Source: https://www.legalcrystal.com/case/95148/morimura-arai-co-vs-taback
Timestamp: 2017-12-15 16:12:47
Document Index: 361597288

Matched Legal Cases: ['§ 14', '§ 6', '§ 14', '§ 6', '§ 14', '§ 14', '§ 3']

Morimura Arai and Co Vs Taback - Citation 95148 - Court Judgment | LegalCrystal
Morimura, Arai and Co. Vs. Taback - Court Judgment
LegalCrystal Citation legalcrystal.com/95148
Case Number 279 U.S. 24
Appellant Morimura, Arai and Co.
Respondent Taback
..... footnote 4 ] this reads as follows: taback bros. assets and liabilities as per books january 1st, 1920 assets cash in banks, paterson, n.j. . . . . . . . . $25,318.95 accts. receivable (good). . . . . . . . . . . 19,887.98 notes receivable (good) . . . . . . . . . . . 43,352.89 inventory of mdse. on hand at cost, raw silk. . . . . . . . . . . . . . . 43,500.00 liberty bonds . . . . . . . . . . . . . . . . 12,170.79 first mortgage held on real estate property acquired at 80 george st., paterson, n.j. . . . . . . . 126,225.00 loans receivable. . . . . . . . . . . . . . . 3,215.99 furniture & fixtures. . . . . . . . . . . . . 288.45 delivery equipment. . . . . . . . . . . . . . 3,886.43 ----------- total.....
U.S. Supreme Court Morimura, Arai & Co. v. Taback, 279 U.S. 24 (1929)
1. Under § 14b of the Bankruptcy Act, as amended by § 6 of the Act of June 25, 1910, bankrupts who have obtained goods on credit upon a written statement that was materially and grossly incorrect are not entitled to discharges if they made the statement to the vendor, or acquiesced in its making, for the purpose of obtaining the credit, with actual knowledge that it was incorrect, or with reckless indifference to the actual facts and with no reasonable ground to believe that it was correct. Pp. 279 U. S. 25 , 279 U. S. 33 .
2. In the absence of concurrent findings by the two lower courts upon any of the material issues relating to such a written statement, this Court examined the evidence at length for the purpose of determining the essential facts. P. 279 U. S. 27 .
3. The rule attaching special weight to findings of a master is inapplicable to a finding which does not depend upon the weighing of conflicting testimony and credibility of witnesses. P. 279 U. S. 33 .
In September, 1920, Nathan Taback and Louis Taback were adjudged bankrupts, both individually and as partners
trading as Taback Brothers, under an involuntary petition in bankruptcy filed against them in the district court for New Jersey. They seasonably applied for discharge. The firm of Morimura, Arai & Co., and objecting creditor, filed specification of opposition on the two grounds, among others: that the bankrupts had obtained property on credit on a materially false statement in writing made by them to the objection creditor for the purpose of obtaining credit, and that, with intent to conceal their financial condition, they had destroyed, concealed, or failed to keep books of account or records from which such condition might be ascertained. Bankruptcy Act, § 14b, as amended by § 6 of the Act of June 25, 1910, 36 Stat. 838, c. 412. [ Footnote 1 ] The issues so raised were referred to the referee, as special master, to take proof and report it to the court, with his findings thereon. [ Footnote 2 ] He took the proof in 1921 and 1922, and in 1926 reported that, in his opinion, the bankrupts were entitled to discharge. The District Judge sustained exceptions to this report and ordered that the application for discharge be denied. The circuit court of appeals reversed this order with directions to dismiss the exceptions and discharge the bankrupts. 21 F.2d 161.
The first of these grounds is predicated on a written statement made to the Morimura Company in January, 1920. This, under § 14b(3) of the Bankruptcy Act, as amended in 1910, required a denial of the discharge, if (a) the bankrupts obtained property on credit from the
Morimura Company upon this statement, and (b) the statement was materially false and (c) was made to the Morimura Company for the purpose of obtaining such property on credit. See Gerdes v. Lustgarten, 266 U. S. 321 , 266 U. S. 323 , 266 U. S. 326 .
In the master's report, which is set forth in the margin, [ Footnote 3 ] he made no specific findings of fact in reference to the precise issues, but without citing any testimony or giving his reason, stated generally that he believed the statement "was substantially correct." The District Judge -- after referring to the vagueness and generality of this report -- stated that obviously the statement was false and was made for the purpose of obtaining credit. The circuit court of appeals, after referring to the fact that
On January 1, 1920, the firm opened a new set of books. An accountant carried forward to the new books the entries from the previous books which showed the status of affairs of the firm on December 31, 1919. The correctness
There was introduced in evidence a tabulated statement compiled from the opening entries in the new books, which is set forth in the margin. [ Footnote 4 ] This tabulated statement, the accuracy of which was not questioned, shows that, on January 1, 1920, the total assets of the firm, as shown by the new books, were $277,846.48, and the total liabilities $266,175.05, leaving a net worth of $11,671.43 -- the exact amount of the aggregate capital of the two partners as shown on the books.
This statement, which is set forth in the margin, [ Footnote 5 ] is utterly irreconcilable with the financial condition of the
firm as disclosed by the new books opened on January 1. This appears by a comparison with the tabulated statement compiled from these books. [ Footnote 6 ] The statement of January 7 shows on its face total assets of $372,066.03 as against only $277,846.48 shown by the books; a liability, of only $96,395.20, by open account, as against total liabilities of $266,175.05 shown by the books, and a net worth of $275,670.83 as against only $11,671.43 shown by the books -- that is, the statement of January 7 shows $94,219.55 more of assets and $169,779.85 less of liabilities than those shown by the books, and a net worth of $263,999.40 more than the net worth shown by the books. And, as appears by a detailed comparison between the statement of January 7 and the tabulated statement, every item in the statement of January 7 is materially different from the corresponding item appearing on the books.
No evidence whatever was offered by the bankrupts to account for the discrepancies between the statement of January 7 and the tabulated statement drawn from the books. There was no effort to show that the firm had on December 31, 1919, any assets that were not shown on the books, or did not owe any of the liabilities shown on
And when asked in reference to the fact that the statement of January 7 showed that the liabilities were only $96,395.20 (by account payable), while the general ledger showed "notes payable" alone
On January 10, the firm contracted with the Morimura Company for the purchase of twenty bales of silk at a stipulated price on terms of four months after delivery in February. [ Footnote 7 ] In April, the the Morimura Company delivered to the firm the twenty bales called for by the contract, taking in payment two trade acceptances, aggregating $39,536.19 at four months each. The credit manager of the Morimura Company testified that the contract and deliveries were made in reliance upon the statement of January 7.
In the latter part of January, the price of silk began to fall. This finally resulted in a panic in the silk market, and the firm became bankrupt in September. Between January 1 and the bankruptcy, it had bought more than $100,000 worth of silk from the Morimura Company in addition to the twenty bales of silk mentioned above, and had also bought a large amount of silk on credit from other dealers. For some time, it paid its bills to the Morimura Company before maturity, and at the time of the bankruptcy had paid everything due the Morimura Company
1. The undisputed evidence shows that the written statement of January 7 was materially and grossly incorrect, purporting as it did to show that the firm had a net worth of approximately $264,000 more than the actual net worth shown by its books. The opinion of the master that this statement was "substantially correct" -- the only specific finding made in his report -- manifestly did not depend upon the weighing of conflicting testimony or the credibility of witnesses. For this reason, if for no other, it does not have the weight ordinarily attaching to the conclusions of a master upon conflicting evidence, as stated in Tilghman v. Proctor, 125 U. S. 136 , 125 U. S. 149 , and it was clearly due to error or mistake.
It follows that the specification of opposition based on this written statement should have been sustained, and
As to such references, see generally §§ 14(b) and 38(4) of the Bankruptcy Act; General Order in Bankruptcy No. 12, § 3; International Harvester Co. v. Carison, 217 F. 736, and In re Hughes, 262 F. 500.