England v. Doyle

• Decision Date: 11 August 1960
• Docket Number: No. 16269.,16269.
• Citation: 281 F.2d 304
• Parties: John O. ENGLAND, Trustee of the Estate of Irene Mansfeldt, Bankrupt, Appellant, v. Morgan J. DOYLE, Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

281 F.2d 304 (1960)

John O. ENGLAND, Trustee of the Estate of Irene Mansfeldt, Bankrupt, Appellant, v. Morgan J. DOYLE, Appellee.

No. 16269.

United States Court of Appeals Ninth Circuit.

August 11, 1960.

COPYRIGHT MATERIAL OMITTED

Shapro & Rothschild, Arthur P. Shapro, August B. Rothschild, San Francisco, Cal., for appellant.

Raymond T. Anixter, Burlingame, Cal., for appellee.

Before CHAMBERS, HAMLIN and KOELSCH, Circuit Judges.

KOELSCH, Circuit Judge.

Several months before a judgment creditor filed an involuntary petition in bankruptcy against her, Mrs. Irene Mansfeldt appointed as her agent the appellee, Morgan J. Doyle, a practicing attorney, and delivered to him cash and bonds valued at upwards of $74,000. Mrs. Mansfeldt was ultimately adjudged a bankrupt, but between the filing of the petition and eventual bankruptcy adjudication she had demanded and received from her agent the return of her property. Appellee had acceded to her demands only after first procuring an order from the District Court, through an ex parte application, which authorized and approved the termination of the agency. Shortly afterwards the order of adjudication of bankruptcy was entered by the referee, but the trustee was not appointed until more than a year later. In the meantime, Mrs. Mansfeldt departed from the United States with her property; upon her return, she admitted to having less than $2,000, which was far from sufficient to satisfy the petitioning creditor's claim of $36,566.17.¹

The trustee, in what is avowedly a preliminary step in an endeavor to impose liability upon the appellee, made a motion in the District Court asking that its order approving the termination of the agency be set aside and vacated. The District Court denied this motion. The trustee has appealed. We have jurisdiction under 11 U.S.C.A. § 47.

The trustee's first argument is that "the application * * * by Appellee Doyle was an adversary proceeding of which the opposing party (petitioning creditor) had to have notice in order for the Court's order to stand."

When the granting of the relief sought by a litigant would operate to terminate, impair or modify a substantial right or claim of another, then due notice of the proceeding must be given the person so affected in order to meet the requirements of due process; but if no such right be thus affected due process does not require that he be given notice or an opportunity to be heard in the proceeding. Chaloner v. Sherman, 1917, 242 U.S. 455, 37 S.Ct. 136, 61 L.Ed. 427; Mullane v. Central Hanover Bank and Trust Co., 1950, 339 U.S. 306, 70 S.Ct. 652, 94 L.Ed. 865.

It is clear that the trustee is not asserting, and indeed could not assert, that the petitioning creditor had a legal interest in or right to the property at the time of appellee's redelivery to Mrs. Mansfeldt; during the period between the filing of a petition in bankruptcy and the qualification of a trustee following adjudication, the title to the property of a bankrupt remains in the bankrupt as "trustee" for creditors, as does the incidental right of dominion and control of the property itself, in the absence of either the appointment of a marshal by the bankruptcy court to take charge of the property or the issuance of a restraining order preventing its disposition. Johnson v. Collier, 1912, 222 U.S. 538, 32 S. Ct. 104, 56 L.Ed. 306; Danciger and Emerich Oil Co. v. Smith, 1928, 276 U.S. 542, 48 S.Ct. 344, 72 L.Ed. 691; In re Press Printers and Publishers, 3 Cir., 1926, 12 F.2d 660.

In this instance, no receiver or marshal was ever appointed nor was any restraining order issued; the trustee concedes that appellee had no interest in the property of Mrs. Mansfeldt except as her agent under their agreement, that this relationship was terminable at the will of either party, and that Mrs. Mansfeldt had made repeated demands upon appellee for the return of her property before it was finally turned over.

Property received by one in his capacity as agent is not his, and the general rule is that the agent must deliver such property to his principal upon termination of the agency or the principal's demand. Savage v. Mayer, 1949, 33 Cal. 2d 548, 203 P.2d 9. Thus, if appellee had steadfastly refused to comply with the demand, Irene Mansfeldt could have successfully prosecuted an action for its recovery against her recalcitrant agent. Danciger and Emerich Oil Co. v. Smith, supra.

However, the trustee takes the position that the petitioning creditor was entitled to be given notice because of what he refers to as a "stipulation" or "agreement" purportedly entered into between Mrs. Mansfeldt, the petitioning creditor, and the appellee before Mrs. Mansfeldt was adjudged a bankrupt. The circumstances surrounding this "stipulation" were as follows: during the course of one of the hearings held some eighteen months before the bankruptcy adjudication, Mr. Torregano, now deceased, the attorney for Mrs. Mansfeldt, requested a continuance; present in the courtroom at the time, in addition to Mr. Torregano and the referee, were the attorney for the petitioning creditor and appellee, the latter appearing as witness and as agent for Mrs. Mansfeldt;² when the referee commented that a continuance might unduly delay the conclusion of the matter, Mr. Torregano, during an extended argument and explanations in support of his request, made the following statement:

"May I make the observation, Your Honor? So far as this case being delayed, whatever delay there is in the case is not to the detriment of the creditor, because Mr. Doyle has properly observed in the record here that the assets which would, in the event of an adverse decision by this Court, be administered by this Court are being properly preserved and augmented by income. As to delay, if Your Honor please, we have to be realistic about the matter. If we don\'t adopt the procedure I have suggested herein, we are faced with inevitable delay. Because in the discharge of our duties, we are going to have to consume this Court\'s time."

At the conclusion of Mr. Torregano's remarks, counsel for the petitioning creditor (who now represents the trustee) stated his position:

"As to Mr. Torregano\'s statement to the effect that there would be no prejudice to the estate, I am willing to accept his statement on that basis and I feel we can conserve a great deal of the Court\'s time as well as our own by doing it that way because we have a gentleman\'s understanding that as a result of your Honor\'s ruling on this offer of proof and the objections to it, to the extent that evidence is ordered excluded, if any, no questions and answers will be propounded by the respondent."

Appellee apparently was not called upon during the discussion and made no statement of any kind.

As we understand it, the trustee contends that this colloquy constituted a binding and enforceable stipulation or agreement between Mrs. Mansfeldt, the petitioning creditor and appellee to the effect that appellee would continue to retain the property of Mrs. Mansfeldt to await the outcome of the petition in bankruptcy or, in the alternative, that even if it was not a binding agreement, it was tacitly accepted by the appellee and operated to preclude him from transferring the assets to his principal without notice to the creditor after the latter's reliance upon the statement.³

There are several difficulties both factual and legal with the trustee's argument. It is extremely doubtful that the remarks by Mr. Torregano were intended by him as a proposal in the nature of an offer to the petitioning creditor on behalf of his client. They were an integral part of an extended statement or argument addressed to the referee for the purpose of securing a continuance. Mr. Torregano's "observation" that the delay resulting from the continuance "would not be to the creditors' detriment because the assets which would, in the event of an adverse decision by this Court, be administered by this Court, are being properly preserved and augmented by income," cannot be extended to imply in addition that neither Mrs. Mansfeldt nor the appellee would terminate the agency and continue to leave the assets in appellee's possession for some indefinite duration.⁴ It was simply an acknowledgment that the assets "are being properly preserved and augmented by income." We also experience the same difficulty in treating as an acceptance of an offer the statement of the attorney for the creditor.

Nor are we impressed that the creditor so understood Mr. Torregano's statement or that he was induced by it to refrain from sequestering these assets. His later conduct itself strongly tends to refute this present contention, for shortly after the hearing the creditor unsuccessfully sought an order to restrain the appellee from transferring or disposing of these assets pending an adjudication. In the affidavit filed in support of his motion, he asserted that unless an injunction were granted "* * * said funds or a substantial part thereof may be paid out or otherwise transferred or disposed of by said agent acting under the instructions of said Involuntary Bankrupt, and may be so paid out or transferred to persons or places without the jurisdiction of the above-entitled court....