The opinion of the court was delivered by: BYERS
The bankrupt seeks to set aside the order of the referee denying his application for discharge.
The specification of objection which was sustained by the referee is as follows:
"On or about the 3rd day of June, 1937, the bankrupt for the purpose of obtaining money upon credit from The Amalgamated Bank of New York made a statement, in writing, which was materially false in that the said written statement did not set forth that the bankrupt was a borrower on a loan at the Morris Plan Industrial Bank of New York at said time. That by virtue of the said written statement, the said bankrupt obtained a loan of $300.00 from The Amalgamated Bank of New York, the claimant herein."
It appears from the testimony that there was such a loan so procured, and that the bankrupt failed to state, in making written application therefor, that in the month of April, 1927, he was similarly a borrower from the Morris Plan Industrial Bank to the extent of $197.00.
The precise question was:
Q. Are you a borrower or endorser on any other note? A. Yes.
Q. To whom? A. To Amalgamated Bank.
There can be no doubt that the foregoing statement was false, in that the bankrupt was already a co-maker on a note to the Morris Plan Bank which was almost two-thirds as large as the one upon which he was co-maker in this transaction.
The referee states in his report:
"I do not think that there was an intentionally or fraudulently withholding of the name of the Morris Plan in answer to the question referred to in the financial statement. However, I think that is entirely foreign to the part of the law governing responsibility for false financial statements, i.e., that any person is responsible certainly under Section 14 of the Bankruptcy Act [11 U.S.C.A. § 32] for any statement that is not true, made over their signature, whether they intend to mislead or not, if that statement is material and is relied upon by the lender, and there is a consideration for it, good, bad or indifferent intention on the part of the borrower cannot be taken into consideration."
Within the test suggested in the case of In re Lessler, 2 Cir., 74 F.2d 249, at page 251, which represented the individual views of the writing Judge, it would seem that in this case "there are reasonable grounds for believing that a false statement in writing was intentionally made about a 'matter which, if disclosed, would have caused the party who was to act upon the statement to withhold the credit which he extended.'"
The fact that a proposed borrower is already indebted to another institution in a sum which is almost two-thirds of his present application might well be regarded as a circumstance which would cause the institution to which ...