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IN RE HOROWITZ

April 17, 1959

In the Matter of Alfred HOROWITZ, Bankrupt


The opinion of the court was delivered by: BYERS

Hearing on petition to review a Referee's decision granting discharge. The bankrupt concededly made a false statement in procuring a loan from Bankers Trust Co. on December 5, 1957 in the sum of $ 594 payable in monthly instalments of $ 33.

The written loan application contained the following: 'Statement of Current Debts.

 'The total amount of all my present debts as Borrower, Endorser, Guarantor or otherwise is $ 0.'

 That was completely false, because he had obtained a loan from Bensonhurst National Bank of Brooklyn on August 28, 1957, less than five months earlier, of $ 670 payable in monthly instalments of $ 27.10.

 His weekly salary was $ 135 or roughly $ 540 per month, of which $ 125 was required for rent, leaving about $ 415 to support himself and his family. (The application form states two dependents.)

 The Bensonhurst Bank is the objecting creditor, and since this is a no-asset case, which means that its note will be wiped out if discharge is sanctioned, its arguments are entitled to receive the most careful scrutiny.

 The Referee's decision cites Industrial Bank, etc. v. Bissell, 2 Cir., 219 F.2d 624, which must be consulted, particularly the discussion on page 625, as to the major factors to be established by the objecting creditor.

 The Referee finds that the latter creditor has failed to meet these requirements, according to the concluding paragraph of his opinion, namely that 'the bankrupt knowingly made a false statement in writing as to his financial condition, for the purpose of obtaining the loan from the Bankers Trust Company, and in addition, the objecting creditor has failed to establish that the Bankers Trust Company relied on the statement in writing (Ex. 3,), in granting the loan to the bankrupt of $ 594.00 on December 5, 1957.'

 The foregoing comes to this court under the presumption arising from General Order 47, and the record made before the Referee has been examined in the light thereof. I am unable to agree that the testimony sustains the first two clauses above quoted, which means that in my opinion, as to those matters the decision is clearly erroneous, thus: The statement was made by the bankrupt, in writing, and was false as to the nonexistence of the indebtedness to the Bensonhurst Bank. Also it was made for no other purpose then to obtain the second loan from Bankers Trust Company. The testimony as to these matters leaves nothing to conjecture or construction.

 The remaining clause, following the words 'in addition' which have to do with the failure of the objecting creditor to establish reliance by Bankers Trust Company upon the statement, presents the only clsoe question in the case, and it is a troublesome one.

 The testimony of the witness Meyer Trossman, the employee who received and approved the Bankers Trust Company application for the loan as to reliance upon the statement, was perhaps equivocal. He said that the handwriting in the application was his, from which it necessarily follows that he asked questions of the bankrupt, and wrote down the answers.

 As to the crucial question of whether the application would have been granted, if the statement had disclosed the truth as to the existence of the Bensonhurst Bank loan, his testimony in summary was:

 'I can't answer that.'

 That he did rely upon the application blank (i.e., ...


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