Ingels v. Boteler

• Decision Date: 15 December 1938
• Docket Number: 8761.,No. 8711,8711
• Citation: 100 F.2d 915
• Parties: INGELS, Director of Motor Vehicles, et al. v. BOTELER et al. (two cases). In re RICHMAID CREAMERIES, Inc.
• Court: U.S. Court of Appeals — Ninth Circuit

100 F.2d 915 (1938)

INGELS, Director of Motor Vehicles, et al. v. BOTELER et al. (two cases). In re RICHMAID CREAMERIES, Inc.

Nos. 8711, 8761.

Circuit Court of Appeals, Ninth Circuit.

December 15, 1938.

U. S. Webb, Atty. Gen., of Cal., and John O. Palstine, Deputy Atty. Gen., of Cal., for appellants.

David Schwartz, of Los Angeles, Cal., for appellee.

Before GARRECHT, STEPHENS, and HEALY, Circuit Judges.

GARRECHT, Circuit Judge.

The Richmaid Creameries, Inc., filed its petition under Section 77B of the Bankruptcy Act, 11 U.S.C.A. § 207, in the court below on September 16, 1936, and on the same day John H. Chamness was appointed temporary trustee, with authority to operate the business of the debtor. Prior to September 16, 1936. The Richmaid Creameries, Inc., was engaged in the creamery business in Wilmington, California, owning certain milk and ice cream routes and making deliveries thereon and operating twenty-seven automobiles and trucks in the course of such business.

The temporary trustee began to operate the business and borrowed money for that purpose, but his first month of operation of the business resulted in a loss of $2,865. On December 22, 1936, the District Court entered an order directing liquidation of the assets of the debtor, continuing the trustee in office for that purpose, and referred the estate generally to the referee for further administration.

January 5, 1937, a schedule of assets and liabilities of Richmaid was filed, showing assets of $148,380.02, and liabilities of $87,089.64, including $2,000 borrowed by the trustee on certificates.

January 20, 1937, L. Boteler, appellee here, was appointed trustee in bankruptcy for the purpose of liquidating the assets of Richmaid.

During the months of January and February, 1937, and up to and including February 27, 1937, the temporary trustee and the trustee, respectively, continued to operate the business of Richmaid and to make the usual deliveries of milk and ice cream on the aforesaid "routes." The trustee issued checks against the estate in payment of expenses in connection with the operation of the business. When there were insufficient funds in the estate to pay the checks, the trustee, on some occasions, cashed the same out of his own personal funds and held the checks until there were sufficient funds in the bankrupt estate with which to pay the same.

The total receipts of the trustee from September 16, 1936, to January 19, 1937, were $70,006.23, and the total disbursements for the same period were $79,647.65; the total receipts from January 20, 1937, the date when the appellee assumed trusteeship of the estate of Richmaid, to February 4, 1937, were $7,899.61, while the total disbursements for the same period were $7,624.46.

Automobile license fees are due and payable in the state of California on the first day of January of each year, to be paid at the time of registration or renewal thereof. Sec. 3, Calif.Vehicle License Fee Act (Ch. 362, p. 1313, Cal.Stats.1935, as amended by St.1937, p. 62, § 2). Delinquency arises upon operation of a vehicle upon any highway of the State without the license fee having been paid and a penalty attaches if the fee is not paid within 30 days. Sec. 6, Ibid., as amended by St. 1937, p. 63, § 5. The penalty is by law added to the fee upon any application for annual renewal of registration made on or after February 5, unless the vehicle has not been operated on the highways of the state since the expiration date. Sec. 378(b), Calif.Vehicle Code, St.1935, p. 150. Section 379(a) of the California Vehicle Code, St.1935, p. 151, provides that every registration or transfer fee and any penalty added thereto, from the time the same became due, constitute a lien upon the vehicle for which due.

Continuously during the month of January, 1937, and to and including February 27, 1937, the temporary trustee and the trustee operated the Richmaid automobiles and trucks upon the public highways of the state of California, carrying on the business of Richmaid.

The trustee did not pay the California 1937 license fees upon said vehicles, in the amount of $410.90, prior to February 5, 1937. On February 28, 1937, the referee made an order confirming the sale of Richmaid's milk and ice cream delivery routes and certain equipment, for the sum of $8260. This was the first property sold in liquidation, and the trustee did not thereafter attempt to operate the business of the debtor.

On or about February 27, 1937, 23 days after the statutory delinquency date, the trustee made application to the Department of Motor Vehicles of the State of California for 1937 licenses for the motor vehicles referred to, tendering the fees, but not the penalties demanded by the statutes of California for violation of its motor vehicle license laws. Because of the refusal of the trustee to pay the penalties required by the laws of the state of California, the 1937 licenses were not issued to him.

Thereafter, the trustee filed a petition with the referee for an order requiring the appellants here to show cause why the penalties assessed against the Richmaid motor vehicles should not be set aside and, further, to show cause why the 1937 license plates for said motor vehicles should not be issued to the trustee upon payment of the fees, exclusive of the penalties. Following this, the trustee filed an amended petition to require the appellants to show cause why they should not be required immediately to file such claims as they assert against the bankrupt estate or be forever barred from asserting such claims against said estate or against the motor vehicles, and further requiring said appellants to show cause why the trustee should not be authorized to sell the motor vehicles free and clear from any and all liens claimed by the motor vehicle department of the state of California upon said vehicles.

The referee made certain findings of fact, most of which are set forth above, but, in addition, the referee made findings as follows:

"The court further finds that the trustee herein had absolutely no funds in his possession between the date of his appointment on the 20th day of January, 1937 and the 27th day of February, 1937 with which to purchase the 1937 license plates for said motor vehicles * * *."

"The court further finds that at no time prior to the 27th day of February, 1937, did said trustee have funds with which to pay said registration and license fees owing upon said motor vehicles and that the same condition existed from the date that the order of liquidation was made herein, to-wit, the 22nd day of December, 1936 to the date of the appointment of L. Boteler, the present trustee on the 20th day of January, 1937. That during the month of January, 1937 and up to the said 27th day of February, 1937, the trustee herein and his predecessor operated said vehicles upon the public highways of the State of California without the payment of any registration and license fees for said year."

The referee made an order setting aside all penalties assessed against the motor vehicles and directed the trustee to sell said motor vehicles free and clear of any and all liens thereon arising by reason of the failure of the trustee to pay the motor vehicle license tax provided under the laws of the State of California and commanding Ingels and Deems to file claims in the bankruptcy proceeding for the registration and license fees upon said motor vehicles within 30 days from the date of the order "or be forever barred from asserting any claim or claims for taxes and/or registration or license fees against said motor vehicles and against this bankrupt estate or the trustee herein, either in his official capacity as such trustee or individually." The appellants petitioned the District Court to review the said order and the District Judge denied the petition and confirmed the order of the referee.

In addition, the trustee had petitioned the referee for an order directing the appellants to receive the principal of the license fees in full payment of any and all sums owing by Richmaid on said motor vehicles and enjoining collection or attempted collection by them of any penalties which the statutes of the state of California compelled them to collect. The referee declined to include such mandate in his order, and the trustee made application to the District Court, for a mandatory injunction directed to the appellants requiring them to receive the statutory fees less the penalties and to deliver the license plates to the trustee, which issued the order as prayed.

An appeal was allowed Ingels, Director of Motor Vehicles of the State of California, and Deems, as Registrar of Motor Vehicles, from each order.

The sole question in each case is whether the lower court committed error in entering the order appealed from.

The two cases involved the identical facts, were consolidated for briefing and hearing and are disposed of in this opinion.

The referee made two findings of fact, set forth above, to the effect that the trustee had no funds with which to pay the license and registration fees prior to February 5, 1937. These findings are contrary to the true facts. Actually during the period January 20, 1937, to February 4, 1937, large sums of money were received by the trustee, all of which were received and paid out before the license fees became subject to penalty, without taking into account the moneys received and disbursed in the operation of the business from January 1, to January 19, 1937.

Whether a debt or claim is provable in bankruptcy turns upon its status at the time of the filing of the petition (Sec. 760, Remington on Bankruptcy, 4th ed.); claims not owing at the time of filing of the petition are not provable. Sec. 807, Remington; Colman Co. v. Withoft, 9 Cir., 195 F. 250, 252; Cantor v. Cherry, 3 Cir., 73 F.2d 188. Section 1(9) of the Bankruptcy Act, 11 U.S.C.A. § 1(9), includes, in the definition of "creditor" anyone who owns a...