Allen v. Fargo

ASHBURN, J. Joseph F. Fargo, doing business as Main Liquor & Wine Depot, appeals from “Order Approving, Settling and Allowing Report and Second Account Current of Receiver [R. E. Allen], and Instructing Receiver on Claims, etc.” Respondent Allen is general receiver of the assets of Cole’s Check Service, Inc., and Fargo’s contention on appeal is that his claim to payment out of the receivership assets was erroneously rejected by the court in said order.1 Before bankruptcy of Cole’s Check Service, Inc., Fargo had entrusted to Cole’s the sum of $3,908.38 for deposit by it in [334]Fargo’s own bank account, which was not done.

Cole’s Check Service, Inc., prior to its bankruptcy on April 4, 1956, was engaged in business as a check seller or casher, licensed under division 3 of the Financial Code, section 12000 et seq.2 Section 12300.3 of that code provides: "All funds received by a licensee or his agents from the sale of checks, drafts, money orders, or other commercial paper serving the same purpose and for the purpose of paying bills, invoices, or accounts of an obligor shall constitute trust funds owned by and belonging to the person from whom they were received. • • • ” The Supreme Court, in Bank of America v. Bowden, 46 Cal.2d 863, 868 [300 P.2d 10], summarizes the effect of this section as follows: "In terms of trust law, when a check is sold the licensee becomes the trustee, the purchaser becomes the trustor, and the third party payee and holders in due course become the beneficiaries of the trust. The Legislature, by section 12300.3, has authorized both trustor and beneficiaries to enforce the trust, but has denied to general creditors such as plaintiff the right to attach or levy upon the trust funds. The rules thus laid down by the statute appear fair and equitable, and we should not allow them to be frustrated by sustaining the attachment here attempted by plaintiff. ’ ’

After the Cole bankruptcy had run its course the referee in bankruptcy made an order approving the trustee’s account and directing him to turn over all trust funds previously held by Cole’s cheek Service, Inc., to R. E. Allen as receiver, he having been appointed by the Los Angeles Superior Court as general receiver of all the assets and trust funds of the Cole concern.

In Allen v. Ramsay, 179 Cal.App.2d 843 [4 Cal.Rptr. 575], an action brought by this respondent in his capacity of receiver, seeking recovery of alleged trust funds, the court said, at page 850: "To prevail in this case it would seem that the receiver would have to represent the trustors and obligors of Cole’s who gave their money to Cole’s in purchase of checks and who gave their money to Cole’s to pay their bills and