Westcott v. Nixon

The plaintiff, as trustee in bankruptcy of the bankrupt estate of Eobert Curtis Kitehel, a bankrupt, began this action to quiet title to 100 tons of baled alfalfa hay, and also to recover certain alleged preference payments and also to quiet title to an order for approximately $100. In the first cause of action it is alleged that on the second day of January, 1930, Kitehel indorsed and delivered to Nixon, in payment of past indebtedness, an order in the sum of $308 drawn on the Globe Grain and Milling Company by Kitehel,- that Kitehel was bankrupt at the time and Nixon knew or had reasonable cause to know the fact. The second count alleges that on the tenth day of December, 1929, Kitehel, under similar circumstances, gave Nixon a personal check on the Bank of Italy for $300. The third count alleges that on the fourth day of February, 1930, under similar circumstances, Kitehel assigned an account of $107.94 on the Globe Grain and Milling Company to Nixon; that Nixon had not received the money, and prays that the plaintiff’s title to the same be quieted. The fourth count alleges that on the twenty-fifth day of July, 1929, Kitehel sold and attempted to transfer to Nixon 100 tons of alfalfa hay, but retained possession and control thereof. The trial court entered judgment in favor of the plaintiff on each count. The court found that payment had been made as alleged in the first cause of action, and further found that at about the time the payment was made, P. G. Nixon was familiar with the financial condition of the said Kitehel, and knew, or had reasonable cause to believe, that the said Kitehel was insolvent and unable to pay his debts as they became due. The court adjudged the payment a. preference. A similar finding was made as to the $300

The question of the existence of reasonable cause to believe that a preference would be effected, is a question of fact, and each ease must be determined from an independent investigation of the facts. (Remington on Bankruptcy, vol. 4, sec. 1820; 7 C. J., p. 152.) In In re McDonald & Sons, 178 Fed. 487 , the court says:

“Positive proof of collusion between debtor and creditor, by which one may be preferred, is not generally to be expected, and for that reason, among others, the law allows a resort to circumstances as a means of ascertaining the truth, and the rule of evidence is well settled that circumstances inconclusive if separately considered may by their joint operation, especially when corroborated by moral coincidences, be sufficient.”

In the case of Sundheim v. Ridge Avenue Bank, 138 Fed. 951 , the court says: “Reasonable cause to believe that it was intended to give a preference does not require proof that the defendant had either actual knowledge or actual belief, but only such surrounding circumstances as would lead an ordinarily prudent business man to conclude that a preference was intended.” By the weight of authority, the test is: What inference would an ordinary business man draw from the facts? The facts that were before the trial court may be briefly summarized as follows: In December, 1928, Nixon agreed to furnish Kitchel money, the arrangement first being that he would loan the money on the hay, and finally, according to the testimony of Kitchel, culminated with Nixon taking an option on the hay. At that time Nixon knew that Kitchel was running a ranch and had to have money to pay his rent, labor and power bills. Nixon kept in touch with Kitchel during the months following their first business transaction, and finally, in September, Nixon advanced Kitchel $400 in two separate checks. In the latter part of November, Kitchel and Nixon discussed an arrangement whereby Kitchel purchased a one-half interest in Nixon’s dairy herd; about the 1st of December, 1929, Nixon made an agreement with Kitchel to

Appellant challenges the sufficiency of the evidence to support the finding. In the case of Hassell v. Bunge, 167 Cal. 365 [ 139 Pac. 800 , 801], the court says: “ . . . change of possession is a question of fact to be determined by the court or jury upon a consideration of all the evidence. The finding upon this, as upon other issues of fact, is conclusive on appeal, unless, reading the evidence in the light and with inferences most favorable to the conclusion reached below, the appellate court can say that that conclusion is without substantial support in the record.”

Briefly summarized, the evidence shows that there was an attempted sale of 100 tons of hay about May 17, 1929, and that the purchase price was payable by July 17, 1929. The hay was yet to be cut and baled at that time, but there was at least 61 tons of hay in the barn by July 26, 1929, and by October there was 106 tons in the barn. That the appellant did nothing to take possession of said hay, nor did he exercise any control over the hay between the twenty-sixth day of July, 1929, and the following February. On the other hand, there is evidence that the vendor, Kitchel, had repeatedly exercised control over the hay, and had even sold hay out of the very pile appellant now contends was hay set aside for him. Thus the evidence clearly shows that the hay was not delivered immediately, but, on

Unless, as a matter of law, there was some reason for the contrary, the delivery of the hay should have been actual, apparent and not constructive, and the transfer, possession or control of the hay by the transferee should be continuous, and so open and unequivocal as to carry with it the usual marks and indication of ownership. (Sec. 3440, Civ. Code.)

The mere fact that the crop was yet to be grown is no justification for the failure to deliver it immediately upon the hay being cut and baled, for while property not in existence at the time of the sale cannot be the subject of the rule of immediate delivery, nevertheless, when the property comes into existence, the delivery must be made at once. (Sequeira v. Collins, 153 Cal. 426 [ 95 Pac. 876 ]; 12 Cal. Jur. 1009.)

It cannot be said, as a matter of law, that the appellant used due diligence in taking possession and control of the hay when he allowed it to remain at the place of sale and under the possession and control of the vendor the long period of time that he did in the instant case.

“Growing crops are not susceptible of manual delivery until harvested and are not in the possession or control of a vendor so as to require an immediate change of delivery upon sale. When, however, the crop is harvested the vendee must take immediate possession and retain the -same under penalty of having the transfer voided at the instance of creditors.” (12 Cal. Jur. 1005.) This rule is supported by Crocker v. Cunningham, 122 Cal. 547 [ 55 Pac. 404 ]; Davis v. McFarlane, 37 Cal. 634 [ 99 Am. Dec. 340 ] ; O’Brien v. Ballou, 116 Cal. 318 [ 48 Pac. 130 ].

Reading the evidence in the light of the inferences most favorable to the conclusion reached by the trial court, we cannot say that the finding is without substantial support in the record. It follows that the attempted transfer of the personal property to appellant in this action was conclusively presumed to be fraudulent, and therefore void against nonassenting creditors. (Civ. Code, sec. 3440.)

Barnard, P. J., and Marks, J., concurred.

A petition by appellant to have the cause heard in the Supreme Court, after judgment in the District Court of Appeal, was denied by the Supreme Court on August 7, 1933.