Court Opinion

ID: 9462824
Source: CourtListenerOpinion
Date Created: 2023-08-04 22:51:20.088736+00
Date Added: 2024-06-11T17:37:48.436102
License: Public Domain

ALFRED T. GOODWIN, Circuit Judge
(dissenting):
I believe that we should affirm. In re Belmetals Mfg. Co., Inc., 299 F.Supp. 1290 (N.D.Cal.1969), affirmed sub nom. Eranosian v. England, 437 F.2d 1355 (9th Cir. 1970). The only part of the questioned transaction relevant here is the duty of the corporation to pay the installments on the note. This duty is executory. It is also unenforceable.
As a practical matter, when the trustee seeks to marshal the assets of the bankrupt estate he cannot sell the real property free of the lien. The lien can be satisfied only by having someone pay a debt that is no longer lawfully collectible in California. Trowbridge v. Love, 58 Cal.App.2d 746, 137 P.2d 890 (1943), is at least consistent with my view that when such a debt is discharged the lien securing the debt becomes functus officio.
Further, I am not satisfied that the policy reasons given by the majority in favor of the lien holder in this case overcome equally valid policy reasons which may have commended themselves to the California legislature when it enacted Cal.Corp.Code § 1707. The majority here is creating a precedent that may frustrate present and future creditors of other small, closely held corporations. See McConnell v. Estate of Butler, 402 F.2d 362 (9th Cir. 1968).