Court Opinion

ID: 6835373
Source: CourtListenerOpinion
Date Created: 2022-07-23 20:03:50.647717+00
Date Added: 2024-06-11T16:04:40.969212
License: Public Domain

CAMPBELL, District Judge
(after stating the facts as above). The objections of the appellant to the confirmation of the composition may be grouped under four heads: (1) False financial statement; (2) concealment, removal, or destruction of books of account and records; (3) concealment of assets by virtue of failing to make reasonable explanation of gross discrepancy recently occurring; and (4) not for the best interest of creditors.
Appellant has shown that the bankrupt’s written financial statement of March 1, 1925, sets forth a greater inventory and less liabilities than in fact existed in a substantial amount; but that alone is not sufficient to warrant refusal of the composition.
Under section 14b of tfie Bankruptcy Act, (Comp. St. § 9598), it is essential to show that the bankrupt obtained credit from a person upon a materially false statement in writing, made to such person for the purpose of obtaining such property or credit; and the weakness of the appellant’s ease lies in the fact that it does not appear that the objecting creditors relied upon these statements in issuing and granting credit to the bankrupt.
The statement was mailed to the appellant on June 1, 1925, at which time the bankrupt was indebted to it in the sum of $6,032.84, and between that time and the bankruptcy the credit extended to him was but $364.60, while his payments on account of the indebtedness amounted to $2,785.51, thus reducing the liability of the bankrupt to the appellant to $3,-611.93. Considering the dealings between the appellant and the bankrupt, it does not seem to us that reliance on the statement in granting credit in the sum of $364.60 has been shown.
The statement was received by the First National Bank of Bridgeport some time after March 1st, and on April 17th the bank loaned the bankrupt $1,000. The testimony shows that the bankrupt had been a depositor in the bank for about 8 years, and that it had extended credit to him on his own paper to the extent of $5,000.
There was but little difference in the amount of the bankrupt’s indebtedness to the bank at the time of the receipt of the statement and at the time of the bankruptcy. That the bank did not rely on the statement, notwithstanding the claim made by the cashier to the effect that his opinion of the bankrupt was not as good when he applied for the loan on April 17, 1925, as it was a year before, is shown by the letter recommending the bankrupt, written by the cashier to a New York bank on July 29, 1925.
The bankrupt presented all his books of original entry, and did all in his power to as*372sist by bringing as witnesses those who had worked on the books. The general ledger was not a book of original entry, but a book in which were posted summaries from the books of original entry, which he had produced, and we see no reason why, if required, the general ledger could not have been reconstructed.
In any event, the absence of the book does not seem to have greatly interfered with ascertaining the financial condition of the bankrupt, and we do not believe that the evidence is sufficient to sustain a finding of concealment, removal, or destruction of books of account or records, because the general ledger, some inventory sheets, and some trial balances have not been found. In the face of our finding as to the financial statement, the evidence does not sustain a finding of concealment of assets.
Nothing specific as to the payment of money or delivery of merchandise in an irregular or fraudulent manner, ■ constituting a fraudulent concealment or transfer, - was shown. There was no evidence of any extraordinary purchases, suspicious sales, or removal of property, or disposition of -money or property at any time before the bankruptcy; on the contrary, the business appears to have been carried on in the regular course, and the assets to have been substantial.
The composition seems to be fair and, while not controlling, still of great weight on the question of whether the composition is for the best interest of the creditors, is the fact that less than 2 per cent, of the creditors in number, and less than 10 per cent, in amount, have objected to it. The evidence does not warrant a finding that a greater amount would have been paid to creditors by administering the estate, nor that the composition was not for the best interest of the creditors.
The order appealed from is affirmed.