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03/06/52 Plitt v. Stonebraker Et Al.

March 6, 1952

PLITT

v.

STONEBRAKER ET AL. 1952.CDC.9 DATE DECIDED: MARCH 6, 1952



Before KIMBROUGH STONE, Circuit Judge, retired (sitting by designation), and EDGERTON and WASHINGTON, Circuit Judges.

UNITED STATES COURT OF APPEALS DISTRICT OF COLUMBIA CIRCUIT.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE STONE

STONE, Circuit Judge.

A quantity of beer was seized by the United States Marshal under a writ of attachment issued (August 2, 1948) by the Municipal Court in a proceeding by Mildred M. Stonebraker v. Gold Label Distributing Company. Thereafter, the beer was sold by the Marshal and the proceeds are being held by him. Norman S. Bowles, Jr. has brought a proceeding against Stonebraker, the Gold Label Distributing Company and the Marshal, claiming ownership of these proceeds by virtue of a "transfer of title and an assignment" of the beer - dated October 17 and 18, 1947 - to secure a loan made by him to the Distributing Company. Stonebraker answered denying such transfer of title and assignment. The Distributing Company defaulted.

Thereafter, appellant moved for leave to intervene. The proffered complaint of the intervenor states that the loan by Bowles was evidenced by a promissory note - dated October 6, 1947 - which was secured by the property seized by the Marshal; that this note was transferred to intervenor by Bowles on its date; "that therefore any security given for said note is retained for the benefit of your Intervenor, who is the real party in interest".

The Court denied the motion for leave by an order stating argument by counsel for appellant and for Stonebraker and "it appearing to the Court" that counsel for plaintiff Bowles and for the Marshal "take no position with respect to" the motion for leave to intervene. From that order, Plitt appeals.

Briefs have been filed by appellant and by Stonebraker on the right to intervene and, after argument and upon instruction of the Court, on whether security given to the original creditor after assignment of the debt (the note here) passes to the assignee.

Under Rule 24(a)(3) of the Rules of Civil Procedure, 28 U.S.C.A. an intervention is of right "when the applicant is so situated as to be adversely affected by distribution or other disposition of property which is in the custody or subject to the control or disposition of the court or an officer thereof." This property being in control of an officer of the Court and subject to disposition by the Court, the right of appellant to intervene is to be tested by whether he is "so situated as to be adversely affected by distribution or other disposition" of the funds held by the Marshal.

The claimed interest of appellant in these funds is that they represent the security which he alleges is back of a promissory note owned by him. If these funds are, in a legal sense such security, appellant would obviously be "adversely affected" by delivery thereof to plaintiff or to Stonebraker, each of whom is claiming them as of right. Therefore, the controlling issue here is whether these funds are security for payment of the note.

These funds are in place of the beer from sale of which they resulted. There was no transfer or assignment of the beer until ten or eleven days after the promissory note had been sold by Bowles to appellant. The assignment was not to appellant but to Bowles. The complaint herein by Bowles states this assignment was "to secure a loan made by him" to the Gold Label Distributing Company for $9,500. This is the face amount of the promissory note. There is no reasonable room for dispute that the loan intended by Bowles is that represented by the note which Bowles had transferred to appellant some ten days before the assignment. Therefore, the issue as to whether these funds (representing the beer) were security for payment of the note depends upon whether this security, later taken by Bowles for the same indebtedness as covered by the note, inures to the benefit of appellant, the owner of the note.

Beyond this main issue, appellee presents several reasons why, she contends, there was no absolute right of intervention by appellant. We will first consider these. Appellee argues that appellant has not shown that he would be adversely affected by denial of intervention because he does not allege that the Distributing Company (maker of the note) has no assets to pay a judgment on the note and cites Sutphen Estates v. United States, 342 U.S. 19, 72 S. Ct. 14.That case is no authority that a note holder is not adversely affected by deprivation of security if the note maker is solvent. That case declares that a guaranty, substituted by decree in an Anti-Trust reorganization, was of equal or better value than the original security and, therefore, the guarantee had not been adversely affected by such substitution. Legal rights to an existing security are not measured by the necessity for security.

Appellee urges that the fact that appellant had theretofore filed suit on the note without claiming any security back of it is material. We do not agree. He is entitled to the benefit of any security even though he may not have known of its existence. 8 Am.Jur. p. 74, ยง 339, cases in footnote 19.

Appellee contends that appellant has not "shown that the form of the alleged security was one which was not personal to the plaintiff below, but was such as should pass to appellant as a matter of law." The complaint of plaintiff (Bowles) alleges a "transfer of title and assignment" made to him "to secure a loan made by him" to the Distributing Company "in the amount of $9,500.00". The motion to intervene alleges that this transfer to Bowles was to secure a promissory note sold to appellant and that appellant is entitled to this security and is the "real party in interest".These pleadings sufficiently present the issue of appellant's right to the security as against Bowles.

Appellee asserts that Bowles was not a security holder under the allegations in his complaint that there was "a transfer of title and an assignment" to him of the beer. This allegation is followed, in the same ...


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