Katzenstein v. Reid, Murdock & Co.

• Decision Date: 06 December 1905
• Citation: Katzenstein v. Reid, Murdock & Co., 91 S.W. 360, 41 Tex.Civ.App. 106 (Tex. App. 1905)
• Parties: KATZENSTEIN v. REID, MURDOCK & CO.<SMALL><SUP>*</SUP></SMALL>
• Court: Texas Court of Appeals

91 S.W. 360

KATZENSTEIN v.REID, MURDOCK & CO.^*

Court of Civil Appeals of Texas.

December 6, 1905.

Rehearing Denied January 3, 1906.

Appeal from District Court, Bexar County; A. W. Seeligson, Judge.

Action by Reid, Murdock & Co. against Sol.Katzenstein.From a judgment for plaintiffs, defendant appeals.Affirmed.

Clark & Davis, for appellant.Keller & Keller, for appellees.

FLY, J.

This is a suit by appellees against appellant, instituted to recover a balance of $1,038.68 due on an account for merchandise sold by appellees to appellant.It was alleged in the petition that from September, 1903, and up to and including November 27, 1903, appellant was insolvent, and that, while so insolvent, he falsely represented to appellees, and to certain mercantile agencies, that he was solvent and had assets largely in excess of his debts and liabilities, and that appellees, relying on such representations, were thereby induced to sell appellant the merchandise itemized in the account; that the false and fraudulent representations were made with the secret, fraudulent intent to obtain the goods from appellees, and then to never pay for the same; that on November 27, 1903, appellant filed his petition in the District Court of the United States for the Western District of Texas, praying that he might be adjudged a bankrupt; that appellees immediately filed a suit in said federal court, praying that said sale be rescinded, and that said goods be adjudged to be the property of appellees; that said decree was rendered, but only a portion of the goods could be found, those not found being of the value of $1,153.97; that said claim was allowed by the referee in bankruptcy, and the sum of $115.29 was paid thereon; that appellees filed general and special exceptions, and pleaded in bar of the suit that appellees had propounded their claim in the bankrupt court, and the same was allowed and approved and part of it paid, and that appellant, having thereafter been discharged, was thereby relieved from all liability to all of his creditors, among the number being appellees; that when the goods were purchased on or about March 1, 1903, appellant was wholly solvent and able to pay all his debts; and that at the time appellant made the statement to the commercial agencies he was solvent.A jury was waived, and the court rendered judgment in favor of appellees for $1,055.90.

It was shown that appellees are merchants in the city of Chicago, and in January, 1903, opened an account with appellant; his first order being dated January 20, 1903, and the last about November 13, 1903.When the first order was received, appellees applied to Bradstreet Commercial Agency, and the Commercial Agency of R. G. Dun & Co., for detailed reports as to the financial standing of appellant, and on January 23, 1903, received reports from the agencies, and another from the Bradstreet Agency on September 8, 1903.In the report of Dun & Co. was a signed statement of appellant as follows: "Total assets $21,930, total liabilities $10,500, leaving a net worth of $11,430."In the statement made to the Bradstreet Companyappellant represented that his gross assets were $22,430, total liabilities $10,500, and net worth $11,930.Relying on those statements, appellees extended to him credit for the goods for whose value this suit was instituted, as well as other goods.Early in November appellees endeavored to obtain a statement as to appellant's financial condition from appellant, who failed to give the same, but even as late as November 14, 1903, not more that two weeks before he, on his voluntary application, was adjudged a bankrupt, was endeavoring to obtain more merchandise from appellees.Appellant did not give a true statement of his assets and liabilities to the mercantile agencies.He admitted owing at least $10,000, which was not included in his list of liabilities.Only a few days before appellant stated to the mercantile agencies that his total liabilities were $10,500 he swore that they were $20,690.26, being $500 in excess of the assets as sworn to by him; and we conclude that appellant knew at the time he made the statement to the mercantile agencies that his liabilities exceeded his assets.

It is provided in section 14 of the bankruptcy act (ActJuly 1, 1898, c. 541, 30 Stat. 550 [U. S. Comp. St. 1901, p. 3427]), as amended by the act of Congress of February 5, 1903, c. 487,32 Stat. 797[U. S. Comp. St. Supp.1905, p. 684], that an application for the discharge of a bankrupt shall be granted, unless he has done certain things; the third being: "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."In section 17 of the bankruptcy act (30 Stat. 550[U. S. Comp. St.1901, p. 3428]), as amended by the Act of February 5, 1903(32 Stat. 798[U. S. Comp. St. Supp.1905, p. 684]), it is provided: "A discharge in bankruptcy shall release a bankrupt from all of his provable debts except such as * * * (2) are liabilities for obtaining property by false pretenses or false representations," etc.These two sections should undoubtedly be construed together, as argued by appellant, and, following that plan of construction, we arrive at the conclusion that the two sections are perfectly harmonious;section 14 providing for the discharge of a bankrupt, unless it should appear that certain acts have been done by him, and section 17 setting forth the debts from which the bankrupt shall be released by such discharge.Each bears upon a different subject; the one relating to the discharge, the other to the debts from which such discharge will relieve the debtor.The matters and things which will prevent a discharge in bankruptcy are different from those set out in the section which will not relieve from liability in case there is a discharge of the bankrupt.The bankrupt may be discharged and still be held liable for the classes of debts mentioned in amended section 17 of the act of 1903; and in seeking to hold a party liable, who has been discharged in bankruptcy, the ground for such liability must be found in section 17, and not in section 14, which enumerates grounds upon which a discharge shall be refused.Brandenburg, Bankr.p. 275;In re Lewensohn (D. C.)99 Fed. 73;In re Rhutassel (D. C.)96 Fed. 597;Forsyth v. Vehmeyer, 177 U. S. 177, 20 Sup. Ct. 623, 44 L. Ed. 723;Bullis v. O'Beirne, 195 U. S. 606, 25 Sup. Ct. 118, 49 L. Ed. 340;In re Steed (D. C.)107 Fed. 685.

There is no requirement in amended section 17 as to the manner in which the false pretenses or false representations shall be conveyed to the defrauded party, and we do not believe that the national Legislature intended that a requirement that such pretenses or representations should be in writing should be read from section 14 into section 17.In the first section it is provided that the bankrupt shall not be discharged if he has obtained property on credit upon a materially false statement in writing made to the person defrauded for the purpose of obtaining such property on credit; but in section 17 it provides that such discharge will not release the bankrupt from liabilities for obtaining property under false pretenses.The two provisions are not antagonistic, and there is no warrant for reading one into the other.In all the cases coming under our...