Opinion
No. 6564.
August 25, 1943.
Mabry Carstarphen, of Shreveport, La., for bankrupt.
Samuel P. Love, of Shreveport, La., for Bossier State Bank.
Proceedings in the matter of Robert L. Wyche, Jr., bankrupt, on opposition of the Bossier State Bank to the discharge of bankrupt. On application of opponent to review order of referee overruling opposition and recommending discharge.
Order of referee affirmed and bankrupt discharged.
The opinion of Referee Grimmet follows:
In this case Robert L. Wyche, Jr., was adjudicated a bankrupt on November 12, 1942, upon his voluntary petition, which was filed on the same date. The first meeting of creditors was held on November 24, 1942, at Shreveport, Louisiana, at which the bankrupt was examined.
Notice of return day for filing of opposition to bankrupt's discharge was mailed to all interested parties on December 3, 1942.
On December 23, 1942, the Bossier State Bank of Bossier City (Shreveport P.O. Station), a creditor, filed opposition to bankrupt's discharge and set forth in the specifications of objections the following grounds, as follows, to-wit:
"(a) Because of the failure on the part of the said Robert L. Wyche, Jr. to list certain assets in his schedule, particularly two $25.00 United States War Bonds, said bonds being the property of the said bankrupt, but placed in the name of his wife.
"(b) By concealing the said above two mentioned United States War Bonds fraudulently, wilfully and knowingly intending to defraud and defeat the creditors of their rights to said bonds.
"(c) That said bankrupt wilfully, knowingly and falsely omitted from his schedule a certain sum of cash money belonging to the bankrupt and in his possession at the time of the preparing of the schedule or the filing of same, the exact amount of money opponent is unable to say, but in the neighborhood of between $15.00 and $100.00.
"(d) That said bankrupt wilfully, intentionally, knowingly and fraudulently failed and refused to list the amount of accrued salary due unto the said bankrupt by his employer, Silas Mason Company, between the last pay day and the date of the filing of the schedule in bankruptcy; that said sum is unknown to opponent but will be shown on the trial hereof.
"(e) That said bankrupt knowingly, wilfully, fraudulently and falsely made a false oath to the schedule in bankruptcy filed herein in that said bankruptcy schedule does not now nor did they at the time of the filing thereof, contain a true and correct status of the bankrupt's affairs; that said schedule does not contain the names of all of the creditors of said bankrupt, although a false oath was made to that effect; that said bankrupt did not list all of his creditors particularly the H.H. Holt Service Station and W.R. Allen Grocery Store, and others whose names are unknown to your opponent at this time but will be shown on the trial hereof.
"(f) That the bankrupt making a false oath in his schedule has committed a violation of Section 29 B(2) and bars his discharge under Section 14 B(1) of the Bankruptcy Act [11 U.S.C.A. § 52, sub. b(2) and § 32 sub. c(1)].
"(g) That the said bankrupt fraudulently, wilfully and knowingly failed to list in his schedule one Model T Ford Pick Up Truck, although one-half interest in and to said Model T. Ford Pick Up Truck belongs to the bankrupt despite an attempt on the part of said bankrupt to give said one-half interest, in 1938 or thereabouts, to his wife there being no consideration for same and only in an attempt to divert same to the separate estate of his wife.
"(h) That it is possible the bankrupt failed to list other property presently unknown to your petitioner, but which will be attempted to be shown on the trial hereof, all of which was done in violation of the National Bankrupt Act and was done with the intent of defrauding the creditors."
The bankrupt on January 14, 1943, filed an answer to the specifications of objections, in which he alleged that amended schedules had been filed.
A summary of the answer is as follows:
(a) That bankrupt listed in his amended schedules and surrendered two U.S. Savings Bonds, purchased by him through his employer, Silas Mason Company; said company withholding a portion of his wages each payday to pay for said bonds. One of the bonds had not been completely paid for on the date of adjudication.
(b) Bankrupt denied that he wilfully and knowingly intended to defraud his creditors by omission of said bonds but thought they were not considered a part of his assets, and were payable to his wife.
(c) Bankrupt denies that he wilfully or fraudulently omitted the amount of cash on hand in his original schedule; that the amount he had on hand was $40, which was paid to his attorney to cover Court costs and that he agreed to pay his attorney $50 attorney's fee.
(d) He listed in his amended schedules the accrued but unpaid wages that he had earned up to November 11, 1943, or $41.67; bankrupt alleges that he thought that the wages were exempt and that they had also been seized under garnishment proceedings.
(e) Bankrupt admits failure to list two creditors, H.H. Holt and W.R. Allen Grocery store, but denies that he did so wilfully and with intent to defraud his creditors.
(f) He denies that he made a false oath.
(g) He admits that he failed to list a truck, which it is alleged that he owns, and further pleading, alleges that the truck is the separate property of his wife, Mrs. Wynema Wyche; that one-half interest in said truck was given to his wife by R.L. Wyche, Sr., and that in October, 1940, bankrupt donated his one-half interest to her and that she has owned the truck since that time and has had the license from the State of Louisiana issued in her name both for the year 1941 and 1942.
There is not much controversy over the facts. The question in this case is whether or not the acts alleged are legal grounds for denying the bankrupt a discharge.
It is proper here to state that the jurisprudence is well established that the act of the bankrupt complained of must have been made or done with a wilful and fraudulent intent to justify denial of bankrupt's discharge. Collier, 14th Ed., Vol. 1, p. 1360, provides: "In order to justify a refusal of discharge under Sec. 14c(4), it must be shown that the acts complained of were done with an intent to hinder, delay, or defraud his creditors. This intent, moreover, must be an actual fraudulent intent as distinguished from constructive intent." See authorities cited.
In this case, admitting the allegations of opponent, we find the total value of the assets would not exceed $50.00: —
The U.S. Savings Bonds have a value of $18.75 each, total $37.50; the wages earned but unpaid at Silas Mason Company, after exemption, would net practically nothing; the alleged one-half interest in a six year old truck, which is mortgaged for almost its value, if not quite its value, would net nothing; the accounts due from negro tenants, who farmed in 1941 on a rented plantation and were unable to pay the amount due bankrupt at the end of the year, and which accounts the bankrupt gave them when he left the farm, are worthless and nothing can be realized therefrom.
Coming now to the count that charges bankrupt concealed his Savings Bonds the evidence shows that the bankrupt thought the bonds matured in 10 years and were not valuable until that time. The bonds were issued to Robert L. Wyche, Jr., and in case of his death to Wynema Wyche; said bonds are not transferable. Treasury Circular 653 outlines the method of obtaining payment from the United States in cases where the bonds are to be paid prior to maturity. The bankrupt testified at the first meeting of creditors November 24, 1942, that he owned the bonds and agreed on that date to surrender them and within six days he brought the bonds to his attorney's office. Amended schedules were later filed and the bonds attached. The trustee was unable to liquidate the bonds and it was necessary for Mr. Robert L. Wyche, Jr., the bankrupt, to sign all papers, and after that was done the Government issued the check payable, not to the trustee, but to Robert L. Wyche, Jr., and he then endorsed the check to the trustee who deposited the fund in the trustee account under the jurisdiction of the Bankruptcy Court. I have been unable to find the authority for seizing and selling a bond of this series, which is U.S. Savings Bond, Series "E". Since both lawyers and the Court itself are unable to cite authority for seizing and selling bonds of this character, it must follow that a layman cannot be charged with bad faith in concluding that a bond that is not transferable is exempt. Even though the bonds are assets and should have been surrendered, it would not be a sufficient offense to deny a bankrupt a discharge, if he honestly thought the bonds were exempt and not an asset. He stated that he thought that since his wife's name was written on the bonds they were payable to her. The conduct of the bankrupt in this matter is not reprehensible and he should not be denied a discharge.
There is no evidence supporting the count that bankrupt concealed cash. He testified at the first meeting that he may have had a few dollars but he was not sure how much, or if he had any, but on the trial of the opposition he explained it by stating that he had $40 and gave it all to his attorney to pay the filing fee and the cost of Court. No evidence has been offered to contradict this statement.
The bankrupt failed to list the amount of salary that had been earned and not paid up to November 11, 1942, the day prior to the filing of his bankruptcy petition. He claimed that he did not think this was necessary as his salary was under garnishment, which is true, and the creditor opposing the discharge was one of those having the garnishment. The failure to list earned salary is a common occurrence in bankruptcy and is often overlooked by both the bankrupt and his attorney. There is no wilful or fraudulent intent present in this case by the omission. However, the bankrupt filed an amended schedule listing the amount due.
(e) Bankrupt admits that he omitted from his schedule H.H. Holt Service Station and W.R. Allen Grocery Store, but he denies that he did so with fraudulent intent as he intended to pay those two creditors the amount he owed them. It is true that he should have listed these two creditors as the Bankruptcy Act provides that all creditors should be listed in the schedules; however, he in this instance filed an amended schedule and did list these two creditors. There could have been no fraudulent intent in failing to list a creditor in this case, for the reason that he injured no creditor and deprived no creditor of any asset or right in the bankrupt's estate, and the injury was to him, and not to the creditors, as Sec. 17 of the Bankruptcy Act, 11 U.S.C.A. § 35, provides the debt may not be discharged if not listed. The Court has held that omitting from the schedules in similar circumstances a creditor and making oath to the schedules as being correct is not a false oath within the contemplation of the Bankruptcy Act. In re Burroughs, D.C., 18 F. Supp. 921; Sharcoff v. Schieffelin Co., 2 Cir., 70 F.2d 725.
(f) The bankrupt denies that he made a false oath and the above citations support the bankrupt's contention that he did not make a false oath to his schedule. The Referee thinks it rather commendable for a bankrupt, who finds himself involved and his wages seized under garnishment, which forces him into bankruptcy, to desire to pay for the gasoline and oil necessary to enable him to work and to also desire to pay for the food he eats while working. These creditors, who were omitted from original schedule, should have been listed and then paid, but it is a mere error of judgment and not a false oath to do as he did.
(g) The bankrupt's failure to surrender a Model "T" Ford Pick-Up Truck is adequately explained by the evidence. The truck was and is the property of the bankrupt's wife and had been in her possession two years. She had obtained in her own name license plates for the operation of said truck from the State of Louisiana for the years 1941 and 1942. She had placed a mortgage on it to secure a loan. The truck was not the property of bankrupt.
The claim that the bankrupt failed to surrender debts of a number of negro debtors who worked on a rented plantation of bankrupt during the year 1941 and who were unable to pay their accounts at the end of the year is answered by the bankrupt, who testified that when he left the farm he gave the negroes the debts and cancelled them off.
Taken as a whole, the Referee considers that the several specifications of objections in this case are levelled at various small matters. Nothing is found in the record which indicates that the bankrupt is not an honorable and honest man. The bankrupt on the witness stand was ready to answer all questions propounded to him and was never evasive. He made a good impression on the Referee. This case appears to be a clean bankruptcy, in which the bankrupt is actually insolvent and has been forced into bankruptcy by his creditors seizing his salary.
All oppositions are, therefore, overruled and dismissed, and the bankrupt is hereby granted a discharge.
Appropriate order will be entered.
The Bossier State Bank, whose claim was filed and allowed, seeks a review of the ruling of the Referee recommending the granting of a discharge to the bankrupt. The bankrupt has answered, praying the adoption of the ruling of the Referee; and in the alternative, that the matter be remanded, with directions to permit trial of his allegation that the claim of the Bossier Bank had been paid since filing of the proceedings.
The grounds of the opposition were: (a) Failure to list certain assets consisting of two war bonds for the sum of $25,000 each; (b) concealing the same bonds; (c) failure to list cash "between $15 to $100"; (d) failure to list earned but unpaid salary; (e) making a false oath to his schedules in which said property and funds were omitted; (f) the violation of section 29 sub. b(2) of the Bankruptcy Statute, 11 U.S.C.A. § 52, sub. b(2); (g) failure to list a Ford pick-up truck among his assets; and (h) failure to list other property unknown to opponent.
The matter was tried before the Referee and a full record of the evidence made. After a careful review of the facts and the law, and without finding it necessary to discuss the same at this time, I am of the opinion the recommendation that the discharge be granted should be adopted. The written opinion of the Referee therefore is adopted and affirmed. It becomes unnecessary to consider the alternative question of whether, in the trial of an opposition to a discharge, the Court should go into the question of payment of the opponent's claim.
Proper decree should be presented.