Wheelon v. Patco, Inc.

TAYLOR, J. On these appeals from judgments awarding third party claims, the sole question presented is whether the evidence establishes that title to the funds in question had passed to respondent prior to the attachments of appellants.

The facts are not in dispute. In March 1966, Pateo, Inc. (hereafter Pateo) sold its supermarket in Crescent City to Lehman Co., Inc. for about $52,000. This amount was deposited with the escrow holder, United California Bank (hereafter Bank). Pateo instructed the Bank to disburse all of the funds in accordance with its April 8, 1966 list of claims under notice to creditors. This list included $12,000 to be paid to respondent Skeels and her husband. Pateo, however, instructed the Bank to then pay only $7,000 of this amount and to hold the remaining $5,000 for instructions from Pateo.

The Bank complied with these instructions and disbursed all of the funds except the above mentioned $5,000. On June 10 and June 14, appellants, both creditors of Pateo,1 attached the $5,000. The Bank answered the garnishments, indicating that at the time of the attachments, it was indebted to Pateo in the amount of $5,000. Respondent orally informed appellants that their claims would be paid, and attempted to obtain the $5,000 from the Bank. The Bank refused to do so as they needed further authorization from Pateo, since the letter dated June 17 instructing them to pay respondent was signed only by Pateo’s attorneys and not the president of the eorpo[73]ration. Subsequently, the Bank received a letter signed by the president of Pateo and paid the approximately $2,300 of unattached funds in its possession to respondent.

Thereafter, on August 5, 1966, respondent, pursuant to section 689 of the Code of Civil Procedure, filed petitions for hearings on her third party claims to the amount attached by each appellant.2 The matters were consolidated for a hearing by the court. The evidence adduced indicated that since April 20, 1963, respondent had been the manager of the market and had advanced $12,000 to Pateo for its operation. Pursuant to her written contract of employment, dated April 5, 1963, respondent obtained a 30-day option to purchase the market in the event the contract was in effect on April 1, 1966. To effectuate the sale of the market to Lehman, respondent agreed to release her option for the return of her $12,000. She did not know why Pateo had instructed the Bank to pay her only $7,000, except as a means of keeping her there until the end. Aside from Pateo’s instructions to the Bank concerning the disbursement of the escrow funds and respondent’s contract of employment, the documentary evidence included the June 17 letter from Pateo’s attorneys to the Bank (set forth below)3 and a covering letter from the attorneys to respondent and her husband.4