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In re Topper

decided: January 16, 1956.


Author: Kalodner

Before GOODRICH, KALODNER and STALEY, Circuit Judges.

KALODNER, Circuit Judge.

This is an appeal from the affirmance by the District Court of the Order of the Referee in Bankruptcy denying a bankrupt his discharge in bankruptcy.

The undisputed facts may be summarized as follows:

Prior to January 15, 1951 Raymond Topper, the bankrupt, conducted a small Army and Navy Store in Easton, Pennsylvania. On the date mentioned he retired, voluntarily, paying all debts in full, with the exception of $3,000.00 owed to his mother, $350.00 owed to two small loan companies, $146.35 owed to four retail accounts and rent for his store beyond February, 1951. His landlords subsequently entered judgment by confession for accelerated rent in the sum of $1,417.50 under the terms of the bankrupt's lease; the amount was later reduced by payments of $287.50 to $1,130.00.

On February 25, 1953, Topper filed a voluntary petition in bankruptcy and was adjudicated a bankrupt. In Schedule A of the prescribed official forms, he listed only one creditor, his landlords, for $1417.50 and in his oath to the Schedule stated "that the said Schedule is a statement of all my debts * * * according to the best of my knowledge, information and belief." Subsequently the landlords filed their claim for $1,130.00, the balance due them on their judgment.

The bankrupt had no assets when he filed his petition, nor did he have any when his discharge was denied.

At a meeting of creditors and later, at the hearing on objections to his discharge, the bankrupt freely testified that at the time of preparing and filing his petition and schedules he had outstanding the debts previously stated; that he had not listed these debts because he intended to pay them; that he listed only his landlords as creditors because he desired to utilize the bankruptcy proceedings to discharge his obligation to them; that at the time of preparing his schedules he had disclosed to his attorney his indebtedness to others than his landlords and his intention to pay them and that his attorney had advised him to list only his indebtedness to his landlords; that acting on such advice he signed the schedules and took the required oath.

The Referee held that the bankrupt was not entitled to his discharge because he had committed an offense under Title 18 U.S.C.A. § 152*fn1 which provides among other things, "Whoever knowingly and fraudulently makes a false oath or account in or in relation to any bankruptcy proceeding * * *. Shall be fined not more than $5,000 or imprisoned not more than five years, or both."

In making this ruling the Referee conceded that "the * * * facts present a novel situation"; "The bankrupt had little to gain from the omission" (to list all his creditors); "fraudulent intent * * * is not easily inferred from the omission itself"; the bankrupt had acted in reliance upon the advice of counsel after a full disclosure to him of all the facts and that "In some cases this has been held a good defense" (citing as to the latter Levinson v. United States, 3 Cir., 1920, 263 F. 257).

The District Court affirmed the decision of the Referee "with some reluctance and on the theory, supported by weighty authority (In re Schnabel, [D.C.], 61 F.Supp. 386; In re Steinberg [2 Cir.], 143 F.2d 942), that the word 'fraudulent' in Title 18 U.S.C.A. § 152 has a special statutory meaning somewhat different from the meaning given it in ordinary usage, and that it means no more than an 'intentional untruth in a matter material to the issue which is itself material' and this does not mean 'with intent to defraud creditors'".

In its opinion the District Court further stated that "I think it is fair to say that there is no evidence that either this bankrupt or his attorney had any intention whatever of defrauding anybody of a cent of money. When the bankrupt filed his petition, his intention was to pay all his creditors, except one, if and when he became able to do so. He had no assets and was not able to pay anyone at the time of his bankruptcy. Withholding the names of creditors from his schedules was not necessary to his purpose."

We are of the opinion that the District Court erred in affirming the Referee's Order under its view that there was "no evidence that the bankrupt had any intention whatever of defrauding anybody."

As we noted In the Matter of Wolf, 3 Cir., 1948, 165 F.2d 707, 710: "To bar the bankrupt's discharge there must be an actual fraudulent intent". We spelled out "actual fraudulent intent" to be "an actual intent on the part of ...

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