Parrish v. City Nat. Bank

• Decision Date: 06 May 1929
• Docket Number: No. 8173.,8173.
• Citation: 32 F.2d 982
• Parties: PARRISH v. CITY NAT. BANK OF KEARNEY, NEB.
• Court: U.S. Court of Appeals — Eighth Circuit

32 F.2d 982 (1929)

PARRISH v. CITY NAT. BANK OF KEARNEY, NEB.

No. 8173.

Circuit Court of Appeals, Eighth Circuit.

May 6, 1929.

Arthur G. Abbott, of Grand Island, Neb., for appellant.

John A. Miller, of Kearney, Neb. (E. L. Randall, of Kearney, Neb., on the brief), for appellee.

Before VAN VALKENBURGH and BOOTH, Circuit Judges.

BOOTH, Circuit Judge.

This is an appeal from an order which affirmed the report of the referee in bankruptcy relative to a discharge of the bankrupt, Frank M. Parrish, and denied such discharge. The appellee, hereafter called the bank, was the objecting creditor.

Among the specifications of objections to the discharge of the bankrupt set up by the bank before the referee, the particular one sustained by him was that the bankrupt had obtained from the bank an extension of credit upon a materially false statement in writing, made to the bank by the bankrupt for that purpose.

The relevant statute is section 14b(3) of the Bankruptcy Act. Prior to the amendment of May 27, 1926, the section read as follows:

"(b) The judge shall hear the application for a discharge and such proofs and pleas as may be made in opposition thereto by the trustee or other parties in interest, at such time as will give the trustee or parties in interest a reasonable opportunity to be fully heard, and investigate the merits of the application and discharge the applicant unless he has * * * (3) obtained money or property on credit upon a materially false statement in writing, made by him to any person or his representative for the purpose of obtaining credit from such person."

The amendment made the section read:

"(b) * * * (3) obtained money or property on credit, or obtained an extension or renewal of credit, by making or publishing, or causing to be made or published, in any manner whatsoever, a materially false statement in writing respecting his financial condition." 11 USCA § 32(b)(3).

Among the undisputed facts are the following: October 28, 1919, the bankrupt executed and delivered to the Skinner Packing Company his promissory note for $5,000 due October 28, 1920. October 31, 1919, the bank purchased the note. It was renewed by the bank on November 23, 1920, by a note which fell due May 23, 1921. Other renewal notes followed; the last one being dated November 17, 1923, which was the note filed in the bankruptcy proceedings. Whether in making these renewals the old notes were in all instances surrendered, the record does not show; but it does appear that in one instance at least the old note was surrendered. In connection with the first renewal note dated November 23, 1920, a written property statement was given by the bankrupt to the bank. The statement was signed by the bankrupt and sworn to by him before a notary public. It contained the following:

"From F. M. Parrish, Address Kearney, Nebr., to The City Nat'l Bank of Kearney, Nebr.

"For the purpose of obtaining loans and discounting paper with you, and otherwise procuring credit from time to time, I furnish you with the following statement and information, which is a true and correct statement of my financial condition on November 23, 1920.

"I agree to and will notify you immediately in writing of any materially unfavorable change in my financial condition, and in the absence of such notice, or of a new and full written statement, this may be considered as a continuing statement and substantially correct; and it is hereby expressly agreed that upon application for further credit, this statement shall have the same force and effect as if delivered as an original statement of my financial condition at the time such further credit is requested."

The statement contained a list of assets of various kinds amounting in the aggregate to $31,400, and liabilities consisting of the one note at the appellee bank for $5,000, leaving a net worth of $26,400. This property statement was concededly false in material particulars.

Whether the bank believed the property statement to be true, and relied upon the same in making the extension of credit to the bankrupt are questions upon which the evidence taken before the referee is conflicting. Mr. Morris, one of the witnesses, testified that he was president of the bank at the time the first renewal note was given, November 23, 1920, and granted the extension; that the statement was carefully gone over by Mr. Parrish before it was signed by him; that the witness as president of the bank relied upon the statement in extending the credit and believed that it was full, true, and correct; that he did not learn that the statement was untrue until after the last renewal note was given. On the other hand, Mr. Parrish, the bankrupt, testified that at the time he made the property statement he told Mr. Morris that he had nothing in the way of property; that the property which was listed in the statement was located on a ranch and was owned by his father and Mr. Cool;...