Court Opinion

ID: 9453548
Source: CourtListenerOpinion
Date Created: 2023-08-04 18:17:08.39573+00
Date Added: 2024-06-11T17:33:42.529204
License: Public Domain

RYAN, District Judge
(dissenting):
The judgment appealed from which reversed the order of the Referee and which denied the bankrupt a discharge should be affirmed.
This Court’s decision is based on an assumption which is not supported by either the facts or the Bankruptcy Act, which is that the admittedly false statement was not given with intent to deceive because it was but an approximation or estimate of the bankrupt’s net worth, rather than an exact statement.
Nothing on the face of the personal balance sheet for the period of May 1, 1961 suggests that it was an approximation or estimate, rathey than an exact statement.1 That it was signed by an accountant belies that fact that it was but a guess, and the accountant’s statement that it was not audited does not give weight to any such inference. Quite the contrary might be said as to the fact of the accountant’s signature under the statement, i. e., that this purported to be an accurate and reliable listing of assets and liabilities.
The trial record before the Referee also shows that on May 1, 1961 the status of the Louis Ostrer account with the bank was $191,260.01 outstanding indebtedness made up of $50,000 unsecured loans, $55,000 owed through discounting of Receivables, and $84,000 on *651secured loans. This May 1, 1961 statement was delivered to the bank on May 10, 1961 when the aggregate indebtedness was $206,192.28. This indebtedness increased with the reliance of the bank on the May 1, 1961 statement so that on January 29, 1962 Ostrer owed the bank a total of $267,839.36.
The Referee specifically found:
1. The financial statement (of May 1, 1961) which shows a net worth of $1,064,061 was erroneous to the extent that his assets were less by the sum of at least $240,300, if not more, than stated.
2. That the testimony of a former Vice President of the creditor clearly indicated that he, as the person who approved the loans to the bankrupt and to his corporations, relied partially upon the aforesaid financial statement.
3. That the objecting creditor established the issuance of a materially false statement in writing by the bankrupt to obtain credit or an extension of credit to the extent of approximately $350,000 for himself and his corporation at a time when he was engaged in business individually and as an executive of corporations.
The three elements defined in this Court in Industrial Bank of Commerce v. Bissell, 219 F.2d 624, as sufficient to sustain an objection to discharge — (1) that the bankrupt for the purpose of establishing credit made a written statement respecting his financial condition; (2) that such statement was materially false; and (3) that it was relied upon by the objecting creditor — appear here in the clearest possible light.
No question is raised as to elements (1) and (3), and I cannot understand why the second element is found missing merely because, later after obtaining the credit, the bankrupt says that, although false, the statement was but an approximation. No authority has been cited and certainly the Bankruptcy Act makes no exception of false statements because they are but estimates. Quite the contrary, for the Act includes statements made “with reckless indifference to the actual facts, without examining the available source of knowledge which lay at hand, and with no reasonable ground to believe that it was in fact correct”— a definition which certainly encompasses an approximation or estimate.
Whether an approximation or estimate, or an audited statement, it was knowingly false, it was given by the bankrupt for the express purpose of obtaining credit, and he obtained credit. The bankrupt’s attempt to explain away the overstatement of assets by showing that he had other assets which he deliberately omitted, cuts both ways. If, as the bankrupt says, it shows that he was worth more than he disclosed and that, therefore, he had no intent to deceive (a conclusion we cannot accept), it also shows that he deliberately misrepresented assets by concealment as well as by overstatement, which makes the statement even more materially false.
It was precisely such a defense that Judge L. Hand put to rest when he said in In re Maaget, 245 F. 804:
“(1) I certainly cannot agree with the proposition that a bankrupt or any one else may defend a written statement of his financial condition, merely by showing that the balance is substantially correct, nor does it appear that the learned master so thought. It needs no argument to show that a financial statement, showing assets of $107,000 and liabilities of $63,000, is not a correct statement of a business in which the assets are $157,000, and the liabilities $113,000, any more than, to put extreme cases, it would be a correct statement of a business in which the assets were $57,000 and the liabilities $13,000, or the assets $1,157,000 and the liabilities $1,113,000. Still in each case the surplus is the same. A merchant is concerned, not only with the net surplus, but with its proportion to the liabilities, and everybody knows that who knows anything about financial statements, personal or corporate.”
*652The bankrupt deceived in order to obtain credit — and no more is required to establish culpable intent. Industrial Bank of Commerce v. Bissell, supra.
I agree with Judge Zavatt that this was sufficient to bar discharge, and that the Referee’s conclusion was wrong as a matter of law. The Referee’s statement that “Despite diligent search by the Court no case has been found which is on all fours with the case at bar,” simply overlooks the long respected opinion of L. Hand, J., in In re Maaget (1911) and of this Court in Industrial Bank of Commerce v. Bissell (1955), both of which are “on all fours.”

. There was reference by counsel to “round sums” in the statement of May 1, 1961. The plain fact is that it contains no “round sums.” An examination of the statement reveals that only cents are omitted, but the assets are stated down to tens and dollars. Note, for example: “Notes Receivable from Clients $21,357.00”; “Commissions due Canada Life $16,329.00”; “Total current assets $461,836.00”; and “Total Assets $1,220,-636.00”; these are not “round” figures. It also appears from the bankrupt’s testimony and exhibits that these figures were the result of his listed itemized calculations.