Court Opinion

ID: 3297897
Source: CourtListenerOpinion
Date Created: 2016-07-05 17:15:06.364104+00
Date Added: 2024-06-11T13:28:53.785783
License: Public Domain

The petition for rehearing is denied.
[13] It is urged upon petition for rehearing herein that the court should have also considered and disposed of the question of the validity of the claim of title asserted by the Bank of Italy in its amended third-party claim in determining the latter's liability for damages for the conversion of the property through its wrongful release from attachment, based upon its assertion of a third-party claim and through the delivery to it of such property upon such claim of ownership thereof by it. The trial court found that on July 22, 1919, and at the time of the levy of the writ of attachment referred to in the complaint Luigi Dellaira, doing business as California Grape Association, was the owner and in the exclusive possession, custody and control *Page 210 
of certain merchandise, describing the property in question. Whatever claim of ownership the Bank of Italy at any time asserted to said property had its origin in transactions between itself and. Dellaira antedating said date. These transactions as shown by the evidence thereof educed by the bank itself in connection with its original and amended third-party claim sufficiently show Dellaira to have been prior to June 4, 1919, the owner and in possession of the property in question; that he made an assignment of the same to the defendant Bank of Italy as security for an indebtedness to it, and delivered the same to the bank as a pledge with said assignment; that thereafter the bank restored the possession of said goods to Dellaira and thus destroyed said pledge; that it then took from Dellaira the trust receipts in question, leaving the latter in full possession and control over said property; that its claim of ownership of said property, as set forth in its original and amended third-party claim, rests wholly upon the aforesaid state of facts. The conclusion is irresistible that such a claim of ownership is void upon its face as against creditors, for the reason that it is violative of the provisions of section 3440 of the Civil Code. (George v.Pierce, 123 Cal. 172 [55 P. 775, 56 P. 53]; People v.Martin, 53 Cal.App. 671 [200 P. 808.].) Trust receipts of this character, resting upon no prior ownership of the property by the creditor for whose benefit the so-called trust is created, have quite uniformly been held to be void as against creditors. (In re Fountain, 282 Fed. 816 [25 A. L. R. 319];Jordan v. Fed. Tr. Co., 296 Fed. 738, and cases cited.) Both of these recent cases refer with approval to an instructive article upon "Trust Receipts" in volume 22, Columbia Law Review, page 395 et seq. After quoting copiously from said article and commenting upon the decisions of the supreme court of the United States upholding its views, the court in the case of In re Fountain, supra, sums the whole matter up as follows:
"Every trust receipt decision cited by the supreme court in connection with the remarks we have quoted falls within the foregoing limitation. (See Commercial Bank v. Canal Bank,239 U.S., at page 524 [Ann. Cas. 1917E, 25, 60 L.Ed. 417,36 Sup. Ct. Rep. 194, see, also, Rose's U.S. Notes].) Any such extension of the rights of the holders of trust *Page 211 
receipts as is sought to be established here would, if consistently applied, enable every money lender, by employing a trust receipt, to preserve a secret lien, and would virtually destroy the efficacy of the Chattel Mortgage Act. We regard the contention as untenable and unsupported by authority. The only case where the holders of trust receipts have been allowed by this court to prevail against the ultimate purchaser or his trustee in bankruptcy, have been those where the title of the holder of the trust receipt was derived from someone other than the debtor. (In re Cattus, 183 Fed. 733 [106 C.C.A. 171]; Inre Coe, 183 Fed. 745 [106 C.C.A. 121]; In re Marks  Co.,
222 Fed. 52 [137 C.C.A. 590].) The same is true of the decision of the supreme court in Dows v. National Exchange Bank,91 U.S. 618 [23 L.Ed. 214, see, also, Rose's U.S. Notes], a case which arose in the Southern District of New York. The federal courts in the Third District have adopted the same view. (CenturyThrowing Co. v. Muller, 197 Fed. 252 [116 C.C.A. 614]; AssetsRealization Co. v. Bank, 210 Fed. 156 [126 C.C.A. 662]; Roth
v. Smith, 215 Fed. 82 [131 C.C.A. 390]; In re Dunlap CarpetCo. [D.C.], 206 Fed. 726; and In re Killian Mfg. Co. [D.C.], 209 Fed. 498.) We have discovered no decision of any court extending the above doctrine, and this court has refused to extend it to a case like the present. (In re Gerstman,
157 Fed. 549 [85 C.C.A. 211]. See, also, American  British Sec. Co.
v. American  British Mfg. Co. [D.C.], 275 Fed. 121.)"
In the case of In re Fountain, supra, the court had also before it another matter entitled "In re Carl Dernburg  Sons Inc.," wherein the identical situation was presented which is present in this case and wherein the court held that the trust receipts taken by the preferred creditors in that case were void as against creditors of the putative trustee or their representative, the trustee in bankruptcy. The reasoning of these cases has exact application to the facts of the case at bar and leave no doubt in our minds as to the insufficiency of the trust receipt taken by the Bank of Italy in the instant case to support its claim of ownership of the attached property. [14] This being so and said bank having been a coactor with its codefendant, the sheriff, in procuring an unlawful release of the property in question from the lien of said attachment and the delivery thereof *Page 212 
to itself, it must be held liable for whatever damages the plaintiff sustained from the conversion of said property accomplished thereby.
All the Justices concurred except Shenk, J., who dissented.