Larsen v. Beekmann

• Decision Date: 17 September 1969
• Citation: 276 Cal.App.2d 185,80 Cal.Rptr. 654
• Court: California Court of Appeals Court of Appeals
• Parties: Herold W. LARSEN, Plaintiff and Respondent, v. Carl H. BEEKMANN, Defendant and Appellant. Civ. 33024.

Page 654

80 Cal.Rptr. 654

276 Cal.App.2d 185

Herold W. LARSEN, Plaintiff and Respondent, v. Carl H. BEEKMANN, Defendant and Appellant.

Civ. 33024.

Court of Appeal, Second District, Division 5, California.

Sept. 17, 1969.

Hearing Denied Nov. 12, 1969.

Ellis D. Reiter, Los Angeles, Stanley L. Avery, Sherman Oaks, and Ellis D. Reiter, Jr., Los Angeles, for defendant and appellant.

Joseph S. Potts, Santa Ana, for plaintiff and respondent.

AISO, Associate Justice.

Defendant appeals from a superior court order denying his motion to recall and quash a writ of execution which plaintiff, the unpaid judgment-creditor of a judgment entered upon a stipulation for judgment, had caused to be levied. The question presented is whether the judgment was one dischargeable in bankruptcy, and more particularly whether the stipulation upon which the judgment rests is a compromise settlement and a waiver of plaintiff's right to assert thereafter that the genesis of his claim for accounting is a tort not dischargeable under section 17 of the Bankruptcy Act (11 U.S.C.A. § 35).

I.

Plaintiff filed an action averring in substance that he and defendant were partners in an employment agency known as the 'Nosker Agency,' that defendant had wrongfully converted partnership assets to his own use, and praying for a judicial declaration of dissolution of partnership, an accounting, and recovery of such sums as the accounting should determine to be due to plaintiff.

The allegations of the complaint pertinent to the bankruptcy question raised read: 'That since the commencement of said partnership, the defendant * * * in violation of the partnership agreement, wrongfully and without the knowledge or consent of plaintiff, misappropriated and converted substantial sums of money, receipts and profits of the (partnership business) said NOSKER AGENCY to his own use and benefit; that said defendant wrongfully cashed checks made payable to the NOSKER AGENCY and failed to account to the company for said funds * * * That * * * defendant has wrongfully misappropriated, converted, and received sums in excess of $11,000.00 over and above his just and fair proportion of copartnership profits. * * *'

Defendant's answer to the complaint appropriately denied these allegations. The pretrial order lists 'Whether * * * defendant misappropriated or diverted partnership funds in the approximate amount of $11,000.00 or any other amount' as an issue to be tried; it also enumerates among plaintiff's contentions the one that defendant did commit the alleged misappropriations and conversions, which he denied.

On March 21, 1966, a document entitled 'STIPULATION FOR JUDGMENT AND JUDGMENT' was signed and filed by the trial court and entered in the judgment book on March 22, 1966. It states in part: 'The parties to the above entitled litigation, by and through their respective attorneys, entered into a Stipulation for Judgment and pursuant to that judgment, the court enters its judgment and order' of the following tenor:

'Defendant CARL H. BEEKMANN is ordered to pay to plaintiff HEROLD W. LARSEN the sum of $6,000.00, to be paid as follows: (a) $2,500.00 in cash, to be paid within 30 days from the date of judgment; (b) The balance of $3,500.00, which shall bear interest at the rate of 6% Per annum, commencing from the date of this judgment, shall be paid in monthly installments of $50.00 per month on the 1st day of each month commencing on the 1st day of May, 1966, and continuing until the balance of principal and interest is paid in full. If any of the installments is not paid when due, the plaintiff shall have the right to notify either the defendant or his attorney by regular mail of the fact that he declares a default, whereupon, the defendant will be given a five day grace period within which to make the payment then in default. If said payment is not paid within five days of said notice, then the full unpaid balance of the principal and interest due under this judgment shall automatically become due and payable.'

The balance of the stipulation and judgment: declared the existence of a partnership business between plaintiff and defendant which had terminated on October 9, 1964, after which date plaintiff had the right of sole ownership of the business and exclusive use of the name, 'Nosker Agency'; enjoined defendant from using the name of 'Nosker' for any purpose; ordered plaintiff to assume all obligations of the business and to hold defendant harmless from same; ordered plaintiff to prepare federal and state partnership tax returns for 1964 and each party to assume his proportion of any tax found to be due; and ordered that each party bear his own respective costs of suit.

Defendant failed to make the payments required by the judgment. On May 6, 1966, he was adjudicated a bankrupt in bankruptcy proceedings No. 210279 IH in the United States District Court, Southern District of California, Central Division, and his discharge was subsequently entered.

On February 9, 1967, defendant's mother, Ida Wolff Beekmann, died testate providing by her will that defendant share equally in her estate along with four other children.

Plaintiff caused a writ of execution for $6,000, plus $420 interest, to be levied on the executrix of Ida Wolff Beekmann's estate on June 9, 1967.

On October 4, 1967, defendant filed his notice of motion to recall and quash the writ of execution, based on the theory that the stipulated judgment had been discharged in bankruptcy. His declaration in support of his motion stated in part: 'The settlement of this case was predicated upon negotiations between our attorneys, and the settlement finally determined was the result of a compromise of the above lawsuit, and for that reason the settlement was less than the demand. The settlement embraced more than the agreement to pay $6,000.00 at stipulated intervals, as is reflected by the stipulation for such judgment.' Plaintiff's declarations filed in opposition to the motion did not deny this averment of a compromise settlement, but set forth statements of defendant's misfeasance, fortified by exhibits, from which a trier of fact could have found the alleged conversions to be within the category of 'willful and malicious injuries to property of another' within the meaning of the bankruptcy act.

On November 17, 1967, the trial court by minute order denied defendant's motion, and he appeals from that order.

II.

Except to assert the non-dischargeability of the judgment, plaintiff has not otherwise attacked the validity of defendant's discharge in bankruptcy. It is true that plaintiff's counsel ¹ argues in his briefs that 'the facts of this case strongly suggest that when (defendant) stipulated to the Judgment, he intended to file bankruptcy and attempt to thereby avoid his obligation.' However, the record does not disclose any attempt by plaintiff to set aside the stipulation for judgment or the judgment upon this ground.

A liability for 'willful and malicious injuries to * * * the property of another' is not dischargeable in bankruptcy. (Bankruptcy Act, § 17 (11 U.S.C.A. § 35).) However, a conversion is not Per se always a willful and malicious injury to the property of another. (Davis v Aetna Acceptance Co. (1934) 293 U.S. 328, 331--332, 55 S.Ct. 151, 152--153, 79 L.Ed. 393, 396--397; Morris v. Drubin (1958) 165 Cal.App.2d 467, 469, 332 P.2d 371; Royal Indemnity Co. v. Sherman (1954) 124 Cal.App.2d 512, 517, 269 P.2d 123, 42 A.L.R.2d 890.) 'There must also be a showing of the tort with aggravating features, which will warrant a deduction that the conversion in question transcends ordinary wrongdoing into a situation evincing a reckless disregard of the * * * property rights of others, and a willingness by the tort-feasor to inflict the injury complained of in the specific case.' (Rees v. Jensen (9 Cir. 1948) 170 F.2d 348, 350--351.)

Plaintiff cites Fooshe v. Sunshine (1950) 96 Cal.App.2d 336, 340--343, 215 P.2d 66, 16 A.L.R.2d 1142 and Marlenee v. Warkentin (1945) 71 Cal.App.2d 177, 180--181, 162 P.2d 321, as controlling authorities which dispose of the issue here presented. We do not so read them. They hold in effect that under the circumstances of those respective cases, the conversion by a partner of partnership assets to his own use constituted a willful and malicious injury to another's property, excluded from bankruptcy discharge, and that if the findings and the judgment recite that the defendant's misdealing with partnership property was willful, malicious and fraudulent, the query whether the judgment is dischargeable in bankruptcy is foreclosed.

The distinctive feature of the cause before us is that the judgment in question rests upon a stipulation for judgment which does not recite the specific basis of liability for paying plaintiff the $6,000 in the manner provided. The judgment is also silent in that respect; it could be supported upon a pure accounting theory. Postulating the California view that in this situation the court will go behind the judgment and examine the entire record (e.g., Fitzgerald v. Herzer (1947) 78 Cal.App.2d 127, 130--131, 177 P.2d 364; Robinson v. Early (1967) 248 Cal.App.2d 19, 23, 56 Cal.Rptr. 183) and that it may even resort to extrinsic evidence (United States Credit Bureau v. Manning (1957) 147 Cal.App.2d 558, 305 P.2d 970) to determine the essential character of the obligation sought to be discharged, nevertheless the first step in the examination of the...