Cooper v. Cooper

The above-entitled cases were consolidated for the purpose of trial. Separate findings and judgments were rendered in each case. Separate appeals were perfected from the respective judgments. They were brought to this court and presented on a single transcript of evidence. The determination of the main issues of both cases depends on the same evidence. ■

The plaintiff Stuart F. Cooper 'has appealed from a judgment in the first case which was rendered against him in a suit on a promissory note. The court found that the alleged note was given without consideration and that it is therefore void, and directed that it be canceled.

The defendant and the intervener are husband and wife. The plaintiff is their son. All of the corporation stock and money which are involved in this suit were the community property of the defendant and his wife. Since 1895 the parties to this action have been residents of Los Angeles. Until October 1, 1926, the defendant Milton G. Cooper maintained an incorporated mercantile business in Los Angeles under the name of Milton G. Cooper Dry Goods Company, having 20,000 shares of capital stock of the par value of $100 per share. Milton G. Cooper was the president of the corporation. On the date last mentioned the capital stock of the corporation was reduced to 12,000 shares of the par value of $100 per share. The defendant owned 65 per cent of the stock of this corporation. October 22, 1919, he gave to his son 150 shares of his stock, and on December 26, 1922, made him a present of 100 other shares. About the time of the

This cause was tried by the court sitting without a jury. The court found that prior to November 20, 1924, the defendant Milton G. Cooper purchased a large number of shares of stock from other stockholders, for which he became obligated to pay the sum of $400,000; that he is still indebted for a considerable portion of that purchase price of the stock; that, on the last-mentioned date, the defendant transferred to the plaintiff 250 shares of his stock with the oral agreement that this stock together with all dividends subsequently paid thereon were to be held by his son in trust until the defendant’s indebtedness was fully paid, and until, in the opinion of the defendant, his financial standing warranted him in requesting the plaintiff to reconvey the last-mentioned stock and accrued dividends to him; that by the terms of the oral trust agreement the defendant was authorized to use all such stock and accrued dividends as collateral security for any debts or obligations of -the defendant; that pursuant to the same trust agreement the defendant on December 3, 1925, transferred to the plaintiff 250 additional shares of stock, and on the last-mentioned date there were issued and delivered to the plaintiff under that trust agreement 1666 other shares of stock as dividends on the stock held by the plaintiff; that subsequently 1600 shares of this dividend stock were transferred to the defendant Milton G. Cooper, and pledged by him to the Pacific Finance Company to secure a debt which he then owed that company ; that these 1600 shares of dividend stock were redeemed by the defendant and reconveyed to the plaintiff subject to the same trust agreement, on December 30, 1927; that at the time of the reduction of the capital stock of the mercantile company, September 21, 1927, the plaintiff surrendered 1,000 shares of the stock which stood in his name, leaving only approximately 1500 shares in his name, all of which were subject to the trust agreement, except 250 shares thereof which belonged to him; that at the time of the reduction of the capital stock cash dividends on the shares owned and held in trust by the plaintiff were declared and paid to him as partial liquidation, in the sum of $62,500; that $20,833.33 of this sum belonged to the plaintiff, and the balance belonged to the trust fund in his hands; that

The appellant contends that the court erred in admitting evidence of an oral declaration of trust in conflict with the terms of the promissory note; that the court erred in permitting the defendant to file an amendment to his answer to conform to the proof at the trial, and that the judgment is not supported by the evidence.

Oral evidence was competent in this case to prove that the alleged promissory note, for the payment of which this action was instituted, was not executed or delivered as an evidence of indebtedness to the payee thereof, but that it was signed and delivered only as a memorandum and receipt of the sum of money appearing therein which was paid by the plaintiff to the defendant at the time of the reduction of the capital stock of the corporation and the partial liquidation thereof. This oral evidence does not vary the terms of the promissory note, but tends to indicate that it was not intended by the parties thereto to become a promissory note, and on the contrary that it was signed and delivered as a mere receipt for money paid to the defendant pursuant to the terms of a verbal declaration of trust with respect to the capital stock and the dividends therefrom which were held by the plaintiff.

Oral evidence is competent to prove that a purported promissory note or written contract was executed as a mere artifice affecting the relationship or conduct of the parties thereto, and that it was not the intention of the parties that it should become binding upon them. Under such circumstances the reception of oral evidence does not have the effect of varying the terms of the written instrument, but rather tends to prove the invalidity of the challenged document. (P. A. Smith Co. v. Muller, 201 Cal. 219 [ 256 Pac.

The oral evidence was competent on another theory of defense. The answer of the defendant affirmatively alleged the note was executed without consideration except for a small proportion of the amount thereof which had been fully paid. It has been frequently held that oral evidence is always competent to show want of consideration, or even partial lack of consideration, for an instrument. This rule is invoked for the reason that such evidence does not result in varying the terms of the written instrument, but really amounts to an impeachment of the character of the document. (Richardson v. Lamp, 209 Cal. 668 [ 290 Pac. 14 , 15]; Wurdeman v. Waller, 88 Cal. App. 393 [ 263 Pac. 558 ]; sec. 1962, subd. 2, Code Civ. Proc.; Brannan's Neg. Instr. Law, 4th ed., p. 254, sec. 28.) In the Richardson case, supra, it is said in that regard: “While the truth of the facts recited in a written instrument is conclusively presumed between the parties thereto, or their successors in interest by a subsequent title, this rule does not apply to the recital of a consideration. . . . The true consideration or the want of consideration may always be shown by extrinsic evidence for the purpose of impeaching a contract, notwithstanding that it states facts to show a valuable consideration.”

And with respect to a partial failure of consideration, the text referred to in Brannan’s Negotiable Instruments Law, supra, says: “Absence or failure of consideration is matter of defense as against any person not a holder in due course; and partial failure of consideration is a defense pro tanto, whether the failure is an ascertained and liquidated amount or otherwise.”

It is asserted the amendment is inconsistent with the original defense alleged in the answer. We are of the opinion the amendment to the answer was unnecessary, since the original answer alleged facts sufficient to support the findings and judgment of the court. But even though it be deemed to be inconsistent with the original answer, the defendant was entitled to allege as many different defenses as he possessed. (Sec. 441, Code Civ. Proc.; 21 Cal. Jur.,p. 134, sec. 90.) Since the oral evidence was competent under the issue of want of consideration, even though the asserted invalidity of the note was not otherwise adequately alleged, it was proper to permit the defendant to amend his answer to conform to the proof adduced at the trial. (Burrow v. Carley, 210 Cal. 95 [ 290 Pac. 577 ].)

While there is an irreconcilable conflict of testimony, we are of the opinion the findings and judgment are adequately supported by the evidence. It is claimed the acts and conduct of the defendant, together with certain written documents which were introduced in evidence, refute the theory of the existence of an oral declaration of trust with respect to the corporation stock and dividends therefrom which were held by the plaintiff in his name for the benefit of the defendant.

It was not necessary that the term “trust” should have been employed in the creating of a relationship between father and son which may be deemed to constitute an oral

Section 2221 of the Civil Code provides in part:

“A voluntary trust is created, as to the trustor and beneficiary, by any words or acts of the trustor, indicating with reasonable certainty:

“1. An intention on the part of the trustor to create a trust, and

“2. The subject, purpose and beneficiary of the trust.”

Nor was it necessary for the plaintiff to have specifically or orally accepted the terms of the trust. Any acts or conduct on the part of the trustee which indicates with reasonable certainty that he understands and accepts the terms thereof are sufficient to create the trust. (Sec. 2222, Civ. -Code; Drinkhouse v. German Savings & Loan Soc., 17 Cal. App. 162 [ 118 Pac. 953 ]; American Bible Soc. v. Mortgage Guarantee Co., 217 Cal. 9 [ 17 Pac. (2d) 105 ]; Becker v. Schwerdtle, 141 Cal. 386 [ 74 Pac. 1029 ].) The fact that the plaintiff specifically denied the existence of the trust in the course of his testimony at the trial merely creates a conflict of evidence and raises a question which was solely within the province of the trial judge to determine. Owing to the conflict of evidence regarding that subject, this court may not interfere with the decision of the trial judge in that regard. (2 Cal. Jur., p. 921, sec. 543.) The record is replete with positive statements repeatedly made by the defendant to the effect that the 500 shares of stock which were delivered to the plaintiff on November 20, 1924, and on December 3, 1925, together with the dividend shares and cash dividends thereon, were to be held by the plaintiff as trustee for the benefit of the defendant. The defendant testified in that regard that he transferred to his son the 500 shares of stock which stood in his own name, to be held in trust by his son, together with the proceeds therefrom, until the father was free from debt. The defendant said with respect to the first transaction: “At the time of transfer when I handed him the stock . . .

We will now consider the appeal of Stuart F. Cooper from that part of the judgment which was rendered against him in the second above-entitled case. This is a suit on the part of Hattie May Cooper to quiet title to her undivided community interest in all of the stock and the proceeds therefrom which were involved in the first action. There is no dispute regarding the finding of the court in this suit that all of the stock in question is the community

With respect to the 150 shares of stock transferred to the defendant Stuart F. Cooper on October 22, 1919, and the 100 shares transferred to him on December 26, 1922, and the proceeds therefrom, the court found that these shares were given to the son by his father with the knowledge and consent of this plaintiff and that her suit to quiet title thereto was therefore barred by the provisions of section 338 of the Code of Civil Procedure. A judgment was rendered accordingly.

None'of the parties to this suit are questioning on appeal the last-mentioned findings of the court or the validity of the transfer to Stuart F. Cooper of the 250 ° shares of stock therein referred to. The finding that this action is barred by the statute of limitations with respect to these 250 shares of stock is not challenged on appeal. The title to that stock and the proceeds thereof should therefore be, and it is hereby, confirmed in Stuart F. Cooper, and the judgment is affirmed in its application thereto.

For the same reasons heretofore assigned in the first cause of action with relation to the 500 shares of stock which were transferred to Stuart F. Cooper by his father November 20, 1924, and on December 3, 1925, and the cash and dividend stock which he received as the proceeds thereof, we are satisfied the findings and judgment in this case that this property was transferred to the son and is held by him pursuant to the oral declaration of trust above referred to, are adequately supported by the evidence. It follows that the defendant Stuart F. Cooper is without any right, title" or interest in this last-mentioned property, and he may therefore not complain of the judgment in this case which

Both judgments are affirmed.

Pullen, P. J., and Plummer, J., concurred.

A petition by appellant to have the cause heard in the Supreme Court, after judgment in the District Court of Appeal, was denied by the Supreme Court on February 14, 1935.