Sullivan v. Washburn & Moen Manufacturing Co.

The Washburn & Moen Manufacturing Company, a creditor of Thomas Sullivan, an insolvent debtor, appeals from an order of the superior court granting a discharge to the insolvent and from an order denying the creditor’s motion for a new trial of the opposition to the discharge. The respondent moved the court to dismiss both appeals. »

The motion to dismiss the appeal from the order granting the discharge is put upon the ground that the appeal was not taken within sixty days after the order was entered in the minutes of the court. It appears from the record that, upon the filing of the insolvent’s petition for his discharge, the appellant filed written specifications of the grounds of his opposition thereto, to which the debtor filed his answer. Upon the issues thus raised a trial was had, evidence heard, and the cause submitted to the court for decision. Thereupon, on January 13, 1899, the court announced its decision in the matter, and caused a minute order to be entered as follows: “It is ordered by the court that the application for final discharge be and the same is hereby granted.” Thereafter, for some reason not explained in the record, there was a delay of nearly a year, and on January 5, 1900, the court

We have discussed this question upon the theory that an appeal must be taken from an order granting or refusing to grant the application of an insolvent for a final discharge within sixty days from the entry of the order. We do not wish to be considered as deciding that this is correct. Subdivision 3 of section 939 of the Code of Civil Procedure provides that an appeal from certain orders therein described shall be taken within sixty days after the order is entered, and from this the respondent argues that the present appeal should have been taken within sixty days from the time the order in question was entered. There is, however, no description of an order in that subdivision which would include an order granting a discharge. Whether or not such an order is

The motion to dismiss the appeal from the .order denying a new trial is based on the proposition that in proceedings in insolvency relating to applications for discharge there can be no such thing as a new trial, and, consequently, that the proceedings for a new trial were wholly nugatory. We do not consider the point well taken. We think the Insolvency Law clearly implies that a motion for a new trial is proper in an insolvency proceeding where issues have been formed which require a trial as in an ordinary civil case. Section 54, above quoted, provides that the trial of proceedings for discharge shall be according to the practice provided in civil actions. A similar provision is contained in section 12 of the act with respect to the trial of the issue of insolvency upon a creditor’s petition in involuntary insolvency, and in section 71 it is provided that an appeal may be taken to the supreme court from an order granting or overruling a motion for a new trial. It is clear that the statute contemplates that motions for new trial may be made and granted, and, although there is no express provision for such a proceeding, we think it is necessarily implied from the provisions we have mentioned. It follows, therefore, that the appeal from the order denying a new trial should not be dismissed.

The grounds upon which the appellant founded his opposition to the petition for discharge were,—1. That the insolvent being a merchant, did not keep proper books of account; and 2. That within one month prior to the commencement of the proceedings he transferred all of his property to his mother for the purpose of preferring her as a creditor, and for the purpose of preventing his property from being distributed to his creditors under the Insolvent Act.

With reference to the books of account, it appears from the evidence that the insolvent owed thirty thousand dollars to his mother, Elizabeth R. Sullivan, upon a promissory note executed in the first instance about the time he began business in 1890, and renewed on May 15, 1896; that he also owed her, for moneys advanced, over nineteen thousand dollars

It is claimed that an account was kept of the thirty thousand dollars. The only memorandum which had any reference thereto was a certain book containing blank notes with stubs attached thereto, which was kept for the convenience of the insolvent and his customers on occasions when, either with reference to the business or for their own private use, notes would be called for. On one of these stubs appears this memoranda: “$30,000, August 23, 1890; drawn by T.; due; demand; No. 1.” It is very clear that no person by the inspection of these ambiguous figures in the stub of a notebook could understand that any one held a claim against the insolvent for the amount stated, or for any amount. The memorandum comes far from the “proper books of account” which the statute requires should be kept by a merchant. "

With regard to the account of nineteen thousand dollars for money advanced by Elizabeth R. Sullivan, it appears that a book was kept in the store of the insolvent, marked “E. R. S.,” in which was contained entries of moneys received and paid out by him as agent for his mother. This book contained no other entries, and did truly show the state of the account between himself and his mother, but it contained nothing whatever to show that the money received by him for his mother was used by him in the business he was carrying on in the store. It was not treated or considered as one of the books pertaining to the business. The other items which, it is claimed, were not entered in the books have no entry relating to them whatever, except that the bookkeeper says that they Were shown in the cash account. This cash account he says also included the cash received by the insolvent from the moneys collected by him as agent for his mother. It appears from the testimony that although there was in the cash-book an item of cash received or cash on hand (and the evidence

The court finds that the insolvent did keep proper books of account, and, further, that none of his creditors ever inspected or asked to inspect his books or were in any respect deceived by the manner in which he kept his books, and that the insolvent was at all times ready to make true exhibit of all the matters connected with the business if he had been solicited so to do. It is claimed by the respondent that these further findings constitute an answer to the charge that he did not keep proper books of account. The fact that the wrongful method of keeping books was followed in good faith and without intention to defraud, or that no creditor was deceived thereby, or that credit was not obtained by any false appearance caused by the failure to enter items in the books, is, however, no excuse for the insolvent, and does not give him the right to a discharge. This was held in the case of In re Good, 78 Cal. 399 . The court says with respect to the good faith of the insolvent partners, which was involved in that case: “This might be material if it were proposed to inflict a positive punishment on them. But no crime is charged against them. They were simply offered a valuable privilege upon certain conditions; and they have not complied with the conditions. ... We do not think that a set of books which says that the firm was in good condition, when in fact it was utterly insolvent, can be held to be ‘proper’ in any view.”

With respect to the transfer to his mother, the evidence is of somewhat doubtful character. Although, no doubt, the effect of the transfer would have been to prefer his mother as

The defendant objects to the consideration of the sufficiency of the evidence at all, upon the ground that it appears in the bill of exceptions that certain evidence, which had been given upon the hearing of a contest as to the validity of the claims of the mother and aunt against the insolvent, was by stipulation considered as evidence in the trial of this proceeding for discharge, and that it is not set out in the bill. The notice of intention to move for a new trial stated, as one of the grounds upon which the motion would be made, that the evidence was insufficient to justify the decision. One of the specifications of the particulars of this insufficiency contained in the bill of exceptions was, that the evidence was not sufficient to justify the finding that the insolvent did keep proper books of account. Upon this notice and specification the bill was settled by the judge as full, true, and correct, and at the same time the attorneys for the respondent stipulated that the bill, as settled, is full, true, and correct. It appears from the bill itself that the evidence concerning the books kept by the insolvent was full and complete. The insolvent and his bookkeeper were witnesses. Their testimony is fully reported, and there is no hint that any books were kept except those fully described in their testimony. It is evident that the bill contains all the evidence upon which the insolvent relied to show that he kept proper books. The evidence not in the bill, and which was admitted under the general stipulation, was given upon other issues, and there is nothing indicating that it was pertinent or relevant to this question. From the nature and completeness of the evidence which is set out, we do not perceive how the matters omitted could qualify or contradict that which is given concerning the books or the claims. It is the duty both of the court and of the parties to exclude from the bill all irrelevant and useless matter, and it is to be presumed that the performance of this

The motions to dismiss the appeals are denied.

The judgment and order are reversed, and the cause remanded for a new trial.

Angellotti, J., and Van Dyke, J., concurred.