Court Opinion

ID: 6880117
Source: CourtListenerOpinion
Date Created: 2022-07-23 21:13:47.190324+00
Date Added: 2024-06-11T16:05:34.015701
License: Public Domain

DENMAN, Circuit Judge.
I concur in Judge MATHEWS’ opinion and the decision it indicates.
Delaney Petroleum Corporation Dividends.
What I gather ' from Mr. Delaney’s sketchy and hesitant testimony of his recollection of the events over ten years before under strongly leading questions by the court is that the understanding he had with his associates, sometime late in 1926 before the organization of the Delaney Petroleum Corporation, was not carried out after that corporation subsequently was organized.
The most that can be made out from that testimony is that Mr. Delaney was to have a portion of that corporation’s shares after he had paid for the shares by his services. What actually transpired is that after the organization of the corporation he subscribed for shares of its original issue and agreed to pay for them as would any subscriber. He actually did pay for them before the amendment of the California community property law became effective on July 29, 1927, with community funds consisting of money loaned him by his associates. He had no agreement with the corporation, of which he was general manager, other than the subscription.
Delaney stipulates that the certificate stubs and his company’s stock ledger show the 1,100 shares were issued to him on June 21, 1927. Following this, and on August 4, 1927,. prior to the payment of his loan from his associates, he voted the stock at a stockholders’ meeting, signing the minutes to that effect.
Upon payment of his subscription, at the very latest, he acquired the shares. San Joaquin Land & Water Co. v. Beecher, 101 Cal. 70, 79, 35 P. 349, 352; Balla-ntine and Sterling, California Corporation Laws (1938 Ed.) § 50, § 120. Nothing further was required to complete his ownership. Since the entire transaction antedated the change of July 29, 1927, and the shares were acquired with “old type” community funds, the shares were held as “old type” community property.
In my opinion the evidence sustains the lower court’s finding that the funds which discharged the loans were earned after July 29, 1927. However, I agree that it is the law of California .that the payment of the loan of his- associates from funds so earned did not change the character of the ownership of the shares acquired under the earlier community property law.
Delaney Producing and Refining Company Dividends.
With regard to the acquisition of the 1,500 shares of Delaney Producing and Refining Company, it appears that Delaney had an account on the books of the Delaney Petroleum Corporation, in effect, an account payable to Delaney arising from a loan to the Delaney Petroleum Corporation of certain of Delaney’s California Petroleum Company stock which had been used by that corporation in another transaction and resulted in a credit to Delaney of $106,250 which had been reduced by June 1, 1928, to $37,500. This credit was “old type” community property.
In Delaney’s books appear certain items which he describes as loans by the Delaney Petroleum Corporation to purchase shares of Delaney Producing and Refining Company. One of these entries indicates that 2,707 shares of the Refining Company stock were to be purchased from J. B. Dabney at $10 per share and 2,300 from’some seller whose name is not indicated.
On May 31, 1928, appears an item of $18,949 called a loan “to purchase” 2,707 of these shares at $7 per share. The record does not show that these shares were then purchased. On June 1, 1928, appears another entry of $31,121 “to purchase” 2,300 more shares at $10 per share and also an additional $3 per share on the purchase of the previously mentioned 2,707 shares to be purchased from Dabney.
On the same day, June 1, 1928, appears an item in Delaney’s books summarizing the transaction of the two previous entries aggregating $50,070 in which it appears that there had been purchased in all 5,007 shares of the Refining Company stock at $10. per share, of which but 1,500 shares at $10 per share had been purchased for $15,000 for Delaney. The only inference that can be drawn from these items is that the $10 per share full price for the purchase of these shares had been paid not earlier than June 1, 1928. In this summarizing entry Delaney says of the stock purchased for him “ — cost of same to be applied against loan account to D. P. Corp. (Loan of Cal. Pet. stock).” *341On this date also there appears in the California Petroleum loan account of the Delaney Petroleum Corporation books a debit against A. J. Delaney’s balance of $37,500 of $15,000 for the 1,500 shares of stock. These entries do not sustain Delaney’s burden of proof that the Collector erred in assessing the dividends as on stock purchased by him out of the balance of $37,500, his credit with the Delaney Petroleum Corporation, which credit was old type community property.
In this connection it should be noted that it is stipulated that there was no resolution authorizing the Delaney Petroleum Corporation to lend money to Delaney, no note given by him to the corporation, and the only proof relied on in brief and argument of the character of the transaction to purchase the 1,500 shares is the unexplained entries in his books and the books of the corporation.