Bogus v. American National Bank of Cheyenne, Wyoming, 9893.

• Decision Date: 09 October 1968
• Docket Number: No. 9893.,9893.
• Citation: 401 F.2d 458
• Parties: Thomas C. BOGUS, Trustee in the Matter of Jacob Rosenblum, Bankrupt, Appellant, v. The AMERICAN NATIONAL BANK OF CHEYENNE, WYOMING, Defendant.
• Court: U.S. Court of Appeals — Tenth Circuit

401 F.2d 458 (1968)

Thomas C. BOGUS, Trustee in the Matter of Jacob Rosenblum, Bankrupt, Appellant, v. The AMERICAN NATIONAL BANK OF CHEYENNE, WYOMING, Defendant.

No. 9893.

United States Court of Appeals Tenth Circuit.

October 9, 1968.

James P. Horiskey, Cheyenne, Wyo., for appellant.

Carl L. Lathrop, Cheyenne, Wyo. (David D. Uchner, Cheyenne, Wyo., with him on the brief), for appellee.

Before LEWIS, Circuit Judge, WILBUR K. MILLER, Senior Circuit Judge,^* and BREITENSTEIN, Circuit Judge.

WILBUR K. MILLER, Senior Circuit Judge:

Jacob Rosenblum was adjudicated a bankrupt September 22, 1966, pursuant to an involuntary petition filed September 1, 1966, by certain of his creditors. The act of bankruptcy relied on by the petitioning creditors was that, within four months of September 1, 1966, Rosenblum had made a preferential transfer to a creditor, The American National Bank, by selling his liquor license, bar fixtures and supplies, and causing the entire proceeds of the sale to be paid to the Bank. Thomas C. Bogus became Trustee on November 2, 1966.

The Trustee filed this suit against The American National Bank on March 10, 1967, demanding judgment for $56,750, the proceeds of the sale of the liquor license and business which Rosenblum, while insolvent, paid to the Bank within four months of the involuntary petition in bankruptcy. The Bank answered that it had received $56,725 in reduction of an antecedent indebtedness which had been secured by a security interest in the liquor license, fixtures and inventory acquired in accordance with the Uniform Commercial Code in effect in Wyoming more than four months prior to the filing of the bankruptcy petition.

The answer was based on the following sequence of events. On January 11, 1965, Rosenblum, being indebted to the Bank in a sum greater than $160,000, executed to it a security agreement on his bar supplies and equipment and his liquor license, issued by the City of Cheyenne, to secure his indebtedness and future advances. A financing statement covering the same property was executed by Rosenblum the same day and was filed in the office of the County Clerk of Laramie, Wyoming, January 12, 1965.

On May 4, 1966, Rosenblum executed an assignment to the Bank which in substance said that, because of Rosenblum's default, it had become necessary to sell his liquor business; that he was further assigning to the Bank the "entirety of his business" as of May 4, 1966, "for the sole purpose of having the bank sell said business for such sum as it is able to obtain from some bona fide purchaser, the proceeds of which sale shall be applied to the loans of Jacob Rosenblum secured by said Security Agreement."

Rosenblum's liquor business was sold June 6, 1966: the inventory, furniture and fixtures for $2,900 and the liquor license for $53,825. The total of $56,725 was paid to the bank which applied it to the reduction of Rosenblum's indebtedness to it, which then approximated $190,000. The sale was made in accordance with Section 12-13, Wyoming Statutes 1957, and was approved by the City of Cheyenne which had issued the license.

These facts being undisputed, there was presented to the District Court the question whether a liquor license issued under Section 12-13, Wyoming Statutes 1957, is property in which a valid security interest can be acquired under the Uniform Commercial Code; and, if so, whether the security interest attaches to the proceeds when the liquor license is sold.

The District Court made findings of fact, from which we have drawn our summary, and reached conclusions of law, which held inter alia (a) that the Bank had a security interest in Rosenblum's bar property and liquor license which was "perfected" on January 12, 1965, "in accordance with the provisions of the Uniform Commercial Code — Secured Transactions, Wyoming Statutes, 1957 * * *," which of course was more than four months before the involuntary petition in bankruptcy was filed; (b) that the Bank's security interest continued in the identifiable proceeds from the sale of the liquor license; and (c) that a Wyoming liquor license constitutes "property" as defined in the Uniform Commercial Code. Accordingly, the District Court dismissed the complaint and the Trustee in Bankruptcy appeals.

The Wyoming liquor control statute provides that a retail liquor license issued thereunder "shall be a personal privilege, good for one year unless sooner revoked * * *" but also provides that, subject to certain conditions, a license may be assigned and transferred pursuant to an actual bona fide sale. It is further provided in the statute that, with the exceptions noted therein, "no license shall be transferred or sold * * * nor shall it be subject to attachment, garnishment or execution."

From these provisions the Trustee argues, as he did in the District Court, that a Wyoming liquor license may not be the subject of a lien and therefore may not be the subject of a security interest under the Uniform Commercial Code. He contends that the liquor control statute itself, and subsequent interpretation thereof by the Supreme Court of Wyoming,¹ "clearly preclude the incumbrance sic of a liquor license." It is noted that the statute does not in terms so provide: it reads that a license may not be transferred or sold except in the manner therein provided, "nor shall it be subject to attachment, garnishment or execution." Even though the liquor control act does not expressly say a license shall not be subject to mortgage or lien, and prohibits only the acquisition of a lien thereon by the affirmative action of a hostile creditor, there might be some force in the Trustee's argument that the legislature intended to forbid any lien upon a license if the liquor control statute stood alone.

But it does not stand alone. After its enactment, the Wyoming legislature adopted the Uniform Commercial Code, effective as of January 1, 1962, which provides that a security interest in favor of a creditor may be created in intangibles without any transfer or assignment thereof. In this respect, the Code broadened previously existing law and made subject to security interests forms of property which theretofore could not be placed in lien. Section 34-9-102, ...