In the Matter of Albert M. Barbato, Bankrupt, Royal Indemnity Company, a Corporation of the State of New York, a Creditor

Appellee, Albert M. Barbato, was a general contractor who, immediately preceding his bankruptcy, was engaged in federal construction projects which necessitated his obtaining performance and payment bonds. He applied to appellant, Royal Indemnity Company, to act as surety on these bonds and in this connection appellant requested semi-annual financial statements. In January, 1964, Erich Stier, accountant for the bankrupt, prepared a financial statement as of December 31, 1963 based on the financial records of the bankrupt which were kept on a cash basis. The statement showed the accounts…