BUSCH v. TRUITT (1945)

Respondent sued to recover 1,380 corporate shares of the Dried Food Products Company held by defendant as administratrix of the estate of her deceased husband, Charles C. Truitt. He alleged two counts, namely, (1) that defendant holds the shares in trust for plaintiff; (2) that decedent owed him the shares; that within the time allowed by law he presented his claim to the administrator of decedent's estate for the stock; that such claim was not actually approved but that by reason of divers statements and promises of the first administrator and of appellant and because of the promise of appellant in a new contract executed by her with the corporation, respondent was led to believe that his claim had been allowed and that the shares would be assigned to him, but that on November 16, 1942, appellant refused to make delivery.

Defendant denied generally both counts of the complaint and pleaded as a bar to both actions the 4-year and 2-year statutes of limitation, towit, section 343 and subdivision 1 of sections 337 and 339, Code of Civil Procedure. Also, she pleaded the insufficiency of any ‘promise * * * of a new or continuing contract’ by appellant to avoid the operation of the statutes of limitation (Code Civ.Proc. § 360), and alleged noncompliance with 707 and 716 of the Probate Code, which sections require the filing of claims against a decedent's estate within 6 months after the first publication of notice to creditors. Also, she alleged the nullity of the alleged transaction as a violation of the Corporate Securities Act, St.1917, p. 673.

The court found that for a valuable consideration on March 1, 1938, decedent executed and delivered to plaintiff a writing wherein he declared that he owed to plaintiff 1,380 shares of his escrowed stock of the corporation as of that date, and ‘That said Charles C. Truitt stated and represented to plaintiff that the stock owned by him was held in escrow and that he would secure the consent from the Corporation Commissioner of the State of California to transfer to plaintiff said 1380 shares of said stock. That plaintiff relied upon said promise and believed said representation that the said Charles C. Truitt would secure such consent. That the said Charles C. Truitt died before he did secure such consent to transfer said stock.’

In addition to the foregoing the court found that after appellant became administratrix she promised to effect the transfer of the 1,380 shares to respondent and that she told him it was unnecessary for him to do anything further in the matter; that he relied upon her statements; that decedent had promised to transfer the 1,380 shares to respondent and to cause their release from escrow; that on August 12, 1942, by written agreement appellant promised to transfer the shares to him; that in September, 1942, by her application she caused the corporation commissioner to release the 17,145 shares of the Dried Food Products Company standing of record in the name of decedent and held in escrow; that on November 16, 1942, appellant rejected respondent's demand for the transfer to him of the 1,380 shares to which he is entitled; that its value then was $5,520; and that she had collected net dividends on the shares in the amount of $1,817. All of the special defenses were decided against appellant.

On its date decedent delivered to respondent the following letter:

‘Maywood, California

‘March 1, 1938

‘Mr. Geo. J. Busch

‘834 North Hudson

‘Hollywood, California

‘Dear Mr. Busch:

‘My records now show that I owe you 1,380 shares of escrowed stock which is made up of advances to me from time to time as follows:

‘On April 10, 1937, I received $115.00, making a total amount received up to that time of $225.00. Then there was 100 shares assumed by me which was owing to you by Ross Robertson; there was $80.00 left with Wilson for me; $200.00 paid Kallock for me; and $75.00 given to me. Also, I owe you 700 shares of escrowed stock in exchange for 600 shares of free stock.

‘All told, this amounts to 1,380 shares of escrowed stock that I owe you as of this date.

‘Very truly yours,

‘Chas. C. Truitt’

‘Chas. C. Truitt.’

Thirty-nine days later Mr. Truitt departed this life. At the time he owned 17,145 shares of the capital stock of the Dried Food Products Company, held in escrow under order of the State Corporation Commissioner.

Following the decease of decedent one F. C. Hendrix qualified as administrator to whom respondent presented his claim. That officer stated he would acknowledge the debt of the estate and that the shares would be transferred to respondent, but he did not approve, reject or file the claim in his lifetime. He died on July 16, 1939. After his decease there was a vacancy in the administration from July 16, 1939, to January 19, 1940, when appellant qualified.

Questions for Decision

We are now to determine the following:

1. Did decedent or his administratrix hold in trust for respondent the 1,380 shares?

2. Is respondent a creditor of the estate (a) either by having presented a verified claim to the administrator or (b) by the written contract of August 12, 1942?

3. Is respondent's action barred by any statute of limitation?

There was No Trust

If a trust ever existed it was either an express trust or a resulting trust. It could not have been an express trust, for there is no evidence that decedent ever declared that he held any shares of stock belonging to respondent or that he held certain corporate stock in which Busch had an ownership to the extent of 1,380 shares or in any amount. In the absence of proof of an express declaration by the alleged trustee or of acts that are equivalent to such declaration, evincing an intention to create a trust, there is no express trust. 65 C.J. 220.

There was no resulting trust. All the shares to which decedent ever had title was the 17,145 shares in his name held in escrow subject to the permit of the corporation department. There is no proof that his escrowed holdings increased by virtue of his transaction with respondent. While some shares and some money were transferred or paid by Busch to decedent, they were mere loans. To have effected a resulting trust in the corporate shars it would have been necessary for respondent to advance to decedent a fund with which the latter purchased the shares, taking title in his own name but for the benefit of respondent. Watson v. Watson, 198 Pa. 234, 47 A. 1096; Smith v. Smith, Ky., 121 S.W. 1002. Nothing like that occurred between decedent and respondent. After Mr. Truitt had used the money and shares loaned to him by respondent he settled with his creditor by giving him the letter of March 1, 1938. That writing means no more than what it says, ‘I owe you 1,380 shares of escrowed stock.’ It does not evidence a resulting trust Vol. 2, Restatement of Trusts, § 440. It merely acknowledges decedent's debt for advances made to him by respondent on divers occasions in the past and states merely that he owes 1,380 shares in full settlement.

Before one who claims to be the beneficiary of a trust can realize upon his claim, he must identify specific property to which he has title or which was acquired with funds furnished by him. Holland v. Bank of Italy, 115 Cal.App. 472, 1 P.2d 1031; Roncelli v. Fugazi, 44 Cal.App. 249, 186 P. 373; Lathrop v. Bampton, 31 Cal. 17, 89 Am.Dec. 141; Byrne v. Byrne, 113 Cal. 294, 45 P. 536. He who claims to be the beneficiary of an alleged trust must be able to identify the trust fund or follow it through its mutuations. Failing to do so, he is no more than a general creditor. Roncelli v. Fugazi, supra.

Respondent has No Enforcible Rights under the Writing of August 12, 1942.

The bases of respondent's claim as a creditor of the estate are (1) that he presented an ‘acknowledged’ claim to the administrator on November 14, 1938, and (2) that on August 12, 1942, appellant executed a written agreement with the corporation whereby she promised to transfer 1,380 shares of decedent's escrowed stock to respondent upon its release by the corporation commissioner. We first direct our attention to the corporate contract. This contract was the fruitage of an action by appellant against the corporation upon a contract to pay decedent 50,000 shares for his services during a term of years. Negotiations for a settlement resulted in a compromise evidence by a written contract. The provision of the contract under which respondent makes his claim is as follows:

‘3. First Party as Administratrix agrees that she will pay all claims now or heretofore filed or presented against the Estate of said Charles C. Truitt for stock of Dried Food Products Co. agreed to be delivered by said Charles C. Truitt to pay such claimant, excepting as to any such case to which she, as such Administratrix, shall have a bona fide defense. Said claims which have been disclosed by first party to second parties are the following:

That such language cannot serve as the basis for an action for specific performance is readily apparent. The writing promises no more than that she will pay all claims theretofore presented for stock which decedent had promised to deliver to any such claimant, but it is equally as emphatic that she would not pay any claim against which the estate had a bona fide defense. The instrument was drawn under the advice of competent counsel for appellant who demanded of the corporation's counsel that it be inserted in the agreement that appellant would not pay any claim to which she had a bona fide defense. Not having pledged the estate to pay outright every claim included in the list without regard to its merits, the writing cannot be construed unreservedly to require the estate to pay every claim listed. 49 Am.Jur. 34, § 22 et seq. If the purpose of the contract was to obtain appellant's waiver of the defense of the statute of limitations, it failed of its mark for an administrator has no authority to waive a statute of limitations. In re Estate of Cates, 195 Cal. 319, 232 P. 972. Neither can an administrator do any act which would have the effect of extending the time for filing a claim so as to bind an estate. Ibidem.

The contention that the corporate contract is an acknowledgement that respondent had filed or presented a verified claim is not justified by the language of the instrument. The qualification contained in the promise to transfer the stock to respondent takes it out of the category of those unequivocal promises that are ‘sufficient evidence of a new or continuing contract.’ Code Civ.Proc. § 360. Where an estate based its suit for recovery upon the debtor's promise to pay the claim if it was valid and if he ever got money enough was held too uncertain to come within the exception of section 360. Visher v. Wilbur, 5 Cal.App. 562, 90 P. 1065, 91 P. 412. Also, a promise made to the corporation in order to satisfy its requirements was not a promise to respondent and does not take the case out of the operation of that section. President, etc., of California College v. Stephens, 11 Cal.App. 523, 105 P. 614; Roper v. Smith, 45 Cal.App. 302, 187 P. 454. Respondent had no claim against the corporation. The corporation owed no debt to respondent. In order for the contract to constitute an obligation of appellant to pay a claim of respondent, appellant must have been in debt to the corporation. Restatement, Law of Contracts, Vol. 1, § 133b.

The Second Count is Barred

We have for final consideration appellant's plea that respondent's claim is barred by the statutes of limitation. Code Civ.Proc. §§ 337, 343 and 339. Respondent concededly never procured the approval of his claim by either the administrator or the judge. The most that can be said for his case is that he testified that he presented an ‘acknowledged’ claim to the administrator and relied upon that official's oral statement that the claim would be honored. He should first have presented a verified claim (Probate Code, § 705), and upon failing to obtain such approval within 6 months after publication of the first notice to creditors it was incumbent upon him to exercise diligence to gain its approval by judicial decree. Instead, he waited and talked until after 4 years had elapsed from the date his cause of action arose. Not only did he neglect to file or present a verified claim, but in order to recover he contends that he had the right to rely upon conversations with Mr. Hendrix at first and later to depend upon promises of appellant. Neither could have been a substitute for (1) procuring the approval of his claim or (2) prompt action to obtain judgment upon it.

The last cited sections inhibit the maintenance of a cause of action upon a contract in writing after the lapse of 4 years and 2 years respectively. Since the writing of March 1, 1938, is in effect a due bill, time runs from its date. Harrigan v. Home Life Co., 128 Cal. 531, 58 P. 180, 61 P. 99; Witman v. Board, 19 Cal.App. 229, 231, 125 P. 265. The cited sections are general statutes governing the limitation of actions and are supplemented by no provision of the Probate Code whereby the period of the life of a cause of action may be extended. Neither the death of decedent nor the inaction of the administrator or of the probate judge in not approving the claim can lengthen the term named in the Code sections. The only statute touching upon grace to a claimant whose debtor dies is section 353, Code of Civil Procedure, which grants to a claimant the privilege of filing suit within one year after the issuance of letters of administration if the death occurs before the expiration of the time limited for the commencement of the action. Since the one year's grace adds nothing to the 4-year statute period, that section is of no avail to appellant. Decedent died April 9, 1938. Letters were issued May 24, 1939. But since the date of the contract granted him till February 28, 1942, his action could not have been barred prior to the latter date. Barclay v. Blackinton, 127 Cal. 189, 59 P. 834.

But he did not choose to file suit at any time within the 4 years after the date of the contract. He displayed no diligence at any time in the protection of his claim. Although decedent passed away on April 9 and letters issued to the first administrator on May 24, 1938, he presented no claim until 5 months and 20 days had elapsed when he prepared and ‘acknowledged’ a claim and presented it to the officer. No sign of interest in the claim was manifested by respondent throughout the calendar year 1939, although administrator Hendrix who had advised the presentation of a claim departed this life on July 16, 1939. It is an unusual event in a man's life such as that asceribed by respondent to Hendrix in having his assistance in preparing the claim. Yet respondent did not bestir himself to ascertain the fortunes of his asserted claim for 5 months and 15 days in 1939 for 12 months in 1940, and for 9 months and 27 days in 1941. In view of such laches no amount of excuse or of conversation will toll the statute. If the excuses urged by respondent may keep alive a claim, it would be possible for a claimant in collaboration with a corrup adminsitrator to keep alive a claim until such time as they would encounter no opposition and by its untimely allowance rob the estate of its substance. See Barclay v. Blackinton, supra, 127 Cal. at page 193, 59 P. 835. ‘The right of a claimant to enforce his claim under our statutes of limitations depends upon his own vigilance, and is often lost by his own laches.’ Id.

To excuse his laches if not his utter failure to act for the protection of his claim respondent pleads that he was lulled into a sense of security by the following events: (1) That administrator Hendrix promised him that he would honor the claim; (2) that appellant had on several occasions promised that his claim would be paid; (3) that limitation was interrupted by the vacancy in administration and appellant's absences from the state. The evidence as to these excuses is presented in the discussion that follows.

Notwithstanding his first conversation with Hendrix concerning his claim was on May 24, 1938, he did not present a claim to Hendrix until November 14, 1938, when according to respondent the latter stated: ‘I'll acknowledge that; it will be just a matter of a few days until I can get this thing taken care of. * * *’ Although the administrator told him it would be just a few days respondent offered no testimony of further interviews with Hendrix during the succeeding 8 months of the latter's life. In that interval a reasonably prudent person would have ascertained the status of a claim theretofore presented to the administrator; also, if he had discovered that his claim had not been approved he would have taken steps to procure the appointment of a special administrator with a view of establishing his claim. The record discloses only the silence of respondent during the 6 months of vacancy.

He testified that he had a conversation with appellant on the very day she qualified, towit, January 19, 1940, but no substance of that conversation was revealed by him. He had conversations with her in August and October, 1942, both in person and by telephone, but all of such conversations were after the expiration of 4 years from the date of decedent's promise. The statements made by appellant's attorney at the two meetings of the stockholders in October and November, 1941, were not such as would suspend the running of the statute of limitations. The statements of the attorney were to the general effect that all just claims against the estate would be paid. But if either appellant or her attorney had stated definitely that the estate would transfer 1,380 shares of escrowed stock to Mr. Busch, he would not have been able to make good. The administrator is without power to waive the necessity of presenting a verified claim to him or of filing it with the clerk. Since these conversations were impotent to toll the running of the statute and no promises were ever made to incude respondent not to sue the estate, the action was barred by the 4-year statute (Code Civ.Proc. § 337, subd. 1), unless the running of the statute was tolled by the vacancy in the office of the administrator and by appellant's absences from the state. Such facts are unavailing to toll the statutes of limitation. Conceding that a verified claim had been presented within the 6 months following the first publication of notice to creditors, more than 4 years intervened between the day of the promise and the day of filing the action.

In view of the foregoing it is ordered that the judgment be and is hereby reversed with instructions that the action be dismissed.

MOORE, Presiding Justice.

W. J. WOOD and McCOMB, JJ., concur.