The opinion of the court was delivered by: ABRUZZO
The creditors filed twelve specifications of objections to the arrangement proposed by the debtor. One of the objections, numbered 2, was withdrawn.By order of the referee in bankruptcy, eleven objections have been overruled. The objecting creditors now move for an order reversing the order of the referee overruling the eleven specifications to the arrangement proposed by the debtor.
The debtor corporation filed its petition for an arrangement on or about August 29, 1941. It offered fifty (50%) per cent to unsecured creditors, 10% in cash and the balance in periodic payments.
During the course of the proceedings before the referee, an amended plan was filed and this time the debtor offered 20% in cash which was apparently accepted by a majority of the creditors in number and amount.
The specifications of objections were filed on November 18, 1941. Hearings were held on the eleven specifications of objections on December 24, 1941, and December 26, 1941. At the close of these hearings, the referee made his decision overruling the eleven of them. It now remains to be determined whether or not the referee was justified in making his decision.
Specification 4 charges that the debtor has not performed its duty as required under Chapter XI, 11 U.S.C.A. § 701 et seq., in that it has not filed a correct or truthful statement of affairs, particularly insofar as item No. 10 and item No. 15 are concerned.
Item No. 10 of the statement of affairs required information as to repayments of loans during the year immediately preceding the filing of the petition. The debtor answered, "Loans repaid as per books". The referee ruled that this answer fulfilled the duty of the debtor as required under Chapter XI.
The objecting creditors contend that the referee was in error as to this finding. They claim that it was the duty of the debtor to answer the question as submitted since it was inserted by Chapter XI to take the place of an examination under section 21, sub. a, 11 U.S.C.A. § 44, sub. a. The objecting creditors maintain that a creditor is not obligated to go to the books of the debtor to check on loans but rather it is the duty of the bankrupt to give this information. In the instant case, one of the objecting creditors had a place of business in New Jersey and it is argued that it is not the duty of the creditor to travel to Brooklyn to ascertain what loans have been repaid, especially when the books are still in the possession of the debtor.
The debtor, refuting these claims, asserts that the books and records were before the referee and the creditors had ample opportunity to examine same.
The Court is of the opinion that the debtor was duty bound to set out these loans in detail in the statement of affairs.
Item No. 15 required disclosure of the names and addresses of each stockholder of twenty-five (25%) per cent or more of the issued and outstanding stock of the corporation.
The debtor answered that both Louis Schneider and his wife were owners of more than twenty-five (25%) per cent of the stock. However, the debtor claimed a typographical error had been made as to Mary Schneider inasmuch as she was not a stockholder. The referee held that the answer did not materially affect the issue.
The referee unquestionably was justified in holding that the answer did not materially affect the issue, but this matter is pointed out to indicate the careless manner in which the bankrupt gave information.
In passing, the debtor could be apprised of the fact that he is obligated to give complete factual answers. He cannot escape censure because of carelessness. This conclusion is borne out by other indifferent explanations by the debtor, referred to elsewhere in this opinion.
Specification 5 states that on information and belief, on or about the 28th day of August, 1941, that being one day before the petition for arrangement was filed herein by the debtor, the debtor transferred, removed, destroyed or concealed, or permitted to be removed, destroyed or concealed, certain property belonging to it with intent to hinder, delay and defraud its creditors, as follows:
(a) Approximately one hundred twenty-five (125) fluorescent light fixtures of the approximate value of over $250.
(b) Certain property, moneys or notes being the proceeds of sale of said property sold by the debtor to Famous Furniture Co., in or about the month of October, 1940, for the sum of $1,845.
(c) Certain cash moneys disposed by the debtor, or its officer, within one year prior to the filing of the petition herein, amounting to the sum of approximately $2,000.
The objecting creditors have eliminated subdivision (a) of this specification since sixty (60) lights have been explained ...