Case ID: f_268/html/0871-01.html
Source: Caselaw Access Project
Author: {"author": "SIBLEY, District Judge.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

In re DAY.
    (District Court, N. D. Georgia.
    November 27, 1920.)
    No. 6606.
    1. Bankruptcy &wkey;>407(5)- — Obtaining oí credit on fats© statements ground for denying discharge, though debt would not fee released.
    Bankruptcy Act, § 14b (Comp. St. § 9598), specifying the obtaining of credit on a false statement, in writing made for that purpose as ground for denial of a discharge, and section 17 (section 9001), providing that liabilities for obtaining property by false pretenses are not released by a discharge, are not mutually exclusive, or even in pari materia, and such obtaining of credit is ground for denying discharge, though the debt so contracted would not be released by the discharge.
    2. Bankruptcy <&wkey;407 (5) —Obtaining credit on false statements is ground for denial ©f discharge to any bankrupt.
    Bankruptcy Act, § 14b (Comp. St. § 9598), providing for denial of a discharge to one obtaining credit on a false statement in writing made for that purpose, is not limited to merchants, but applies to all who ask a discharge in bankruptcy.
    
      3. Bankruptcy &wkey;4OT (5) —Obtaining credit by any material false statement of fact in writing is ground for denial of discharge.
    Bankruptcy Act, § 14b (Comp. St. § 9598), relative to tbe obtaining of credit on false statements in writing, is not confined to statements of general financial, condition, but covers any material statement of fact made in writing to tbe creditor to induce tbe credit.
    In Bankruptcy. In the matter of Albert Lee Day, bankrupt. On application for a discharge.
    Discharge denied.
    E. M. 'Habersham and W. I. Heyward, both of Atlanta, Ga., for objecting creditors.
    Westmoreland & Smith, of Atlanta, Ga., for bankrupt.
   SIBLEY, District Judge.

The application for a discharge is met by a creditor’s objection, supported by proof that part of his debt represents a credit extended on the faith of a written statement of financial condition made by the bankrupt to the creditor, wherein the bankrupt states his liabilities to be about $5,000, whereas his schedule in bankruptcy shows that they were at the time over $60,000. The contention of the bankrupt is that, while this matter may make a case of a “liability for obtaining property by false pretenses or false representations,” which will be unaffected by a discharge under Bankruptcy Act, § 17, as amended (Comp. St. § 9601), it cannot also be urged as a ground for denying a discharge under section 14b, and that the creditor’s remedy is under the former and not the latter section, which are mutually exclusive.

Although section 17 can have no application to a bankrupt who has been refused a discharge under section 14b, I do not think the two sections are mutually exclusive, or even in pari materia. Section 17 is for the benefit of the creditor whose claim is covered thereby, and to be invoked by him only. It comes into operation only after the bankruptcy court has done its work, and can hardly ever be applied by such court, unless in a second bankruptcy. Section 14b is addressed to the bankruptcy court only, and is not for the benefit of any particular creditor or class of creditors, and by its express terms may be invoked on any application for discharge by the trustee or other party in interest to entirely defeat the discharge. The purpose of the section is to preserve the discharge feature of .the Bankruptcy Act from abuse, and deny its benefits to one who has shown himself unworthy of them in any of the ways specified in the section. The section is at bottom one of penalty or forfeiture, and one of the things penalized is the commercial dishonesty manifested by obtaining a credit on a materially false statement in writing, made to induce the credit. This section, having its own purpose, must be construed according to its own terms, and independently of section 17. There is nothing in the words of the provision 'in question, nor in the history of its adoption and its amendment, to confine it in its application to merchants, as here contended. It applies to all who ask a discharge in bankruptcy. Nor is it to be confined to statements of general financial condition, hut covers any material statement of fact made in writing to the creditor to induce the credit. It covers the case at bar.

This conclusion accords with that reached by this court in Re Reed, 256 Fed. 412. It accords, also, with the statement of the law made by the Circuit Court of Appeals of the First Circuit in Robinson v. Williston, 266 Fed. 970, in holding that the giving of a bad check did not bar a discharge only because there was no express written statement, but only an inferential one. The case of In re Hudson (D. C.) 262 Fed. 778, involving the giving of a mortgage on property not owned by the mortgagor, was correctly decided according 'to the Robinson Case.

The discharge is denied.