In re Taff & Conyers

NEWMAN, District Judge. The recent case of W. S. Peck Company v. Julius Lowenbein, 178 Fed. 178, 101 C. C. A. 498, 24 Am. Bankr. Rep. 138, decided by the. Circuit Court of Appeals for the Fourth Circuit, in which the court was divided, the majority opinion being delivered by Pritchard, Circuit Judge, and the dissenting opinion by Waddiill, District Judge, discusses the principal question made by counsel here very clearly, and the two opinions perhaps cite all the material authorities up to February, 1910, when the case was decided. In the majority opinion Judge Pritchard says: “It is the evident purpose of the bankruptcy act to protect the unfortunate class of debtors who are unable to pay their debts, by giving them a discharge, thus affording them an opportunity to engage in business again, while, on the other hand, it is manifestly intended to deny a discharge to those whose conduct has been such as to show that they obtained credit by false statements calculated and intended to deceive and thereby defraud their creditors. “Construing the act with this end in view, it would be manifestly unjust to deny a discharge to a debtor when it appears, as it does in this instance, that the statement which he made was not actuated by any fraudulent purpose.” In his dissenting opinion Judge Waddill states the issue in a para- • graph in his opinion as follows: “The opinion of the majority of the court in this case proceeds upon the theory that the true construction of the act is that credit must be obtained by a false statement, made with fraudulent intent, and for the purpose of defrauding the creditor, clearly changing the language of the act from a “materially false statement in writing” to one which the debtor was actuated in making by a fraudulent motive, and with the purpose, design, and intent to defraud and deceive. The statute says nothing about any fraudulent motive, or any purpose and intent to deceive. It suffices to defeat the discharge, un-, der the existing bankruptcy law, if the debtor makes a statement in writing as to an existing fact, which he knows is untrue in a material particular, as a result of, and but for which he would not have secured credit. The debtor’s act must be construed in the light of the effect it had upon his creditor, and if its necessary result was to defraud the creditor, and it did do so,, it does not lie in the mouth of the debtor, who has caused loss to another, secured goods, and not paid for them, to claim that he meant no wrong in what he did. He does not occupy that favored position.” [904] Whatever may be the correct construction of subsection b (3) of section 14 of the bankruptcy act of 1898 (Act July 1, 1898, c. 541, 30 Stat. 550 [U. S. Comp. St. 1901, p. 3427], as amended by Act Feb. 5, 1903, c. 487, § 4, 32 Stat. 797 [U. S. Comp. St Supp. 1909, p. 1310]), it is clear, if the finding of the special master in this case is correct, that both Taff and the firm of Taff & Conyers must be denied a discharge. It is not denied by counsel arguing this case at the bar that there were incorrect statements made by these bankrupts for the purpose of obtaining credit. They claim, however, that these statements were not made with fraudulent intent, and that the facts show this, notwithstanding the report of the special master. The special master finds, as shown by his report above, that he “is forced to the conclusion, by the repeated false statements made by the bankrupts, that they willfully and deliberately and systematically were making fraudulent statements for the purpose of obtaining unrightful credit,” and “that the statement of March 20, 1907, was false, * * * and that the statement in question was made under such circumstances as to preclude any doubt that the same was willfully and knowingly so made.” The special master then cites five particulars in which he finds the statements to be materially false, as shown above. So, taking either view of the matter, as stated above, if the finding, of the special master was justified by the evidence, it was clearly correct. I think the evidence before the special master certainly justified, if it did not require, this finding. He had all of the witnesses before him and seems to have carefully considered all the evidence. The report of a special master upon the facts should- be clearly and manifestly incorrect to justify the court in setting it aside. I do not think this is true here. . The report .of the special master must be 'confirmed, and the discharges applied for denied. ’ •