Opinion
April 12, 1934.
In Bankruptcy. In the matter of Tor Robert Bergman, bankrupt, in which issues raised by bankrupt's application for a discharge and the specifications of objection thereto filed by James D. Moyer, a creditor, were referred to a special master. On motion to confirm the report.
Report confirmed, and bankrupt ordered discharged.
The report of the special master follows:
To the Honorable the Judges of the United States District Court for the Southern District of New York:
I, Peter B. Olney, Jr., to whom as special master were referred for examination, testimony, and report the issues raised by bankrupt's application for a discharge and the specifications of objection thereto filed by James D. Moyer, a creditor, do hereby report as follows:
The specifications are, in substance, a follows:
(1) That bankrupt knowingly and fraudulently swore falsely in failing to schedule as an asset an interest in a trust fund of 10,000 Swedish crowns left to him by Robert Peterson, deceased, the income of which was payable to bankrupt.
(2) That bankrupt knowingly and fraudulently swore falsely in his testimony before the referee at his first meeting of creditors where in answer to the question, "Do you get any money from Sweden?" bankrupt testified, "I did not have any money unless my aunt should die, if she should die I might get some money but I cannot call it mine until I get it." Amended to "I do not," etc., conformity to actual testimony. SM. Specifications, pp. 4 and 5.
(3) That bankrupt concealed from trustee or other officer of the court charged with the control or custody of his assets, said trust fund referred to in specifications and/or income thereof.
Bankrupt is a conductor employed by Interborough Rapid Transit Company. He was adjudicated a bankrupt on his own petition on March 20, 1933.
Bankrupt is a Swede. The will of an uncle of his, Robert Peterson, probated Jun 1931, makes a bequest of 10,000 crowns to institution called Sveriges Handels res and eforening in Stockholm, and provides that bankrupt, if he survives his uncle and provided the following stipulations are follow shall be entitled to receive the interest of said legacy, but that, in order to be entitled to receive his interest from the legacy, bankrupt must himself or through legal representative appear before the institution, appearance to take place each year. The further provided that, until the beginning of the calendar year during which such appearance takes place, the said institution has right to freely dispose of the interest, that the institution has the same right of disposition for each calendar year in which the bankrupt did not appear, as bankrupt only entitled to receive interest during calendar years during which he has appeared before the institution. The will of said Robert Peterson leaves all his residuary estate to his two sisters, or, if either predecease him, to the other. Objecting Creditor's Exhibit 4, 10/17/33.
Bankrupt in his schedules does not list as an asset his interest under his uncle's will. Though at the time he had a copy of said will and had read it, he did not tell his lawyer anything about his interest under the will. Objecting creditor contends that under section 98 of the Real Property Law of the state of New York (Consol. Laws, c. 50) a trustee in bankruptcy of bankrupt's estate would have an interest in the income to which the bankrupt is entitled under his uncle's will.
Section 98 of the Real Property Law of the state of New York reads as follows: "Surplus income of trust property liable to creditors. Where a trust is created to receive the rents and profits of real property, and no valid direction for accumulation is given, the surplus of such rents and profits, beyond the sum necessary for the education and support of the beneficiary, shall be liable to the claim of his creditors in the same manner as other personal property, which can not be reached by execution."
The provisions of said section 98 apply also to trusts of personal property Spellman v. Sullivan (D.C.) 43 F.2d 762 Jenks v. Title Guarantee Trust Co., 17 App. Div. 830, 156 N.Y. S. 478. A trustee in bankruptcy has the same right as would judgment creditor to the surplus over an above the amount necessary for the beneficiary's support. Re Reynolds (D.C.) 24 F. 272, 40 A. B. R. 139; Jenks v. Title Guarantee Trust Co., supra.
The income of the trust for the year 1932 received by bankrupt in January, 1933, was $81. Specifications Objections SM. 7. No proof is required for a finding that this is insufficient for the yearly support of an unmarried man working in New York City. This is the bankrupt's situation.
Section 98 of the Real Property Law does not by its terms provide that in determining whether there is a surplus all earnings and income from sources other than the trust in question should be taken into consideration. Had the Legislature so intend section 98 would doubtless have been so worded, reading somewhat as follows: "Where trust is created to receive the rents and profits of its of real property and no valid direction accumulation is given, the surplus of such rents and profits (when added to all other income of the beneficiary) beyond the sum necessary for the education and support the beneficiary shall be liable to the claims his creditors in the same manner as other personal property which cannot be reached execution" — instead of as it actually read above quoted with the omission of the words in parentheses. There would seem to be no warrant for reading into the statute these words in parentheses. So I have come to the conclusion that in determining whether or not there is a surplus over and above the amount necessary for the support of the beneficiary, which surplus can be reached by creditors, the court is precluded from taking into consideration any other income of the beneficiary, and is limited to determining whether the income from the trust in question alone is more than enough for the support of the beneficiary. That the courts have so interpreted "surplus" as used in section 98 appears by inference from Jenks v. Title Guarantee Trust Co., supra, and Rowe v. Farmers' Loan Trust Co., 132 Misc. 651, 230 N.Y. S. 382.
It follows, therefore, that, as $81 a year, the only proven yearly income, is obviously insufficient for the support of the bankrupt, there is nothing to base a finding of any surplus income to which a trustee in bankruptcy would be entitled.
A specification based on a false oath is one of the specifications referred to by section 14 of the Bankruptcy Act (11 USCA § 32) as one of the offenses under section 29 (11 USCA § 52) which provides that the offense must have been committed "knowingly and fraudulently." Where false oath is the basis of specifications of objection to discharge, such alleged false oath "must contain all the elements involved in perjury at common law, namely, an intentional untruth in a matter material to an issue which is itself material." Re Troeder (C.C.A. 1st) 150 F. 710, 713, 17 A. B. R. 723-731; Re Slocum (C.C.A.) 22 F.2d 282, 11 A. B. R. (N.S.) 16, 22. Re Marshall (C. C. A.) 47 F.2d 209, 17 A. B. R. (N.S.) 576-578.
Since for the reasons above given there is no ground to suppose that a trustee in bankruptcy would have any interest in bankrupt's legacy under his uncle's will, such legacy was immaterial so far as the schedules are concerned, and there was no obligation on bankrupt to set forth his interest under his uncle's will in his schedules; hence his failure to do so did not constitute a false oath. See Re Buchanan (C.C.A.2d 219 F. 492, 33 A. B. R. 638, not so strong a case in favor of bankrupt as the matter at bar. Re Carter (C.C.A.2d 32 F.2d 186, 14 A. B. R. (N.S.) 53, 56, holding that the omission from schedules of property of very little or very doubtful value is no ground for denying a bankrupt his discharge. It follows that specification 1 has not been sustained and must be dismissed.
As to specification 2: At his first meeting of creditors on April 11, 1933, bankrupt, in answer to the following questions made the following answers:
"Q. Do you get any money from Sweden? A. I do not have any money unless my aunt should die. If she should die I might get some money but I cannot call it mine until I get it.
"Q. The money comes to you on her death? A. Yes, sir, I had an uncle that died a couple of years ago and he gave his entire estate to my aunt.
"Q. She is still alive, is she? A. Yes, sir.
"Q. What was your uncle's name? A. Robert Peterson.
"Q. Where was he? A. In Gutenburg, Sweden."
This the specification alleged to be false in that bankrupt did thereby conceal "the fact that" he "is a beneficiary under a trust fund under the last will and testament of Robert Peterson, deceased, in the sum of 10,000 Swedish crowns, and that the income thereof is payable to the bankrupt during his lifetime and that the income for the years 1931 and 1932 has been paid to said bankrupt." The first question, the answer to which is alleged to be false, is not "Did you receive any money from Sweden?" but, "Do you receive any money from Sweden?" There is an obvious difference in meaning, the first form of question meaning whether at any time you received money; the second form of question (the one to which the bankrupt made answer) meaning whether you habitually as a matter of course receive money. The significance of this difference in meaning appears in bankrupt's testimony on the hearings before me on the specifications where his attention was called to his testimony at his first meeting of creditors, the subject-matter of the second specification. In answer to the following questions, he testified as follows:
"Q. Now, at the time you testified as shown here in the minutes and in the specifications of objections, did you have in mind the: provisions of your uncle's will in clauses one and two? A. I had them in mind in regard to the estate going to the family.
"Q. Didn't you have in mind that under the provisions of the will the legacy of ten thousand Crowns that went to the Swedish Society, that you could get the income of that? A. No, sir.
"Q. Didn't you have that in mind? A. No, sir.
"Q. How come, did you forget it? A. I did not exactly forget it but I mentioned the estate that went to the family, and the thirty thousand crowns that went to charity, that was outside of the family.
"Q. Didn't you have in mind you could get the income if you applied for it? A. I could only get the income if I was sick and in need.
"Q. There is nothing to that effect in the will? A. That is true, but in 1925 my uncle wrote to me he was about to make out his will and he said `I am going to give a certain organization ten thousand crowns and it is my wish that the interest on this fund should be used for needy widows and traveling salesmen and it should go to the sick fund or the pension fund,' but he said, `in case you are sick or in need you may also put in an application for one particular year.' That means I could only ask for the one year's income if I am sick or in need, but his wish was the income would go to the needy widows.
"Q. You say you had in mind this letter that you had from your uncle? A. Yes, sir.
"Q. You had that in your mind when you testified? A. Yes, sir, when I left out this charity fund, yes, sir.
"Q. Didn't you consider you were in need when you were forced to go into bankruptcy? A. Well, that was this year. I was in need the last year when I was sick for two months, and I wrote to this organization that they should send me the income for 1932 and they sent me $81 this year because the income must be earned first, and they claimed that was the income for 1932.
"Q. When did you get that, in 1932? A No, sir, a few days after New Year's 1933, ] do not exactly remember the date; it may be the 8th or the 10th." SM. 6, 7.
The bankrupt impressed me as honest and truthful. It is natural that he, not a lawyer should not appreciate that the terms of his uncle's will controlled, and that anything said in a letter would have no binding force and effect in so far as at variance with the term of the will. I am convinced that bankrupt relying upon his uncle's letter, believed that he was not absolutely entitled upon demand to his income, but only in the event of his need for it. The peculiar provision of the will that, in order to be entitled to the income bankrupt must himself or through a legal representative appear before the institution, such appearance to take place each year, otherwise the income to go to the institution, is in and of itself calculated to support bankrupt's belief that there was an additional condition; namely, that to get the income he had to be in need.
With the condition precedent of his being entitled to the yearly income as actually provided in the will, it cannot be said that bankrupt regularly and as a matter of course received money from Sweden as would be implied in the answer "Yes" to the question, "Do you receive money from Sweden.?" All the more so would this be true if the fact was, as I find the bankrupt believed it to be, that there was an additional condition precedent that to get the income he must need it. Had the bankrupt at his first meeting of creditors been asked the specific question, "Did you receive any money from Sweden under your uncle's will during the last year?" I doubt not that he would have answered to the same effect as he volunteered on the hearing on specifications (SM. 7) that he had received $81 in January, 1933.
The worst that could be said about bankrupt's testimony, made the subject-matter of specification 2, is that it was perhaps evasive and disingenuous, calculated to give the impression that bankrupt had no interest under his uncle's will, but, as said by Judge Wallace in Re Gaylord (C.C.A.2d 112 F. 668, 670, 7 A. B. R. 1, 3: "The testimony of the bankrupt throughout his examination at the first meeting of the creditors was so evasive and disingenuous as to discredit his truthfulness, but his discharge cannot be defeated upon such a consideration. It is incumbent upon the opposing creditor to establish satisfactorily that the particular statements on which perjury is predicated were false. They cannot be found to be false upon mere conjecture."
Aside from the considerations to which I have just referred and from which I find that bankrupt was not intentionally testifying falsely, for the reasons heretofore stated, in view of the fact that there was no interest which a trustee would take under the will, I do not see how the questions and answers were material anyway.
I find that specification 2 has not been sustained and should be dismissed.
As to specification 3, aside from the fact that there was no trustee of bankrupt's estate and no receiver, custodian, marshal or other officers of the court charged with the control or custody of bankrupt's assets, the findings which I have made with regard to specifications 1 and 2 demand a finding that this specification also has not been sustained and should be dismissed.
I find that all three of the specifications should be dismissed, and I recommend that bankrupt's application for a discharge be granted.
The special master has been occupied in this matter as follows: Hearing October 17, 1933, time one-half hour, examination of record and preparation of report December 12, 1933, March 3, 4, 6, 7, and 8, 1934, six hours, total time six and one-half hours and, pursuant to Bankruptcy Rule 26, I request that my fee be fixed at $5 per hour, in the sum of $32.50.
All of which is respectfully submitted.
Emerson Sperling, of New York City, for bankrupt.
Louis F. Stumpf, of New York City, for opposing creditor.
Ordered, adjudged and decreed that the report of the Hon. Peter B. Olney, Jr., Referee in Bankruptcy, sitting as special master, dated March 13, 1934, be and the same hereby is in all respects confirmed.