In Re Ford, 14 F.2d 848 (W.D. Wash. 1926)

US District Court for the Western District of Washington - 14 F.2d 848 (W.D. Wash. 1926)
September 23, 1926

14 F.2d 848 (1926)

In re FORD.

No. 7648.

District Court, W. D. Washington, N. D.

September 23, 1926.

*849 John J. Kennett, Kenneth Durham, and Ray M. Wardall, all of Seattle, Wash., for bankrupt.

Warren H. Lewis, of Seattle, Wash., for objecting creditor.

NETERER, District Judge.

The act of June 25, 1910 (Comp. St. ยง 9598), reads:

"* * * (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 word "credit" comes from the Latin word "credere," to trust, and may be said to imply ability by reason of property or estates to make promised payment. Bouv. Law Dict. says: "Credit: The ability to borrow on the opinion conceived by the lender that he will be repaid. A debt due in consequence of a contract of hire or borrowing of money. The time allowed by the creditor for the payment of goods sold by him to the debtor." "Credit" requires a debtor and creditor relation.

The obtaining of the surety bond did not create the relation of debtor and creditor; no "money or property" on credit was obtained from the surety company. The relation pertained to the future. The act, supra, says that the statement must be "made by him to any person or representative for the purpose of obtaining credit from such person." The relation of debtor and creditor is a prerequisite. The bonding company became a guarantor, and not a creditor. A guarantor is one who makes a guaranty. A guaranty is an undertaking to answer for another's liability, and collateral thereto; a collateral undertaking to pay the debt of another in case he does not pay it. Dole v. Young, 24 Pick. (Mass.) 252.

While the policy of the law is to refuse a discharge to a person guilty of practicing fraud, the court may not legislate and extend the plain provisions of the statute. While a collateral liability was created from the bankrupt to the surety company, the relation of creditor on the part of the surety company had not been created. The Circuit Court of Appeals, in Re Bleyer, 215 F. 896, 132 C. C. A. 236, did, in substance, hold that "credit" meant pecuniary benefit; but in that case the relation of debtor and creditor was created between the bank and the corporation of which the bankrupt was an officer and stockholder, and the money obtained was obtained for the use of the bankrupt, and the court said:

"Where it clearly appears that the bankrupt has obtained personal pecuniary benefit from false statements, whether regarding his own property or the property of some one else, he does that which prevents him from securing a discharge."

All of the relations, however, were presently created by the bankrupt fraudulently obtaining the money in the name of his corporation. In Re Oliner, 262 F. 734, the same court explicitly held that a provision of the Bankruptcy Act is not to be extended by construction. In Re Tanner (D. C.) 192 F. 572, Judge Rudkin said:

"In my opinion * * * the indemnity bond in question is not property within the meaning of the statute, and, if it is, it was not obtained on `credit,' because the relation of debtor and creditor did not exist *850 after the bond was obtained any more than before."

The Act of February 5, 1903 (32 Stat. 797), denied the discharge where a person obtained property on credit; the amendment of June 25, 1910, enlarges the provision to "money or property," but does not change the relation or status of the parties. The bond, not being property, is not made money by the amendment, supra.

The demurrer is sustained.