In re Freitas

• Decision Date: 12 October 1936
• Docket Number: No. 27520-Y.,27520-Y.
• Citation: 16 F. Supp. 557
• Parties: In re FREITAS.
• Court: U.S. District Court — Southern District of California

16 F. Supp. 557

In re FREITAS.

No. 27520-Y.

District Court, S. D. California, Central Division.

October 12, 1936.

Earl E. Moss and Spencer Austrian, both of Los Angeles, Cal., for petitioner.

Charles J. Katz and Alfred Gitelson, both of Los Angeles, Cal., for trustee.

YANKWICH, District Judge.

On March 7, 1936, a creditors' petition in involuntary bankruptcy was filed against Alfred De Freitas doing business under the name of Club Seville, a night club conducted upon property located at 8433 Sunset boulevard in Los Angeles, Cal. Coincident with the filing of this petition, there was filed a petition asking for the appointment of a receiver-custodian.The alleged bankrupt consenting to the making of the order, E. A. Lynch was appointed receiver-custodian and qualified on the same day.An adjudication was made on March 30, 1936.E. A. Lynch later became the trustee.Schedules filed on April 10, 1936, showed assets in the sum of $5,582.13, and liabilities in the sum of $55,802.67.

On April 30, 1936, the referee in bankruptcy, upon the verified petition of the trustee, issued an order to show cause requiring Frances De Freitas, the wife of the bankrupt (to whom, for brevity, we shall refer as the wife), to appear and show cause why the title of trustee to the real property in Los Angeles, and its appurtenances, and upon which the business of the bankrupt was conducted, should not be quieted.The wife made no written answer to the order to show cause.She appeared on the day of the return, May 21, 1936, and objected, orally, to the jurisdiction of the referee to hear the matter.The objection being overruled, the referee proceeded to take testimony.On May 29, 1936, he made his order declaring that the wife had no right, title, or interest in the property or the building, appurtenances and improvements thereon, and that her claims in that respect are void as against the trustee, whose title the order quieted.

The wife seeks to review this order.

Two questions are involved.

The first refers to the power of the referee to determine summarily the question of title.That power is questioned.

The law on the subject may be summed up as follows: When the property is not actually in the possession of the bankrupt, and persons having such possession assert title to it, adversely, the bankruptcy court(or the referee) cannot by summary process determine the rights so asserted.Resort must be had to a plenary action.SeeIn re Club New Yorker(D.C.1936)14 F.Supp. 694, 30 A.B.R.(N.S.) 650.When, however, the property is in the actual or constructive possession of the bankrupt,the bankruptcy court has the power to determine the title.

This power is dependent upon one fact only, possession by the bankrupt, no matter in what capacity he holds it.Of course, the capacity in which he holds it may, ultimately, affect the extent of the right he has in the property.It does not, however, affect the right of the bankruptcy court to make the inquiry summarily.

These principles are beyond dispute.The following may be cited, as among the leading authorities, supporting them: 5 Remington on Bankruptcy (4th Ed.) § 2382, p. 482;Gilbert's Collier on Bankruptcy(3rd Ed.) § 699;Whitney v. Wenman(1905)198 U.S. 539, 25 S.Ct. 778, 49 L. Ed. 1157;Murphy v. John Hofman Company(1908)211 U.S. 562, 29 S.Ct. 154, 53 L.Ed. 327;Hebert v. Crawford(1913)228 U.S. 204, 33 S.Ct. 484, 57 L.Ed. 800;Page v. Arkansas Natural Gas Corporation(1932)286 U.S. 269, 52 S.Ct. 507, 76 L.Ed. 1096;Schumacher v. Beeler(1934)293 U. S. 367, 55 S.Ct. 230, 79 L.Ed. 433;Commercial Credit Co. v. Street(C.C.A.9, 1933)65 F.(2d) 102;Buss v. Long Island Storage Warehouse Co.(C.C.A.2, 1933)64 F. (2d) 338;Marcell v. Engebretson(C.C.A. 8, 1934)74 F.(2d) 93;Chandler v. Perry(C.C.A.5, 1934)74 F.(2d) 371.It is clear that the bankrupt here had possession which he surrendered to the receiver, who later became trustee.The receiver took over the property from the city marshal, who had a keeper on it under an attachment.The surrender was voluntary, and, without objection, from the attaching creditor, or from the wife.The referee had, therefore, the right to determine, by summary process, the assertion of the claim of the bankrupt's wife to the property which was in the trustee's possession.SeeTaubel-Scott-Kitzmiller Co., Inc. v. Fox(1924)264 U. S. 426, 44 S.Ct. 396, 68 L.Ed. 770.

The validity of this claim is the second question arising upon this review.Briefly, the basis asserted for the claim is: The real property stood in the wife's name, pursuant to an alleged oral agreement entered into at the time of her marriage to the bankrupt, whereby it was agreed that her earnings should remain her separate property.The money with which the property was purchased was claimed to be the wife's.The improvements upon the building on the property were made by the husband at a cost of many thousands of dollars.The husband claims to have expended $5,000 in cash.And some of the bills are still unpaid and listed in the schedules.He claimed that he had agreed to pay rent to his wife during the occupancy, and that his possession of the property was merely that of her lessee.

The referee determined the matter by holding that the property so claimed by the wife as her separate property, was, in fact, the community property of herself and the bankrupt.

Under the law of California, all property owned by either husband or wife before marriage and that acquired afterwards either by gift, bequest, devise, or descent, with the rents, issues, and profits thereof, is separate property.California Civil Code, §§ 162,163.All other property acquired after the marriage by either husband or wife which would not have been the separate property of either is community property.However, whenever property, real or personal, or an interest in it is acquired by a married woman by an instrument in writing, the presumption is that it is her separate property.California Civil Code, § 164, as amended bySt.1935, p. 1912.Courts have been very liberal in applying the presumption so declared.SeeKimbro v. Kimbro(1926)199 Cal. 344, 249 P. 180.

Husband and wife may change their legal relations as to property.To that end, each may convey to the other all title and interest in either separate or community property.The mutual consent of the spouses is sufficient consideration for such an agreement.California Civil Code, §§ 158-161.In this manner the character of property, whether separate or community, may be changed instantly, upon the entering into such agreement.

In determining whether that was done in a particular case, consideration is given to the fact that the community property may stand in the name of either spouse.The circumstances under which the property was acquired and the facts surrounding such acquisition are, in such cases, more important than the fact that one or the other spouse may have been named as the holder of the property.SeeKillian v. Killian(1909)10 Cal.App. 312, 101 P. 806;In re Estate of Wahlefeld(1930)105 Cal. App. 770, 288 P. 870;In re Estate of Sill(1932)121 Cal.App. 202, 9 P.(2d) 243;Kenney v. Kenney(1934)220 Cal. 134, 30 P.(2d) 398.And the presumption in favor of the wife as to real property standing in her name may be overcome by evidence, direct or circumstantial, showing that, in reality, there was no intention to vest the property in her as her separate property, but that, on the contrary, by so doing, the intention was merely to have her hold the property in her own name for the benefit of the marriage community.As to money deposited in a bank by husband or wife, after marriage, the presumption is that it is community property.Fennell v. Drinkhouse(1901)131 Cal. 447, 63 P. 734, 82 Am.St. Rep. 361;In re Estate of Pepper(1910)158 Cal. 619, 112 P. 62, 31 L.R.A.(N.S.) 1092;Blair v. Roth(C.C.A.9, 1927)22 F. (2d) 932.A like presumption applies to all personal property acquired after marriage, no matter in whose name the title stands.SeeHammond v. McCollough(1911)159 Cal. 639, 115 P. 216;Stafford v. Martinoni(1923)192 Cal. 724, 221 P. 919;McAlvay v. Consumers' Salt Co.(1931)112 Cal.App. 383, 297 P. 135.Ultimately, as to any kind of property, the facts and circumstances in each case must determine the intention of the parties.

When the question arises after the death of one of the spouses, the declarations of the partiesmay be determinative.Especially where the right is asserted by the heirs of the deceased against the surviving spouse, and no rights of creditors or third parties intervene.SeePotter v. Smith(1920)48 Cal.App. 162, 191 P. 1023.But at all times, the statutory provision amounts to nothing more than a disputable presumption.It may be overcome by evidence, direct or indirect.Potter v. Smith, supra;Cohn v. Smith(1918)37 Cal.App. 764, 174 P. 682;Goucher v. Goucher(1927)82 Cal.App. 449, 255 P. 892;Jansen v. Jansen(1932)127 Cal.App. 294, 15 P. (2d) 777.

However, where the rights of third parties are involved, where, as here, after bankruptcy, it is attempted to claim on behalf of the wife property upon which a business was carried on by the husband — property upon which the husband, according to his own admission, has spent thousands of dollars in improvements — and the assertion is made against creditors who parted with goods and services which went into the improvement of the property now claimed by the wife, and the conduct of the business on it, even the most emphatic declarations of the spouses themselves will not be sufficient, if circumstances show no assertion of such right prior to the bankruptcy or go counter to it.

The ipse dixit of the parties in such cases, even if not contradicted by their own actions, means very little.After all, courts are not compelled to accept the verbal statement of a person as to his intention, when, from his own actions, a contrary...