Ribaudo v. Citizens National Bank of Orlando

• Decision Date: 26 November 1958
• Docket Number: No. 17204.,17204.
• Citation: 261 F.2d 929
• Parties: Peter T. RIBAUDO, Trustee of Visser Plumbing and Heating Co., Inc., Bankrupt, Appellant, v. CITIZENS NATIONAL BANK OF ORLANDO et al., Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

261 F.2d 929 (1958)

Peter T. RIBAUDO, Trustee of Visser Plumbing and Heating Co., Inc., Bankrupt, Appellant, v. CITIZENS NATIONAL BANK OF ORLANDO et al., Appellees.

No. 17204.

United States Court of Appeals Fifth Circuit.

November 26, 1958.

COPYRIGHT MATERIAL OMITTED

Stephen R. Magyar, Orlando, Fla., for appellant.

C. O. Andrews, Jr., Andrews & Smathers, Orlando, Fla., for appellees.

Before HUTCHESON, Chief Judge, and CAMERON and BROWN, Circuit Judges.

JOHN R. BROWN, Circuit Judge.

The Trustee appeals from an Order of the District Court affirming a series of similar Orders of the Referee arising out of the bankruptcy of Visser Plumbing and Heating Co., Inc., a corporation, engaged in the plumbing contract and supply business. The holdings were that (1) two air conditioning window units and a heating unit were fixtures annexed to the leased realty; and that a Bank, as Creditor of the Bankrupt, (2) was entitled to set off deposits against the Bankrupt's debts to the Bank, (3) was a secured Creditor as to inventory pledged under a field warehousing plan, and (4) was entitled to retain collections from accounts receivable assigned as security for loans by the Bank.

I.

Motion to Dismiss Appeal.

Before we get to these questions, we must take notice of the Motion to Dismiss the appeal for untimely filing of the Notice of Appeal.

By its corrected order of December 23, 1957, the District Court denied the Trustee's Petition for Review from the Referee's adverse decisions on all of these points. On December 31, 1957, well within the 30 days' time available for appeal under the controlling provision of the Bankruptcy Act¹ the Trustee filed a petition for rehearing and in the alternative for an amendment of the order as corrected December 23. By order² dated January 13, entered January 15, 1958, the District Court denied this petition. Notice of Appeal was filed February 13, 1958. This was within thirty days from the last order but some fifty days after the initial order of December 23, 1957.

The Federal Rules of Civil Procedure are only conditionally applicable. F.R. C.P. 81, 28 U.S.C.A. expressly excludes cases in bankruptcy. But the Supreme Court General Order in Bankruptcy 36, 11 U.S.C.A. following § 53, prescribes that appeals in bankruptcy "shall be regulated, except as otherwise provided in the Act, by the rules governing appeals in civil actions in the courts of the United States, including the Rules of Civil Procedure for the District Courts of the United States."

Stressing cases involving motions to amend or alter judgments under F.R.C.P. 59, the Trustee insists that this appeal would have been held timely in civil actions and a similar result should follow here. Stevens v. Turner, 7 Cir., 1955, 222 F.2d 352; Segundo v. United States, 9 Cir., 1955, 221 F.2d 296; Papanikolaou v. Atlantic Freighters, Inc., 4 Cir., 1956, 232 F.2d 663; McConville v. United States, 2 Cir., 1952, 197 F.2d 680; Calvin v. Calvin, 1954, 94 U.S.App.D.C. 42, 214 F.2d 226.

Whether anything is gained by importing the Federal Civil Rules decisions into this problem is doubtful. While the express provision in F.R.C.P. 59 for motions to alter or amend judgments has no counterpart in the Bankruptcy Act or any express General Order, it is clear that, as between the Court functioning in bankruptcy and in civil proceedings, it has much greater powers to entertain petitions for rehearing in bankruptcy. It may be done even after time for appeal has elapsed. Wayne United Gas Co. v. Owens-Illinois Glass Co., 1937, 300 U.S. 131, 57 S.Ct. 382, 81 L.Ed. 557; Bowman v. Lopereno, 1940, 311 U.S. 262, 61 S.Ct. 201, 85 L.Ed. 177.

Wayne United condenses the troublesome dilemma facing counsel. "A defeated party who applies for a rehearing and does not appeal from the judgment or decree within the time limited for so doing, takes the risk that he may lose his right of appeal, as the application for rehearing, if the court refuse to entertain it, does not extend the time for appeal." 300 U.S. at page 137, 57 S.Ct. at page 385, 81 L.Ed. at page 561. Bowman repeats this caveat but sounds the hope which both of those cases made a reality by their respective orders of reversal: "* * * But where a court allows the filing and, after considering the merits, denies the petition, the judgment of the court as originally entered does not become final until such denial, and the time for appeal runs from the date thereof." 311 U.S. at page 266, 61 S.Ct. at page 203, 85 L.Ed. at page 180.

The key is that the Court must "entertain" the petition, and this seems to be that it must consider it on its merits as a good faith request that the Court take a second look and reverse itself at least in part. If it is so treated, the result is not altered by the fact that the decision on rehearing is the same as the initial order. In that light, there is nothing to suggest that we are not entitled to read Judge Barker's order, note 2, supra, literally that he heard the petition for rehearing and considered it after being fully advised. Certainly with the petition for rehearing filed within ten days of the corrected initial order and twenty clear days left for appeal, he could hardly ascribe to the Trustee's counsel a purpose to use the petition for rehearing as a way to resurrect a right to appeal then gone.

On this interpretation of the District Court's action, MacNeil v. State Realty Company of Boston, Inc., 1 Cir., 1956, 229 F.2d 358, supports our view that the appeal was timely. Carpenter, Babson & Fendler v. Condor Pictures, Inc., 9 Cir., 1939, 108 F.2d 318.

II.

The Fixtures.

The Referee denied the request that the Trustee be awarded two window air conditioning units and circulating hot water furnace (not including ducts) installed by the Bankrupt in the leased premises. The two air conditioning units were typical window type. However, to install them the Bankrupt had removed the window frames of the two windows on the mezzanine floor and had replaced them with concrete blocks and glass blocks except for an opening to fit each unit. The Bankrupt had also installed a circulating hot water furnace that included numerous pipes, which, through walls and floors, were connected with radiators permanently affixed to the walls. The heater unit itself was affixed to the floor to which was attached permanent type water and electrical connections.

There is no disagreement over applicable legal principles. 22 Am.Jur., Fixtures, §§ 3-12, 54-62 (1939); Commercial Finance Co. v. Brooksville Hotel Co., 1929, 98 Fla. 410, 123 So. 814, 64 A.L.R. 1219; Ridgefield Investors, Inc., v. Holloway, Fla.1954, 75 So.2d 208. It is finally a question of fact under these principles.

Like the District Court, and for reasons so well stated there, there is no basis to alter the decision. "The record submitted to the Court does not contain the oral testimony upon which the Referee based his Order in reference to the air conditioning units and heating system. The only evidence in this regard being photographs of the air conditioning units and the furnace. Therefore, the Court does not have before it sufficient evidence to reverse the Referee's Order finding that the said units and heating system became part of the leased premises."

III.

The Setoff of Bank Deposits.

On September 10, 1956, the date of bankruptcy, the Bankrupt was indebted to the Citizens National Bank of Orlando on three demand notes aggregating $64,613.30. On that date there was $778.09 on deposit in the Bankrupt's regular checking account and $835.53 in a special payroll account. Between that date and a week later, when all items previously deposited for collection had cleared, the Bank set off this total of $1,613.62 against the loans then due. As security for their payment the promissory notes expressly pledged "* * * also any balance on deposit account of the undersigned with the Bank."

Here again there is no dispute as to the legal principles. Both recognize that a general setoff is permissible in respect of deposits made in the ordinary course of business. 4 Fla.Jur., Banks & Trust Companies, § 83; and see 4 Collier, Bankruptcy § 68.16 (14th ed. 1942). However, both contentions of the Trustee are without merit. The Bank did not lose the right to exercise this option on the filing of the Petition for Bankruptcy. The special payroll account was special in name only. It was not a trust or similar immobilized account. Segregation under that label was for the Bankrupt's convenience only and the funds were subject to its unlimited dominion.

IV.

The Field Warehousing.

Over the period from March 1955 through March 27, 1956, this same Bank, on notes ranging in the neighborhood of $15,000 each, had loaned the Bankrupt an aggregate of $207,462. These loans were secured, the Bank contends, by assignment of construction contracts then in progress and traditional accounts receivable. We discuss these assignments later, infra V. However, more capital was needed and on April 9, 1956, the Bank, the Bankrupt and American Express Field Warehousing Company entered into a contract for the field warehousing of all of the Bankrupt's inventory. On April 11, 1956, the Bank loaned $50,000, then simultaneously deposited to the Bankrupt's general account as new funds, against the security of nonnegotiable warehouse receipts executed by American Express. None of this loan had been repaid and obviously it represented the greater share of the outstanding indebtedness of $64,613.30 referred to above in the discussion of the setoff of bank deposits. The District Court declared that the Bank had a "preferred lien" on the merchandise covered by the warehouse receipts held by the Bank, but it is clear that the term was an inadvertent slip. We look upon it as though the order declared the Bank to have a secured claim.

We see no point in discussing the evidence in detail. It suffices to say that it was the nature of this tripartite arrangement which...