Opinion
Department One
Appeal from a judgment of the Superior Court of Merced County, and from an order refusing a new trial.
COUNSEL:
The publication of notice to creditors was sufficient. (Wilson v. His Creditors , 55 Cal. 476; S. & L. Soc. v. Thompson , 32 Cal. 347; Mich v. Mayhem , 51 Cal. 514.) The fact that the defendant omitted to include in his schedule a portion of his property was not conclusive evidence of fraud, and the instruction to the contrary effect was erroneous. (Tevis v. Hicks , 41 Cal. 125.) The preference given to certain creditors did not vitiate the discharge. (Act of March 31, 1876, sec. 8.)
Schell & Bond, and R. H. Ward, for Appellant.
Wigginton, Creed & Hawes, for Respondent.
The fact that the creditors were cited to appear before the county judge on the thirtieth day after the first publication of the notice rendered the notice and publication ineffectual, as the creditors were entitled to the whole of the interval of thirty days within which to appear. (Code Civ. Proc., sec. 12; McDonald v. Katz , 31 Cal. 168; Hastings v. Cunningham , 39 Cal. 141; Cerf v. Oaks , 59 Cal. 133.) The omission of property from the schedule was fraudulent. (Civ. Code, secs. 1573, 1574; McDaniel v. Baca , 2 Cal. 338; S. C., 56 Am. Dec. 339.)
JUDGES: McKinstry, J. Paterson, J., and Temple, J., concurred.
OPINION
McKINSTRY, Judge
The action was brought on a promissory note, the defense being a discharge under the Insolvency Act of 1852. It is urged by plaintiff (respondent) that the County Court never acquired jurisdiction of the estate of the defendant, alleged insolvent, because there was no sufficient publication of a notice for the appearance of his creditors. By an amendment of the Insolvent Act of 1852, the county judge, on the filing of the insolvent's petition, was required to order the clerk to issue notice calling the creditors to appear on a specified day, not less than thirty days from the first publication of the notice. (Stats. 1863, p. 750.) In Grimes v. His Creditors, the first publication was on December 7, 1878; the return day was January 6, 1879. The order of the judge and the publication thereunder were sufficient to bind the creditors of the insolvent. (Wilson v. His Creditors , 55 Cal. 476.)
The court below, as portion of its charge, read to the jury sections 2, 3, 4, 7, 27, 28, 29, and 32 of the Insolvent Law of 1852, and section 8 of the act of March 31, 1876 (Stats. 1875-76, p. 582); and then instructed the jury:
" If you [14 P. 179] believe from the evidence that the defendant, I. C. Grimes, violated any of this law, or failed in any manner to fully comply with all provisions and requirements of said law, your verdict must be for the plaintiff.
" These insolvency proceedings are novel and extraordinary, created by statute in derogation of the common law, and should be strictly enforced. The proceedings in insolvency are special, and no intendments can be made in favor of the jurisdiction. Everything bearing upon that question must appear affirmatively." The defendant duly excepted.
The instructions were erroneous and misleading. They did not alone submit to the jury the issue whether the defendant had committed any of the frauds, or been guilty of the misconduct mentioned in section 32 of the act of 1852, and in section 8 of the act of 1876. But they also left to the jury to decide, and apparently informed them that their verdict should turn on the decision, whether the defendant had literally complied with the requirements of sections 2, 3, and 4 of the act of 1852, which treat of the form and contents of the insolvent's petition, his schedule, and his oath. But the petition, schedule, and affidavit were introduced as evidence in the present action, and were proved by record. Whether they were defective "in any manner" was a question of law for the court, and ought not to have been submitted to the jury. If such was not the intention of the instructions, but one other meaning can reasonably be given them. They must have been intended to inform the jury it was their duty to inquire whether the petition or schedule or oath contained any statement which was false, and, if they found such false statement, to render a verdict for the plaintiff. But if that interpretation can be given the instructions, they were clearly erroneous, since they eliminated from the conditions which would justify a verdict for plaintiff the element of fraud. (Tevis v. Hicks , 41 Cal. 128; Dean v. Baker , 64 Cal. 232.) Thus, for instance, the jury were told that the insolvency proceedings were "novel and extraordinary," in derogation of common law, and "special"; and if the defendant had failed in any manner to comply with section 4, their verdict must be for the plaintiff.
The clause of the instructions given, that everything bearing on the question of "jurisdiction" must appear affirmatively, is, like the rest, somewhat ambiguous. If by jurisdiction was meant the power of the County Court to enter the judgment of discharge, no question as to its power could arise, except such as were presented in the record of the proceedings in Grimes v. His Creditors. Every such question was one of law which it was the duty of the court in this action to decide. If the record in Grimes v. His Creditors showed want of jurisdiction, the court below should not have admitted it in evidence. No other objection to the jurisdiction has been argued than the one considered at the beginning of this opinion. It was not for the jury to inquire whether the judgment discharging defendant Grimes from his debts was or was not valid, as they should deem the publication of notice to creditors was or was not sufficient. The question for the jury to determine was, whether the defendant, having had the benefit of the Insolvent Act, "had concealed any part of his property or estate, or given [knowingly] a false schedule, or committed any fraud under the provisions of the act" of 1852 and its amendments. (Stats. 1852, sec. 32, p. 75.)
The court below told the jury that if defendant violated or in any manner failed to comply with section 8 of the supplemental act of 1876 (Stats. 1875-76, p. 582), the verdict must be for the plaintiff.
This was error. The mere giving of a preference to one creditor, without intent to delay or defraud others, is not in itself, and independent of the statute, a fraud. Section 8 of the act of 1876 provides that the assignment of any part of an insolvent's estate, within two months prior to his filing his petition, is void, and that the assignee may recover the property attempted to be assigned. The penalty imposed upon an attempt to prefer a creditor within the four months is the recovery [14 P. 180] by the assignee in insolvency of the property which the insolvent has sought to transfer. If section 32 of the act of 1852 refers at all to section 8 of the act of 1876, still to constitute a fraud, as against a creditor, which can be asserted after the discharge, it must at least be made to appear that the assignment was not made "in the usual and ordinary course of business of the debtor."
Judgment and order reversed, and cause remanded for a new trial.