Grover v. Tindall

• Decision Date: 25 May 1966
• Parties: William B. GROVER, Plaintiff and Appellant, v. Maurice W. TINDALL and Alice M. Tindall, Defendants and Respondents. Civ. 22792.
• Court: California Court of Appeals Court of Appeals

Page 617

51 Cal.Rptr. 617

242 Cal.App.2d 427

William B. GROVER, Plaintiff and Appellant, v. Maurice W. TINDALL and Alice M. Tindall, Defendants and Respondents.

Civ. 22792.

District Court of Appeal, First District,

Division 1, California.

May 25, 1966.

Frederick L. Hilger, Eureka, for appellant.

Leo M. Cook, Ukiah, for respondents.

MOLINARI, Justice.

Plaintiff, who brought this action as the trustee in bankruptcy of Carl W. Rynearson against defendants, Maurice and Alice Tindall, to recover on behalf of Rynearson's creditors certain goods (or the value thereof) allegedly transferred to defendants by Rynearson in fraud of his creditors, appeals from the judgment in favor of defendants.

The complaint in the instant action, after reciting that Rynearson had been adjudged a bankrupt and that plaintiff was the duly qualified and acting trustee in bankruptcy possessing the rights of any and all of Rynearson's creditors, alleged that since the transfer by Rynearson to defendants of certain property was not advertised or noticed pursuant to the provisions of Civil Code, section 3440 ¹ such transfer was fraudulent as to the creditors represented by plaintiff and that by such transfer plaintiff and the creditors were damaged in the amount of $8,000, this being the alleged value of the transferred property. ²

The cause was submitted to the trial court on a stipulation of facts as follows: On August 31, 1960 defendants, who owned Tindall's Market in Boonville, California, and who leased this market to Rynearson and his wife (hereinafter referred to as Rynearson), entered into a written agreement with Rynearson by which the latter agreed to purchase the stock-in-trade of this market from defendants. The agreement provided that the purchase price of the inventory, to be represented by a promissory note, was $7,000 payable at the rate of $200 or more per month with interest on unpaid principal at the rate of 7 1/2 percent per annum, payable monthly. In addition the agreement contained the following provisions: '2. Purchasers shall have the right to sell said stock in trade in the regular course of business to retail customers for cash, and for credit to such persons or companys (sic) as are approved by sellers, however title to the said stock in trade shall remain in sellers until the full purchase price is paid. 3. Purchasers agree to keep the said stock in trade at its approximate level as of July 1, 1960, and agree that title to all items purchased by them shall vest in owners until the full purchase price as specified herein has been paid.' ³ In July 1961, Rynearson having defaulted under the agreement with defendants, defendants repossessed the store, including the stock-in-trade, which, as of that date had a value of $4,357.19. At the time defendants repossessed the subject property, which repossession was accomplished without advertising or giving notice under the provisions of section 3440.1, ⁴ various creditors of Rynearson who had furnished items of inventory to him and who had not been paid for these items, possessed claims against Rynearson in excess of $4,357.19.

The trial court found that the contract entered into between Rynearson and defendants was a conditional sales contract reserving title; that defendants repossessed under this contract; and that section 3440.1 did not apply to the transaction. Accordingly, the trial court entered judgment in favor of defendants.

It should be here noted that the trial court made no determination as to whether any transfer was made in violation of section 3440 as alleged in plaintiff's complaint. A review of the record discloses an ambivalence on plaintiff's part as to whether he was relying on section 3440 or section 3440.1 as the basis for his cause of action. Although his complaint alleged that the transfer complained of was in violation of section 3440, plaintiff, by letter, advised the trial court while it had defendants' demurrer to the complaint under consideration that plaintiff was 'proceeding under Section 3440.1. * * *' However, the complaint was never amended so as to allege a transfer in fraud of creditors under section 3440.1. ⁵ The record discloses, moreover, that although the sole statutory reference in the stipulation of facts was to section 3440.1, plaintiff, in his memoranda of points and authorities filed in the trial court, ⁶ based his right to relief on section 3440 rather than section 3440.1. As to the posture of this case on appeal, although plaintiff indicates in his closing brief that he is relying on both sections 3440 and 3440.1, in his opening brief he refers only to section 3440.1, asserting that 'The question herein presented for review is limited to the very narrow question: Can a vendor in a conditional sales contract reserve title to himself covering after-acquired merchandise to be acquired by his buyer from other vendors so as to cut off the claim of the other unpaid vendors where there is no recording of the conditional sales contract, and no compliance with CC § 3440.1?' In addition, defendants in their reply brief argue only the applicability of section 3440.1 upon the basis, as therein stated, that in view of plaintiff's aforementioned letter to the trial judge that he was relying on section 3440.1 the case was tried on that theory.

In view of the foregoing it appears that this case was tried on the theory that Rynearson made a transfer to defendants in violation of section 3440.1. While plaintiff makes the broad assertion in his closing brief that 'We seek to set aside a transfer or the creation of a lien in violation of * * * Section 3440 and Section 3440.1,' he has not on this appeal argued or furnished authorities in support of the contention that a transfer was made in violation of section 3440. Under the circumstances we are entitled to assume that plaintiff has abandoned this contention and that this issue, which was urged by him in the court below, is not an issue on this appeal. ⁷ (Rich v. State Board of Optometry, 235 Cal.App.2d 591, 603, 45 Cal.Rptr. 512; Blackman v. Kristovich, 216 Cal.App.2d 792, 795, 31 Cal.Rptr. 413; People v. Scott, 24 Cal.2d 774, 783, 151 P.2d 517.)

Another indication of ambivalence on plaintiff's part appears in the position taken by him as to the transfer which he claims to be in fraud of creditors. In his complaint plaintiff alleged that the fraudulent transfer consisted of the repossession by defendants of the stock-in-trade after Rynearson's default in July 1961. Plaintiff reiterates this contention both in his memoranda of points and authorities submitted to the trial court and in his briefs on appeal. Yet, in these memoranda and briefs he seems to be making another contention, namely, that the transfer by Rynearson to defendants of a security interest in items of inventory acquired by Rynearson after the execution of the conditional sales contract--these transfers having been made pursuant to paragraph 3 of the subject contract--were fraudulent. Plaintiff sometimes states this issue in another way, namely, in terms of the effectiveness in an unrecorded conditional sales contract of a provision vesting title in the conditional vendor to all items of inventory subsequently acquired by the conditional vendee. Defendants urge that plaintiff has raised this issue for the first time on appeal and that therefore it should not be considered by us. However, while plaintiff's contention in this regard does appear to be a change in his theory or basis of recovery from that alleged in his complaint, since he did raise this issue in his memoranda in the trial court, we are entitled to consider it on appeal. (See Byrd v. Savage, 219 Cal.App.2d 396, 399, 32 Cal.Rptr. 881; Auer v. Frank, 227 Cal.App.2d 396, 405, 38 Cal.Rptr. 684; People ex rel. Dept. Pub. Wks. v. Lagiss, 223 Cal.App.2d 23, 37, 35 Cal.Rptr. 554; Miller v. Peters, 37 Cal.2d 89, 93, 230 P.2d 803.) Moreover, it is well settled that a change in theory is permitted on appeal when a question of law only is presented by the facts appearing in the record. (Ward v. Taggart, 51 Cal.2d 736, 742, 336 P.2d 534; Panopulos v. Maderis, 47 Cal.2d 337, 341, 303 P.2d 738; Byrd v. Savage, supra, 219 Cal.App.2d p. 399, 32 Cal.Rptr. 881.) In the instant case, as will appear from the discussion which is to follow, the question of defendants' right to repossess the stock-in-trade from Rynearson is a legal one and interdependent with that of defendants' rights under the conditional sales agreement with regard to both the property sold by defendants to Rynearson thereunder and the property subsequently acquired by Rynearson from other vendors.

Before proceeding to an analysis of the applicable principles it should be noted that plaintiff expressly concedes that a valid conditional sales contract can be created covering the stock-in-trade of a merchant when such stock-in-trade is purchased in bulk from a seller who retains title to the specific items therein as security. This concession conforms to the general principle that such a transaction is valid as between the conditional seller and conditional buyer. (See Pacific Finance Corp. v. Hendley, 103 Cal.App. 335, 338, 284 P. 736, 285 P. 1048; 43 Cal.Jur.2d, Sales, § 322, p. 448.) Where, however, the personal property is delivered under a conditional sales contract to a buyer who is in the business of selling property of the same kind, and with the knowledge of the seller the property thus delivered is placed on display for sale with such other property, the holder of the reserved title is estopped to assert his title against a bona fide subvendee for value. (Pacific Finance Corp. v. Hendley, supra, p. 338, 284 P. 736, 285 P. 1048; Democrat-Herald Pub. Co. v. Pettit, 94 Cal.App. 724, 728, 271 P. 910; 43 Cal.Jur.2d, supra.) This rule is particularly applicable where, as in the instant case, the seller expressly authorizes a resale of the property. (General Secur. Corp. v. Reo Motor Car Co., 91...