BRAINARD v. FITZGERALD (1934)

The facts out of which this case arose are: Richard Behrendt Company was a copartnership consisting of Alvin H. and Arthur Behrendt engaged in the business of selling at wholesale toys, fireworks, novelties, etc., at 711 Mission street, San Francisco. The copartnership was indebted to the National Fireworks Distributing Company to the amount of $1,225.03, for which the fireworks company, in the morning of January 20, 1932, filed suit in the municipal court of the city and county of San Francisco. In connection therewith it caused a writ of attachment to be issued, which the sheriff on the same day, between 2 and 3 o'clock p. m., levied by placing a keeper in the store of the aforementioned Behrendt Company. At about 9:15 a. m. of the same day, unknown to the fireworks company, the Behrendt Company made to one G. W. Brainard, secretary of the board of trade of San Francisco, a general assignment for the benefit of creditors. At about 10 o'clock of that day a representative of said G. W. Brainard arrived at the store of the Behrendt Company and proceeded to check the books and take inventory, remaining at the store until shortly before 2 o'clock, when he attended a meeting at the board of trade office. It was while he was at this meeting that the sheriff levied the aforementioned writ and placed the keeper in possession. The representative of Brainard returned to the store within an hour or so and found the keeper there. He continued with his work of taking inventory and examining the books. Both copartners remained on the premises and were still there at the time of the trial in the lower court. The same clerks were retained except one who was discharged a few days later. No change was made in the large sign appearing above the front of the store and none in the sign on the window. However, Brainard's representative, when he first went to the store, in his own handwriting, wrote on a sheet of paper described as a half-letter size, the words “G. W. Brainard, Assignee,” and placed same on the floor of the window. The same letterheads were used and bills were sent out as usual. All business was transacted as before under the name of Richard Behrendt Company. The sheriff removed certain quantities of merchandise inventoried at $3,000, which was later sold by the sheriff under execution issued out of the municipal court, realizing the sum of $1,400.

On January 23, 1932, respondent Brainard served a third party claim on the sheriff, whereupon the National Fireworks Distributing Company filed a bond with the sheriff to prevent the release of the property. The appellant herein, Massachusetts Bonding & Insurance Company was the surety on that bond. Respondent brought suit on the bond including as defendants, in addition to the appellant, Sheriff Fitzgerald and the National Fireworks Distributing Company, but abandoned the suit as to the two latter named defendants and proceeded against the appellant alone on its bond.

From the judgment entered in respondent's favor this appeal was taken. The evidence does not show that the assignment was ever recorded, and the assignment filed as an exhibit does not show that it was recorded. Respondent proceeds on the theory of a common-law assignment for the benefit of creditors as being within the exception contained in section 3440, Civil Code.

Section 3440, Civil Code, provides: “Every transfer of personal property * * * is conclusively presumed if made by a person having at the time the possession or control of the property, and not accompanied by an immediate delivery, and followed by an actual and continued change of possession of the things transferred, to be fraudulent, and therefore void, against those who are his creditors while he remains in possession; * * * provided, also, that the sale, transfer or assignment of a stock in trade, in bulk * * * otherwise than in the ordinary course of trade and in the regular and usual practice and method of business of the vendor * * * will be conclusively presumed to be fraudulent and void as against the existing creditors of the vendor * * unless at least seven days before the consummation of such sale * * * the vendor * * * shall record in the office of the county recorder * * * a notice of said intended sale; * * * provided, further, that the provisions of this section shall not apply or extend to any * * * transfer or assignment * * * made for the benefit of creditors generally. * * *”

Sections 3449 to 3473, Civil Code, exclusively provide for assignments for the benefit of creditors.

These sections have received the attention of our courts particularly in Wilhoit v. Lyons, 98 Cal. 409, 33 P. 325; Garn v. Thorwaldson, 40 Cal. App. 62, 180 P. 9; Jarvis v. Webber, 196 Cal. 86, 236 P. 138.

In the latter case we find (page 94 of 196 Cal., 236 P. 138, 141): “In order to determine the validity of a transaction purporting to be a statutory assignment for the benefit of the creditors of an assignor, we look to the provisions of the Civil Code, found in the title covering that subject. Watkins v. Wilhoit, 104 Cal. 395, 399, 38 P. 53. It is therein provided that an insolvent debtor may, in good faith, execute an assignment of property in trust for the satisfaction of his creditors (section 3449). Such assignment must conform to the provisions of the code sections. It must be in writing, must contain a list of the creditors of the assignor, their places of residence, the amount of their respective demands, and the amounts and nature of any security therefor. * * * There is the further requirement (section 3458) that an assignment for the benefit of creditors must be acknowledged, proved, and certified in the mode prescribed by the chapter on recording transfers of real property, and must be recorded. Unless that be done, the assignment is void against every creditor of the assignor not assenting thereto (section 3459).”

The assignment under consideration in this appeal did not contain a list of the creditors of the assignor, it was not recorded nor had the time elapsed for the making and filing of the inventory provided by section 3461, Civil Code. It therefore follows that there was nothing in the property assignment which prevented the levy of the attachment by the National Fireworks Distributing Company or which prevented the sheriff from selling the attached property under the execution placed in his hands.

Judgment reversed.

SCHMIDT, Justice pro tem.

We concur: NOURSE, P. J.; STURTEVANT, J.