In re Reed , 191 F. 920 ( 1911 )

COTTERAL, District Judge.

The objections of Peck & Hills Furniture Company to the discharge were (1) obtaining merchandise from this creditor upon a materially false statement in writing; (2) omission to include in schedule of assets stock in the Green Dawn Realty’ Company; and (3) scheduling without valuation certain town lots in Eureka Springs, Ark., as exempt, in excess of the area and valuation permitted by law, secretion of the “equity” thereon from the creditors, and failure and refusal to turn same over to the trustee. The exceptions to the report of the master definitely relate only to the first and third grounds of objections.

’ As to the first ground of exception, the questions presented are whether the master erred in. deciding' that there was no evidence to the effect that this creditor relied upon the false statement, and that the bankrupt was not responsible for the statement. With reference to the homestead, the exception taken is that the master erred in finding that the bankrupt was entitled to the real estate known as Magnetic Springs Hotel, as an exempt homestead, the evidence showing that it was used as a hotel, and not as a home or residence for the personal use of the bankrupt and her family.

[1] The master found with the objector as to the falsity of the property statement, but held the bankrupt was not chai’geable with it, and, further, that the proof failed to show that it was relied upon by the objector in furnishing the merchandise. In the opinion of this court’ the scope of the authority of the agent who made the statement under the power of attorney and in view of all the circumstances was sufficient to charge the bankrupt with responsibility for the statement.

[2] It was not shown by direct testimony that the objector parted with the merchandise in reliance upon it. No witness testified to the' fact. But it was competent to establish the fact by circumstantial evidence. The statement was asked and furnished as a basis for credit, and the relation between the representation and the shipment of the merchandise was so close that the conclusion is only reasonable that the creditor parted with the merchandise on the strength of the representation. The evidence amply sustains the finding that such was the fact, and the fact ought to be so found in this case where there is an absence of any showing to the contrary. The holding that there was ho evidence that the creditor relied upon the statement overlooks the. probative force and weight of the evidence introduced. Reliance on the statement was sufficiently proven.

[3] The contention that this creditor had no interest in defeating the discharge is not tenable.- It is true the bankrupt is not entitled to be discharged from debts fraudulently contracted, but a creditor who has proved a claim, and from whom property has been obtained by a materially false property statement in writing, is entitled to contest the discharge, and to prevail with this objection thereto if it is established by the proof. The exceptions are well taken to the report of the master on this ground, and will be sustained.

With reference to the controversy as to the claim of exemption, it appears in the first place that the bankrupt scheduled the real estate in Eureka Springs as exempt, but omitted to give it a valuation. The state laws which govern as to the exemption are those of the state in which the bankrupt had her domicile for the six months or the greater portion thereof immediately preceding the filing of the petition in bankruptcy. In this case, the laws of Arkansas appear to be applicable. However, -it is not necessary to plead .these laws as the federal courts take judicial knowledge of the laws of all of the states. But the question involved on the contest over the discharge was not what homestead in respect of area or valuation the bankrupt was entitled to have awarded to her. That controversy was one to be dealt with and disposed of on exceptions to the report of the trustee. The question involved in this proceeding was whether the schedule was falsely made, and there was a secretion of property from the trustee. In other words, whether an offense was committed under section 29b of the bankruptcy law. The exception does not clearly present the question. Waiving this, however, the evidence, in the view of the court, does not sustain the objection originally taken. It was not sufficiently established that the bankrupt intentionally made a false oath with respect to the exemption or intentionally withheld or secreted the property from the trustee. The conclusion of the master on this branch of the issues was correct, and the exceptions thereto are overruled.

It follows from the foregoing that the discharge should be denied. It will be so ordered.