Scandinavian-American Bank v. Sabin

• Decision Date: 25 October 1915
• Docket Number: 2615.
• Citation: 227 F. 579
• Parties: SCANDINAVIAN-AMERICAN BANK v. SABIN. In re SONDHEIM.
• Court: U.S. Court of Appeals — Ninth Circuit

227 F. 579

SCANDINAVIAN-AMERICAN BANK v. SABIN.

In re SONDHEIM.

No. 2615.

United States Court of Appeals, Ninth Circuit.

October 25, 1915

This is a controversy between R. L. Sabin, trustee in bankruptcy of the estate of D. Sondheim, bankrupt, and the Scandinavian-American Bank, a corporation, respecting the ownership of a certain stock of goods and merchandise. The material facts are not in dispute. On or about the 22d day of October, 1914, Sondheim, who was engaged in the business of buying and selling bankrupt stocks of merchandise, was in debt to the bank in the sum of about $2,600, represented by three promissory notes. Being desirous of purchasing a certain bankrupt stock of merchandise, he on the date above mentioned applied to the bank for an additional loan of $2,600. The loan was made by the bank, whereupon Sondheim gave to the bank his note for the amount, and at the same time entered into an agreement with it, the material recitals of which are as follows:

'Whereas the Scandinavian-American Bank has furnished to D. Sondheim the sum of $2,600, to be used to purchase the goods, wares and merchandise of the store located at 146 Sixth street Portland, Oregon, under an agreement to protect the said party of the second part (the bank), absolutely on said purchase: Now, therefore, said agreement is hereby reduced to writing and executed between the parties of the first and second part in the following manner and form, to wit:

'It is understood and agreed between the parties hereto that the goods, wares, and merchandise heretofore named were purchased with the money furnished by the party of the second part, and that said D. Sondheim holds title in the same as trustee for the said party of the second part, in so far as the holding of said title is necessary to protect and pay back to the party of the second part the sums of money owing by the party of the first part to the party of the second part.

'It is understood and agreed that the party of the first part shall proceed to sell the goods, wares, and merchandise in the regular course of business, and shall keep an account of each day's sales, and one-half of the moneys taken in for the sale of said goods at the close of each day shall be turned over to the party of the second part at the opening of its banking hours the following day, until such time as the $2,600 advanced by the party of the second part, and any other indebtedness to the extent of $2,600 owing by the party of the first part to the party of the second part shall have been fully paid and satisfied.

'It is further understood that the party of the second part shall have the right to install a cashier, whose wages shall be paid as part of the running expenses of the business by the party of the first part, to keep track of the receipts and disbursements from the sale of said merchandise, and to be cashier in charge of all moneys handled during said sale; said party to have access to all books, records, bills, and invoices in connection with the said business heretofore referred to, and the sale and disposal of the same.

'It is further stipulated that no sale of the bulk of said articles, goods, wares, and merchandise first above named, shall be made without the consent of the party of the second part.'

The agreement was never recorded. Sondheim thereupon purchased the stock of goods and merchandise, opened a store, and proceeded to sell the same, and continued to sell the same up to and including about the 13th day of November, 1914.

Both the referee and the court below found, and, indeed, it is not disputed, that during this period Sondheim was in possession of the stock of merchandise as sole and exclusive owner; that no account of sales was rendered by him to the bank; that the proceeds from sales were deposited by him in the bank to his own credit in the ordinary course of business, and commingled with funds received from other sources; that the account was at all times subject to his check; and that he was permitted to and did make large additional purchases of merchandise, claims for which are included in the bankruptcy proceedings in the court below; that the clause in the agreement to the effect that Sondheim should keep an accurate account of each day's sales, and should turn over to the bank one-half of the moneys taken in for the sale of the goods at the close of each day, and also the clause respecting a cashier to be installed by the bank to keep track of receipts and disbursements, were, by consent of the parties, disregarded and not enforced.

On November 13, 1914, actions were brought by certain creditors of Sondheim, and writs of attachment were issued thereunder. On the same date the bank, learning of the attachments, and before the same could be levied upon the stock of merchandise in controversy, entered Sondheim's store and took possession of the merchandise, and placed in charge thereof one of its representatives. Three days later involuntary proceedings in bankruptcy were instituted in the court below, and a receiver was appointed to take charge of the assets of the estate. Subsequently the receiver filed a petition in the bankruptcy proceedings, claiming that the merchandise in question was an asset of the estate, and asking for an order directing the bank to deliver the stock to him forthwith, and to account to him for the proceeds of such part thereof as had been sold by the bank. By stipulation of the parties, approved by the court, the goods were delivered to the receiver and by him sold, and the proceeds deposited with the bank to await the action of the court in the present proceeding. Such proceedings were thereupon had in the court below that on the 21st day of May, 1915, the court made and entered its decree directing the payment of the moneys representing the proceeds of the sale of the stock to the trustee, who had succeeded the receiver, for the benefit of the creditors of the bankrupt estate. From the decree the bank has prosecuted an appeal, and also seeks to have it reviewed by this court by petition to revise under section 24b of the Bankruptcy Act.

Sidney J. Graham, of Portland, Or., for petitioner and appellant.

Sidney Teiser and Roscoe C. Nelson, both of Portland, Or., for respondent and appellee.

Before GILBERT, ROSS, and MORROW, Circuit Judges.

MORROW Circuit Judge (after stating the facts as above).

1. We are of opinion that the question at issue presents a controversy arising in the course of bankruptcy proceedings, and is appealable under section 24a of the Bankruptcy Act (Act July 1, 1898, 30 Stat. 553). Hewit v. Berlin Machine Works, 194 U.S. 296, 24 Sup.Ct. 690, 48 L.Ed. 986; In re First National Bank, 135 F. 62, 67 C.C.A. 536; In re Mueller, 135 F. 711, 68 C.C.A. 349. The petition for revision will therefore be dismissed.

2. To the contention of the appellant that the trustee is without...