Erwin E. Hassen v. Sam Jonas, Trustee of the Estate of Pomona Properties, Inc., Doing Business as Steve's Ranch Market, Bankrupt

One Hassen appeals from a decision of the United States District Court in a bankruptcy case. Pomona Properties, Inc. is the bankrupt. Jonas, the trustee in bankruptcy, filed in the bankruptcy proceeding an “Application for Order Requiring Return of Converted Assets and to Set Aside Preferences and Fraudulent Conveyances.” The trustee asserted that Hassen was under an obligation to pay $52,500 to the trustee for the benefit of the bankrupt estate and the creditors of the bankrupt. Hassen answered the trustee’s application, denying any such obligation. Hearings on the application were held before a referee in bankruptcy, who decided in favor of the trustee. Hassen filed a petition for review of the referee’s decision. The District Court, after a hearing, affirmed the referee’s decision and order except that it reduced the amount from $52,500 to $52,000. We have the case on Hassen’s appeal from the District Court’s decision. Bankruptcy Act § 24, 11 U.S.C. § 47 .

The first item which the appellant was ordered to pay to the trustee is $4,000. The bankruptcy of Pomona Properties, Inc. was adjudicated on April 5, 1961. Hassen, who was accustomed to conducting the affairs of Pomona…

(dissenting in part).

I concur in the opinion of the court except with regard to the item of $28,-000 which the appellant took, on February 20, 1961, from the cash on hand of the bankrupt. The appellant’s explanation for the taking is that it was done to “protect” bona fide creditors of Pomona from a threatened “improper” attachment by Dadigan, his joint venturer in Pomona, who had, by that time, disassociated himself from the market enterprise. The trustee says that the taking was in violation of the California Uniform Fraudulent Conveyance Act, Cal. Civ.Code § 3439.07, which says:

The appellant urges that he “returned” $22,000 of the $28,000 within three days of the taking and the remaining $6,000 within 11 days of the taking and that all of the $28,000 was used to pay “bona fide general creditors” of Pomona, and that, therefore, the California Civil Code provision was not applicable. He says that if he is obliged to pay the $28,000 to the trustee, as ordered by the district court, he will have paid it twice, and both times to creditors of Pomona. In a sense that is true. But, as the opinion of the court says, the philosophy of the bankruptcy law is that such assets as an…

(concurring).

I concur in the result reached by Judge Ely. I cannot agree with him that Section 3439.07 of the California Civil Code, upon which the referee relied, was “misapplied.” I think it was applicable, and rendered the conveyance fraudulent. But it was relied upon, per se, to authorize the remedy. This I think, was error. The referee sought to achieve the remedies suggested by Section 3439.09. But while the transfer was fraudulent under Section 3439.07, the remedies suggested by the referee was its recovery, by the trustee, even though it had been previously returned by Hassen. The only logical basis for such a remedy would be Section 3439.09 (a) (2) which permits a creditor to “[disregard the conveyance and attack or levy execution upon the property conveyed.” The property, having already been returned, could not, in my opinion, be again reached under any remedy provided by Section 3439.09.

The Fraudulent Conveyance Act constitutes a two step process. First, the facts are tested by Section 3439.07 to decide if a transfer was fraudulent. Second, a creditor can try to remedy a fraudulent transfer under Section 3439.05. In this case the facts come within Section 3438.07,…

373 F.2d 880 Erwin E. HASSEN, Appellant, v. Sam JONAS, Trustee of the Estate of Pomona Properties, Inc., doing business as Steve's Ranch Market, Bankrupt, Appellee. No. 20415. United States Court of Appeals Ninth Circuit. Feb. 3, 1967, Rehearing Denied May 15, 1967. James J. Arditto, Los Angeles, Cal., for appellant. Benjamin E. King, Robert H. Thau, of Buchalter, Nemer, Fields & Savitch, Los Angeles, Cal., for appellee. Before MADDEN, Judge of the United States Court of Claims, and BARNES and ELY, Circuit Judges. ELY, Circuit Judge. 1 One Hassen appeals from a decision of the United States District Court in a bankruptcy case. Pomona Properties, Inc. is the bankrupt. Jonas, the trustee in bankruptcy, filed in the bankruptcy proceeding an 'Application for Order Requiring Return of Converted Assets and to Set Aside Preferences and Fraudulent Conveyances.' The trustee asserted that Hassen was under an obligation to pay $52,500 to the trustee for the benefit of the bankrupt estate and the creditors of the bankrupt. Hassen answered the trustee's application, denying any such obligation. Hearings on the application were held before a referee in bankruptcy, who decided in favor of…