from which his financial condition and business transactions might be ascertained, unless the court deems such acts or failure to have been justified under all the circumstances of the case; or (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; * * * '
Title 18 U.S.C. § 152, 18 U.S.C.A. § 152, provides, inter alia, as follows:
'Whoever, after the filing of a bankruptcy proceeding, knowingly and fraudulently withholds from the receiver, custodian, trustee, marshall, or other officer of the court entitled to its possession, any document affecting or relating to the property or affairs of a bankrupt.
'Shall be fined not more than $ 5,000 or imprisoned not more than five years , or both.'
After extended hearings of June 29, 1951, and September 18, 1951, before referee James E. Marsh, Esq., during which evidence and testimony were introduced in behalf of the Warren Bank and Trust Company and in behalf of (he Warren Bank and Trust Company and in behalf of the bankrupts, referee Marsh made findings of fact sustaining the allegations contained in each of the specifications.
It is well settled that a false statement or misrepresentation for the purpose of securing money or property on credit will justify the denial of a discharge in bankruptcy. In re Bernstein , 7 Cir., 197 F.2d 378.
Undoubtedly, in the present instance, when the findings of a referee must necessarily be based upon conflicting evidence involving questions of credibility, and the referee has heard the witnesses and observed their demeanor, great weight attaches to his conclusions and the weight of authority is that the District Judge, while scrutinizing with care his conclusions upon a review, should not disturb his findings unless they are manifestly unsupported by the evidence. In the matter of Musgrave, D.C., 27 F.Supp. 341, 343; In re Lawrence, 2 Cir., 134 F. 843.
General order in bankruptcy No 47, 11 U.S.C.A. following section 53, provides in part:
'Unless otherwise directed in the Order of reference the report of a referee or of a special master shall set forth his findings of fact and conclusions of law, and the judge shall accept his findings of fact unless clearly erroneous.'
An examination of the record develops the irrefutable fact that referee James E. Marsh, Esq., on February 16, 1950 requested Edward Shapiro, one of the petitioning partners herein, to surrender the partnership books to the trustee, an act which is generally accepted procedure after adjudication in bankruptcy, but that such surrender, after numerous demands by the Trustee, was not made until June 29, 1951, and this was limited to part of the books, while the remainder were not made available to the trustee until August 23, 1951.
Despite bankrupts' contention that the books were retained to complete current returns for federal income tax, no justification existed to keep them in New York City after May of 1950.
Evidence was introduced to show that the books were being used for the purposes of the bankrupt to the detriment of creditors.
The record further develops the fact that after the Warren Bank and Trust Company began to make inquiries with regard to the status of the assigned accounts receivable during the latter part of June, 1949, the whole complexion of the bookkeeping changed.
The record discloses a sufficient basis from which the referee could have reasonably concluded that Edward Shapiro fraudulently withheld the books of account from the trustee because these books did not properly reflect the financial picture with regard to the accounts receivable which had been assigned to the Warren Bank and Trust Company. I am satisfied that the findings of the referee in refusing discharge to Edward Shapiro are amply supported by convincing evidence.
With respect to the referee's denial of discharge to Sophie Shapiro and Annette Greenberg, Section 14, sub. e of the Bankruptcy Act provides as follows:
'If the bankrupt fails to appear at the hearing upon his application for a discharge, or having appeared refuses to submit himself to examination, or if the court finds after hearing upon notice that the bankrupt has failed without sufficient excuse to appear and submit himself to examination at the first meeting specially called for his examination, he shall be deemed to have waived his right to a discharge, and the court shall enter an order to that effect.'
The referee found that the bankrupts Sophie Shapiro and Annette Greenberg without proper excuse, failed to appear at the hearings on application of discharge and are therefore deemed to have waived their right to a discharge.
Sophie Shapiro is the wife of Edward Shapiro and Annette Greenberg is his daughter. They did not appear at any of the hearings held with regard to discharge. At the hearing held on June 29, 1951, the referee inquired whether Sophie Shapiro and Annette Greenberg had had notice of the hearing and whether they would be present. Mr. Shapiro said that his wife was at home ill and that they had written their daughter about the hearing. At the hearing of July 24, 1951 the same excuse was offered for Mrs. Shapiro and Annette Greenberg. No excuse of any sort was made for them at the hearing held on September 18, 1951.
It is apparent that the referee exercised reasonable discretion and restraint in affording Annette Greenberg and Sophie Shapiro every opportunity to participate in the bankruptcy hearings, and his action in denying their discharge was in order.
An appropriate order is entered.
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