Kentile Floors, Inc. v. Clifford L. Winham and Corinne Winham, Bankrupts

In this bankruptcy proceeding a creditor, Kentile Floors, Inc. (Kentile), objected on several grounds to the general discharge of the bankrupts, Clifford L. Winham and Corinne Winham, who operated Winham’s Floor Coverings, a sole proprietorship. After a hearing, the referee held for Kentile on all grounds asserted, and denied a general discharge. On review the district court rejected the referee’s findings and held that the Winhams were entitled to a general discharge. This appeal followed.

For a number of years the Winhams operated a small residential floor covering business in Phoenix, Arizona. In 1963 they ventured into the field of comercial floor coverings. Previously they had been procuring materials through Kentile’s distributor. Discussions between the Winhams and representatives of Kentile, early in 1964, resulted in an arrangement involving purchases directly from Kentile.

Under this arrangement, Kentile granted the Winhams credit in the amount of $75,000, which was sufficient to handle the commercial jobs the latter then had under contract. Kentile thereafter extended credit whenever it filled an order for materials placed by the Winhams. When bankruptcy proceedings…