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October 26, 1933


The opinion of the court was delivered by: INCH

INCH, District Judge.

On August 7, 1931, an involuntary petition was filed against the bankrupt and on the 24th day of August, 1931, he was duly adjudicated.

His schedules, filed November 8, 1931, show liabilities: Secured claims $496,783. Unsecured claims $208,424.82. Notes and bills which ought to be paid by other parties $52,945.51. Accommodation paper $202,751.66, making a total of $960,904.99, while his assets are stated as real estate, value unknown, cash on hand none, debts due $85,653.58, stock bonds, etc., value unknown, deposit in bank $76.71, property claimed to be exempt $250, making a total of $85,980.29.

 On or about April 22, 1932, the bankrupt's petition for discharge came before the court and specifications of objections were duly filed by certain bank creditors.

 The trustee of the bankrupt's estate was duly authorized by the creditors to object to the discharge, but, beyond noting his appearance in opposition seems to have relied upon the specifications filed by others.

 The specifications were duly referred to a referee and proof was taken by him. Several witnesses were presented by the banks, including the introduction of documentary evidence. The bankrupt likewise was a witness.

 The learned referee has dismissed the specifications of objection and recommended the bankrupt's discharge.

 Most of the material facts appear not to be disputed.

 In view of the long experience of the referee, I would hesitate to disagree with his conclusions were it not that the consideration of these undisputed facts results, in my opinion, in conclusions contrary to those held by him.

 I need only consider one of the specifications of objection filed by the Underwriters Trust Company.

 This specification is predicated upon section 14b, subdivision 3 of the Bankruptcy Act, as amended in 1926, 44 Stat. 663, § 6, 11 USCA § 32 (b) (3).

 Under this section the bankrupt must be denied his discharge if the evidence shows that he "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." It is also provided under the amended act (section 14b (7), 11 USCA § 32 (b) (7), and pursuant to the proviso therein contained, a creditor has the burden of showing to the satisfaction of the court that "there are reasonable grounds for believing that the bankrupt has committed" this act complained of, and, having done so, "then the burden of proving that he has not committed any of such acts shall be upon the bankrupt." In re Tobias (D.C.) 49 F.2d 651.

 This creditor claims that on February 13, 1931, the bankrupt signed and gave to this bank creditor a written statement, which was materially false, purporting to set forth his assets and liabilities. This statement is as follows:

 FINANCIAL STATEMENT NATHAN STRAUSS February 2, 1931. Assets: Cash in Banks $ 49,500.00 Accounts Receivable 79,300.00 * 74,400 Shares Nathan Strauss, Inc., Stock at $9 $669,600.00 100 Nathan Strauss 6% 10 yr. Con. Bonds 60,000.00 Other Securities 310,500.00 1,040,100.00 Real Estate Equity 1,574,500.00 $2,743,400.00 Liabilities: Notes Payable 59,000.00 Net Worth 2,684,400.00 $2,743,400.00 Real Estate Schedule: Net Equity: 37 Nevins St., Brooklyn, N.Y. 60,000.00 383-385 Bridge St., Brooklyn, N.Y. 50,000.00 455 Atlantic Ave., Brooklyn, N.Y. 25,000.00 524 Carlton Ave., Brooklyn, N.Y. 10,000.00 Flushing Acreage 250,000.00 Elton Ave., Brooklyn, N.Y. 6,000.00 24-165 Puntine St., Jamaica, N.Y. 12,000.00 99 Water Street, Stapleton, S.I. 45,000.00 114-10 Liberty Ave., Richmond Hill, N.Y. 15,000.00 3 1/4 acres, Flushing, N.Y. 10,000.00 228 Livingston St., Brooklyn, N.Y. 45,000.00 119 Willoughby St., Brooklyn, N.Y. 15,000.00 189 Duffield St., Brooklyn, N.Y. 12,000.00 191 Duffield St., Brooklyn, N.Y. 7,500.00 626-628 Pacific St., Brooklyn, N.Y. 30,000.00 79 Bond St., Brooklyn, N.Y. 12,000.00 245 Bergen St., Brooklyn, N.Y. 10,000.00 Cash paid for Leasehold (to run 48 yrs) 426 Fulton St., Jamaica, N.Y. 220,000.00 Cash paid for Leasehold (to run 44 yrs) 569 Fulton Street, Brooklyn, N.Y. 200,000.00 Garage Property-Puntine St., Jamaica, N.Y. 40,000.00 Emmons Ave., Sheepshead Bay, N.Y. 100,000.00 571 Fulton St., Brooklyn, N.Y., Lease- hold 400,000.00 $1,574,500.00

 Nathan Strauss

 February 13, 1931.

 Exhibit A

 The reason for the making and the giving of the above statement was as follows:

 During the year 1929 this bank had personally loaned the bankrupt $40,000 taking his promissory note, unsecured. This loan had been on the books since that time and had been reduced from time to time so that on February 2, 1931, it had been reduced to $21,000 and was due on that date.

 During the month of January, 1931, the bank, knowing that this note would soon become due, requested the bankrupt to "furnish the bank with an up-to-date financial statement." The bankrupt did not comply at that time but promised to do so.

 When February 2, 1931, arrived, the note was not renewed by the bank. The bankrupt then attempted to renew it by sending a new note for $20,000 together with a check for $1,100 representing interest and a payment on account. He was told, however, by the bank officials that this "could not be accepted until the ...

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