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IN RE SUGARMAN

March 10, 1933

In re SUGARMAN


The opinion of the court was delivered by: CAMPBELL

CAMPBELL, District Judge.

This is a motion to confirm the report of the referee, which sustained the first and second specifications of objection to the discharge of the bankrupt, and recommended that the bankrupt be refused a discharge.

The first specification of objection charged that the bankrupt made a false statement in writing to the Reliance Investment Corporation, for the purpose of obtaining credit, and obtained credit thereon.

 The second specification of objection charged that the bankrupt, in the course of proceedings in bankruptcy of the Sugarman's Department Store, Inc., of which corporation this bankrupt was secretary and treasurer, refused to answer material questions approved by the court, on the ground that the answer thereto might tend to incriminate him, in examinations held before Louis R. Bick, Esq., special commissioner, and Edward C. McDonald, Esq., referee, both duly and properly appointed by this court to hear testimony in the aforesaid bankruptcy proceedings.

 There were three other specifications which it is unnecessary to further consider as the referee recommended the dismissal thereof, and no question was raised on the argument of the motion to confirm as to the referee's recommendation as to them.

 The specifications of objections to the bankrupt's discharge were referred to the referee, and hearings were had before him on the said specifications.

 This discharge is sought in the proceeding in bankruptcy of Henry Sugarman, individually, which was a separate and distinct proceeding from that in bankruptcy of the corporation, Sugarman's Department Store, Inc.

 On the first specification, however, that is not of great moment in so far as the question of the financial statement is concerned, as the bankrupt Henry Sugarman said the statement in question was given by him before the corporation was fully organized, and was of his own and the corporation's assets and liabilities, and although apparently the credit was given to him, it would probably be sufficient to show that the credit was obtained by the bankrupt corporation, Sugarman's Department Store, Inc., in which the bankrupt owned a half interest. In re Dresser & Co. (D.C.) 144 F. 318, affirmed (C.C.A.) 145 F. 1021.

 The first specification of objection is based on section 14b of the Bankruptcy Act as amended, now title 11, § 32(b), United States Code, 11 USCA. § 32(b), so much of which as is necessary for consideration as to this objection reads as follows: "(b) The judge shall hear the application for a discharge and such proofs and pleas as may be made in opposition thereto * * * and investigate the merits of the application and discharge the applicant, unless he has * * * (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."

 Generally, a false statement to obtain credit carries with it the idea of fase pretense, namely, a statement known to be false, made with knowledge of its falsity, which is intended to deceive, and which in fact does deceive, and injury results therefrom. Morris Plan Bank of Richmond, Va. v. Henderson (D.C.) 57 F.2d 326.

 Statement will bar discharge if (a) property was obtained on credit thereby, (b) the statement was materially false, and (c) was made for the purpose of obtaining such property on credit. Morimura, Arai & Co. v. Taback, 279 U.S. 24, 49 S. Ct. 212, 73 L. Ed. 586.

 Ordinarily, the statement would be offered in evidence.

 That, however, was not done on the hearing before the referee on the specifications of objections to bankrupt's discharge in this matter, but I will pass over that, as the bankrupt admitted the making of the statement, the delivering of it to a creditor, and obtaining credit thereon.

 All of this, however, did not prove that the statement was false, which must be shown.

 Whatever evidence the objecting creditor may have had to show that the statement was false, there was no evidence offered on the said hearing or before this court which proves that the statement as a whole or any item thereof was false.

 This objection was properly made by the attorney for the bankrupt on the hearing before the referee, and was renewed on the argument of this motion.

 The only evidence received on the hearing before the referee, and now before the court, are the quotations of the bankrupt's testimony on hearings before the special commissioner and referee in the bankruptcy proceedings of the corporation Sugarman's Department Store, ...


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