Section 14b(3) of the Bankruptcy Act which withholds a discharge
from a bankrupt who obtained money or property on credit upon a
materially false statement in writing, made by him to any person or
his representative for the purpose of obtaining credit from such
person, applies where the bankrupt through his false statement
obtained a loan for a corporation controlled by him and in which he
was largely interested as a stockholder and creditor. P.
276 U. S.
283.
16 F.2d 769 affirmed.
Page 276 U. S. 282
Certiorari, 274 U.S. 731, to a judgment of the circuit court of
appeals affirming a denial of a discharge in bankruptcy.
MR. JUSTICE HOLMES delivered the opinion of the Court.
Levy, a bankrupt, was denied a discharge by the district court,
and the denial was affirmed on appeal by the circuit court of
appeals. 16 F.2d 769. In view of a conflict between this decision
and
In re Applebaum, 11 F.2d 685, a writ of certiorari was
granted by this Court. 274 U.S. 731. The conflict concerns the
construction of § 14b(3) of the Bankruptcy Act. (July 1, 1898, c.
541, 30 Stat. 550; Act June 25, 1910, c. 412, § 6, 36 Stat. 838,
839). By that section,
"the judge shall . . . discharge the applicant unless he has . .
. (3) obtained money or property on credit upon a materially false
statement in writing, made by him to any person or his
representative for the purpose of obtaining credit from such
person."
The facts that raise the question are found to be as follows.
The bankrupt was president of the American Home Furnishers
Corporation, had the general management and control of it, had made
large advances to it, and with his sister-in-law owned more than
two-thirds of the stock; he obtained a loan of $1,500,000 to the
corporation from the objectors, and, in order to obtain it, made to
them a statement in writing, known by him to be false, which very
materially overstated the assets of the corporation. There is no
doubt of his pecuniary interest in the result of the fraud found to
have been practiced by
Page 276 U. S. 283
him, but it is said that he did not obtain money by this fraud,
inasmuch as the money went to the corporation, and not to him.
A man obtains his end equally when that end is to induce another
to lend to his friend and when it is to bring about a loan to
himself. It seems to us that it would be a natural use of ordinary
English to say that he obtained the money for his friend. So when
the statute speaks simply of obtaining money, the question for whom
the money must be obtained depends upon the context and the policy
of the act. It would seem that, so far as policy goes, there is no
more reason for granting a discharge to a man who has fraudulently
obtained a loan to a corporation which is owned by him and in which
his interests are bound up than for granting one to a man who has
got money directly for himself.
In re Dresser & Co.,
144 F. 318. It is true that the narrower construction is somewhat
helped by the words "for the purpose of obtaining credit from such
person," which naturally would be taken to mean for the purpose of
obtaining credit for himself, and so would fortify the
interpretation that only immediate benefit was contemplated. But we
cannot think it possible that the statute should be taken to allow
an escape from its words, fairly read, by the simple device of
interposing an artificial personality between the bankrupt and the
lender. We go no farther than the facts before us, and, without
intimating that our decision would be different, we express no
opinion as to how it would be if the bankrupt had no substantial
pecuniary interest in the borrower's obtaining the loan. The later
amendment by the Act of May 27, 1926, c. 406, § 6, 44 Stat. 662,
663, serves to limit the bars to a discharge more narrowly and by
indirection to favor the defendant's position by a change of the
words to "a materially false statement . . . respecting his
financial condition."
Page 276 U. S. 284
But that statute did not govern this case, and cannot be invoked
for the construction of the earlier law. As to the suggestion in
In re Applebaum that the language before us may have been
drawn from the original statute of false pretenses (referring, we
presume, to St. 30 Geo. II, c. 24), and that the words should be
taken with the construction first given to them, it is enough to
reply with the Court below that it is equally likely that they were
taken from a more modern source, and were used with knowledge of
the broader interpretation of later days.
Decree affirmed.
MR. JUSTICE STONE took no part in the consideration or decision
of this case.