The Federal Reporter with Key-Number Annotations, Volume 250: Cases Argued and Determined in the Circuit Courts of Appeals and District Courts of the United States, August-October, 1918. Page: 994
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250 FEDERAL REPORTER
Appeal from the District Court of the United States for the South-
ern District of New York.
In the matter of William Kerner, alleged bankrupt. From an order
confirming the report of a special master recommending the creditor's
objections to an offer of composition made before adjudication be
sustained (245 Fed. 807), the bankrupt appeals. Order reversed.
Lester M. Friedman, of New York City, for appellant.
Charles H. Broas, of New York City, for appellee.
Before WARD, ROGERS, and HOUGH, Circuit Judges.
ROGERS, Circuit Judge. It appears that the alleged bankrupt made
application for the confirmation of a composition offered by him, and,
objection having been made by a creditor, confirmation has been de-
nied by the District Judge, who has confirmed the report of the spe-
cial master, recommending that the creditor's objections be sustained.
 The composition proposed was made before adjudication and
involved a payment of 30 per cent. in cash and notes. The offer has
been accepted by a majority both in number and amount of all the
creditors. The objection is by one creditor, whose claim amounts to
$445.34. The objection relied upon is that the alleged bankrupt had
made a materially false statement of his financial condition, and had
obtained credit from the said objecting creditor upon the faith of
The alleged bankrupt was in the cloak and suit business, and was
asked by the objecting creditor for a financial statement, which was
furnished in January, 1917, and was made as of November 30, 1916.
The statement omitted from the assets spring merchandise to the
amount of $6,000, and from the liabilities $6,000, being the amount
owing for the aforesaid merchandise. The amount of the omitted
assets and the amount of the omitted liabilities thus equaled each
other; and the alleged bankrupt offered to prove at the hearing, but on
objection was not permitted by the special master to do so, that it
was the custom in the cloak and suit business not to include in a state-
ment any merchandise which had been received for the following sea-
son. The special master in his report, in alluding to this, says:
"Evidence to this effect was excluded, because it seems to me that, if a
financial statement, with such omissions, is unlawful, as I hold it to be,
it makes no difference whether there is, or is not, such a custom in the
cloak and suit trade as that alleged."
Bankruptcy Act July 1, 1898, c. 541, 14b, 30 Stat. 550, provides
for a discharge of the applicant unless he has, among other things,
"obtained property on credit from any person upon a materially false
statement in writing made to such person for the purpose of obtain-
ing such property on credit." The above provision was not in the
statute as originally enacted, but was added in part by an amendment
made in 1903 (Act Feb. 5, 1903, c. 487, 4, 32 Stat. 797), and in part
by an amendment made in 1910 (Act June 25, 1910, c. 412, 6, 36
Stat. 839 [Comp. St. 1916, 9598]). The words "a materially false
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The Federal Reporter with Key-Number Annotations, Volume 250: Cases Argued and Determined in the Circuit Courts of Appeals and District Courts of the United States, August-October, 1918., legislative document, 1918; Saint Paul, Minnesota. (digital.library.unt.edu/ark:/67531/metadc38821/m1/1009/: accessed April 26, 2017), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.