyn, for claimant.

David Haar, New York City, for trustee.

IRVING R. KAUFMAN, District Judge.

This Court has before it the petition of one Morris Klein to review an order made by the Referee in Bankruptcy expunging his amended proof of claim. The petitioner contends that his claim in the sum of $84,414.23 is a provable claim under the Bankruptcy Act, 11 U.S.C.A. § 1 et seq., that the claim had been proven, and, therefore, should not have been disallowed.

The controversy in this case arises from the filing of an amended proof of claim by the said Klein based on "implied contract" on the part of the bankrupt to repay money which Klein advanced to one Cohen.

The basis of Klein's claim is that he had been induced to advance moneys to one Wilfred E. Cohen who was President of Spotlight Productions, Inc. upon false representations made by Cohen to the effect that the Treasury Department of the United States was indebted to Spotlight Productions, Inc. in various sums of money for projection machines sold by Spotlight to the Treasury Department. Klein alleges that, relying upon these representations he advanced to Spotlight Productions, Inc. the sum of $163,584.91 and received from Spotlight Productions, Inc. assignments of the moneys alleged to be due from the Government. It was subsequently learned that no moneys were due from the Government and the assignments were fraudulent. Klein had been repaid the sum of $74,170.68, leaving a balance of $89,414.23, which was the basis of his amended claim.

The crux of Klein's claim against the bankrupt is that Sussman, the bankrupt, "aided and abetted" Cohen and Spotlight Productions, Inc. in obtaining the money from the claimant because, Klein charges, the bankrupt received from Spotlight Productions, Inc. checks issued by the claimant to Spotlight Productions, Inc. totalling $103,424.29, and deposited the same.

A full hearing was had on the objection to Klein's proof of claim before the Referee, at which the claimant, Klein, failed to appear. I have examined the minutes of the hearing before the Referee and cannot find sound ground for the reversal of the Referee's order or logic for the setting aside of his findings and conclusions.

The evidence established that the bankrupt did not know Klein and therefore did not make any representations to Klein. The bankrupt was in the check cashing business and in the course of his business cashed thousands of checks. There was no proof that the bankrupt retained any of the proceeds of the alleged fraud upon Klein by Cohen other than the fees which he obtained for the cashing of Cohen's checks. Indeed, Sussman flatly denied that the proceeds of checks cashed for Cohen remained with him and this denial was not overcome at the hearing by any clear or credible evidence.

While Klein strains to make out a case in implied contract, on the theory that the bankrupt has received money of Klein's which he knows belongs to Klein and therefore has impliedly contracted to repay it, the basis of his claim is nevertheless one for fraud and misrepresentation. His amended proof of claim alleges on the face of it that the bankrupt aided and abetted Cohen and Spotlight Productions, Inc. in obtaining the money from the claimant on false and fraudulent representations. In order to be implicated in aiding and abetting, the bankrupt must have done whatever he is accused of doing with knowledge of the fraud alleged to be perpetrated by Cohen upon Klein and the bankrupt must have known that the moneys were the fruit of the fraud. Proof of such knowledge is completely lacking in the record. A claim for fraud and misrepresentation is based in tort and not in contract. This is not a case where any direct relationship existed between the claimant Klein and the bankrupt Sussman. In fact,...