In re Welch

44 N.W. 667, 43 Minn. 7, 1890 Minn. LEXIS 94

• Court: Supreme Court of Minnesota
• Decided: February 17, 1890
• Status: Published

Opinion

Dickinson, J.

This is an appeal from an order of the district court denying t'he petition of a creditor of an insolvent debtor for leave to share in the estate without filing releases. The question of fact presented to the district court upon such an application, under section 10 of the insolvent law of 1881, (Laws 1881, c. 148,) is as to whether the insolvent debtor has “fraudulently concealed, or fraudulently incumbered or disposed of, any of his property with intent to cheat and defraud his creditors.” To entitle the petitioning creditor to an order dispensing with the requirement to file a release, there must have been a fraudulent concealment, disposal, or incumbrance of property, and with the intent to cheat and defraud creditors. Mere negligence or want of prudence in business affairs, living beyond one’s income, or honest inability to show fully how his property has been expended and disposed of, do not necessarily entitle the creditor to such an order. These things are not necessarily inconsistent with good faith and honesty of purpose. In the case before us, while the debtor was confessedly unable to account for the disappearance of a considerable amount of property, it appeared that he kept no general books of account, except for charges for goods sold on credit; never made such an examination as to inform himself as to his financial condition; and made large expenditures for family expenses, without knowing what they amounted to. The case is such that the finding of the district judge, that there had not been any concealment or disposal of property with fraudulent intent, should not be disturbed on appeal.

The mere purchase of a lot of land, and constructing a residence on it, which became the debtor’s homestead, and paying for these out of the proceeds of his business, was not a fraudulent concealment or disposal of his property, entitling the debtor to the order sought. It was not even shown that he was then insolvent. Though it be conceded that, because the title to the land so purchased was conveyed to the wife of the purchaser, a trust may have resulted in favor of his creditors, as provided by Gen. St. 1878, c. 43, § 8, that alone does not avail the creditor in this application. This is not a proceeding to have such a trust declared, nor to enforce it; and it is immaterial whether or not the facts may have been such as to give rise to a resulting trust, if those facts do not present also a case within the provisions of the insolvent law above recited; that is, the transaction must involve the fraudulent intent specified, in order to bring it within the scope of the proviso in section 10.

There was no error in allowing the debtor in this proceeding to testify that in fact he never owned some of the property named in the schedule, Exhibit D, which he had previously presented to this creditor as showing the property then owned by him, and on the faith of which credit had been given. That statement was not a written contract, the terms of which could not be contradicted by parol evidence, but a mere representation of a fact, having no other effect than if it ■ had been made orally. The debtor was not estopped by the statement from showing in this proceeding that in fact he never had such property. An element wanting to create an estoppel preventing the debtor testifying to the truth in this proceeding, is prejudice to the creditor, if he be not now permitted to avail himself of the estoppel. The creditor never purchased the property referred to in the schedule, and has no right to resort for the payment of his debt to property never owned by the debtor. Nor in this proceeding does he seek to do so. The question of fact is here presented whether the debtor owned this property, and has fraudulently concealed or disposed of it. The creditor is prejudiced by allowing the debtor to now set forth the truth, only in this way: If the debtor’s mouth is now closed, it will appear from his former representation that he had this property; and from the fact that it was not included in the assignment, and perhaps from other circumstances, it may be claimed to have been proved that there has been a fraudulent concealment or disposal of it; and for that reason the creditor should have the right specified in the proviso to section 10 of the statute. On the other hand, if the truth be disclosed, only a case of fraudulent representation will be shown; and for that the statute does not allow the remedy here sought. In other words, the only prejudice to the creditor from allowing the truth to be stated is that by that means he will be prevented from obtaining a legal remedy upon a state, of facts which does not perhaps exist. Of course, if there was a fraudulent representation, the creditor may have been prejudiced by that; but that is not the question here. He suffers no prejudice, in contemplation of the law, from the disclosure of the truth in this inquiry concerning the facts. Whatever remedy he may have for the fraud may be pursued, but the doctrine of estoppel is not applicable to make a fraudulent representation the cause for legal relief which the statute allows only upon other grounds.

Order affirmed.