Tucker v. Dr. P. Phillips Co.

• Decision Date: 24 April 1945
• Docket Number: No. 11170.,11170.
• Parties: TUCKER v. DR. P. PHILLIPS CO., Inc., et al.
• Court: U.S. Court of Appeals — Fifth Circuit

148 F.2d 904 (1945)

TUCKER v. DR. P. PHILLIPS CO., Inc., et al.

No. 11170.

Circuit Court of Appeals, Fifth Circuit.

April 24, 1945.

A. R. Johnson and Newman T. Miller, both of West Palm Beach, Fla., for appellant.

O. B. Simmons, Jr., of Miami, Fla., for appellee.

Before SIBLEY, WALLER, and LEE, Circuit Judges.

LEE, Circuit Judge.

Alleging that certain moneys belonging to the bankrupt, Southern Roadside Restaurants, Inc., had been wrongfully appropriated by appellees, the trustee in bankruptcy brought this suit for an accounting. From an adverse judgment the trustee appealed, and this court reversed the judgment and remanded the cause for further proceedings. Tucker v. Dr. P. Phillips Co., 5 Cir., 139 F.2d 601. From an adverse judgment on remand, the trustee has again brought the case here for review.

The facts are: On October 31, 1940, Locar, Inc., entered into a written contract of lease with Howard Johnson, Inc., of certain lots in Orange County, Florida, and agreed to erect thereon improvements for use as a restaurant. The lease was for a term of ten years and provided for a monthly rental of $400 per month, the term of the lease and the monthly rental to begin upon delivery of the leased premises. The lease also granted to lessee an option to lease other lots in Orange County, Florida. On November 29, 1940, the parties entered into a supplemental lease whereby the said Locar, Inc., leased unto Howard Johnson, Inc., the lots described in the option upon the same terms, stipulations, and conditions set forth in the original lease between the parties, and for a monthly rental of $100 per month, due and payable as provided in the original lease. On the same date that the original lease was executed, Howard Johnson, Inc., subleased to the bankrupt, the said sublease providing that there was "sublet to the lessee all the premises and buildings leased, or which may hereafter be leased, to it Howard Johnson, Inc., by Locar, Inc., under and subject to the same terms and conditions as stated in said lease," the sublessee agreeing "to fulfill all conditions and other obligations assumed and undertaken by said Howard Johnson, Inc., under its lease." One of the conditions required of Howard Johnson, Inc., by Locar, Inc., was that it deposit the sum of $10,000 in escrow to secure performance by it of its obligations under the lease.¹ The bankrupt, to fulfill all conditions and obligations assumed and undertaken by said Howard Johnson, Inc., under its lease, deposited a cashier's check for $10,000 with Dr. P. Phillips Co., Inc., escrow agent. The restaurant on the leased premises was completed on January 15, 1941, and the bankrupt took possession. The monthly rents due under the contracts, totaling $500, were paid monthly in advance by the bankrupt to Dr. P. Phillips Investment Co., Inc. (assignee of Locar, Inc.), beginning with January 15, 1941, to and including December 15, 1941. Dr. P. Phillips Investment Co., Inc., credited said payments on the rent account of Howard Johnson, Inc., and Howard Johnson, Inc., made the same credits on the rent account of the bankrupt.

The business of the Southern Roadside Restaurants, Inc., did not prosper and on March 23, 1942, an involuntary petition in bankruptcy was filed against it. At that time the monthly rentals due in advance on January 15, 1942, on February 15, 1942, and on March 15, 1942, were in arrears. Some several days later the escrow agent deposited the cashier's check for $10,000 for collection. On or about April 1, 1942, the escrow agent delivered the proceeds to Dr. P. Phillips Investment Co., Inc., and, upon receipt of said amount, Dr. P. Phillips Investment Co., Inc., credited Howard Johnson, Inc., under the lease, with the three monthly rentals past due and with future monthly rentals to and including September 15, 1943, and Howard Johnson, Inc., made the same credit to the bankrupt under the sublease.

In our former opinion, we said 139 F. 2d 603: "We have noted that the money deposited with the escrow agreement was not deposited to secure the obligations of the bankrupt as sublessee, but of Howard Johnson, Inc., as lessee; and it does not appear how much was due by Howard Johnson, Inc., under the lease. The money, when deposited in escrow, belonged to the Southern Roadside Restaurants, Inc. After it was so deposited it continued to be the property of that corporation, subject to the lien of the escrow agreement, until its adjudication in bankruptcy, whereupon the title thereto passed to the trustee in bankruptcy subject only to said lien. It now appears that the escrow agent has paid over all of the money to an affiliated company. This payment may have been justified, but there was no proof of it, though proof, if it existed, was peculiarly within the knowledge of the escrow agent. The trustee in bankruptcy made out a prima facie case; he was not required to negative facts peculiarly within the knowledge of defendants."

On remand, the trustee, appellant here, amended his bill of complaint, alleging that Howard Johnson, Inc., had received the benefit of the $10,000 placed by the bankrupt in escrow and was liable to him for said sum, as it had been used to pay the rent due by Howard Johnson, Inc., under its lease; and the trustee prayed for judgment...