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IN RE BARNHART

June 29, 1950

In re BARNHART


The opinion of the court was delivered by: WOODS

Geraldine Jane Barnhart was adjudicated bankrupt on February 14, 1950 and Wilfred H. Collins is the trustee in bankruptcy.

Her discharge came on for hearing in the usual course, and the Commercial Credit Plan, Incorporated, filed specifications of objection to her discharge, which excluding the formal parts are as follows:

 '1. The said Geraldine Jane Barnhart did obtain money and credit, and did obtain an extension of credit from the creditor by making and publishing a materially false statement in writing respecting her financial condition. Said statement was made in writing on February 25, 1949, to Commercial Credit Plan, Incorporated for the purpose of obtaining a loan from said corporation. Said corporation did on said date loan to said Geraldine Jane Barnhart, the sum of $ 553.25 of which the sum of $ 496.03 was used to pay off the principal of a prior note to said corporation executed by said Ivan J. Barnhart and Geraldine Jane Barnhart, and the sum of $ 57.22 was paid to said corporation as the balance of interest due on said prior note, and a new note was executed in said sum of $ 553.25 which materially extended the time of payment and provided for monthly payments over a period of 18 months thereafter. Said Geraldine Jane Barnhart failed to list all of her creditors in said financial statement, a substantial number and amount in claims was omitted from her said financial statement though said bankrupt knew of the existence of said claims, and said statement purported to be a full and complete list of her claims. Said financial statement was materially false in that she listed a total of her liabilities in the amount of $ 837.50 whereas in trust and in fact the same were approximately $ 1800.00. Said creditor relied upon said financial statement in making said loan.

 '2. The said Geraldine Jane Barnhart did on various and sundry occasions prior to February 25, 1949 obtain money and credit and an extension or renewal of credit by making materially false financial statements to said Commercial Credit Plan, Incorporated, which were relied upon by said corporation.'

 The relevant statute, Section 14, sub. c of the Bankruptcy Act, 11 U.S.C.A. ยง 32, sub. c, provides as follows: 'c. The Court shall * * * discharge (the bankrupt) unless satisfied that the bankrupt has * * * (3) obtained money or property on credit, or obtained an extension or renewal of credit, by making or publishing or causing to be made or published in any manner whatsoever, a materially false statement in writing respecting his financial condition; * * * .'

 Counsel for bankrupt filed a demurrer to specifications of objection, and at the hearing parties were advised that a ruling on the demurrer would be reserved and all matters disposed of upon the hearing of the evidence.

 The bankrupt is employed as bookkeeper and food controller at the Mayflower Hotel, is the mother of two children, and the continued illness of her husband contributed to the bankruptcy.

 The trustee has already filed a no asset return and the estate has been administered, except as to the disposition of objections to her discharge.

 The proof shows that bankrupt had six previous loans from the objecting creditor, beginning February 19, 1946 in the amount of $ 150, including a loan on August 13, 1947 for $ 600, and each of these was refinanced, and the last prior to the one here in controversy was given June 7, 1948, for $ 496.03, and this last was refinanced with the note and statement of February 25, 1949, Ex. 1.

 The manager and witness for objector testified that he and the bankrupt had been classmates in school; that he had handled the last three previous loans of bankrupt, that this last loan was in default, and he asked that a new contract be made, so that the time for payment could be extended. After this solicitation, bankrupt and her husband signed the new note, received two checks, for principal $ 496.03 and for interest $ 57.22, as stated in the objections, which checks were immediately endorsed and turned over to objector upon the execution of the new note, and at the same time the statement of financial condition was signed.

 The note for the previous loan was kept by the objector and is endorsed on the back- 'Refinanced- hold'. It was produced by the objector as Ex. 19, although it was admitted that the note had been paid in taking the new obligation.

 The bankrupt says that while she knew of other debts, these were omitted from the statement, and that she talked with Roy P. Reffner, agent of objector, about them and he took the statement, as signed, as sufficient.

 The schedule shows other debts and objector called witness from another loan company, showing an unpaid obligation, and an examination of this shows some 20 creditors, four for doctors and one a medical group.

 The cases hold that to prevent a discharge, a statement must be false and fraudulent and must be a materially false statement, and that is intentionally untrue. It was said in re Venturella Co., D.C. Conn. 1938, 25 F.Supp. 332, 39 A.B.R.,N.S., 527, affirmed 2 Cir., 102 F.2d 1022, that a materially false financial statement, on the ground of which a bankrupt's discharge may be denied ...


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