Peter Barceloux Co. v. Buffum

• Decision Date: 21 November 1932
• Docket Number: No. 6400.,6400.
• Citation: 61 F.2d 145
• Parties: PETER BARCELOUX CO. v. BUFFUM.
• Court: U.S. Court of Appeals — Ninth Circuit

61 F.2d 145 (1932)

PETER BARCELOUX CO. v. BUFFUM.

No. 6400.

Circuit Court of Appeals, Ninth Circuit.

September 8, 1932.

Rehearing Denied November 21, 1932.

Huston, Huston & Huston, of Woodland, Cal., W. T. Belieu, of Willows, Cal., and Percy Napton, of Woodland, Cal., for appellant.

Devlin & Devlin & Diepenbrock, Robt. T. Devlin, Wm. H. Devlin, Arthur C. Devlin, A. I. Diepenbrock, and Horace B. Wulff, all of Sacramento, Cal., and George R. Freeman, of Willows, Cal., for appellee.

Before WILBUR and SAWTELLE, Circuit Judges, and NETERER, District Judge.

WILBUR, Circuit Judge.

This action was brought by the trustee in bankruptcy to recover property alleged to have been fraudulently transferred by the bankrupt while insolvent, and is predicated upon section 70e of the Bankruptcy Act, 11 USCA § 110(e), and section 3439 of the California Civil Code, which is as follows: "§ 3439. Transfers, etc., with Intent to Defraud Creditors. Every transfer of property or charge thereon made, every obligation incurred, and every judicial proceeding taken, with intent to delay or defraud any creditor or other person of his demands, is void against all creditors of the debtor, and their successors in interest, and against any person upon whom the estate of the debtor devolves in trust for the benefit of others than the debtor."

The plaintiff alleges that on February 25, 1927, a voluntary petition in bankruptcy was filed by Henry Joseph Barceloux, who will hereinafter be referred to as "the bankrupt," or as "Henry"; that on February 25, 1928 sic he was adjudicated a bankrupt; that on April 27, 1926, while the bankrupt was president and managing director of the Peter Barceloux Company, which will hereinafter be referred to as "the company," he executed and delivered to the company an agreement pledging 2,499 shares of the capital stock of the company to the company to secure certain pre-existing indebtedness evidenced by three promissory notes, one for $24,064.48, one for $2,000, and the other for $3,500; that this pledge was made with intent to hinder, delay, and defraud the creditors of the bankrupt; that the company knew of the fraudulent intent of the bankrupt, and that said shares of stock were reasonably worth the sum of $80,000; that on June 29, 1926, the bankrupt deposited with the company other property as additional security for the indebtedness specified in the original pledge agreement. This property consisted of 75 shares of Pacific National Fire Insurance Company, evidenced by certificate No. 126; 5 shares of capital stock of the Bank of Orland, evidenced by certificate No. 25; 4 shares of capital stock of the Bank of Orland, evidenced by certificate No. 26; 50 shares of Glenn County Garage Company, evidenced by certificate No. 53; and 50 shares of Glenn County Garage Company, evidenced by certificate No. 10; that the reasonable value of all such shares was $2,100. It is alleged that this transaction was also had with intent to defraud the bankrupt's creditors, and was made when the security already held by the company was of a value of over twice the total amount of said indebtedness; it is also alleged that on August 16, 1926, the company purported to hold a sale of all the securities pledged as aforesaid for the indebtedness stated in the pledge which aggregated $29,564.48, with interest, and also for certain additional indebtedness, as follows:

$1,000 claimed to have been due from the bankrupt to the company from and after January 3, 1923, with interest in the sum of $276.69; $1,717.62 claimed to be due from the bankrupt to the company within two years prior to August 4, 1926, with interest thereon amounting to $304.18; the sum of $1,800 claimed to be due the defendant within two years prior to August 4, 1926, with interest in the sum of $830 — a total of $5,928.49; that of this amount the sum of $1,800, with interest of $830, was not an obligation accruing to the company nor owing to it nor secured by said pledges; that the stock was sold upon the pledgee's sale for $36,314.41, of which $35,814.41 was principal and interest, and $500 attorney's fees; that the sale was made at a pretended public sale without the demand for the payment of said indebtedness, without any notice thereof, without bidders being present at the sale, and the price realized was grossly inadequate and the sale was improvident; that the company failed and refused to adjourn the sale, "all of which was done with intent to delay and defraud the nonkindred creditors of Henry Joseph Barceloux." It is alleged that all the transactions were done and had with the intention of defrauding the nonkindred creditors of the bankrupt, and that at the time the bankrupt was in failing financial circumstances contemplating filing a voluntary petition in bankruptcy; that the value of the bankrupt's property in his hands at the time of the bankruptcy was only $300, and the liabilities, exclusive of the cost of administration, are in excess of $100,000. It is alleged that, after the pledgee's sale, the company purported to sell to George A. Barceloux, a brother of the bankrupt, all the securities purchased by it at the pledgee's sale, "and that said George A. Barceloux has at all times thereafter, and still does, purport to hold and possess said securities as owners thereof." It is alleged that the administrator, George R. Freeman, who was afterwards dismissed from the case, claimed that 2,499 shares of the capital stock of the Peter Barceloux Company were transferred to him as administrator "by way of security for the payment of a considerable sum of money, then and now due to him as such administrator by said Henry Joseph Barceloux; that an accounting is necessary to ascertain what, if any, moneys were at the time of said sale due to defendant Peter Barceloux Company by said Henry Joseph Barceloux and secured by said pledges, or either of them; that an accounting is necessary to ascertain what moneys, if any, were, at the time of said sale, and now are due or owing to said George R. Freeman upon the security of said transfer and assignment; * * * that an inquiry is necessary to ascertain the respective rights of all parties thereto; that it is necessary that the equities of all parties hereto be adjusted in one action; and that complainant is entitled to recover from defendant Peter Barceloux Company, the excess, if any, over and above the amount, if any, found to be due and owing to said George R. Freeman upon the security of said transfer and assignment at the time of said sale and still remaining due and owing, and the value of all of said shares of stock at the time of said sale."

Plaintiff also alleged: "* * * That none of said shares of stock are quoted on any stock exchange and that plaintiff has no means of ascertaining the actual value of such shares other than by an inquiry as to the valuation of the assets and liabilities of the respective corporation issuing the same, and that without the aid of this court * * * said corporations will refuse to allow any such inquiry and valuation."

The plaintiff prayed that an accounting be had as to the moneys due from the bankrupt to defendant George R. Freeman secured by said 2,499 shares of stock; that an inquiry and decree be had as to the valuations of all of said stocks on August 16, 1926; that the pledges of April 27, 1926, and June 29, 1926, and the sale thereunder, be decreed fraudulent and void, and that the plaintiff have judgment against the company for the value of all of said shares of stock at the time of sale, "less such sum, if any, as may be found to be due or owing to George R. Freeman, upon the security of said transfer and assignment and still remaining due and owing; * * * that an inquiry and decree be had and made as to respective rights and equities of the parties hereto * * * and for general relief."

The company answered the complaint, and, among other things, denied "that all the stock of the said Henry Joseph Barceloux is now claimed by this defendant to be owned by George A. Barceloux." It alleged that the company had held the 2,499 shares of its stock as security for the payment of obligations due it and to be due to it from the bankrupt for several years prior to April 27, 1926, and that the pledge agreement executed April 27, 1926, was not executed to it willingly or voluntarily by the bankrupt, but upon the insistent demand of the company, and without any intent on the part of the bankrupt to defraud his creditors; that at the time of the transfer he was not insolvent, and denied that at the time of the transfer the stock was of the value of more than $36,314.41, the amount for which it was sold at the pledgee's sale. The company admits that the additional property pledged to it on June 29, 1926, was so pledged, but that said shares were pledged, not only for the indebtedness covered by the pledge of the 2,499 shares of stock, but also for other indebtedness due from the bankrupt to the company, and denies that this agreement was made with the intention of defrauding creditors, and denies that the additional property pledged was worth $2,100; defendant alleges that the pledgee's sale was conducted in accordance with law, and admits that defendant George R. Freeman, as administrator, claims that the stock in the Peter Barceloux Company was assigned to him as security for a considerable sum of money alleged to be due him as administrator by the bankrupt, but alleges that this transfer to defendant Freeman by way of pledge "was long after the execution and delivery of the pledge agreement of such securities to the company" and denies that an accounting is necessary, and denies that there is no means of ascertaining the value of the shares of the corporate stock involved in the controversy. It denies that defendant Freeman has any interest in the stock, and prays that the title of the company to securities held by it be declared to be good and valid. This answer was...