Arena v. Bank of Italy

This appeal is from a judgment in the defendants’ favor in an action instituted by the plaintiff to recover damages arising from the alleged wrongful release of an attachment. The facts, as shown upon the trial and found by the trial court, in so far as they are necessary to a decision of this cause, are the following: For some time prior to July 22, 1919, one Luigi Dellaira had been doing business under the name of “California Grape Association” and under that name had come into the possession of certain merchandise consisting of 204 barrels of olives, 11 crates of empty half-gallon cans, 349 cases of tomato puree, and 72 cases of Grinola oil, which said merchandise was of the value of about $8,000 and was on said above date situate in certain premises on Front Street, in San Francisco, which, prior to and at said date, were rented and occupied by said Luigi Dellaira and constituted his store and salesroom while doing business under said name; that on July 22, 1919, the plaintiff in this action commenced an action against said Luigi Dellaira, under both names, to recover upon an alleged in

The primary . question presented for our determination relates to the sufficiency of the third-party claim presented to the attaching officer in its original form by the Bank of Italy as forming a basis for the demand mad.e by such officer

“If the property levied on is claimed by a third person as his property by a written claim verified by his oath or that of his agent, setting out his right to the possession thereof, and served upon the sheriff, the sheriff is not bound to keep the property unless the plaintiff, or the person in whose favor the writ of execution runs, on demand, indemnifies the sheriff against such claim by an undertaking by at least two good and sufficient sureties in a sum equal to double the value of the property levied on; and the sheriff is not liable for damages for the taking or keeping of such property to any such third person, unless such a claim is made.”

[1] By virtue of the provisions of section 549 of the Code of Civil Procedure this section is made applicable to attachment proceedings. It would appear from the language of the above-quoted section, and from the fact of its insertion in the Code of Civil Procedure in the title in which it appears, that the right of an officer levying a writ of attachment or execution in an action at law to demand and receive an indemnifying undertaking from the plaintiff in such action as a condition of retaining the property levied upon by virtue of such writ depends upon and can only be set in motion by the presentation of a written and verified claim by the third party claiming such property as his property and setting out his right to the possession thereof. Prior to the adoption of the Code of Civil Procedure the Practice Act provided that when property levied upon was claimed by a third person as his property the sheriff should summon a jury to try the validity of the claim and if such jury decided in favor of the claimant, the sheriff was entitled to relinquish the levy unless the attaching or judgment creditor gave him sufficient indemnity for proceeding thereon. This provision of the Practice Act was carried into section 689 of the Code of Civil Procedure upon its original adoption and was continued therein in substantially that form until the year 1891 when the said section was amended so as to read substantially as the section now reads, except that it contained the requirement that the third-party claimant, in addition to claiming the property levied upon as his

In other words, we interpret the intention of the legislature in the adoption of section 689 of the Code of Civil Procedure in the form of its enactment in 1891 and of its later modification in 1907 to have been that of requiring that a third-party claimant shall have presented to the officer a verified claim showing on its face substantially that he claimed the property subjected to the levy to be his property and setting out his right to the possession thereof before such officer would become entitled to demand of the plaintiff in the action an indemnifying bond. The absence of either or both of the foregoing requirements from such verified third-party claim as might be presented would have

[2] Having in mind these conclusions, let us look to the substance of the third-party claim presented to the sheriff, as shown by the pleadings and findings in the instant case. It sets forth, it is true, that the goods in question “are the property of the Bank of Italy,” describing the same; but it immediately thereafter proceeds to set forth as the basis for its claim of ownership thereof the fact that it “became owner of said goods by an assignment given by the defendant ... to the said Bank of Italy to secure the payment of a promissory note.” This statement shows upon its face that the Bank of Italy was not the owner of the property in question and had no other right of property in it than that which would arise from the alleged assignment thereof to it as security for a debt. [3] Section 2924 of the Civil Code provides that: “Every transfer of an interest in property, other than in trust, made only as a security for the performance of another act, is to be deemed a mortgage, except when in the case of personal property it is accompanied by actual change of possession, in which ease it is to be deemed a pledge.” Section 2888 of the Civil Code provides: “Notwithstanding an agreement to the contrary, a lien, or a contract for a lien, transfers no title to the property subject to the lien.” From these provisions of the Civil Code it follows that the utmost right of property which the Bank of Italy could have had or asserted with respect to the merchandise in question by virtue of the alleged assignment thereof from Dellaira to it would have been a lien of some sort upon said property.

[4] There are only two forms of lien which under our law can be created by an assignment of personal property as security for a debt. These are (1) a pledge and (2) a mortgage. As to the lien of a pledge, it is dependent on possession (Civ. Code, sec. 2989), and in case such possession has been taken by the creditor under such form of transfer it is provided in section 2913 of the Civil Code that: “The voluntary restoration of property to its owner by the holder of a lien thereon dependent upon possession extinguishes the lien as to such property, unless otherwise agreed by the parties, and it extinguishes it, notwithstanding any such agreement, as to creditors of the owner and

[7] It would appear beyond question that the third-party claim of the Bank of Italy was in its original form fatally defective in so far as it attempted to assert any right of property in the said bank which would give it a superior right thereto as against the right of the attaching creditor. But it was fatally defective for still another reason. Section 689 of the Code of Civil Procedure provides that the third-party claim required by that section to be served upon the officer must also set out the claimant’s “right of possession thereof.” The claim of the Bank of Italy as originally set forth and served upon the sheriff in this case entirely omits to expressly assert any right of possession in it or to set out anything from the statement of which any implication or reference of a right of possession in the Bank of Italy could arise. It follows necessarily that said third-party claim in its original form and content furnished no basis

[8] It is contended, however, by the respondents herein that the service upon the attaching officer by the Bank of Italy of its amended and verified claim, which they assert to have been sufficient in form and substance to satisfy the terms of the statute, was such as to entitle the bank to a release of said property and as to entitle the sheriff to give such release without any further or renewed demand upon the plaintiff for an indemnifying bond and without any such delay as would have enabled the latter to have procured and tendered such bond. We discover no merit in this contention since, if, as we have held, the original claim of the bank was so fatally defective as to furnish no basis for the sheriff’s demand for an indemnifying bond, and if his said demand therefor was so utterly ineffectual as to give him no right whatever to release such property on account of the failure or refusal of the plaintiff to give such bond, it must follow that no attempted amendment of such original claim could be held to give any validity to the sheriff’s void act in making such demand. Conceding, though not deciding, that the amended claim of the bank would have been sufficient in form and substance to have justified the attaching officer in the making of a new demand of the plaintiff for an indemnifying bond, the undisputed evidence in the ease discloses, and the findings of the trial court show, that without the making of any such renewed demand and, so say the findings, “without notice to the plaintiff of the filing of said amended affidavit, ’ ’ the sheriff at once released said attached property and delivered the same to the Bank of Italy; and thereafter, and upon the protest of the plaintiff against such unauthorized release of said property 'and his demand that the said sheriff retake possession of the same, refused and neglected so to do. We have not thus far decided the question as to whether or not the amended and verified claim of the said bank would have been sufficient to have justified the sheriff in demanding an indemnifying undertaking under the provisions of section 689 of the Code of Civil Procedure nor do

[9] The respondents herein make certain other contentions which may be briefly noted: It is insisted by the respondents that the plaintiff’s complaint is insufficient in its averments of ownership of the attached property in Dellaira at the time of such attachment. The averments of the complaint are that the writ of attachment directed to the said sheriff required him to attach and safely keep all the property of the defendant Luigi Dellaira; and that “pursuant to said writ of attachment, defendant Thomas Finn as such sheriff duly levied upon, attached and took into his custody certain goods, wares and merchandise belonging to the defendant Luigi Dellaira,” describing the property so taken. We think a complaint in this form, though inartificial in its recital of the ownership of the attached property by Dellaira, would be sufficient as against a general demurrer. [10] The defendants, however, also presented a special demurrer to the effect that the complaint was uncertain in that it did not appear therefrom “how or in what manner the goods attached belonged to the defendant Luigi Dellaira.” This special demurrer might as a matter of strict pleading be held to furnish sufficient basis for the claim of prejudicial error on the part of the trial court in overruling the same were it not for the fact, as fully shown by the record, that the defendants were in nowise misled thereby, but were at all times fully advised as to what the rights of ownership of the said Dellaira were in said property; and for the further fact that upon the trial of the cause upon its merits the trial court found that at the time of the levy of said attachment the said Dellaira “was the owner and was in the exclusive possession and control” of said property. Under these conditions we think that the complaint formed a sufficient basis for the issuance of the writ of attachment and that the defendants were not prejudicially injured by the overruling of their special demurrer to said complaint. [11] The respondents further contend that the complaint does not sufficiently aver that no demand was made upon the plaintiff by the sheriff for an indemnity undertaking after the presentation to him of the Bank of Italy’s amended claim. The complaint in that behalf avers that the sheriff released the said property without giving any notice to the

[12] The appellant herein urges that this is a proper ease for this court in reversing the judgment of the trial court to order that court to enter judgment in favor of the plaintiff herein upon the findings. The trial court found that the attachment was duly issued and levied by •the defendant Thomas F. Finn as sheriff, etc., and as attaching officer, and that the defendant Hartford Accident and Indemnity Company was the surety upon the said .sheriff’s official bond; that the property taken under said attachment was the property of Luigi Dellaira, doing business as “California Grape Association,” and that at the time of such levy he was the owner and in the exclusive possession, custody, and control thereof; that upon the levy of said attachment and to procure its release the defendant Bank of Italy presented to and filed with the defendant Thomas F. Finn, the attaching officer, its third-party claim, a copy of which is set forth in said findings; that thereupon the said attaching officer made demand upon the plaintiff to indemnify him against said original third-party -claim; that thereupon said plaintiff notified said attaching officer that said third-party claim was invalid and insufficient and that it affirmatively showed upon its face that said Bank of Italy had no right to the possession of said attached property; that thereupon the said Bank of Italy filed with said attaching officer its amended affidavit in support of its said claim; that upon the filing of said amended affidavit in support of its original third-party claim the said attaching officer, without notice to the plaintiff of the filing of said amended affidavit, released said attached property and delivered the

It is, therefore, ordered that the judgment herein be and the same is hereby reversed, with direction to the trial court to enter judgment for the plaintiff in accordance with the foregoing opinion.

Myers, C. J., Lawlor, J., Waste, J., Seawell, J., Lennon, J., and Houser, J., pro tem., concurred.

Rehearing denied.

In denying a rehearing, the court filed the following opinion on August 30, 1924:

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

"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

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 ]; In re 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. (Century Throwing Co. v. Muller, 197 Fed. 252 [ 116 C. C. A. 614 ] ; Assets Realization 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 Carpet Co. [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 ease 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 ease 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 ease 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 eases has exact application to the facts of the ease at bar arid 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

All the Justices concurred except Shenk, J., who dissented.