J.W. Ould Co. v. Davis

• Decision Date: 02 October 1917
• Docket Number: 1525.
• Parties: J. W. OULD CO. v. DAVIS et al.
• Court: U.S. Court of Appeals — Fourth Circuit

246 F. 228

J. W. OULD CO. v. DAVIS et al.

No. 1525.

United States Court of Appeals, Fourth Circuit.

October 2, 1917

Amonette & Bailey, of Lynchburg, Va., for appellant.

Whittle & Whittle, of Martinsville, Va., for appellees.

Before PRITCHARD, KNAPP, and WOODS, Circuit Judges.

KNAPP Circuit Judge.

The court below granted the bankrupts' application for a discharge, and the objecting creditor appeals. These facts appear: In January, 1915, a representative of R. G. Dun &amp Co., the well-known commercial agency, called upon the bankrupts at their place of business in Martinsville, Va and obtained from R. E. Davis, senior member of the firm, a statement of assets and liabilities according to an inventory taken on the 6th of that month. The referee finds that this statement 'was made, signed, and delivered by that firm as a basis of credit. ' In the following April, some three months later, a traveling salesman of appellant wholesale dealer in dry goods and notions at Lynchburg, Va., sent in an order of the bankrupts for about $150 worth of merchandise. Doubtful about giving them credit, for they had become 'slow,' and the salesman had been instructed not to solicit their trade, the credit manager of appellant applied to Dun & Co. for a report on the firm, and was furnished with a copy of their statement to the agency in the previous January. Relying upon this statement, which showed abundant solvency, the order received from the salesman was filled. The goods were not paid for, and in November of that year the concern was adjudicated bankrupt.

In dealing with the case thus outlined it will be assumed that the statement in question, if made directly to appellant for the purpose of getting property on credit, would bar a discharge because of its material falsity. But the statement was not made to appellant, nor was it procured at the request or with the knowledge of appellant or any other creditor. Neither was it made with any apparent purpose of getting goods on credit from appellant or from any particular dealer. Indeed, the finding that it was made 'as a basis of credit' rests upon nothing that occurred at the time it was obtained, but only on a recital to that effect in the printed form used by the agent who got the statement, and such inference as may be drawn from the fact that Davis presumably knew the nature of the business carried on by Dun & Co. In short, the record presents the typical case of a statement of financial condition made to a commercial agency, not procured at the request of any prospective creditor, or made for the purpose of obtaining credit from any particular dealer, but which statement is afterwards communicated by the agency to an inquiring subscriber, who in reliance thereon gives credit to the person making the same. If a statement so made be materially false, will it serve to prevent a discharge?

The original bankruptcy law of 1898 (section 14b) did not include among the grounds for refusing discharge the obtaining of credit by false representations of solvency. Such a provision was inserted in 1903 in the following language:

'Or (3) obtained property on credit from any person upon a materially false statement in writing made to such person for the purpose of obtaining such property on credit.'

Whether this provision covered general statements to commercial agencies, like the one under review, became the subject of dispute, and the decisions were conflicting. In re Kyte (D.C.) 174 F. 867; In re Russell, 176 F. 253 100 C.C.A. 77; In re Augspurger (D.C.) 181 F. 174; In re Foster (D.C.) 186 F. 254. When the law was up for amendment in 1910, the question of allowing false statements to a commercial agency to be available for opposing discharge was specifically considered by the Congress, with full knowledge of the conflict of judicial opinion respecting the 1903 provision. The House passed a bill which so amended section 14b (3)...