PUCCETTI v. GIROLA ET AL

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District Court of Appeal, First District, Division 2, California.

PUCCETTI v. GIROLA ET AL.

Civ. 11476.

Decided: November 25, 1941

Jesse G. Benson, of Oakland, for appellant. John J. Beck, of Los Angeles, for respondent Girola. John C. Altman, of San Francisco (Willard L. Ellis, of San Francisco, of counsel), for respondent State Finance Co. Donahue, Richards & Hamlin, of Oakland, for respondent Bank of America.

Alberto Puccetti commenced an action against numerous persons, natural and artificial, to quiet title to certain lots located in Oakland. Some defendants appeared and answered, other defendants appeared and answered and filed cross–complaints. The action was tried before the court sitting without a jury. The court made findings of fact in favor of the defendants. Alberto Puccetti appealed from the judgment and brought up typewritten transcripts. After the transcripts were filed, and after some of the briefs had been filed, he died. Later Gemma Puccetti, his widow, was, as administratrix, substituted as plaintiff and appellant. In the interest of clarity and to directly reply to statements in the briefs, we will treat the subjects involved as though the original plaintiff were still alive. Additional facts will be stated as it becomes necessary.

Of the numerous defendants named in the plaintiff's complaint, the rights between the plaintiff and three of those defendants are the sole issues in dispute as shown by the record. We will take up first the controversy between the plaintiff and the defendant Madeline Girola.

Girola Bros. was a corporation. Later it changed its name to Madalay, Inc. It was engaged in selling corporate securities. The record discloses that among others it organized and became the owner of Continental Seaboard Corporation. Of the last–named corporation Henry Girola was president and was paid a salary of $2,500 per month; Joseph Girola was a director and was paid $1,000 per month; Josephine Girola was assistant secretary and was paid $750 per month. Those several persons caused their salaries to be paid into a fund which was deposited in a bank in the name of Girola Bros. for the benefit of the depositors. On April 29, 1932, the amount due each of the depositors was ascertained and said amounts were assigned to the defendant Madeline Girola. Having received said assignments she cancelled all claims against Girola Bros., whose name had been changed to Madalay, Inc. In consideration of said assignment Madalay, Inc., executed quitclaim deeds to the several lots, the title to which is involved in this action. On November 1, 1933, in action No. 227,406, in which Alberto Puccetti was plaintiff and Girola Bros., a corporation, and numerous other persons natural and artificial, were defendants, a default judgment was entered in the sum of $5,100, together with costs in the sum of $18 and interest from January 2, 1929. On September 22, 1937, an execution was issued and was levied against the title and interest of Henry Girola and Girola Bros., a corporation, in and to the property described in the plaintiff's complaint. The property was sold under execution pursuant to said levy on November 8, 1937, and bid in by Alberto Puccetti. The sheriff's certificate of sale was recorded on November 9, 1937. Later, on December 3, 1938, the sheriff issued his deed. The plaintiff claims under said sheriff's deed. The defendant Madeline Girola claims under said quitclaim deeds.

The plaintiff makes the attack that the quitclaim deeds were made by Madalay, Inc., and did not recite the fact that Girola Bros., Inc., had changed its name to Madalay, Inc. Civ.Code, sec. 1096. However, there is no claim that the change of name was not legally accomplished. It therefore became a matter of public record and the plaintiff had constructive notice thereof long before the sheriff's certificate of sale, dated November 8, 1937, upon which he bases his claim of title. Having such knowledge plaintiff may not claim the benefits of section 1096 of the Civil Code because he was not a bona fide purchaser for value. Beattie v. Crewdson, 124 Cal. 577, 57 P. 463; III Freeman on Executions, 3d Ed., sec. 344. Moreover, it is the settled law of this state that the doctrine of caveat emptor applies to execution sales made upon valid judgments. The purchaser assumes all the risk of defects in the debtor's title, whether he purchases with or without notice. If the judgment debtor had a good title the purchaser got it; if a partial title he got that; or if no title he got nothing. Breeze v. Brooks, 71 Cal. 169, 181, 9 P. 670, 11 P. 885; III Freeman on Executions, 3d Ed., sec. 335.

The plaintiff alleged, and now contends, that the said quitclaim deeds were fraudulent conveyances and were made without any consideration. The most that can be said is that on said issues the evidence was conflicting. The trial court made a finding to the effect that the said quitclaim deeds were not fraudulent conveyances. It also made a finding that the grantor was not insolvent. An examination of the record discloses that both of said findings are sustained by the evidence. Moreover, where the transfer, as here, was made for a valuable consideration the person seeking to set aside the conveyance on the ground of fraudulent intent must establish the participation of the grantee in such fraudulent intent or at least with having knowledge thereof. Civ.Code, sec. 1228; 12 Cal.Jur. p. 1058. In that connection the testimony of Madeline Girola is clear that she had no fraudulent intent and that she had no knowledge of such intent on the part of any member of her family participating in the transaction.

The plaintiff alleged and now contends that, as to him, the said quitclaim deeds were made without consideration and at a time when the grantor was insolvent. Continuing he claims that the findings to the contrary are not supported by the evidence and that, as to him, said deeds are void. As to the material elements there was no conflict. Girola Bros. was a family corporation. All of the stock was owned by a son named Henry. All of the officers were members of the family. Girola Bros. organized Continental Seaboard Corporation. All of the stock was owned by Girola Bros., a corporation. Henry was president, Joseph was a director, and Josephine was assistant secretary. All were paid salaries. The salaries so paid were pooled in a fund in the name of Girola Bros. and in its name the fund was banked. As early as January 2, 1929, Girola Bros. became indebted to the plaintiff on a fraudulent sale of shares of corporate stock. That debt was reduced to a judgment on November 1, 1933. On September 22, 1937, execution was issued against the title of Henry Girola and Girola Bros., a corporation, in and to the property in suit. It was recorded October 5, 1937. Under that writ the property was sold to plaintiff. The sheriff's certificate was recorded November 9, 1937, in the office of the recorder of Alameda county. The deeds to Madeline Girola were executed April 29, 1932. At the time the deeds were about to be made Girola Bros. was the owner of the lands in suit. It also held the above–mentioned salary fund amounting to $54,423.72. At that time the salary fund was assigned to Madeline Girola. Immediately thereafter deeds to said land were made to her. In consideration thereof she reassigned to Girola Bros. the balance of said salary fund amounting to over $54,000. That fund the plaintiff claims had been purloined from the funds of Continental Seaboard Corporation. It will suffice to state the evidence does not show such to be the fact. If the plaintiff would make such a claim he should have introduced evidence to prove it. The burden was on him. As the record stands, the title to the fund rested in Girola Bros., a corporation, after said deeds were executed. It owed no other debts so far as the record shows except to its officers. The plaintiff claims that at said time Girola Bros. was insolvent. He quotes the record showing certain executions were returned nulla bona and he argues such facts were evidence of insolvency. But those executions were returned on dates including September, 1934, to July, 1937. They were not evidence of insolvency April 29, 1932, the date the deeds were executed to Madeline Girola. There is no other evidence that Girola Bros. became insolvent April 29, 1932, nor prior thereto.

The trial court made a finding the deeds from Girola Bros. (Madalay, Inc.) were not made with intent to hinder or delay creditors of the grantor. The plaintiff asserts said finding is not sustained by the evidence. The point may not be sustained. As shown above there was no evidence that Girola Bros. was insolvent at the time the deeds were made, nor that it had any creditors except its officers. There was evidence that other persons were asserting certain claims but that evidence was not connected. There was evidence that Continental Seaboard Corporation paid its officers large salaries; but there was evidence the corporations did business amounting to millions of dollars and there was no evidence that the salaries were excessive. There was some evidence of dissatisfaction on the part of holders of the securities issued by the Continental Seaboard Corporation, but there was no evidence connecting such facts with any issue in the instant case which would have supported a finding contrary to the finding now under attack.

From what has been said above it is clear the trial court did not err in rendering a judgment in favor of the defendant Madeline Girola.

As to the Bank of America National Trust and Savings Association, it is likewise clear that the court did not err. That defendant holds a deed of trust executed on October 14, 1929, which was given to secure a loan in the sum of $30,000 and on which $20,000 remained due and payable at the date of the trial. It was stipulated by the parties, and the court found, that the bank's claim is a good and subsisting lien and will remain so regardless of the outcome of said action.

As to the defendant the State Finance Company, a corporation, the record discloses that after Madeline Girola obtained title, Joseph Girola applied to State Finance Company to release certain moneys held by it to secure the payment of obligations incurred by Capital Credit Company, one of the interlocking corporations operated by the Girola family. Without knowledge of any of the facts hereinabove recited, State Finance Company made a loan of $3,500. To secure the repayment of that loan Madeline Girola delivered to said company her promissory note in the sum of $10,000 and executed a mortgage to secure the same. That note and mortgage were executed on August 18, 1937. The sheriff's certificate under which the plaintiff claimed was executed November 8, 1937. Under these facts the plaintiff's claim must yield to the title of the State Finance Company. Fly v. Cline, 49 Cal.App. 414, 423, 193 P. 615; Scott v. Purcell, 7 Blackf., Ind. 66, 39 Am.Dec. 453.

We find no error in the record. The judgment is affirmed.

STURTEVANT, Justice.

NOURSE, P. J., and DOOLING, J. pro tem., concurred.