Court Opinion

ID: 9452560
Source: CourtListenerOpinion
Date Created: 2023-08-04 17:44:32.620386+00
Date Added: 2024-06-11T17:33:16.106864
License: Public Domain

MADDEN, Judge
(dissenting in part).
I concur in the opinion of the court except with regard to the item of $28,-000 which the appellant took, on February 20, 1961, from the cash on hand of the bankrupt. The appellant’s explanation for the taking is that it was done to “protect” bona fide creditors of Pomona from a threatened “improper” attachment by Dadigan, his joint venturer in Pomona, who had, by that time, disassociated himself from the market enterprise. The trustee says that the taking was in violation of the California Uniform Fraudulent Conveyance Act, Cal. Civ.Code § 3439.07, which says:
Every conveyance made and every obligation incurred with actual intent as distinguished from intent presumed in law, to hinder, delay, or defraud either present or future creditors, is fraudulent as to both present and future creditors.
The appellant urges that he “returned” $22,000 of the $28,000 within three days of the taking and the remaining $6,000 within 11 days of the taking and that all of the $28,000 was used to pay “bona fide general creditors” of Pomona, and that, therefore, the California Civil Code provision was not applicable. He says that if he is obliged to pay the $28,000 to the trustee, as ordered by the district court, he will have paid it twice, and both times to creditors of Pomona. In a sense that is true. But, as the opinion of the court says, the philosophy of the bankruptcy law is that such assets as an insolvent has are to be devoted, so far as they extend, to the pro rata payment of the insolvent’s creditors. It would be a complete contradiction of that philosophy to allow the principal responsible actor in a corporation to gather up such ready money as the corporation has and use it to pay such of the creditors as he chooses, because he thinks they are more deserving or for some other reason. As the court says in its discussion of appellant’s collection and distribution of the rent money, the use of some of the insolvent’s assets to pay some of the creditors does benefit the other creditors by some small amount not susceptible of calculation or of being credited to the one making such payments.
There is an earnest argument by the appellant that $8,000 or more of the $28,000 taken and returned by appellant was used to pay creditors who, in the bankruptcy, would have been entitled to payment in full if the assets were sufficient, before any payment would be made to general creditors. It seems that the market held itself out to accept cash from its customers and use it to pay the customers’ gas and electric bills for them. The market also issued travelers checks to its customers, which the customers of course paid it for, in cash. The store manager, as we have said, testified about the use of the money returned by the appellant to satisfy such obligations. But his testimony as to the amount so used was undocumented and indefinite. Furthermore, there was no evidence that the deposits for these purposes by customers were held in a trust account. Nor is there any citation by the appellant of any legal doctrine which would give a preferred status to persons in the situation of these customers of the bankrupt market.
The district court, applying Bankruptcy Act, § 57n, 11 U.S.Code § 93n, provided in its order that, as to the $20,000 item of the checks, if the appellant paid back the $20,000 within 30 days after the rendition of the order to pay it back, the appellant might then file a general claim for that amount in the bankruptcy proceedings. The appellant urges that if the district court’s order to pay back the $28,000 item is affirmed by this court, this court should direct that a genera] claim for that amount should be permitted to be filed. I think not. If one wrongfully takes the money of another, and, in litigation, is required to pay it back, there is no basis for any claim in bankruptcy or otherwise for the amount which he paid back. Nor would the fact that he had paid an equiv*886alent amount to others to whom it did not belong give rise to a claim against the bankrupt estate.
I would affirm, in its entirety, the order of the district court.