Swanson v. Skiff

• Decision Date: 08 May 1979
• Citation: 155 Cal.Rptr. 280,92 Cal.App.3d 805
• Parties: Gerald SWANSON, Plaintiff and Respondent, v. Robert S. SKIFF and Jack A. McGlothlan, Defendants and Appellants. Civ. 17747.
• Court: California Court of Appeals Court of Appeals

Page 280

155 Cal.Rptr. 280

92 Cal.App.3d 805

Gerald SWANSON, Plaintiff and Respondent, v. Robert S. SKIFF and Jack A. McGlothlan, Defendants and Appellants.

Civ. 17747.

Court of Appeal, Third District, California.

May 8, 1979.

Hearing Denied July 5, 1979.

Richard F. Mills, Dennis N. Westerberg, Sacramento, for plaintiff and respondent.

Darrel D. Tipton, Sacramento, for defendants and appellants.

REYNOSO, Associate Justice.

The trial court ruled that defendants were obligated to pay on a promissory note they executed. They argue that there was no consideration since plaintiff had paid the amount of the note to a corporation owned by the three of them prior to the execution of the note. Accordingly, they maintain a prior contribution is not consideration.

Quite to the contrary, we are convinced that since defendants agreed to execute the promissory note at the time the contribution was made by plaintiff, consideration exists. That the note was executed thereafter in fulfillment of the promise does not denude it of consideration. We affirm.

Richard Mills, Steven Skiff and defendant Skiff incorporated Sunburst Citrus Products Inc. in August 1972. Plaintiff originally contributed $8,500, which was used in corporate activities. Four months later, in December 1972, plaintiff and defendants, together with Mills, met to discuss the financial contributions to be made by each of the investors. Plaintiff agreed to contribute an additional $16,500 for a total contribution of $25,000. Defendants Skiff and McGlothlan agreed that they would contribute $25,000 between them, and Mills agreed to contribute $7,500. In return for the contributions Skiff and McGlothlan were to receive 50 percent of the stock of the corporation, plaintiff 35 percent, and Mills 15 percent.

Plaintiff made his additional contribution of $15,500 in February 1973. Defendants had been unable to raise their share, and could contribute only $9,500. Since plaintiff felt that without the full contribution from defendants the corporation might not succeed, he wished to have security for his investment. Defendants agreed to sign a promissory note in the amount of $15,500, payable to plaintiff on August 15, 1973, in the event that they had not contributed their share to the corporation by that time.

On February 15, 1973, defendants executed a promissory note in favor of plaintiff. The note reads: "Due August 15, 1973, (only if not paid to Sunburst)." The note is in the amount of $15,500, bears no interest, and provides for attorney fees in the event suit is necessary to enforce collection. Both defendants acknowledged at trial that they signed the note. It was stipulated that no money exchanged hands at the time the note was signed.

Neither defendant contributed money to the corporation after signing the note. Plaintiff testified that when the note became due in August 1973, he made demand upon Skiff for payment and that he made other demands at subsequent times, but no payment was made. Plaintiff did not recall whether he had made demand upon McGlothlan. Skiff admitted that the payment on the note was due and that no payment had been made, but denied that payment had been demanded. In September 1974, the corporation ceased operations.

Plaintiff filed a complaint stating two causes of action, the first for amounts due and payable on the note, and the second for conspiracy to obtain money from plaintiff with no intention of repaying. Defendants answered denying each allegation and asserting eight affirmative defenses as follow: failure to state a cause of action; failure of consideration; contributory negligence; unreasonable delay in making demand for payment; that moneys advanced were for capital contribution to the corporation and not to defendants individually; that services rendered by defendants to the corporation exceeded the amount of the note; estoppel; and that attorney fees may not be awarded since plaintiff failed to make demand for payment.

At trial defendants testified that they had foregone their salaries and made other personal contributions in excess of the amount they owed the corporation. No documentation was presented in support of their testimony. Plaintiff testified that the agreement was that salaries were not to be paid until the corporation was making a profit.

I

Was there consideration for the note? Defendants argue that plaintiff paid his contribution to the corporation prior to the execution of the note and that the prior contribution will not serve as consideration for the note. Our analysis, somewhat different than defendants', leads us to an affirmative conclusion.

Initially we note that the amended judgment recites that findings of fact and conclusions of law were filed, yet defendants' designation of the contents of the clerk's transcript did not request that the findings and conclusions be made a part of the record. Since defendants did not request that the findings and conclusions be made a part of the record, we must presume that the trial court's findings support the judgment. (Minton v. Cavaney (1961) 56 Cal.2d 576, 579, fn. 1, 15 Cal.Rptr. 641, 364 P.2d 473.) In reviewing the sufficiency of the evidence to support the trial court's findings we are bound by the substantial evidence rule, all conflicts must be resolved in favor of the plaintiff. (Nestle v. City of Santa Monica (1972) 6 Cal.3d 920, 925-926, 101 Cal.Rptr. 568, 496 P.2d 480.) Plaintiff testified that he made his contribution to the corporation at the time that the note was executed. Defendants' contention that the amount was paid prior to the execution of the note thus merely raised a conflict in the evidence which the trial court resolved against defendants. It does not, therefore, provide a basis for reversal of the judgment.

Further, any benefit conferred or agreed to be conferred upon the promisor to which he is not lawfully entitled, or any prejudice suffered or agreed to be suffered other than that which a person is lawfully bound to suffer, is a good consideration for a promise. (Civ.Code, § 1605.) A written instrument is presumptive evidence of a consideration (Civ.Code, § 1614); the burden of showing a want of consideration sufficient to support an instrument is upon the party seeking to invalidate or avoid the instrument. (Civ.Code, § 1615.)

It was defendants' burden to establish that the note was executed without valid consideration. Defendants contend that they met this burden by establishing that the contribution by plaintiff to the corporation was made prior to the time the note was executed. The fact that the note may have been executed after the contribution was made by plaintiff, however, is...