Durkin v. Durkin

• Decision Date: 26 May 1955
• Court: California Court of Appeals Court of Appeals
• Parties: Mabel DURKIN, Plaintiff, v. Thomas J. DURKIN and American Trust Company, Defendants. AMERICAN TRUST COMPANY, Cross-Complainant, v. Mabel DURKIN, Thomas J. Durkin, Robert Gregory, State Board of Equalization, State of California, Peter Milan and Lew Irvine, L. A. Cavalier, and Rollen F. Campbell, Cross-Defendants. STATE of California, acting by and through the State Board of Equalization, Cross-Complainant, Cross-Defendant and Appellant, v. AMERICAN TRUST COMPANY, Mabel Durkin, Thomas J. Durkin, Robert Gregory, Peter Milan and Lew Irvine, L. A. Cavalier, and Rollen F. Campbell, Cross-Defendants. Rollen F. CAMPBELL, Cross-Complainant, Cross-Defendant and Respondent, v. STATE of California, acting by and through the State Board of Equalization, American Trust Company, Mabel Durkin, Thomas J. Durkin, Robert Gregory, Peter Milan and Lew Irvine, and L. A. Cavalier, Cross-Defendants. Robert C. GREGORY, Cross-Complainant, Cross-Defendants, and Respondent, v. Mabel DURKIN, Thomas Durkin, State of California, acting by and through the State Board of Equalization, Peter Milan and Lew Irvine, L. A. Cavalier, and Rollen F. Campbell, Cross-Defendants, Peter Milan and Lew Irvine, Cross-Defendants and Respondents. Civ. 16246.

Page 185

284 P.2d 185

133 Cal.App.2d 283

Mabel DURKIN, Plaintiff, v. Thomas J. DURKIN and American Trust Company, Defendants.

AMERICAN TRUST COMPANY, Cross-Complainant, v. Mabel DURKIN, Thomas J. Durkin, Robert Gregory, State Board of Equalization, State of California, Peter Milan and Lew Irvine, L. A. Cavalier, and Rollen F. Campbell, Cross-Defendants.

STATE of California, acting by and through the State Board of Equalization, Cross-Complainant, Cross-Defendant and Appellant, v. AMERICAN TRUST COMPANY, Mabel Durkin, Thomas J. Durkin, Robert Gregory, Peter Milan and Lew Irvine, L. A. Cavalier, and Rollen F. Campbell, Cross-Defendants.

Rollen F. CAMPBELL, Cross-Complainant, Cross-Defendant and Respondent, v. STATE of California, acting by and through the State Board of Equalization, American Trust Company, Mabel Durkin, Thomas J. Durkin, Robert Gregory, Peter Milan and Lew Irvine, and L. A. Cavalier, Cross-Defendants.

Robert C. GREGORY, Cross-Complainant, Cross-Defendants, and Respondent, v. Mabel DURKIN, Thomas Durkin, State of California, acting by and through the State Board of Equalization, Peter Milan and Lew Irvine, L. A. Cavalier, and Rollen F. Campbell, Cross-Defendants, Peter Milan and Lew Irvine, Cross-Defendants and Respondents.

Civ. 16246.

District Court of Appeal, First District, Division 1, California.

May 26, 1955.

Hearing Denied July 20, 1955.

Edmund G. Brown, Atty. Gen., James E. Sabine, Asst. Atty. Gen., Ernest P. Goodman, Eugene B. Jacobs, Deputy Attys. Gen., for appellant.

Cosgrove, Molinari & Tinney, Robert A. Dobbins, San Francisco, for respondents Milan and Irvine.

Cosgriff, Carr, McClellan & Ingersoll, Luther B. Carr, Burlingame, for respondent Gregory.

Burress Karmel, Burlingame, for respondent Campbell.

FRED B. WOOD, Justice.

This action involves the relative priorities of certain creditors of an insolvent automobile dealer; particularly, their relative liens upon two bank accounts of his, a 'Dealer's Reserve' and a 'Special Holdback Account.' The bank interpleaded and paid the moneys in both accounts into court.

The trial court found their priorities as follows: First, Robert Gregory, to the extent of $2,250 of the moneys derived from the 'Dealer's Reserve Account,' by voluntary assignment of the debtor; Second, Rollen F. Campbell, in the amount of $1,504.30 and costs, by attachment followed by judgment and levy of execution upon the moneys of both accounts; Third, Peter Milan and Lew Irvine, in the amount of $278.63 plus costs and interest, by attachment followed by judgment and levy of execution upon the moneys of both accounts; Fourth, the state, a lien upon the moneys of both accounts in the amount of $2,470.07, plus interest and costs, for unpaid sales and use taxes, predicated upon warrants issued and served in 1951-53 under authority of section 6776 of the Revenue and Taxation Code. The assignment to Gregory was made and the liens of the others were acquired during the insolvency of the debtor.

The state has appealed. It claims (1) the taxes should be satisfied ahead of other creditors' claims in view of the preferences accorded by section 6756, Revenue and Taxation Code; (2) Gregory's assignment was ineffective as against the tax liens for the additional reason that notice of assignment was not filed as required by sections 3017-3029, Civil Code; (3) any liens of Milan and Irvine expired (pursuant to § 688, Code Civ.Proc.) one year after issuance of their first writ of execution, subordinating their claim to the lien created by the issuance, meanwhile, of warrants issued by the state.

(1) The State's contention that the taxes should be satisfied ahead of these other creditors is predicated upon its interpretation of SECTION 6756 OF THE REVENUE AND TAXATION CODE¹. The state asserts that the provision that the 'amounts required to be paid' as sales or use taxes 'shall be satisfied first' when the debtor is insolvent means what it literally says: The amounts of these taxes (whether perfected into liens or not), must be satisfied ahead of the claims of all other creditors (whether general creditors, lienholders, or assignees) save only the two types of claims expressly excepted at the end of the section (prior recorded liens and preferred labor claims).

However much we might be persuaded by the state's analysis of the text and the legislative history of section 6756 if this were a matter of first impression, it happens that the question has been answered adversely to the state's contention in two District Court of Appeal decisions which the Supreme Court refused to disturb, denying as it did a petition for a hearing in each case. We refer to People v. Biscailuz (2d Dist., Div. 3, 1950), 95 Cal.App.2d 635, 640-643, 213 P.2d 753, and People v. Biscailuz, (2d Dist., Div. 2, 1951), 107 Cal.App.2d 71, 73, 236 P.2d 591, interpreting similar, virtually identical, provisions of section 46 of the Unemployment insurance Act, now sections 1701 and 1702 of the Unemployment Insurance Code. Under these circumstances we are not inclined to undertake a reexamination of the question, see Masonic Mines Ass'n v. Superior Court, 136 Cal.App. 298, 300, 28 P.2d 691; Clover v. Jackson, 81 Cal.App. 55, 59, 253 P. 187; Bridges v. Fisk, 53 Cal.App. 117, 122, 200 P. 71; People v. Whitaker, 68 Cal.App. 7, 11, 228 P. 376; 13 Cal.Jur.2d 685, section 145. Contra, People v. Brunwin, 2 Cal.App.2d 287, 294, 37 P.2d 1072, especially in view of the fact that the interpretation made in the Biscailuz cases does no violence to the language of the statute, indeed seems no less reasonable an interpretation of its provisions than the view here urged by the state.

That interpretation is best expressed in the words used by the court in the first Biscailuz case: 'The priority conferred by section 46(a) would appear to be intended to apply in cases of insolvency where the State would otherwise be required to share upon an equal footing with general creditors of the employer.' At page 642 of 95 Cal.App.2d, at page 759 of 213 P.2d. That is the fair intendment of the words 'amounts required to be paid by any person under this part * * * shall be satisfied first * * *: Whenever the person is insolvent.' It gives the state, when it has failed to obtain a lien, first call over other creditors who likewise do not have liens of any kind. It leaves our lien laws unimpaired and undisturbed in their operation; indeed, it should required clear and unmistakable language to evince an intent to override those laws. It comports, also, with the common law concept of the sovereign's right of priority in the xase of an insolvent debtor. ² in the case of an insolvent debtor. ² case, such an interpretation did not leave the state hampered or curtailed as to remedies. It had verious procedures available, some quite expeditious, for exacting security or obtaining and perfecting liens. The same observation applies in our case. (See Rev. & Tax. Code, §§ 6701, 6702, 6711-6715, 6736-6739, 6757-6759, 6776-6778, and 6796-6799.)

Yet, the state urges us to disregard the Biscailuz decision as of no value: 'The failure of the court * * * to discuss or give any effect to the last two paragraphs of the priority section [relating to prior recorded liens and preferred labor claims] deprives the opinion of value as a precedent * * *' A.O.B., p. 17. That, we think is an unnecessarily severe stricture. Mere failure to mention a clause of a statute construed does not necessarily signify it was not considered, especially where, as here, that clause does not indisputably have the clearly unequivocal and pivotally significant meaning which the state would ascribe to it. That meaning, thus ascribed, is that the specific exception of prior recorded liens and preferred labor claims conclusively demonstrates a deliberate legislative intent to bar, as exceptions, all other liens and interests of other creditors and thus characterizes the main clause of section 6756 (the tax 'shall be satisfied first' whenever the taxpayer is insolvent), as putting the state's claim ahead of all other creditors except preferred labor claimants and the holders of prior recorded liens.

Upon the contrary, it is just as easy and just as logical to read those last two sentences as cautionary and illustrative, not narrowly restrictive and exclusionary, in purpose and nature. It is a quite common device in any written instrument, after stating a general proposition, to give an illustration or two of what it does or does not include. For example, section 6359 of the Revenue and Taxation Code exempts from the sale and use taxes 'the storage, use, or other consumption in this State of food products for human consumption.' (Emphasis added.) Then follow four sentences. Two declare that 'Food products' include certain things. Two declare that 'Food products' do not include various specified items. Certainly, no one would claim that these explanatory lists of inclusions and exclusions furnish the full measure and scope of the expression 'food products for human consumption.' For some of the case law on this subject, see Oil Workers International Union v. Superior Court, 103 Cal.App.2d 512, 571, 230 P.2d 71. It is a fair inference, therefore, that when it wrote in the exceptions expressed in the last two sentences of section 6756, the Legislature did so merely by way of illustration, not at all as a complete enumeration of exceptions.

For the reasons stated, we do not undertake a detailed analysis and reappraisal of the provisions of section 6756. We accept the interpretation made by the court in the first Biscailuz case and applied by the trial court in the instant case.

(2) Was the dealer's assignment to Gregory of a portion of the 'Dealer's Reserve Account' effective as against the state in view of the failure to record notice of the assignment pursuant to sections 3017-3029 of the Civil Code?

On November 3, 1949, Robert Gregory loaned Durkin approximately $2,250 to...