Bruce Farley Corp., In re, CV

• Citation: 612 F.2d 1197
• Decision Date: 01 February 1980
• Docket Number: No. CV,CV
• Parties: 28 UCC Rep.Serv. 240 In re BRUCE FARLEY CORPORATION, a California Corporation, et al., Bankrupts. Leroy D. STARR and Velma F. Starr, Plaintiffs-Appellants, v. BRUCE FARLEY CORPORATION, a California Corporation, et al., Defendants-Appellees. 77-2634.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 1197

612 F.2d 1197 28 UCC Rep.Serv. 240 In re BRUCE FARLEY CORPORATION, a California Corporation, et
al., Bankrupts.
Leroy D. STARR and Velma F. Starr, Plaintiffs-Appellants,
v.
BRUCE FARLEY CORPORATION, a California Corporation, et al.,
Defendants-Appellees. No. CV 77-2634. United States Court of Appeals,
Ninth Circuit. Feb. 1, 1980.

Page 1198

Fred U. Hammett, Jr., Hammett & Madruga, San Diego, Cal., for plaintiffs-appellants.

J. Terence O'Malley, Gray, Cary, Ames & Frye, San Diego, Cal., Edward L. Kane, La Jolla, Cal., for defendants-appellees.

Appeal from the United States District Court, Southern District of California.

Before KILKENNY and ANDERSON, Circuit Judges, and BYRNE, District Judge. ^*

WM. MATTHEW BYRNE, District Judge.

Leroy and Velma Starr appeal from an order of the district court affirming the bankruptcy court's grant of partial summary judgment in favor of the trustee in bankruptcy for the Bruce Farley Corporation ("bankrupt").

In April, 1970 and July, 1972 third parties executed in favor of bankrupt promissory notes, secured by deeds of trust, as consideration for the purchase of certain properties,

Page 1199

referred to as the "Southlook" and "University Heights" properties. On November 1, 1972 bankrupt offered, in writing, to assign to appellants the Southlook and University Heights notes as consideration for the purchase of appellants' property in El Monte, California. Appellants accepted this offer on November 7, 1972.

The escrow instructions, prepared by a subsidiary of bankrupt, changed the terms of the agreement between bankrupt and appellants to provide that, rather than being assigned outright, the Southlook and University Heights notes would be "pledged" by bankrupt as partial security for its promissory note to appellants and would be retained by bankrupt as appellants' "collection agent." On January 26, 1973 bankrupt executed in favor of appellants promissory notes, secured by the Southlook and University Heights notes, as consideration for the purchase of appellants' property. These promissory notes authorized appellants to collect payments on the Southlook and University Heights notes and to apply the proceeds of those notes to the debt they were pledged to secure. In addition, bankrupt executed declarations of assignment of the Southlook and University Heights notes "as collateral security." Bankrupt and appellants then recorded in San Diego County "Corporation Assignment of Deed of Trust and Request for Special Notice" as to the Southlook and University Heights properties.

It is not disputed that appellants entered into this transaction only after being assured by bankrupt that bankrupt engaged in these types of transactions regularly, and that the terms of the escrow agreement would protect appellants as adequately and have the same effect as the original...