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IN RE DOLNICK

March 22, 1974

IN THE MATTER OF ALVIN DOLNICK, BANKRUPT.


The opinion of the court was delivered by: Bauer, District Judge.

MEMORANDUM OPINION AND ORDER

This cause comes on the Referee's certification for review of the Referee's Order in which petitioner's application to determine the dischargeability of the debt due petitioners from the bankrupt was denied and which also discharged the bankrupt from that debt.

On March 30, 1971, the petitioners, the Bank of Ravenswood, a creditor of Alvin Dolnick, the bankrupt, filed its "Specification of Objections to Discharge" which contained, inter alia, the following allegations:

  1. On or about January 6, 1970, for the purpose of
     obtaining money upon credit from the Bank of
     Ravenswood, the bankrupt made a statement, in
     writing, to the said Bank of Ravenswood,
     respecting his financial condition, which
     statement was made with the intent to deceive the
     Bank of Ravenswood, and which written statement
     was materially false in several matters.
  2. That statement in writing materially set forth
     that said bankrupt, upon January 6, 1970, owned
     assets in the total amount of $438,000.00 and
     which consisted of cash on hand and in banks,
     $2,000.00; United States Government Securities,
     $3,000.00; Unlisted Securities, $390,000.00; Real
     Estate owned, $40,000.00; and Automobiles and
     other Personal Property, $3,000.00 and that his
     liabilities consisted of notes payable to
     banks-secured, $110,000.00; Real Estate Mortgages
     payable $18,000.00; or total liabilities of
     $128,000.00 and that he had a net worth of
     $310,000.00. By virtue of this statement, the
     bankrupt obtained from the Bank of Ravenswood the
     sum of $50,000.00 on credit. In truth and in fact,
     at the time that statement in writing was made for
     the purpose of obtaining money on credit, the
     bankrupt did not owe merely $128,000.00 nor
     substantially that amount but owed grossly in
     excess of that amount.
  3. Schedule A-2 of bankrupt's Petition reveals that
     at or about the time bankrupt executed that
     statement in writing, the bankrupt was indebted to
     the Exchange National Bank of Chicago in the
     amount of $125,000.00. More specifically, the
     bankrupt was indebted to said Exchange National
     Bank of Chicago in the amount of $82,500.00 on
     January 5, 1970 which indebtedness does not appear
     on the statement in writing delivered by bankrupt
     to the Bank of Ravenswood on January 6, 1970, this
     indebtedness was not otherwise known to the Bank
     of Ravenswood. At the time the bankrupt executed
     the financial statement in writing to the Bank of
     Ravenswood the bankrupt was indebted to the
     Columbie National Bank of Chicago in the amount of
     $20,000.00 which indebtedness does not appear on
     that financial statement, this indebtedness was
     not otherwise known to the Bank of Ravenswood. At
     the time the bankrupt executed and delivered the
     financial statement to the Bank of Ravenswood the
     bankrupt was indebted to Bear, Stearns and Company
     of Chicago, Illinois in the amount of $2,600.00
     which indebtedness does not appear on said
     statement and which indebtedness was not otherwise
     known to the Bank of Ravenswood. At the time the
     bankrupt executed and delivered the statement to
     the Bank of Ravenswood the bankrupt was indebted
     to Earl Dolnick for a substantial sum of money,
     the exact amount of which is not known at this
     time, but which indebtedness does not appear on
     said statement and which indebtedness was not
     otherwise known to the Bank of Ravenswood. At the
     time bankrupt executed and delivered the statement
     to the Bank of Ravenswood the bankrupt was
     indebted to Drs. Jacobson and Rosenstein in an
     amount not known to the Bank of Ravenswood but
     which indebtedness does not appear on said

     statement and which indebtedness was not otherwise
     known to the Bank of Ravenswood.
  4. The bankrupt did not, either at the time the
     financial statement was made, or at any date
     proximate thereto, possess, after deduction of his
     liabilities from the value of his assets, a net
     worth of $310,000.00, nor substantially such
     amount.
  5. Based upon the financial statement the bankrupt
     did obtain money upon credit from said Bank of
     Ravenswood, said statement was issued by the
     bankrupt knowing full well that the Bank of
     Ravenswood would rely upon said statement and the
     Bank of Ravenswood in reliance upon said statement
     did grant credit to the bankrupt. Further the
     statement was issued with such a reckless
     disregard by the bankrupt of the true and actual
     condition of his assets and liabilities as to
     constitute the willful issuance of a false
     financial statement with the intent to deceive the
     Bank of Ravenswood as to bankrupt's true financial
     condition.

On June 20, 1972, after hearing the relevant testimony and examining the relevant memoranda submitted by the parties in support of their respective positions, Referee Samuel Berke entered an order denying the Bank of Ravenswood's application seeking to prevent the discharge of the debt owed to the Bank of Ravenswood by the bankrupt Alvin Dolnick. Referee Berke, in this order, made the following findings of fact:

  "A. That on January 12, 1970 the Bank of Ravenswood
      completed its loan to Alvin Dolnick in the sum of
      $50,000.00 and made payment of said sum to the
      Devon Bank and simultaneously therewith received
      from the Devon Bank 10,000 shares of Pig'N
      Whistle stock having a market value as of date
      thereof of $110,000.00.
   B. That the Bank of Ravenswood agreed to, did make
      and approved the aforesaid loan to Alvin Dolnick
      on condition that it would receive collateral of
      10,000 shares of Pig'N Whistle stock as security
      therefor.
   C. That the Bank of Ravenswood made the aforesaid
      loan to Alvin Dolnick in reliance upon his
      reputation based upon inquiries theretofore made
      and contingent upon the collateral security of
      10,000 shares of Pig'N Whistle stock.
   D. That the financial statement bearing date of
      January 6, 1970 was not delivered to the Bank of
      Ravenswood prior to January 12, 1970, but, on the
      contrary, was delivered to it subsequent to the
      date that it approved the loan of $50,000.00 and
      made disbursement of the proceeds thereof.
   E. That Saul Binder had the authority, power and
      right to consider, make and approve the aforesaid
      loan to Alvin Dolnick without the consent,
      approval and authority from ...

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