EL" Bunch" Hullet, Inc. v. Universal CIT Credit Corp.

• Court: U.S. Court of Appeals — Tenth Circuit
• Writing for the Court: MURRAH, PICKETT, and BREITENSTEIN, Circuit
• Citation: EL" Bunch" Hullet, Inc. v. Universal CIT Credit Corp., 259 F.2d 685 (10th Cir. 1958)
• Decision Date: 26 September 1958
• Docket Number: No. 5770.,5770.
• Parties: E. L. "BUNCH" HULLET, INC., a corporation, Bankrupt, Appellant, v. UNIVERSAL C.I.T. CREDIT CORPORATION, Appellee. Matter of E.L. "BUNCH" HULLET, INC., a corporation.

259 F.2d 685 (1958)

E. L. "BUNCH" HULLET, INC., a corporation, Bankrupt, Appellant, v. UNIVERSAL C.I.T. CREDIT CORPORATION, Appellee Matter of E.L. "BUNCH" HULLET, INC., a corporation.

No. 5770.

United States Court of Appeals Tenth Circuit.

September 26, 1958.

Kenneth G. Speir and J. Rodney Stone, Newton, Kan. (Vernon A. Stroberg and Herbert H. Sizemore, Newton, Kan., on the brief), for appellant.

Milton Zacharias and Robert Martin, Wichita, Kan. (Kenneth H. Hiebsch, Wichita, Kan., on the brief), for appellee.

Before MURRAH, PICKETT, and BREITENSTEIN, Circuit Judges.

BREITENSTEIN, Circuit Judge.

Appellee, Universal C.I.T. Credit Corporation,¹ brought involuntary bankruptcy proceedings against appellant, E. L. "Bunch" Hullet, Inc., a corporation engaged in the automobile business at Newton, Kansas. A receiver was appointed, the estate liquidated, the claims of creditors paid, the balance of the assets ordered turned back to the corporation, and the receiver ordered discharged upon compliance with certain directions of the court. This appeal questions the validity of the bankruptcy and receivership proceedings.

E.L. Hullet was a dealer in Lincoln and Mercury automobiles. C.I.T. made him an unsecured loan of $30,000 and advanced to him $265,439.33 on 83 new and used automobiles under the floorplan method of financing. Hullet organized the appellant corporation, E. L. "Bunch" Hullet, Inc.,² in which he and his wife owned all the stock except for one qualifying share. On April 1, 1957, without notice to or the knowledge of C.I.T. and without compliance with the Kansas Bulk Sales Act,³ Hullet transferred to the corporation all the assets of his automobile business and the corporation thereafter sold 11 automobiles without remitting to C.I.T. the $36,557.94 due thereon.

On June 12, 1957, Hullet received a self-inflicted gunshot wound from which he died about two months later. The injury to Hullet brought on a series of law suits which terminated in the bankruptcy and receivership now under consideration. C.I.T. filed two actions in Kansas state courts and by attachment and garnishment took possession of the assets of the corporation. The corporation then brought a state court action against C.I. T., alleging interference with its business, and obtained the appointment of a receiver on an ex parte application.

C.I.T., on June 18, 1957, filed two creditor's petitions in the United States District Court for the District of Kansas, one against the corporation and one against Hullet individually, asking an adjudication of bankruptcy. At the same time, on ex parte applications, a receiver was appointed for the corporation and for Hullet. Thereafter the corporation filed a motion to dismiss and C.I.T. filed a petition for reclamation to recover possession of the automobiles covered by the floor-plan arrangement. When the motion and the petition for reclamation came on to be heard, the court afforded the various parties and their counsel an opportunity to confer. There resulted an agreement, dated June 27, 1957, signed by the corporation, E. L. Hullet, his wife Evelyn Ruth Hullet, C.I.T., and their respective counsel. Therein it was agreed that the petition for reclamation should be granted; that C.I.T. waived any claim for deficiencies with regard to amounts due on the automobiles covered by the floor-plan arrangement; that the other parties would execute and deliver to C.I.T. a note in the amount of $65,011.78 secured by mortgages on real property owned by E. L. Hullet and his wife; that the various state court actions mentioned above would be dismissed; and that funds then held by the receiver appointed in the bankruptcy proceedings against the corporation and funds thereafter coming into his hands as receiver, together with the assets of the corporation, "shall be applied, used and disbursed by him under orders of the United States District Court for the District of Kansas" to pay the claims of the creditors of the corporation, and to pay the balance remaining to C.I.T. for credit against the mentioned note.

This agreement was reported to and later filed with the court. The reclamation petition was granted and the bankruptcy proceedings against E. L. Hullet were dismissed. The required note was executed, delivered and later paid in full by Mrs. Hullet. In due course the assets of the corporation, except for certain accounts receivable, were sold, the debts and expenses of administration paid, the balance of the cash held by the receiver and the accounts receivable were ordered turned over to the corporation, and on October 21, 1957, the receiver was ordered discharged upon performance of the court's directions as to disbursement and distribution. On October 23, 1957, and without permission of the court, the debtor filed an answer to the creditor's petition.

This case presents the anomalous situation of a debtor consenting to the liquidation of its business by a receiver appointed in bankruptcy proceedings and then after such liquidation complaining that the bankruptcy and receivership proceedings were invalid. Such repudiation of a solemn agreement did not appeal to the trial court and does not appeal to this court. In regard to the June 27 agreement, the trial court held that:

"The memorandum of agreement of June 27, 1957 was made in good faith, supported by valid consideration, and was partially performed by both parties without objection. The agreement has been and should be fully enforced by the Court. The parties to the agreement, including the bankrupt and Evelyn R. Hullet, having performed and accepted the benefits of the agreement are estopped to deny the agreement or insist upon the construction or performance contrary to the expressed and unambiguous terms of their contract; * * *."

The court had the duty of sustaining and enforcing the agreement and of protecting the rights of all parties to it unless the agreement had some vitiating infirmity.⁴ Such an infirmity is said to exist here because of jurisdictional defects in the bankruptcy and receivership proceedings which cannot be cured or waived by agreement of the parties.

The creditor's petition alleged facts which, if true, were...