Opinion
No. 94.
November 1, 1945.
Appeal from the District Court of the United States for the Southern District of New York.
Proceeding in the matter of Fred Kolb and another, individually and as copartners doing business under the firm name and style of Kolb Segall, bankrupts, wherein Louis Kassvan and another, copartners doing business under the firm name and style of Kassvan Kassvan, creditors, objected to discharge of the bankrupts because of their refusal to divulge the names of certain persons to whom they claimed to have paid commissions. From an order of the District Court, reversing the decision of the referee in bankruptcy denying bankrupts' application for a discharge, and granting the discharge, the objecting creditors appeal.
Affirmed.
This is an appeal from an order of the District Court, reversing the decision of the Referee in Bankruptcy, who denied the bankrupts' application for a discharge.
In the course of an examination by the Trustee in Bankruptcy, the bankrupts refused to divulge the names of certain persons to whom they claimed to have paid commissions, solely on the ground that such answers might tend to incriminate them. The Referee was not present during the questioning, and at that time the trustee did not ask for a ruling on the materiality of the questions, or for a direction to the bankrupts to answer.
At the subsequent hearing before the Referee, appellants, as objecting creditors, specified bankrupts' refusal to answer as sufficient reason for the denial of the discharge, citing § 14, sub. c(6) of the Bankruptcy Act, 11 U.S.C.A. § 32, sub.c(6), which provides that the court may deny an application for a discharge if it appears that the bankrupt has refused "to answer any material question approved by the court. * * *" The Referee found that the unanswered questions were material, and sustained the objection to the discharge. The District Court accepted the finding as to materiality, but reversed, and granted the discharge, on the ground that the requirement that the questions be "approved by the Court" had not been met.
Krause, Hirsch, Levin Heilpern, of New York City (Elliot L. Krause, of New York City, of counsel), for objecting creditors-appellants.
Harold M. Geller, of New York City, for bankrupts-appellees.
Before L. HAND, CHASE, and FRANK, Circuit Judges.
The questions were undoubtedly material. The sole issue is whether the refusal to answer, without any previous approval by the Referee, is sufficient to deny the bankrupts their relief. Appellants contend that the bankrupts, in failing to object to the questions when asked, conceded their materiality, and waived the express approval by the Court. We think the District judge was correct in rejecting this contention and in concluding that "it is the obligation of the examiner to have the form and the merits of the question on which the right to a discharge may subsequently depend approved by the court, once reluctance to answer is asserted. It is not impossible that a mere ruling by the court might curb the persistence of the witness in his refusal to answer." Before any penalty is imposed on such refusal, there should be at least some indication of the Court's approval of the question posed. A bankrupt need not decide the issue of materiality at his peril.
In re Weinreb, 2 Cir., 153 F. 363, has no application here; as correctly interpreted by the District judge, it dealt with a case where the bankrupt had refused to answer after the Referee had ruled that he should.
Affirmed.