Adams v. Napa Cantina Wineries

• Citation: 94 F.2d 694
• Decision Date: 01 February 1938
• Docket Number: No. 8365.,8365.
• Parties: ADAMS v. NAPA CANTINA WINERIES, Inc.
• Court: U.S. Court of Appeals — Ninth Circuit

94 F.2d 694 (1938)

ADAMS v. NAPA CANTINA WINERIES, Inc.

No. 8365.

Circuit Court of Appeals, Ninth Circuit.

February 1, 1938.

Harry Gottesfeld, Eugene D. Bennett, Joseph A. Brown, and Robert L. Mann, all of San Francisco, Cal., for appellant.

T. J. O'Leary, of Oakland, Cal., for appellee.

Before GARRECHT, MATHEWS, and HANEY, Circuit Judges.

HANEY, Circuit Judge.

Appeal has been taken from an order which affirmed a special master's report and allowed a claim, filed by appellant against appellee as a debtor under section 77B of the Bankruptcy Act, 11 U.S.C.A. § 207 and note, "as recommended" by the special master. The latter recommended that the claim "be allowed as a priority claim in the sum of $400.00, and be disallowed as to all amounts in excess" thereof.

Although the record before us is inadequate, there are, we believe, sufficient facts before us when obtained piecemeal from various reports and documents.

Appellee is a California corporation, and, during the times herein mentioned, the president thereof was one James J. Mahoney.

On December 13, 1933, one Patrick Murphy entered into an agreement with Mahoney and the debtor, wherein the last two named agreed to pay Murphy the sum of $23,290 with interest, and secured the same by a chattel mortgage on 82,000 gallons of wine, located in the winery of the debtor. The record does not disclose who owned the wine.

About January 26, 1934, appellant paid Mahoney the sum of $2,400, the details concerning which will hereafter appear. On March 12, 1934, Mahoney signed and delivered a note payable to appellant 30 days after date for $2,400 with 4 per cent. interest, statutory costs and disbursements, and a reasonable attorney's fee.

On May 7, 1934, Murphy entered into another agreement with Mahoney and the debtor, agreeing on a method by which the wine was to be disposed of, and providing that Murphy would not file a suit to foreclose the chattel mortgage within 6 months, provided Mahoney and the debtor complied with the agreement.

On September 28, 1934, appellant filed in the state court an action against the debtor, Mahoney, John Doe, and Richard Roe, containing two counts. The first count stated that the defendants therein became indebted to appellant in the sum of $2,400, "for money had and received." The second count alleged execution of the note dated March 12, 1934, by Mahoney, and alleged that thereafter the debtor "ratified and approved the acts of its agent, James J. Mahoney in executing and delivering said note and received and accepted the benefits thereof." Judgment for $2,400 against each of the defendants was prayed. A writ of attachment issued in the action and a sheriff levied upon the wine at the winery and took possession thereof. The answer of the debtor is not contained in the record. On October 8, 1934, Mahoney in his answer admitted execution of the note, and alleged that it was delivered "as part of a partnership agreement between plaintiff and defendant, entered into for the purpose of carrying on the business of St. Helena Napa Valley Wine Company, a copartnership. * * *"

On October 26, 1934, appellant entered into an agreement with Murphy. It was therein recited that appellant had filed the action mentioned, and claimed to have "a good and subsisting cause of action against" Murphy. The basis for such claim does not appear in the record, unless it was for money had and received. It was also recited that appellant "with the consent of" Murphy had caused the wine to be attached. Appellant agreed to supply the sheriff with money "to open the wine cellar from time to time as found necessary in the discretion of the Sheriff * * * for the purpose of the preservation of the aforementioned wine for the benefit of" Murphy. It was also agreed that Murphy would cause the foreclosure of the chattel mortgage on November 7, 1934, or soon thereafter, and endeavored to secure the appointment of a receiver for the possession and sale of the wine. It was also agreed that, from the proceeds of the sale, Murphy would pay appellant his claim, not exceeding $3,000, by dividing the proceeds between one Wilson, who was a holder of a judgment against the debtor and Mahoney, appellant, and Murphy in a manner specified. It was also provided that, after appellant had received payment in full, he would assign his cause of action against the debtor and Mahoney, or any judgment recovered against them, to Murphy.

On December 31, 1934, the debtor filed its petition under section 77B of the Bankruptcy Act, in the court below. 11 U.S.C.A. § 207 and note. The petition referred to appellant as "an alleged creditor," and stated that he had commenced an action upon a note "from said James J. Mahoney and not from the debtor" and had caused a writ of attachment to be issued. The petition was approved as properly filed on January 3, 1935.

On May 3, 1935, Murphy and appellant entered into an agreement reciting that the parties had entered the agreement of October 26, 1934, and wished to cancel it. In consideration of $500 paid, and the execution, delivery, and payment of a note for $1,500, by Murphy to appellant, it was agreed that the prior agreement was canceled; that appellant would file in the reorganization proceedings a claim to recover money which was obtained from the sale of wine, but would not urge such petition unless requested to do so by Murphy; that, if appellant recovered any money under the petition, he would return to Murphy the amount paid him by Murphy, not exceeding $2,000. It was further agreed that appellant, at the written request of Murphy, would prosecute his action against the debtor and Mahoney in the state court, when permitted to do so by action in the reorganization proceedings, and that if appellant recovered in the action he would return to Murphy the amount paid him by Murphy, not exceeding $2,000. It was also agreed that, if appellant made no recovery either under his action in the state court, or the petition in the reorganization proceedings to be filed by him, then appellant was under no duty to pay Murphy $2,000; that appellant released Murphy of any claims he had against Murphy on payment of $2,000; and that, if Murphy failed to pay the note for $1,500, then appellant would apply the $500 on any claim he might have against Murphy, arising either from the nonpayment of the note or from the prior contract of October 26, 1934.

On September 28, 1935, appellant filed a proof of debt with the referee, heretofore mentioned, stating that the debtor was indebted to appellant in the sum of $2,400, with interest from January 26, 1934, $500 attorneys' fees, and $165.30 expended costs, in all amounting to the total sum "of Thirty Two Hundred and Nine and 32/100 Dollars ($3209.00)"; that the "consideration of said debt" was "moneys advanced * * * for the use and account of the said debtor as more fully set out in the attached copy" of the complaint in the state court action brought by appellant; that writ of attachment issued in the state court action and that thereunder a sheriff levied on the wine and kept it in his possession; and that "no part of said debt has been paid by said corporation debtor and that appellant has not, nor has any person by his order or to his knowledge or belief for his use, has had or received any security for the said debt whatsoever. * * *"

On October 9, 1935, the debtor filed a document designated as "Reply And Answer To Claim Of George Adams." On October 10, 1935, two secured creditors filed objections to appellant's claim, stating: (1) That the claim was not a valid claim against the debtor, but a claim against Mahoney; (2) that Mahoney individually gave his promissory note to appellant in payment of the claim; (3) that Murphy paid appellant the sum of $500 as part payment of the obligation and gave appellant his promissory note for the balance of the obligation; (4) that although appellant was prosecuting his claim against the debtor, he had also been treating the obligation as one of Murphy individually, and had been trying to collect it from Murphy; (5) that appellant had waived all claims against the debtor, and was relegated to his rights under the Murphy and Mahoney notes.

On October 23, 1935, the debtor filed amended objections, stating all the matters contained in the objections of the secured creditors, except the fifth one.

In the meantime, the referee, before mentioned, died, and on December 6, 1935, the court below referred the matter to another referee as special master. Hearing on the objections began on January 13, 1936, at which time appellant filed an "Amended Proof Of Debt." It differed from the first one, only in stating that no security or note had been received from the debtor. After some testimony was taken, the hearing was continued until January 29, 1936. It appeared for the first time in the hearing or proceeding that appellant had received money from Murphy. The special master thereupon stated that "it looks as if somebody is trifling with the Court," and later made statements to the effect that he did not believe counsel had followed the proper procedure in not stating the facts concerning the Murphy payment and agreements in the proof of debt filed by appellant, and "I am telling you you cannot trifle with me that way." Continuance was then had until February 7, 1936.

On February 5, 1936, appellant presented to the special master a second amended proof of debt which was like the preceding one except that it added thereto statements relating payment by Murphy, and the agreements, copies of which were attached. The special master marked it "received," but said that he "refused to file said document." On February 7, 1936, the hearing was continued until March 12, 1936.

At the conclusion of the evidence, the special master found that appellant had a claim against the debtor, because the Mahoney note was signed by him "as president of the debtor," saying that the evidence on...