Jackson v. Menick, 16314.

• Decision Date: 09 November 1959
• Docket Number: No. 16314.,16314.
• Citation: 271 F.2d 806
• Parties: In the Matter of Cecil M. JACKSON, Bankrupt, Appellant, v. A. S. MENICK, Trustee in bankruptcy of Cecil M. Jackson, bankrupt, Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

271 F.2d 806 (1959)

In the Matter of Cecil M. JACKSON, Bankrupt, Appellant, v. A. S. MENICK, Trustee in bankruptcy of Cecil M. Jackson, bankrupt, Appellee.

No. 16314.

United States Court of Appeals Ninth Circuit.

November 9, 1959.

Irving Sulmeyer, Los Angeles, Cal., for appellant.

Craig, Weller & Laugharn, Hubert F. Laugharn, Frank C. Weller, Thomas S. Tobin, Andrew F. Leoni, Los Angeles, Cal., for appellee.

Before STEPHENS, CHAMBERS and MARIS, Circuit Judges.

STEPHENS, Circuit Judge.

The appellant Jackson has been denied a discharge in bankruptcy pursuant to Title 11 U.S.C.A. § 32, sub. c, for the following reasons: (1) He obtained property on credit from the Union Hardware & Metal Co. by submitting a false financial statement on April 25, 1952; (2) He obtained a loan from the Security First National Bank of Los Angeles by submitting a false financial statement on October 31, 1955; (3) He failed to satisfactorily explain the diminution of his assets; and (4) He swore to a false oath in filing his statement of unsecured debts. The order of the referee denying discharge was affirmed by the District Court, and Jackson has appealed. Two other objections to discharge, — that he failed to keep adequate records of his financial condition, and concealed secret records, — have been decided in his favor, and are not before us.

The financial statement given to the Union Hardware & Metal Co. in April, 1952, showed a net worth of $39,241.44. This favorable picture was produced by omitting all "personal" liabilities, that is, debts which had not been secured by his business, Jackson's Toy Shop. Jackson testified that at that time, these undisclosed liabilities exceeded his net worth, and that he had been losing money since 1950. What his exact position was is not now known.

The statement was prepared by a CPA, who testified that the personal liabilities were omitted on his responsibility. Jackson said that he did not remember checking the statement, and that he relied completely on his accountant. He thus seeks to show that any deception practiced was innocent, and that he did not intentionally deceive the Union Hardware Co.

The accountant even argued that the statement was true and correct, because it did not purport to be a complete financial picture, but only the "Property Statement of Cecil M. Jackson, dba Jackson's Toy Shop." He said that this type of statement was often used, because such personal assets and liabilities as utility bills, household furniture, cash in your pocket, etc., were only a nuisance to all concerned.

It may be customary in arriving at a present worth figure to omit relatively small current expenses, but these personal liabilities here omitted, were substantial and exceeded the bankrupt's net worth. The business involved was a sole proprietorship. The critical statement was prepared for and was used as a basis for the obtaining of credit, and the statement contained the following: "Notes or debts payable to others (including relatives or friends) — none." No other conclusion was possible but that the statement was intentionally false.

The financial statement given to the Security First National Bank on October 31, 1955, showed a net worth of $71,076.00, although actually Jackson was further in debt then, than when he submitted the statement to the Union Hardware Co. He had no net worth whatever. The deception was again produced by omitting all "personal" liabilities, and more since he omitted the mention of a $12,000 note to the Union Hardware Co., for past due merchandise accounts. His position at that time was so shaky that he had to pay his bills with cash or cashier's checks. He claims that the bank did not rely on the financial statement, but...