Davis v. Winona Wagon Co.

California Supreme Court Mar 4, 1898 No. S. F. No. 311Published

Before: Garoutte

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Holding. The court held that the transfer of property without immediate delivery and change of possession was void as to creditors, and the assignee, as trustee for creditors, was not estopped from recovering the property or its value despite a prior voluntary delivery to the defendant.

Issues

Whether a transfer of property without immediate delivery and change of possession is void as to the transferor's creditors.
Whether an assignee in insolvency is estopped from recovering property delivered to a claimant under a mistake of law or fact.
Whether the assignee can claim the transferor acted as an agent for the defendant while simultaneously asserting the transfer was void as to creditors.

Disposition. reversed and remanded

Quotations verified verbatim against the opinion

“As to the creditors of the Bull & Grant Farm Implement Company, the sale by it to defendant was void, for there was no immediate delivery and change of possession of the vehicles.”

“It is difficult to see how the mere delivery of property by a party in possession of it to a party claiming title to it bars the first party from ever attempting to regain its possession or its value.”

“As trustee of the creditors he could not be held to this transaction, even if he was a party to it in fraud. How much less may he be held to it where he acted under mistake.”

Synopsis

Insolvency—Sale Void as to Creditors—Want of Delivery and Change-of Possession—Action by Assignee.—Where a sale of vehicles by an insolvent corporation was made to another corporation, under an agree- . ment that the insolvent corporation should retain possession of the-property, sell the same on commission, and account to the vendee corporation for the net proceeds of sale, such sale is void as to the creditors of the insolvent corporation for want of immediate delivery and an actual and continued change of possession of the vehicles; and the assignee of the insolvent corporation representing the creditors, may bring an action to recover the value of vehicles subsequently converted by the vendee corporation to its own use.

Id.—Delivery by Assignee to Vendee —Pleading—Demand—Answer Claiming Title.—Where the property was delivered by the assignee to the corporation vendee, by reason of its claim of title thereto, and, in a subsequent action by the assignee to recover the value of the property so delivered, for the benefit of creditors of the insolvent corporation, the defendant set out that the property belonged to it, and based its right to defeat the action on that ground alone, no demand for a return of the property was necessary, under such circumstances, before the commencement of the action.

Id.—Action for Conversion—Burden of Proof—Estoppel of Plaintiff— Sales upon Commission—Agency.—In an action by the assignee to recover the value of vehicles alleged to belong to the insolvent corporation and to have been converted to its own use by the defendant corporation, plaintiff is hound to prove that the vehicles of the insolvent corporation were converted by the defendants, and not by the insolvent corporation, and plaintiff is estopped from claiming that the insolvent corporation was not the owner of the vehicles, but was a mere agent of the defendant, for the purpose of claiming that sales of vehicles made by the insolvent corporation prior to the insolvency proceedings, upon commission, and the accounting by it to the defendant corporation for the proceeds thereof, was a conversion of such vehicles by the defendant corporation.

Id.—Notice of Action—Proceeds of Fraudulent Sales not Involved.—In an action to recover the value of vehicles converted by the defendant, an attempt to follow the proceeds of fraudulent sales of vehicles made by the insolvent corporation is not involved, and there is no materiality in the fact that the proceeds of the sales went to the corporation defendant.

Id.—Delivery by Assignee under Mistake—Estoppel—Trust Relation of Assignee.—The delivery of the vehicles to the defendant corporation under its claim of title as vendee of the property, by a mistake either of fact or of law, or both, as to the location of the title, does not estop the assignee from claiming the recovery back of the property or its value; but the assignee, being a trustee for the creditors, had no right or power to give away the property, and could not be held to the transaction,

GAROUTTE, J. The plaintiff, as' assignee in insolvency of the Bull & Grant Farm Implement Company, a corporation, has brought this action against defendant, a corporation, to recover fourteen thousand dollars damages, alleged to be the value of certain wagons and other vehicles wrongfully converted by defendant to its own use. Plaintiff appeals from the judgment and order denying Ms motion for a new trial.

The merits of this litigation are to be disposed of upon a consideration of the second cause of action. The material facts, as found by the trial court, may be substantially stated as follows: The Bull & Grant Farm Implement Company, upon ¡¡November 11, 1889, was the owner and in the possession of a large number of vehicles which it had purchased from the defendant, but was still indebted for the same. Thereupon the defendant canceled [247]this indebtedness, and the Bull & Grant Farm. Implement Company transferred the title to these vehicles to it. At the same time it was agreed that the Bull & Grant Farm Implement Company should retain possession of the property, sell the same on commission, and account for the net proceeds to defendant. Upon December 5, 1890, the Bull & Grant Farm'Implement Company was declared an insolvent debtor, and this plaintiff was thereafter appointed assignee of the insolvent’s estate. Prior to such insolvency the Bull & Grant Farm Implement Company bad sold about seven thousand dollars’ worth of this property, and had accounted to the defendant for the proceeds thereof. Plaintiff, before his appointment as assignee, for a short time acted as receiver of the insolvent’s estate, and as such receiver sold a small portion of this property and accounted to defendant for the net proceeds. Subsequent to plaintiff’s appointment as assignee, defendant, claiming title to all of said property which remained on hand and in the possession of the assignee, demanded its surrender, and plaintiff delivered said property to defendant in accordance with such demand. Subsequently the plaintiff, claiming to act in the interest of the creditors, brought this action, as stated aforesaid, to recover from defendant in conversion the sum of fourteen thousand dollars alleged to be the value of the property converted.

As to the creditors of the Bull & Grant Farm Implement Company, the sale by it to defendant was void, for there was no immediate delivery and change of possession of the vehicles. (Murphy v. Mulgrew, 102 Cal. 547; 41 Am. St. Rep. 200; Byxbee v. Dewey (Cal. 1897), 47 Pac. Rep. 52.) Neither can there be any question as to the right of the assignee of the insolvent debtor, representing the creditors, to bring an action of the character here disclosed. (Brown v. Bank of Napa, 77 Cal. 544.) No demand for a return of the property was necessary before the action was brought. For defendant sets out by" its answer that the property belonged to it, and bases its right to defeat plaintiff’s cause of action upon those grounds alone. Under such circumstances no demand is required. (Parrott v. Byers, 40 Cal. 622.)

Davis v. Winona Wagon Co.

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